A

PROJECT REPORTON

STUDY OF

“RECEIVABLE MANAGEMENT&

CREDIT ANALYSIS”

PIRAMAL HEALTHCARE LTD.

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Vitamin A & Fine Chemicals Division,

Thane

Submitted in partial fulfillment of Degree of

MASTER OF BUSINESS ADMINISTRATION

2007 – 2009

Guided By,

Mr. Mahesh Sane (G.M. (Finance)

Submitted by,

GANESH B.PATIL.

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M.B.A.-I (Finance).

GLOBAL BUSSINESS SCHOOL,JALGAON.

A C K N O W L E D G E M E N T

I wish to express my heartiest thanks to management of PHL for

providing me the opportunity to under go training in the esteemed organization.

Under such a nice environment, systematic work approach and target oriented

task management of this division provided me with the much-desired training

experience needed for future manager.

It is my pleasure to thank Shri. Rajesh Rane, Manager of HR &

Administration to whom I owe a lot for giving me an opportunity to do my

training in this organization; I also owe a special thanks to Mr. Mahesh sane,

General manager of Finance Dept, VFCD,PHL,Thane,for allowing me to do

project under their guidance.

The project would not be a success without the constant and valuable

guidance of Ms. Yogesh Pawar, Mr. Dhawal Kulkarni & Mr. Vikram for the

project, who is rendering all sorts of help as and when required.

Last but not least I wish to regard my sincere thanks to all the

employees of PHL (Finance and Marketing dept. in particular) who directly or

indirectly helped me in completion of project.

Thank you.

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GANESH B. PATIL.

D E C L A R A T I O N

I wish to state that the work embodied in this project titled “STUDY OF RECEIVABLE MANAGEMENT & CREDIT ANALYSIS” of Piramal Healthcare Ltd. VFCD, Balkum, Thane. forms my own contribution to management.

Wherever references have been made to intellectual properties of any individual/ institution/ Government/ Private/ Public Bodies/ Universities, research paper, text books, reference books, research monographs, archives of newspapers, corporate, individuals, business/Government& any other source of intellectual properties viz., speeches, quotations, conference proceedings, extracts from website, working papers, seminal work et al the have been clearly indicated, duly acknowledged &included in the Bibliography.

Ganesh B. Patil.

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C E R T I F I C A T E

Ref. No. Date:

TO WHOMSOEVER IT MAY CONCERN

This is certify that Mr. Ganesh B. Patil, a M.B.A. student of Global Business

School (Jalgaon), have undergone a training & completed a project on “Study of

Receivable Management & credit Analysis”

He has carried out this project for Piramal Healthcare Ltd. (VFCD) from

04/06/2008 to 01/08/2008.

In the span of project duration his candidature was found to be very sincere

& hardworking.

We wish him a bright future.

Mr. Suresh Mohite

General Manager (H.R.)

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Piramal Healthcare Ltd. (VFCD)

S Y N O P S I S

Studying in college & reading books help us to grow mentally. It

enriches our knowledge of particular subjects. But it is the

experience / practical knowledge that helps us for the overall

personality development. Hence for the proper development

theoretical as well as practical knowledge is required.

The very purpose of doing this project is to get actual exposure

to the corporate world. As this project is related to Finance

Department, it helped me to know the actual way of working in

Finance Department in an organization.

Piramal Healthcare Ltd. is a huge manufacturing firm existing

with its four decades of steadfast growth. It manufactures decanters,

valves, performing tubes etc.

I have contributed my best efforts in preparing this project of

Piramal Healthcare Ltd. Along with this I have taken practical insight

of some Finance dept. activities.

This practical knowledge will be beneficial for me in my future

objectives. Hence I will be always grateful to PHL members who

really helped me to get practical insights.

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P r e f a c e

Debt management, by the standard financial definition, involves a

designated third party assisting a debtor with repayment of his or her debt.

Many companies specializing credit counseling offer debt management plans

to help people with heavy debt and damaged credit get their financial situation

under control. A simpler definition of debt management could be the routine

practice of spending less than one earns.

However, for all intents and purposes, debt management is a structured

repayment plan set up by a designated third party, either as a result of a court

order or as a result of personal initiation. Accounts receivable include

reimbursements due from state and federal sponsors of externally funded

research, patient billings, accrued income on investments, tuition, fees and

various other receivables. In order to effect early conversion of these

receivables to cash and minimize credit losses, each campus must maintain a

diligent program for managing receivables.

The management function consists of granting credit, billing accounts,

effecting collection, analyzing outstanding accounts (aging), and providing for

bad debts. In this project report the deep study of receivables is done which is

the main constitute of working capital. According to the expert is A/R one of a

series of accounting transactions. These accounting transactions deal with the

billing of customers who owe money to a person, company or organization for

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goods and services purchased. If you are seriously considering using

accounts receivable as a method of obtaining a more liquid asset.

Some also call accounts receivable trade receivables and try to classify

them as current assets. Every organization has a clear focus on its accounts

receivable solution.

Many believe that they are doing all they can to maximize rapid

collection of outstanding debtors. Most organizations stick to a very standard

layout for their invoices rarely changing the standard output from their

accounting system. But simple redesign of the invoice can dramatically

improve its effectiveness. The term Debtor Day refers to the average number

of days it takes a company to receive payment from its customers.

Thereafter, the study of debtor’s day and reduction of debtors day has

been carried out for company i.e. Vitamins and fine chemicals division of PHL

is focused upon. This research paper is about to reduce the credit period

allowed to debtors considering the receivable which is the essential ingredient

of working capital.

An attempt is made to analyze & reduce the gap between total required

for one particular transaction to complete and actual time which company is

allowed to customer as debtor days

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E X E C U T I V E S U M M A R Y

INTRODUCTION OF THE PROJECT In this project I have covered following topics:

1. Analysis of credit period allowed to debtors.

2. How to reduce the debtor’s day.

3. Export procedure and export documents required for shipment

PROJECT TITLE

‘Study of receivable management & Credit analysis’

LOCATION

Piramal Healthcare Ltd, Vitamins & Fine Chemicals Division, Mumbai-Agra Road,

Balkum, Thane-400 608, Maharashtra.

DURATION OF PROJECT

04/06/2008 to 01/08/2008

HOW THE PROJECT WAS CARRIED OUT

With a field force of about 3,000, companies sales, marketing and distribution

network is among the largest in the country. Companies business is spread throughout

the world, as it is one of the well known manufacturers of Vitamin A. First i have studied

all the sales targeted by the company for current financial year and credit period

the have decided to customers based on various factors. Then i made the break-up of

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the credit period and analyze the places where the reduction is possible. Finally I have

made an attempt to reduce the credit period wherever possible.

