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A

PROJECT REPORT ON

RECEIVABLES MANAGEMENT
IN
HINDUJA FOUNDRIES LTD .(DCU)
Submitted to
JAWAHAR LAL NEHRU TECHNOLOGICAL UNIVERSITY
In partial fulfillment of the requirement
For the award of the degree of
MASTER OF BUSINESS ADMINISTRATION

BY
Mr.V.VIJAYA BHASKARAM REDDY

HI-TECH COLLEGE OF ENGINEERING & TECHNOLOGY


Gandipet, Himayath Nagar, C.B.Post Hyderabad 500075
2008-2010

CERTIFICATE

This is to certify that Mr.V.VIJAYA BHASKAR


REDDY bearing Roll No. 08J11E0058 has submitted the
project

title

RECIEVABLES

MANAGEMENT

in

HINDUJA FOUNDRIES(DCU),HYD-39,for the partial


fulfillment of requirements for the award of the Degree of
Master of Business Administration (M.B.A) with FINANCE
specialization form Hi Tech College of Engineering &
Technology, Hyderabad (affiliated to JNTU, Hyderabad),
during the academic year 2008-2010. It is a bonafied work
done and has been found worthy of acceptance according to
the requirements of the University.

(G.VEERESH REDDY)
MBA.
Asst.Professor
Internal Guide

(Prof. P.BALA ANJI REDDY)


professor & Head,
Dept. of Management

ACKNOWLEDGEMENT

I wish to express my deep sense of gratitude to all those people who


have encouraged me by giving their valuable suggestions during the
project period and motivated me towards my goal.
My thanks to our Head of

Department, Dr.P.BALANJI REDDY

without whose help and encouragement I would have not completed


my project.
I wish to express my sincere thanks to Mr.K.UDAYA BABU- A.G.M
(FIN & ACC) of M/S HINDUJA FOUNDRIES LTD(DCU),HYD39.Who have provided me an opportunity to do my project work in
HINDUJA FOUNDRIES (DCU), HYDERABAD
I am grateful to my external guide Mr.A.V.UMA MAHESHWAR RAO
-

A.M(FIN

&

ACC)

of

M/S

HINDUJA

FOUNDRIES

LTD(DCU),HYD-39.For his whole hearted cooperation during my


project work at M/S HINDUJA FOUNDRIES LTD(DCU),HYD-39.
I wish to express my thanks to my internal guide, Mr.G.VEERESH
REDDY, Assistant Professor of MBA Department for his valuable
suggestions and guidance during the course of my project work.
My expressible gratitude to my parents and my friends who have
provided me worth all the facilities and are always supportive to me in
completing my project work successfully.

PLACE:
DATE:

(V. VIJAYA BHASKAR REDDY)

DECLARATION

I here by declare that the project report title, RECEIVABLES


MANAGEMENT

in

M/S

HINDUJA

FOUNDRIES

LTD(DCU).Submitted by me to the Department of Business


Management, Hi-Tech Engineering College, JNTU, Hyderabad, is a
Bonafide work undertaken by me and it is not submitted to any other
University or Institution for the award of any degree diploma
certificate published anytime before.

(V.VIJAYA BHASKAR REDDY)


H.T.NO:-(08J11E0058)

CONTENTS
Chapters

Particulars

Page

no
I

INTRODUCTION
Introduction
Objectives of Study
Scope of the Study
Research methodology
Limitations

II

INDUSTRY &
COMPANY PROFILE

III

THEORTICAL CONCEPTS

IV

DATA ANALYSIS &


INTERPRETATION

FINDINGS
SUGGESTION
CONCLUSION

VI

BIBLIOGRAPHY

Chapter-1
Introduction

Introduction
Accounts receivable
Money owed to a business by customers who have bought goods or
services on credit. Accounts receivables are current assets that
continually turn into cash as customers pay their bills. Also
called receivables.

Money owed by customers (individuals or corporations) to vendors in


exchange for goods or services rendered. Receivables usually come in
the form of operating lines of credit and are usually due within a
relatively short period, ranging from a few days to a year. On a balance
sheet, AR often is recorded as an asset because it represents cash
legally owed by a customer.

Investopedia explains Accounts Receivable (AR)


When a company has receivables, that means that it has made a sale
but has not collected the money from the purchaser yet. Most
companies operate this way. This allows frequent customers to avoid
the hassle of making cash payments for each transaction. In other
words, the company receives an IOU for goods or services rendered.
People have ARs as well in the form of a monthly or biweekly
paycheck. It's the company's IOU for services (work) rendered. ARs
are the opposite of APs (accounts pay
The classification of an option contract as either a put or a call.
Receivables Management means planning, organizing, directing and
controlling of receivables.

