Finance Management in Apparel Industry

A financial management system is the framework and software that an entity uses to track and control its revenue, expenditures, and properties with the goals of optimizing revenues and ensuring sustainability.

A successful financial management system enhances short- and long-term business efficiency by streamlining invoicing and bill processing, reducing accounting mistakes, minimizing redundancy record-keeping, ensuring compliance with tax and accounting laws, helping staff measure budget preparation, and providing flexibility and expand-ability to accommodate change and increase.

Many critical features of a strong financial management system include: 

• keeping clear on all payments and receivables.
• Amortization of costs carried out in advance.
• Assets are depreciated according to agreed schedules.
• Keeping track of liabilities.   
• Coordinating statement of revenue, statement of expenses, and balance sheets;
• Equilibrate several bank accounts.
• Ensuring integrity and protection of the data.
• Keeps all records fresh.
• Keeping a full and accurate audit trail.
• Minimizing complete regulatory burdens.

Finance Department in Apparel Industry

The finance department is responsible for overseeing all the company's financial administrative affairs, and has a very important impact on many of the management's policy and business decisions. Financing the operations of a company requires precise timely planning and control to ensure adequate funds and credits are available where necessary.

Besides the money to pay vendors, wages, expenditures, etc., funds must be on hand to finance raw materials stocks and finished products. Provision must be made for covering these intervals in times when trading is tough and sales are down.

Some essential functions performed by this department are: 

• Providing management information 
• Expense of administration 
• Budgeting Garment.

Management Information: 

In the business world, success or failure is essentially calculated by money and it is therefore important that the company's financial pulse is under continuous evaluation. This department is solely responsible for providing up-to-date reports to management about the present and future financial status. Some standard management reports are prepared: balance sheets, stock rates and prices, cost of production, operating statements for different agencies, expense rejections, returns etc.

Budgeting: 

The purpose of budgeting is to plan and control the activities of the company with a view to maximizing profitability and the starting point for all budgeting is the sales budget. This is usually drawn up before the start of each financial year or season, taking into account the sales to be established and new customers, general economic trends at home and abroad, manufacturing capacity and funding availability. Other budgets considered are: labor costs, material costs, departmental budgets and overheads.

Garment Costing: 

It is the garment's 'identity card' and includes all the details required to produce garments during the pre-production and production processes. The costing sheet shows the detailed expenses for: 

• overheads of material, 
• labor, 
• fixed and variable, 
• Other expenses.

The details for costing the garment comes from a number of sources: sample section, cutting space, breaking down time values and costs involved in cutting, stitching and finishing, trim and material costs, overhead costs from finance department.

Administration: 

All the departments in a clothing industry require administrative support to ensure orderly and systematic functioning of their operations.

The procedures covered are: 

• Preparation of orders for deliveries, 
• Inspection of goods, 
• Timing and methods for taking stocks, 
• Imports and exports, 
• Obtaining credits for returned goods and materials, 
• Issuing credits for customer returns, 
• Negotiation and issuance of tenders for major projects, 
• Purchase of office furniture and equipment, etc.

A clothing company has 'up front' departments such as design, marketing, and development and the fact that they operate efficiently is the consequence of good administrative assistance.

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