OBJECTIVE OF THE PROJECT

1. To analyze the procedure of allowing the credit period to debtors.

2. To reduce the debtor’s days and minimize the risk of bad debts.

3. To study the Export procedure & documents.

I N D E XTOPIC Page no.

CHAPTER: - 1

Company Introduction 12-21 Company Vision & Mission 13

History of PIRAMAL Group of Companies (Formerly known as NPIL)

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Corporate Strategy & Corporate Structure 16-17

Sites of PHL in UK & INDIA 17

VFCD Profile 18-19

Product Details 20

Organizational Structure 21

CHAPTER:-2

Research Methodology 22-25

Object of the Study. 23

Objective of the project 23

Approach to Research 23

Data collection 24

1. Primary data

2. Secondary data

Limitations of the Project 25

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Data Analysis 25

CHAPTER:-3

Project Theory 26-40 Receivable management & A/C Receivable 27-30

Credit management & Credit decision process 31-34

Export Procedure & export Documents 35-40

TOPIC PAGE NO.

CHAPTER:-4

Practical Insights of Project 41-52

Observation And Analysis of given transaction/orders 41-46

Final Break-up of credit period 47-49

Possible reduction of credit period 50-52

CHAPTER:-5

Conclusions 53-55

- General conclusions 54

- Company specific conclusion 55

CHAPTER:-6

Suggestions & 56-57

Recommendations 57

CHAPTER:-7

Bibliography 58-59

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CHAPTER: - 1

Company Introduction

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Piramal Healthcare Limited (PHL)

Mission

Making a difference to the Quality of Life by reducing the burden of disease.

Vision

To become the most admired pharmaceutical company in India with leadership in

market share, research and profits by:

Building distinctive sales and marketing capabilities

Evolving from licensing to global launch of own patented products

Inculcating a high performance culture, being the partner of choice

Always adhering to ‘our values’ based on our obligations as trustees of customers,

employees, shareholders and society

We shall pursue world-class standards in our People, Products, Processes,

Partnerships and Performance

Encouraging Innovation and Nurturing Intellectual Capital

Corporate Values

Continually enhancing value for our customers with quality products and services to

meet their changing needs.

Empowering our employees, encouraging innovation and entrepreneurship in an

environment which makes work fun.

Steadily building wealth for our shareholders

Contributing to the well-being of society and the environment.

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Continually enhancing value for our customers with quality products and services to

meet their changing needs

Empowering our employees and encouraging innovation and entrepreneurship in an

environment which makes work fun.

H I S T O R Y

The company was formed when the Piramal Group acquired Nicholas Laboratories,

a small formulations company in 1988 from Sara Lee.

Piramal Healthcare Ltd (formerly Nicholas Piramal India Ltd) is the flagship company

of the Rs. 2500 crore (US $ 500 million) Piramal Enterprises (PEL), one of India's largest

diversified business houses. The Group is headed by Mr. Ajay Piramal, who is also the

Chairman of Piramal Healthcare Ltd, and among the most respected names in Indian

industry.

Piramal Healthcare Ltd is one of India's largest companies with an unmatched

record of managing JVs/Alliances/Partnerships, and a proven commitment to IPR. With

strong brand management and sales capabilities, a US FDA site-approved plant for on-

and-off patent APIs and Intermediates, Basic Research, Process Innovation, Custom

Chemical Synthesis, Formulations R&D, NDDS, and a world-class, accredited Clinical

Research Organisation, PHL is poised to emerge as India's pharma powerhouse.

Revenues for FY2008 up by 16% to Rs. 28.7 billion, Operating Profit for the year

crosses Rs. 5 billion, Net Profit up by 53% to Rs. 3.3 billion making FY2008 a landmark

year for the Company

PHL's biggest brands in the pharma business are Phensedyl, Ismo, Supradyn,

Gardenal, Stemetil, Haemaccel and Rejoint - these bring in 67 per cent of the business,

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while its secondary brands which include Paraxin, Flagyl and Omnatax contribute around

24 % of its revenues.

It is a leader in the Cardio-vascular segment. It has a strong presence in Antibiotics

and Respiratory segments, Pain management, Neuro-psychiatry and Anti-Diabetics

segments. The company is also making forays into Biotechnology in key therapeutic areas

for which it has formed several global alliances

PHL has joint ventures and alliances with some of the finest global names in the

industry which include F. Hoffmann-La Roche Ltd., Switzerland; Allergan Inc., USA; UK;

Gilead Sciences, USA; Cheissi, Italy; and IVAX Corp; UK.

Some of PHL's major acquisitions include the Indian operations of Roche Products

Ltd., Boehringer Mannheim India Ltd., Hoechst Marrion Roussel Ltd,'s Research Centre,

Rhone Poulenc India Ltd., ICI India Ltd.'s Pharma Division and Aventis' Research facilities. 

PHL's core strengths are its 2700-strong field force that offers it the depth and width in the

Indian market.

Corporate Strategy

PHL's medium-term business model envisages achieving leadership in the domestic

pharmaceuticals market, and building a strong de-risked international business around

our core strengths in manufacturing, marketing and R&D.

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Piramal Healthcare Limited has an unmatched record of managing Joint

Ventures/Alliances/Partnerships and a proven commitment to IPR. Capabilities include

sales & marketing, a US FDA site-approved plant for on-and-off patent APIs and

Intermediates, Basic Research, process innovation, Custom Chemical Synthesis,

Formulations R&D, NDDS, and a world-class Clinical Research Organization.

Piramal Enterprise has range of business like Textile, Engineering, Glass,

Pharmaceutical, Apparel Retail, Mall Management, Real Estate and Food Retail etc.

CORPORATE STRUCTURE

Board of Directors:

Mr. Ajay G. Piramal Chairman

Mr. Y. H. Malegam Director

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Dr. Swati A. Piramal Director - Strategic Alliances &

Communication

Mr. S. Ramadorai Director

Mr. Deepak Satwalekar Director

Mr. R. A. Shah Director

Mr. N. Vaghul Director

Mr. Keki Dadiseth Director

Mr. N. Santhanam Executive Director & Chief

Financial Officer

The services of PHL are offered from its sites in UK & India .

