This is the key area of problem which manufacturing segments gets into from day one of its existence. Not having a good financial compliance being met, the reason being avoiding of taxes and trying to maintain off the record. Which gives few expenses being cut.
This problem comes to highlight when you are trying to raise funds from banking sector as being non compliant ensures that bank do not entertain such companies and do not fund for there existence or for expansion.
This ensures that the funds are taken from market, which come at higher percentages of interest and eat up the margin from the order till the payment realization happens.
Also the manufacturing units start turning to sick units very soon after a certain point where in income generated is used for taking care of in coming orders and paying of interest and hence ensuring that the profits are not utilized for increasing business but are utilized for payment of dues.
This also ensures that the unit, which does not have compliances, enters into problems, which affect the business