Definition:
In the accounting system, the entries in the accounts receivable ledger
represent amounts of money you are owed. These amounts are usually
the result of the sale of assets or for services you have provided.
A separate accounts receivable ledger is used if your business sells to
customers on credit.

Money which

is

owed

to

a company by

a customer for

products and services provided on credit. This is treated as a current on


a balance

sheet. A specific sale is

generally

only

treated

as

an account receivable after the customer is sent an invoice.


Also Known As: A current asset on your balance sheet.
Common Misspellings: Accounts receivable; accounts receivable.
Examples:
A customer who purchases your product on credit would be listed in
your accounts receivable ledger. This ledger would list each customer
by name alphabetically, and contain a running total of his or her
charges.

OBJECTIVES OF THE STUDY

To study the current receivables management policy of the


company.
To maintain investment in debtors at optimum level.

To study the average credit period in order to prevent undue


credit exposure.
To maintain good customer relationship.

METHODOLOGY
The study is not aimed at collecting information from source, the
players of the industry with sample survey.
Secondary data is the main source i.e., information from industry fro
the effective study of the receivables management.

The basic date for the study from industry will be the profit and loss
accounts and Balance sheet of the unit for the past Four Years.
The database so collected will be analyzed using different accounting
ratios to find out how effective the receivables management in the
organization is.

PERIOD OF STUDY
For the Financial periods of 4 years
1. 2005-2006
2. 2006-2007
3. 2007-2008
4. 2008-2009
(STUDY AND ANALYSIS FOR 45 DAYS)

SCOPE OF THE STUDY


The impact of receivables management in the castings industry is to
promote better quality of castings and expand the casting industry to
give better quality components to the automotive industry and tractors
industry at reasonable price

NEED OF THE STUDY


Need of Receivable Management arises only when merchandise is sold
on credit. If a company makes all sales for cash, it would have no
accounts receivable and therefore, the question of management of such
assets does not arise at all. Although concessions like price discount
are granted to include customers to make immediate cash payment,
practice of extending credit to the customers is very popular. If other

concerns engaged in the same line of business activity are selling


goods on liberal credit terms, the firm will have to pursue liberal
lending policy to maintain volume of sales. Since trade credit device is
used too stimulate sales, there is a greater possibility of business profits
to expand.
The customers from whom receivables or book debts have to be
collected in future are Called trade debtors or simply as debtors and
represent the film` s claim or asset.
Receivable Management is to maximize the value of the firm by
achieving the trade off between liquidity and profitability. In fact the
firm should manage its credit in such way that sales are expanded to an
extent to which risk remains within and acceptable limit. Thus, to
achieve the goal of maximizing the value, the firm should manage its
trade credit:
The aim of credit management should be to regulate the control these
costs. A dynamic credit policy and management will help to optimize
sales at a minimum cost. Thus the objective of receivable management
to promote sales and profits until that point is reached where the
return on investment in future funding receivables is less than the costs
of funds raised to finance that additional credit.

LIMITATIONS OF THE STUDY


This study is based on records of past four years company
Profit & Loss Account, Balance Sheets and other records.
Decisions taken for better relation with big customers to
continue the better business relations.

Government policies and tax system on the business condition


in respective years will have much influence on business
decisions. (Increase in power Tariff etc.).
Liberal credit policies in the recession period to survive in the
industry will have impact strategic decisions like price
reduction, installment system of payment. Zero percent interest
system etc.
Maintenance of international standards in quality and price
impact of competitive market. (High quality & low price).
Shortage of raw materials & Consumables due to natural
calamities during the study period will have impact.

Chapter-2
INDUSTRY&COMPANY
PROFILE

INDUSTRY PROFILE

Casting Industry is the foundation of the automobile and tractor


industry. This industry is playing very important role in catering the
growth of our economy.

In recent years India playing a key role in the world economy by


producing high power engine machinery, heavy trucks fro industrial
requirement & trucks for goods as well as public transportation.
From M/s. Kirlaskar Cummins Ltd., Pune and supplying to all
parts of the world including Korea and Japan. Ashok Leyland and
Telco are making heavy trucks for goods transportation and passenger
Trucks for public transportation. These companies are selling their
trucks in all parts of the world. There are many casting foundries in the
country. M/s. Ennore Foundary limited, Chennai is the foundary which
is a sister concern of Ashok Leyland supplies 90% of components
required by Ashok Leyland. M/s. Kirloskar Foundries Ltd at Hospet,
supplies some portion of castings required for their engines.

India is basically an agricultural country. For better out put


from the agriculture sector the tractor industry is providing the easy
methods of cultivation to the formers with well equipped instruments.
Now-a-days Tractors are helping the framers in planting, Spraying
pesticides and ploughing the land. Once crop is over, the tractors are
helping the former in cutting the crop and in transporting to the
required place. In this way directly or indirectly casting industry is
talking the leading role in the countrys economy. For this achievement
M/S. HINDUJA FOUNDRIES LTD (DUCTRON CASTINGS UNIT)
is playing major role in providing required requirements to the tractor
producers.