PHL at present has 4 sites in UK at Huddersfield, Morpeth, Billingham and Grangemouth. While the first three sites offer PMS services, Grangemouth site offers manufacturing services in the High Potency APIs segments

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VITAMINS & FINE CHEMICALS DIVISION

The Piramal Group acquired shareholding of F.Hoffmann-La Roche Ltd.,

Switzerland, in the Indian subsidiary, Roche Products Limited. Post acquisition, the

company was renamed as Piramal Healthcare Ltd.

Piramal Healthcare Limited was later merged with the group’s flagship Pharma company

Nicholas Piramal India Ltd (now named as Piramal Healthcare Ltd.)

Piramal Healthcare Limited's Vitamin and Fine Chemicals Division has been

manufacturing and selling the most IMPORTANT MICRONUTRIENT - VITAMIN A, for the

last 40 years. Since the takeover of the plant in 1993, chairman is Mr. Ajay Piramal &

President is Mr. Mick Fernandez. The plant is run professionally and is meeting with the

country's requirements in total. The VFCD division achieved a turnover of Rs.76 crores

during the F.Y. 2007-08. The division has set a target turnover of Rs.108 crores for the

current year.

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Piramal Healthcare is the largest and the only producer of Vitamin A in South Asia.

Maintaining World-class quality standards is an obsession with top management and

percolates to every level, making the plants a landmark of quality. The plant at Thane have

obtained the coveted ISO 9001 & ISO 14000 certificates and also the SQF 2000 & HACCP

Certification.

Vitamin A is the main product of VFCD

Core Strengths of VFCD manufacturing facility apart from Vitamin A

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Liquid Ammonia based Cryogenic reactions (upto minus 40 0 C )

Lithium Ammonia reactions -Berch reduction type

High vacuum (1 -2 mm Hg abs) fractionation with Sulzer column ( 22 ft high) and

packed columns

Grignard reactions

Atmospheric Hydrogenation using Lindlar catalyst

Lindlar catalyst regeneration facility

Capacity for Tretinoin Manufacturing

Methyl Vinyl Ketone (MVK ) manufacturing capability and surplus capacity

Betaionone manufacturing capability and surplus capacity

Nitrogen generation plant for inertization of vessels

Molecular Sieves based Solvent Drying plant, currently for Diethyl Ether Drying

All Stainless Steel reactors and piping

ISO - 9001 and ISO - 14001 certified

Product Details PRODUCT RANGE:

1. Human Nutrition & Health (HNH)

2. Animal Nutrition & Health (ANH)

3. Cosmetics & perfumery

PRODUCT VARIETY:

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In HNH product range the company produces: Pharma Grade Products

a) Food Grade Products

b) Customized Premixes

In ANH product range the company produces:

a) Feed Grade Products

b) Customized Premixes

ORGANIZATIONAL STRUCTURE OF VFCD,PHL,Thane.

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PRESIDENT: OPERATIONS

HOD Institutional Business

HOD Mktg. (Domestic)

HOD API MktgHOD Strategic

Planning HOD Finance UNIT HEAD

MGR. Institutional business

Domestic Mktg. & Disstig. Staff

Export teamMKTG.

PerfumeryHOD Excise HOD P& A HOD Engg.

HOD Prod.(Chem.)

HOD EPS/SAFETY

HOD LOG (purchase)

HOD Prod. (CF) HACCP-TL

HOD QA / TQM (MR)

Export Doc.

Finance/ A/C Staff

HOD IT

QA Staff RA Staff

HOD PCL

HOD R& D(CF)MGR R&D

Chem.

QA Staff RA Staff

HOD MS/PPC

VICE_PRESIDENT QA

GM_QC CORPORATE

HOD QC

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CHAPTER: - 2

Research Methodology

Research Methodology

Objective of the project

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1. To study the concept of working capital at Piramal Healthcare Ltd (VFCD)

Thane.

2. To study the receivable management in PHL.

3. To analyze the process of credit decision-making.

4. To find out the possible way to reduce the credit period allowed to

customers.

Object of the study

As part of MBA curriculum Course it is mandatory for every student for the

completion of 2 years MBA course to do a SUMMER PROJECT after 1st year of the

course in any organization for a period of near about 2 months. This is with a view to

help the students to learn partially in the corporate sector the theory implications

taught in the class room. To fulfill this requirement, I have taken up a project on

STUDY OF RECEIVABLE MANAGEMENT AND CREDIT ANALYSIS in Piramal

Healthcare Ltd (VFCD), Thane.

Approach to Research

Research is considered to be the more formal, systematic and intensive

process of carrying on a scientific method of analysis. Research methodology is a

way to systematically solve the research problem. It is important for research to

know not only the research method but also the methodology. “The procedures by

which researchers go through their work of describing, explaining and predicting

phenomenon are called methodology.”

Data Collection

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Data Collection is an important step in methodology of any project and

success of any project will be largely depend upon how much accurate you will be

able to collect and how much time, money and efforts will be required to collect the

necessary data.

1. Primary Data:

The Primary Data is a fresh and first hand data which is collected for the first time

and happen to be original in character.

We have collected the information and data through formal and informal

discussions with our professional guide in the organization, and through personal

interviews of the Marketing persons and the people who handle all export

transaction of the company; and also the keen observation method is also used for

collection for primary data collection.

2. Secondary Data:

The secondary data is the data which have already collected and stored. We can

easily get secondary data from records, journals, annual reports, newsletters and

books. It will save the time, money and efforts in collecting the data.

We also have collected the data related receivable management & credit

judgement from annual reports, website of Piramal healthcare, newsletters, books, &

related reports of inventory from project guide.

Limitations Of Study

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1. The study of this project is restricted to the only few customers depend upon

their potential and their position in the market.

2. The study of this project limited to the boundary of NLC (national level of

credit.

3. The duration of the project was short to collect all the information required.

4. Company has some financial information secrecy regarding its policies, which

was not disclosed at the time of the project.

Data Analysis

Data analysis has been carried out in this way-

1. First of all I collect the data required from the company website and the

reports from official documents.

2. Then I analyze the report of sales projected for current financial year.

3. Secondly I sort out the customers and countries that have credit period 90

days, 60 days & 30 days.

4. Then I found out the break up of that credit period by discussing with

concerned people.

5. Then I made out the beak up and try to found the event whher I could find

the scope for reduction.

6. Finally, I select few customers and formulate the sheet showing reduction

in their credit period.

In this I have completed my project.

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CHAPTER: - 3

Project Theory

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Working Capital

Working Capital refers to the cash a company requires in order to finance its day to

day business operations or it is the amount of capital which is readily available to an

organization.

