Thread by @saysatheesh

Alert : Long #Thread
Subj : #Economy
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As I am seeing many tweets on #Inflation now, wish share this happening too..

Few weeks back, I was travelling in a train and one gentleman was adjacent to me, who started conversation on various things during the travel

It came to #Inflation subject and he gave me an complete new insight.

We were thinking, Corruption and Bribing is only happening in Govt sector. But he explained how large these in Private Sector.

He was heading Finance team and retired and he gave a detailed view

Materials, Logistics & Admin are the major departments which deals with procurement of goods and engaging services in any organisation

Due to huge competition between suppliers, they offer kickbacks to those who gave orders, to keep their supplies dominate the market

Earlier companies will be selecting L1/lowest bidder for services. Now it is changed as selecting specific supplier despite their rates are high but giving justification as some special quality of those suppliers or exclusiveness.

This gave the opportunity to buyers

Initially the kickbacks are voluntary in basis, but now it turned as demanded one like, this order value is X lakhs, if you can give me Y Ks you can get this order. Every major supplies has this condition.

Supplier has no issues. They adjust kickbacks in their pricing.

Buyers get personal benefits. End result is the cost of product get increased.

Just think if every product right from cookware to big machinery, every industry adding it's personal benefits into product cost.. That's one of the reason for retail inflation rise

Fortunately there is no agency to curb these malpractices for private sectors. Only for Govt sector there are Anti Vigilance agencies.

As far as Private companies it is their internal audit or Finance head has to control such things and bring control in product cost

When Material teams personal benefits add the cost of goods purchased, Logistics teams personal benefits added to Transport cost increase, Admin teams personal benefits add to the production cost, end result is higher cost for their products in market

So ultimately, people paying higher cost at market due to some individuals enjoying kickbacks from suppliers and service providers.

The discipline of HR function, strong policies of an organisation, frequent internal audits etc can control this manance

But the most important one is Chartered Accountants

The suppliers who gives kickbacks for their buyers, need to account that expenses in some account right? They cannot unaccount the spendings.

If CAs are strong enough to substantiate every spendings with supportings fine

But if CAs knows that there are some spendings done for kickbacks and the same has been accounted in some other expense head without proper supporting documents.. but still they approve the financials and sign... Then they are the reason for inflation and corruption

This is what the summary of my copassengers view on Corporate Corruption

Few days I was also thinking about his views, if Finance, Internal audit & HR are strong, able to curb corruption in Logistics, Materials depts, many product prices may come down right?

If CAs are obeying laws and ensure no malpractices happened in books of accounts the profit increases and tax revenue also get increased. On the other side the product cost comes down and inflation also gets reduced

But why not Govt make regulations for this?

#JustAsking