Working Capital = Current Assets – Current Liabilities

Working capital refers to a firms short term assets and short term liabilities

includes accounts receivable, inventory and accounts payable how much cash to keep on

hand, inventory to carry, credit terms to offer to customers are examples of working capital

management decisions

Working Capital Cycle

1. Purchase of raw material

2. Conversion of R.M. to F.G

3. Sale of F.G. &

4. Realization of A/c receivable

•The firm has to maintain cash balance to pay the bills as they come due.

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•In addition, the company must invest in inventories to fill customer orders Promptly.

•And finally, the company invests in accounts receivable to extend credit to customers.

•Operating cycle is equal to the length of inventory and receivable conversion periods.MANAGEMENT OF WORKING CAPITAL ( WCM )MANAGEMENT OF WORKING CAPITAL ( WCM )

Management of working capital is concerned with the problems that arise in Management of working capital is concerned with the problems that arise in

attempting to manage the current assets, the current liabilities and the inter-attempting to manage the current assets, the current liabilities and the inter-

relationship that exists between them. In other words, it refers to all aspects of relationship that exists between them. In other words, it refers to all aspects of

administration of CA and CL.administration of CA and CL.

Working Capital Management Policies of a firm have a great effect on its Working Capital Management Policies of a firm have a great effect on its

profitability, liquidity and structural health of the organization.profitability, liquidity and structural health of the organization.

PROFORMA - WORKING CAPTIAL ESTIMATESPROFORMA - WORKING CAPTIAL ESTIMATES

MANUFACTURING CONCERN

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STATEMENT OF WORKING CAPITAL REQUIREMENTS Amount (Rs.)Current Assets(i) Stock of R M( for ….month’s consumption) -----(ii)Work-in-progress (for…months)(a) Raw Materials -----

(b) Direct Labour -----(c) Overheads -----(iii) Stock of Finished Goods ( for …month’s sales)(a) Raw Materials -----(b) Direct Labour -----(c) Overheads -----(iv) Sundry Debtors ( for …month’s sales)(a) Raw Materials -----(b) Direct Labour -----(c) Overheads -----(v) Payments in Advance (if any) -----(iv) Balance of Cash for daily expenses -----(vii)Any other item -----Less : Current Liabilities(i) Creditors (For….. Month’s Purchases) -----(ii) Lag in payment of expenses -----(iii) Any other ----- WORKING CAPITAL ( CA – CL ) xxxxAdd : Provision / Margin for Contingencies -----NET WORKING CAPITAL REQUIRED XXX

Receivable

Money which is owed to a company by a customer for products and services provided on credit. This is treated as a current asset on a balance sheet. A specific sale is generally only treated as an account receivable after the customer is sent an invoice.

Day’s receivable

A measure of the average time a company's customers take to pay for purchases, equal to accounts receivable divided by annual sales on credit times 365.

Accounts Receivable – AR

Money owed by customers (individuals or corporations) to another entity in exchange for goods or services that have been delivered or used, but not yet paid for. Receivables usually come in the form of operating lines of credit and are usually due within a relatively short time period, ranging from a few days to a year.

Accounts receivable are not limited to businesses - individuals have them as well. People get receivables from their employers in the form of a monthly or bi-weekly paycheck. They are legally owed this money for services (work) already provided.

Net Receivables

A company's accounts receivable (money owed to the company) minus bad debts. If a company estimates that 2% of its sales are never going to be paid, then net receivables equals 98% (100% - 2%) of the accounts receivable.

Whether a business is growing too fast or the customers are paying too slowly, a cash crunch is the likely result. As companies grow, it is natural that more and more of their sales get locked up in receivables. While retailers may be immune from this particular problem, most businesses are not.

A/C Receivable

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The role of Accounts Receivable departments, and finance as a whole, is rapidly transforming in today’s enterprise. Formerly thought of as a purely administrative role, A/R functions extending from credit and collections to cash management are now being viewed as a strategic cornerstone that can deliver unprecedented competitive advantage and greater profitability for leading corporations.

  Recent surveys of forward thinking companies have cast a clearer light upon the forces which are currently driving A/R departments. A/R departments are under pressure to provide strategic information around cash flow to CFOs and treasury groups, and at the same time to better manage the customer-to-cash cycle and improve transactional efficiencies. Mastering this three-part role of strategic financial guidance, revenue management, and low-cost efficiency is crucial to building high performance A/R departments. However, many companies face the challenge of fusing these three, often divergent, roles into one streamlined and effective organizational entity.

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CREDIT MANAGEMENT

Credit Management embraces all the activities designed to manage and protect a

company’s investment in receivables.

‘Receivables’ are amounts of money owed to the company (seller) by its customers

(buyers) for goods (including raw materials and/or services) supplied to the customers.

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It is the role of Credit Management to support the Sales Force in its efforts to

maximize sales without endangering the survival of the company.

Sales of goods are the only source of revenue and the main source of funds for

future growth for most businesses.

Credit Management has an equally important investment management role.

In many companies the investment in receivables is one of the largest assets

appearing on the balance sheet and one which demands a significant commitment of

precious working capital resources. An increase or reduction in the amount invested in

receivables will usually have a significant (negative or positive) impact on the company’s

cash flow and on the company’s cash cycle.

The ‘cash cycle’ is the time required to convert goods into cash; from the date the

company pays the costs of acquisition of the goods to the date of receipt of the cash from

related sales.

When a company agrees to deliver goods, without receiving immediate payment, it

gives "credit" to the buyer.

It has been said that "a sale is a gift until it is paid for" - this maxim emphasizes

firstly that the seller gives the buyer free use of the goods for a period of time and secondly

that often in the sale process a tangible asset (goods) is converted into an intangible asset

(receivables).

Competition between sellers is the main motivation behind any offer to provide

credit.

In a situation of monopoly supply the seller can demand terms such as "cash in

advance" but where competition is the rule credit terms can offer a major source of

competitive advantage.

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In fact when the ‘product’ offered for sale is a ‘commodity’ (such as a certain type of

crude oil) it is often true that, when comparing offers made by competing sellers, delivery

dates are not materially different and transport arrangements are similar. In such

circumstances offering unique credit terms may be the only way to win a buyer from the

competition.

It is therefore correct to remark that Credit Management has become an important

'sales tool'.

In a world of increasingly transparent markets (markets where all relevant

information is freely available to buyers and sellers) the importance of the role of credit

terms in providing a competitive advantage is growing.

Nonetheless the risk of loss of a receivable and the danger which this presents to

the survival of the company is still the compelling force behind the need for Credit

Management. The loss of a large amount of working capital in this way would almost

inevitably lead to the failure of a company.

However this risk should not be eliminated, it must rather be managed. Risk is an

essential business ingredient hence the belief that "taking risk offers reward”. The reverse

is a business truism stated thus; "no risk equals no reward".

The Credit Decision Process

Marketing contact

Credit investigation

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Customer contact for information

Finalize written documents, e.g.. security agreements

Establish customer credit file

Financial analysis

Credit Period

The average length of time between the purchase of inputs and the payment for

them. Equal to the average level of creditors divided by the purchases on credit per

day.

Credit Risk

The risk that counterparty to a financial transaction will fail to fulfil their obligation.

Debtors

those who owe a debt.

Debtors Conversion Period

The average number of days to convert customer debts into cash

OBJECTIVES

The objective of Receivables Management is to take sound decision as regards to

investment in Debtors.

“To promote sales and profits until that point is reached where the return on

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investment in further funding of receivables is less than the cost of funds

raised to finance that additional credit”

Features

1. Improve customer satisfaction.

Enhance service levels and increase retention with customized information, history,

and notes that are easily accessible when working with customers.

2. Take control of sales processes.

Manage your sales process more effectively by measuring trends and analyzing

performance with comprehensive customer tracking combined with sales tracking by

person or territory.

3. Enhance the productivity.

Help reduce administrative costs and enhance office productivity with automated

receipt processing and posting and personalized statement cycles that fit your

customers and business.

4. Streamline revenue allocation.

Simplify the task of deferring revenues over multiple periods with automatically

managed calculations and journal entries customized to fit your business needs.

5. Provide access to vital information.

Find the information you need to make more effective business decisions with

comprehensive reporting capabilities and straightforward customer account and sales

performance tracking.

Export Procedures

Format of export order at VFCD

The execution of export order follows a definite procedure of 13 steps-

1. Having an export order

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2. Examination and confirmation of order

3. Manufacturing or Procuring goods

4. Clearance from Central Excise

5. Pre-shipment Inspection

6. Appointment of Clearing and Forwarding Agents

7. Goods to Port of shipment

8. Port formalities & Custom clearance

9. Dispatch of Documents by Forwarding Agent to the exporter

10.Certificate of Origin

11.Dispatch of shipment Advice to the importer

12.Submission of Documents to Bank

13.Claiming export incentives

Every exporter should take following initial steps -–

1. Obtain BIN (Business Identification Number) from DGFT. It is a PAN based number

2. Open current account with designated bank for credit of duty drawback claims

3. Register licenses / advance license / DEPB etc. at the customs station, if exports are

under Export Promotion Schemes

38

Marking and Labeling

Goods must be labeled and marked. Shipping marks are important to the safe and

speedy transfer of the products. In fact, marks, complying with legal requirements, assist

carriers and Custom Authorities to identify the goods. Common shipping marks are the

identification of the importer, the number of the packing case, the port of destination, gross

and net weight, outside measurements of the case, the country of origin and cautionary

marks if careful handling is needed. However, rules applying to shipping marks can vary

according to the country of destination.

Labeling requirements vary according to the country of destination. Normally,

detailed rules are applied to foodstuff, pharmaceuticals and cosmetics, textile and

garments. The importer provides details on labels according to the requirements in the

country of destination.

Export Clearing

Once the goods are loaded on board, the clearing agent prepares the Export

Declaration Form. This is a document stating that the goods have been exported. The

Export Declaration Form is submitted to the Customs Authorities, when presenting the

documents for shipment.

Content of the Export Declaration Form

It describes the products, states their value and weight, and specifies the country of

destination, port of embarkation and arrival, the name of the exporter and the carrier.

Fees & Taxes

There are no taxes, tariffs or duties to pay on exports. The importer will pay the required

duties and taxes at the port of destination. Port fees to be paid are 1.3% of the value of the

shipment.

Transportation

39

The exporter should contract a trucking agency to transport the goods from the

warehouse to the port of embarkation. Goods can be transported to the port area in

containers or in other transport cases. In the latter case, the clearing agent, the trucking

agency or the forwarding company could load the container. If the goods are transported in

containers from the warehouse, then the exporter must arrange with the shipping or

forwarding company for the container to be brought and filled at the factory. Generally, the

exporter fills the container at the factory when goods are not packed in carton boxes.

Export documents

1. Official Documents

Official documents are documents required for the purpose of official (regulatory)

authorization to export. Official documents are either submitted to the appropriate authority

for legalization or are issued by an appropriate authority. Without local authorization (from

competent Jordanian authorities), you will not be permitted to ship your goods out the

country.

1. Customs or Export Declaration

2. An export License or Authorization

3. A wharfage order (for sea freight)

4. A pre-shipment inspection certificate

5. A certificate of origin

6. A health certificate

2. Commercial Documents

These are documents, which support the sales contract between the exporter and importer.

They are issued by the exporter confirming that he/she has met all the terms and conditions

of the sales contract. Examples of commercial documents are:

40

1. Commercial invoice

2. Packing list

3. Beneficiary certificate

4. Verification documents

Invoice

An Invoice contains the name of the exporter, terms of payment, unit price, total price,

quantities and weight of the goods. There are differences between pro-forma and

commercial invoices. The pro-forma invoice is a document prepared by the exporter in

response to a sales order or inquiry. Its receipt by the importer does not obligate the

potential buyer to purchase the product. A commercial invoice, sent by the exporter,

includes specifications that both parties have agreed upon in advance and must be printed

on the exporter’s official letterhead. The importer should sign a copy and return it to the

exporter. The commercial invoice could be a copy of the pro-forma invoice if that was

unchanged by sales negotiations.

Packing List

A Packing List should be prepared by the producer/exporter. The packing list indicates the

gross and net weight of the cargo, invoice number and the importer’s name. It clearly states

all products sent by the exporter as well as the number of pallets, boxes, the contents of

each box and the type of products, their quality and specifications.

3. Transport Documents

Transport documents are distinguished from the commercial documents in that they

represent a contract of carriage with a third party. Transport documents are fundamental to

the payment and delivery process in an import transaction.

41

There are three main types of transport documents that can be used in international

transport. They are:

1. Airway bill

2. Bill of lading

3. Consignment note

Bill of Lading

A Bill of Lading is the transportation contract between a carrier and the owner of the

goods. The carrier issues it and can be negotiable and non-negotiable. Negotiable means

that the goods can be traded while in transit.

Airway Bill

An Airway Bill (for airfreight) is a document constituting the carrier’s confirmation of

receipt for transport. The carrier issues it and is only non-negotiable, therefore the goods

cannot be traded while in transit.

The purpose of all transport documents is to:

-Provide proof that the carrier has received the goods,

-Show evidence of a contract of carriage, and

-Produce a freight bill (information on transport details and costs)

4. Insurance Documents

Insurance documents also constitute evidence of a contract with a third party,

namely the insurance company and therefore must be distinguished from the commercial

documents.

42

The two main insurance documents are:

-Insurance certificate

-Insurance policy

5. Some other documents required

Customs export declaration

Inspection report

Technical standard/health certificate

Terminal handling receipts

Free On Board - FOB

Fob means that the seller delivers when the goods pass the ship’s rail at the named

port of shipment. This means that the buyer has to bear all costs and risks of loss of or

damage to the goods from that point. The fob term requires the seller to clear the goods for

export. This term can be used only for sea or inland waterway transport .A trade term

requiring the seller to deliver goods on board a vessel designated by the buyer. The seller

fulfills its obligations to deliver when the goods have passed over the ship's rail.

When used in trade terms, the word "free" means the seller has an obligation to

deliver goods to a named place for transfer to a carrier. Contracts involving international

transportation often contain abbreviated trade terms that describe matters such as the time

and place of delivery and payment, when the risk of loss shifts from the seller to the buyer,

as well as who pays the costs of freight and insurance.

43

CHAPTER: - 4

Practical Insights of The Project

44

Review of VFCD

Piramal Healthcare Limited's Vitamin and Fine Chemicals Division has been

manufacturing and selling the most IMPORTANT MICRONUTRIENT - VITAMIN A and

its various commercial forms, dry powder, Liquid, pharmaceutical formulations and bulk

drugs at the Thane factory. Apart from this they also manufacture Vitamin Premixes for

Human Nutrition and Animal Nutrition.

VFCD produces following percentage of products mainly-

1. ANH - 15%

2. HNH - 14%

3. Pharma - 15%

4. Institutional Business - 03%

5. Cosmetics - 04%

6. Fragrance & Flavor - 07%

In my project I covered the customers of international market because it generates

more revenue for us. How the company follows up the order and how it records the

transaction. Along with that I have covered the points that company takes into

account while deciding the credit period.

PHL (VFCD) takes use of SAP software for sales transaction-

45

SAP Stands For :

Systems Applications and Product in Data Processing

Modules implemented by SAP

SD – Sales and Distribution

FI – Financial Integration – Statutory/External Reporting

In SAP Group code & Account Range of following sales terms is as follows

DRS-SUNDRY DEBTORS-4200000-4229999

SLS-SALES-5000000-5099999

Masters in SAP For Sales

Customer Master: - Important fields in material master.

Broadly divided into General Data, Co Code Data, Sales Area

Customer Code : Customer code series has been defined as

Export Starting with 5 ……. (6 digit code)

Domestic Starting with 5 ……. (8 digit code)

Customer Name

Country Name - Defines Geographical area.

Division - Defines Customer Belongs to which Division.

Distribution Channel - Defines type of sale like export, direct, consignee

Payment Terms - Defines Credit Period

Reconciliation Account - Defines Control Account in GL for Sub ledger

Tax Classification - Defines Relevant to Tax or Not

Report on receivable management :-

46

I have studied the files of work projected to be done by Mr. Yogesh Pawar sir

in the financial year 2008.

I have done this analysis from it –

Credit allowed to all countries is reasonable

However there is a scope for reduction in credit limit for some cases

Analysis is as follows-

1. Bangladesh - in this country many customers have paid through l/c at sight, only

one case of WFP Bangladesh follows their standard credit terms & procedures

by taking credit of 30 days.

Customer NameSales Bud (Rs Lacs)

GM (Rs Lacs) GM % Pay Term

No of Shipments

Credit Days

Credit Limit

KAZI FARMS LIMITED 130 33 25% L/C at Sight 6 30

2,000,000

WFP Bangladesh 62 20 32% DA 30 Days 6 30

1,000,000

New customers 43 17 40% TT Payment 0 -

ESKAEF BANGLADESH LTD. 30 8 28% LC at Sight 6 30

500,000

(blank) 20 14 69%

Opsonin Pharma Limited 18 5 28% L/C at Sight 5 30 400,000

Micronutrient Initiative 6 3 55%

2. Sri Lanka: - In Sri Lanka many customers paid their payment in advance

and some takes the credit of 30 days. Out of which there is a scope of reduction

in credit period is observed in case of Astron limited. As order of Astron ltd. Is of

only 100gm and time required for shipment is only 5 days at max. So we can

stretch the credit period upto 5 to 10 days.

Customer Name

Sales Bud (Rs

Lacs)GM (Rs Lacs) GM %

Pay Term

No of Shipments

Credit Days

Credit Limit

47

LWL CHEM INTERNATIONAL 71 38 53%DA 30 Days 8 30

900,000

New customers 22 11 49% -

Cereal Products 7 4 59%Advance 0 -

UNILEVER CEYLON LTD. 5 3 56%DA 30 Days 3 30

200,000

Milco 2 1 34%Advance 0 -

ASTRON LIMITED 1 0 -1%DP at Sight 30 -

Sunrich Confectionaries 1 0 -6%D/P at Sight 30 -

3. Ethiopia :- In Ethiopia all customers pay their payment by L/c at sight or by

negotiation

; Though here credit of 30 days was allowed but it is at optimum level, so

there is no scope for reduction in credit period.

Customer Name

Sales Bud (Rs

Lacs)GM (Rs Lacs) GM % Pay Term

No of Shipments

Credit Days Credit Limit

MY Global 51 31 61% LC at Sight 3 30 1,800,000 Faffa Food Share Company 23 14 61% LC at Sight 3 30 800,000

Guder Agro 6 4 61%LC By Negotiation 2 30 300,000

4. Pakistan: - In Pakistan all customers pay their payments in advance

except the WFP Islamabad, which follow their own credit terms and

procedures by taking credit of 30 days.

Customer Name

Sales Bud (Rs

Lacs)GM (Rs Lacs) GM %

Pay Term

No of Shipments

Credit Days

Credit Limit

48

New customers 25 12 49% -

Milestone Marketing 15 3 17% 3 500,000

WFP Islamabad & Afghan 12 8 65%DA 30 Days 2 30

600,000

Habib Oil Mills 5 1 17% 1 500,000

Sadiq Vegetables 5 1 17% 1 500,000

Kisan Vegetable 5 1 17% 1 500,000

Then Finally I have selected few customers from these all and analyze their credit

period break up and try to reduce it as follows-

Total Time Break-up

COUNTRY CUSTOMER PRODUCT BYTRANSIT TIMT

COUNTING

SHIPMENT TIME

CUSTOM CLEARAN

CE

MONEY TRANSF

ER

BANK ADVIC

ETOTA

L

BANGLADESH WFP

VIT PREMIX SEA 21 3 3 2 3 4 36

SRI LANKA

ASTRON LIMITED Tretinoin AIR 3 0 3 2 3 4 17

SRI LANKA

LWL CHEM INTERNATI

ONAL   SEA 8 3 3 2 3 4 23

SRI LANKA

UNILEVEL CEYLON

LTD.NICOVITI

N ULE AIR 1 1 2 2 3 4 13

Conclusion

49

COUNTRY CUSTOMERTYPE OF

CUSTOMER

CREDIT PERIOD

ALLOWEDTOTAL TIME

EXTRA FOR SALE

STRETCH UPTO

BANGLADESH WFPFINAL

CONSUMER 30 36 -6 0

SRI LANKAASTRON LIMITED

FINAL CONSUMER 30 17 13

WEAK CO.

SRI LANKA

LWL CHEM INTERNATIO

NAL DISTRIBUTOR 30 23 7 D

SRI LANKA

UNILEVEL CEYLON

LTD.FINAL

CONSUMER 30 13 17REPUTED

CO.

Similarly,

I have studied the files of work projected to be done by Mr. Dhawal Kulkarni sir in

the financial year 2008. I have selected few customers from these all and analyze their

credit period break up and try to reduce it as follows-

I have done this analysis from it –

Total Time Break-up

COUNTRY COMPANY

TYPE OF CUSTOME

R PRODUCT QUANTI

TY BYTRANSIT TIME

COUNTING

SHIPMENT TIME

CUSTOM

CLEARANCE

TOTAL

USA

AGD NUTRITIO

NDISTRIBU

TOR

Vitamin A Palmitate

1.7 mIU/gm 100 SEA 33 3 3 3 42

ISRAELTEVA

ISRAEL

FINAL CONSUM

ERVitamin D3 200 50 AIR 2 2 3 3 10

USATEMPO

CANADADISTRIBU

TOR

Dl-Alpha Tocopher

ol 1000 SEA 42 3 3 3 51

CANADATEMPO

CANADADISTRIBU

TORVitamin D3 850 100 AIR 4 1 3 3 11

COUNTRY COMPANY

TYPE OF CUSTOME

R PRODUCT QUANTI

TY BYTRANSIT TIME

COUNTING

SHIPMENT TIME

CUSTOM

CLEARANCE

TOTAL

CANADATEMPO

CANADADISTRIBU

TORVitamin D3 850 200 AIR 6 1 3 3 13

CANADATempo Canada

DISTRIBUTOR

Vitamin Premix-

CAN- 250 AIR 4 3 3 3 13

50

Akuna 03

CANADATempo Canada

DISTRIBUTOR

Mineral Premix-

CAN-Akuna E 100 AIR 4 3 3 3 13

Conclusion

COUNTRY COMPANYTYPE OF

CUSTOMER

CREDIT ALLOWE

D TOTALEXTRA DAYS

STRETCH UPTO

USA AGD NUTRITIONDISTRIBUT

OR 90 42 48 60

ISRAEL TEVA ISRAELFINAL

CONSUMER 60 10 50 30

USA TEMPO CANADADISTRIBUT

OR 90 51 39 60

CANADA TEMPO CANADADISTRIBUT

OR 90 11 79 60

CANADA TEMPO CANADADISTRIBUT

OR 90 13 77 60

CANADA Tempo CanadaDISTRIBUT

OR 90 13 77 60

Similarly,

I have studied the files of work projected to be done by Mr. Vikram sir in the

financial year 2008. I have selected few customers from these all and analyze their

credit period break up and try to reduce it as follows-

Total Time Break-up

COUNTRY

COMPANY PRODUCT

QUANTITY in KG BY

TRANSIT

TIMTCOUNTI

NGSHIPMENT TIME

CUSTOM

CLEARANCE

MONEY TRANSF

ERBANK

ADVICE TOTAL

51

SOUTH AFRICA M & A

RSA Wheat Premix 3000 SEA 30 3 3 2 3 4 45

BRAZILDINALA

B

Vitamin A 100 WM 1220 AIR 7 2 3 2 3 4 21

PERUESKE

GROUPChispita

s20000

00 SEA 75 7 10 2 3 4 99

Conclusion

COUNTRY COMPANYTYPE OF

CUSTOMERCREDIT

ALLOWED TOTAL EXTRASRETCH

UPTO             

SOUTH AFRICA M & A DISTRIBUTOR 90 45 45 DBRAZIL DINALAB DISTRIBUTOR 90 21 69 D

PERUESKE

GROUP DISTRIBUTOR 90 99 -9 NO

Similarly,

I have studied the files of work projected to be done by Mr. Mahesh sir in the

financial year 2008. I have selected few customers from these all and analyze their

credit period break up and try to reduce it as follows-

Total Time Break-up

COUNTRY CUSTOMER PRODUCT QUANTITY

IN KG

CREDIT PERIOD

ALLOWED BYTRANSIT

TIMT TOTAL

52

BANGLADESH WFP VIT PREMIX   30 SEA 21 21

EGYPT LUNA CORPORATION     90 AIR 3 3

SRI LANKA ASTRON LIMITED Tretinoin 0.1 30 AIR 3 3

SRI LANKALWL CHEM

INTERNATIONAL     30 SEA 8 8

SRI LANKAUNILEVEL CEYLON

LTD.NICOVITIN

ULE600

BOTTLES 30 AIR 1 1

Conclusion

COUNTRY

TYPE OF CUSTOME

RCOUNTI

NGSHIPMENT

TIME

CUSTOM CLEARAN

CE

MONEY TRANSFE

RBANK

ADVICE TOTALEXTRA

FOR SALESTRETCH

UPTO                   

BANGLADESH

FINAL CONSUME

R 3 3 2 3 4 36 -6 0EGYPT AGENT 3 3 2 3 4 18 72 NO BUZZ

SRI LANKA

FINAL CONSUME

R 0 3 2 3 4 17 13 WEAK CO.

SRI LANKADISTRIBU

TOR 3 3 2 3 4 23 7 D

SRI LANKA

FINAL CONSUME

R 1 2 2 3 4 13 17REPUTED

CO.

For Final analysis I have selected few customers at random and then carried out the

total analysis as follows

Observation

TYPE OF CUSTOMER country Buyer Name BY

transit time

extra ime for pay total CP(O)

DISTRIBUTOR USA AgD Nutrition SEA 33 57 90 90

DISTRIBUTOR CANADA Tempo Canada AIR 4 56 60 60

DISTRIBUTOR CANADA Tempo Canada AIR 6 54 60 60

53

DISTRIBUTOR CANADA Tempo Canada AIR 4 56 60 60

DISTRIBUTOR CANADA Tempo Canada AIR 4 56 60 60

DISTRIBUTOR USA Tempo Canada SEA 42 48 90 90FINAL CONSUMER

SRI LANKA

Unilever Sri Lanka AIR 1 29 30 30

Total Time Break-up

country

Buyer Name Product

TYPE OF CUSTO

MER CP(O)TOTAL

RES.TIMEEXTRA DAYS

REDUCe extra days

STRETCH CP

UPTO

USA

AgD Nutritio

n

Vitamin A Palmitate

1.7 mIU/gmDISTRIB

UTOR 90 49 41 11 60/TT

CANADA

Tempo Canad

aVitamin D3

850DISTRIB

UTOR 60 20 40 10 30

CANADA

Tempo Canad

aVitamin D3

850DISTRIB

UTOR 60 21 39 9 30

CANADA

Tempo Canad

a

Vitamin Premix-

CAN-Akuna 03

DISTRIBUTOR 60 20 40 10 30

CANADA

Tempo Canad

a

Mineral Premix-

CAN-Akuna E

DISTRIBUTOR 60 18 42 12 30

USA

Tempo Canad

aDl-Alpha

TocopherolDISTRIB

UTOR 90 56 34 4 60/TTSRI

LANKAUnil Sri Lanka

Nicovitin ULE

FINAL COMER 30 17 13 0 TT

Conclusion

Product Qty

extra timE for

payCHECKIN

GSHIPMENT TIME

CUSTOM CLEARAN

CE

MONEY TRANSF

ER

BANK ADVIC

E TOTAL DIFFVitamin A Palmitate

1.7 mIU/gm 100 57 3 3 3 3 4 16 41Vitamin D3

850 100 56 3 3 3 3 4 16 40Vitamin D3

850 200 54 2 3 3 3 4 15 39Vitamin Premix-

250 56 3 3 3 3 4 16 40

54

CAN-Akuna 03

Mineral Premix-

CAN-Akuna E 100 56 1 3 3 3 4 14 42

Dl-Alpha Tocopherol 1000 48 1 3 3 3 4 14 34

Nicovitin ULE 600 29 3 3 3 3 4 16 13

For above analysis I have CALCULATED THE TIME PPERIOD FROM

FOLLOWING DATES FOR RESPECTIVE ORDERS OF CUSTOMERS

Buyer Name

Date OF DISPATCH(from

company)Date of

Shipment(port) Date of Delivery Payment DateAgD Nutrition 28.05.2008 29.05.08 02.07.2008 29.08.2008

Tempo Canada 20.06.2008 21.06.08 25.06.2008 21.08.2008Tempo Canada 24.06.2008 25.06.08 01.07.2008 25.08.2008Tempo Canada 10.06.2008 13.06.08 17.06.2008 13.08.2008Tempo Canada 10.06.2008 13.06.08 17.06.2008 13.08.2008Tempo Canada 10.06.2008 18.06.08 30.07.2008 18.09.2008

Teva Pharmaceuticals 18.06.2008 18.06.08 20.06.2008 18.09.2008

Unilever Sri Lanka 28.05.2008 28.05.08 29.05.2008 25.06.2008

55

CHAPTER: - 5

Conclusions

Company Specific Conclusions

Company has to look to enhance their productivity, so that they can fulfill the customer requirement on time and follow for their own credit standards.

They have to demand for the reduction for credit period as per the customer, whether customer is distributor, agent or final consumer.

Also have to try to stretch the customer where we have monopoly about the product.

As per the observations I mentioned the conclusions as follows-

56

1. In USA, For Tempo Canada we have to set credit period of 60days, because though he is a distributor we already allowing him a extra 40 days for selling of goods, so it is possible to stretch him on 60 days from 90 7 120 days.

2. In Canada, for Tempo Canada We can stretch him to credit period of 30 days from 90 days. Because he is getting goods within 25 days if consignment is by air and it will takes 40 days if by sea, he is getting extra period of 40 days. So it is possible to stretch him.

3. While in Cases like Astron Ltd. 7 Uniliver Cyclone In Sri lanka, they are the final consumer and they are getting the goods within 10 to 15 days by sea or by air. So it is possible to demand for advance or TT payment from them.

Company have to set some credit standard for each country or each customer based on the factors mention below-

VFCD (PHL) have to allows credit to its customers according to these factors

• Type of business

• Product

• Financial position of firm

• Credibility

• Intermediator agent

• Profit margin

• Sales budgeted

• ECGC cover

• Previous relation with company

• Country policies

• Bank assistance

• Company norms & background

57

• Past experience

Avoid these issues in receivable management

• weak credit judgment

• Delay in collection procedures

• Delay in issue of invoices or statements

• errors in invoices or statements

• customer dissatisfaction

General Conclusions

• Simple Improvements in credit policy

• Discounts offered wherever it fits to the RBI norms

• Demand for more order if we have monopoly for the product

• To bound customers offer free samples for better industrial relationship

• Following the past records to avoid bad debts by the use of ECGC

• Credit standards set for particular customers as per their NLC

58

CHAPTER: - 6

Suggestions &

Recommendations

Suggestions & Recommendations

• Have the right mental attitude to the control of credit and make sure that it gets the priority it deserves.

59

• Establish clear credit practices as a matter of company policy.

• Make sure that these practices are clearly understood by staff, suppliers and customers.

• Be professional when accepting new accounts, and especially larger ones.

• Check out each customer thoroughly before you offer credit. Use credit agencies, bank references, industry sources etc.

• Establish credit limits for each customer... and stick to them.

• Continuously review these limits when you suspect tough times are coming or if operating in a volatile sector.

• Keep very close to your larger customers.

• Invoice promptly and clearly.

• Consider charging penalties on overdue accounts.

• Consider accepting credit /debit cards as a payment option.

• Monitor your debtor balances and ageing schedules, and don't let any debts get too large or too old.

60

CHAPTER: - 7

Bibliography

Bibliography

1) Company Website: www. nicholaspiramal .com &

www.vfcd nicholas .com

61

2) Company sales report & Sales orders of financial year 2008

3) For export documents www.doingbusiness.com

62