COMPANY PROFILE
MANAGEMENT: - Founded In 1948, Ashok Leyland has emerged
to be a leading manufacturer of commercial vehicles in India. From 7.5

T GVW to 125 T GTW for goods transport and from 19 seaters to 80


seaters forpassengertransport, Ashok reliability, ruggedness, superior
performance and durability. With the entry of the Hinduja Group and
European trucking giant IVECO as principal shareholders in 1987,
Program. Today, it has an installed annual capacity of 50,000 vehicles
and 60,000 engines. Employing

14.500 people, it has six

manufacturing plants: Ennore and Housur (two plants) in Tamilnadu,


Alwar in Rajasthan, Bhandara in Maharashtra and a castings unit i.e.,
DUCTRON CASTINGS UNIT at Hyderabad, Andhra Pradesh. The
registered office of the company is at Rajaji Salai, Chennai.

UNIT LOCATION: - This unit is spread over 15 acres in Uppal


Industrial

Development

Area,

Uppal

Hyderabad.

This

Unit

manufactures of SPHEROIDAL GRAPHITE IRON CASTINGS


(popularly known as SG Castings) & GRAY IRON CASTINGS
(popularly known as GI castings) required for the automobile and
tractor industries.

CAPACITY AND CAPABILITY:- In line with the high growth


levels in the Indian automobile industry, DCU plans to expand its
production capacity and widen its customer base both within India and
in the overseas market. DCU has an installed capacity of 3000
MT/MONTH.

STRENGTH:-Ductron castings is a jobbing foundry is wellequipped with:

Electric induction melting, and Heat-treatment furnaces,

Simultaneous jolt squeeze molding and machines, shot-blasting


facilities,

state-of-the-art

high

pressure

dimension1150x750x350/350with

molding

production

line
rate

(box
of

60

boxes/hour),

In-house pattern making facility,

Fully automated high speed sand mixers(2 sand plants each of


60Tones/hour),

Sand conditioning equipment that includes sand cooler together


with process instrumentation,

Chemical, Sand and metallurgical laboratories.

Spectra meter for metallurgical testing

The latest core making facilities that are available

Hot box process (max.core dimn.450x700c200/100mm, 60


liters magazine capacity).

Shell process (450x225x1000mm).

Cold box process (900x700x100mm, 60 liter magazine


capacity) .

This unit is also blessed with 5 power generators with a capacity


1000kva each for continuous production even in the summer when
power cut is imposed.
Final castings after various processes of fetting, grinding, shot-blasting
are averaged and painted before shipment. Inspection marks every
stage of the process. The unit is equipped with non-destructive testing
facilities like ultra-sonic and x-ray. It is also ell staffed with qualified,
trained and experienced personnel at every level. The unit has installed
an effective system for dust and fume extraction.

CERTIFICATION: - Having complied with the requirements for


quality and testing, the foundry has been recognized by LLOYDS
REGISTER OF SHIPPING, LONDON, an internationally reputed
independent inspection agency, for manufacture of items like
crankshafts in SG iron.

DCU received the coveted ISO 9002 Accreditation in 1995. In 1998,


the QS 9000 certification was achieved.

OBJETCIVE: - It is the objective of HINDUJA FOUNDRIES


(DCU) Quality Policy to achieve customer satisfaction by meeting
customer expectations in relation to the products and services offered
by the company
Towards this objective, the Quality Policy of HINDUJA FOUNDRIES
is:
1)

To make continuous improvement in the products manufactured

by the company as also in the services offered by the company.


2)

To enhance employee potential to contribute to quality by

improving the knowledge and skills of the employees as appropriate to


their functions.
3)

To induce in vendors commitment to continuous improvement

to meet quality standards.

TO GATHER WE CAN is the slogan of HINDUJA FOUNDRIES.


Produced in bulk volumes, the products typically weigh about 25 to 90
Kgs per piece in SG iron Castings and 70 to 120 Kgs per piece in GI
Castings. More efficient melting, molding and core-making facilities
have been added to keep pace with the ever increasing demand for
heavier and complicated castings.

BUSINESS PLANS IN FUTURE:This unit is planning to provide 100% machined castings to the
customers to enable them to send the components directly to the
assembling line of machine by customer. For this purpose the

machining plant has been installed in the premises of the company.


90% of the installation work is completed by the end of this year . AS
customers are demanding for fully machined castings for their
production top management has taken this decision. Earlier we use to
supply raw castings and proof machined castings. The company is also
planning to increase its production capacity.

CHAPTER-3
THEORITICAL CONCEPT

POLICY IN RELATION TO RECEIVABLES


MANAGEMENT:
RECEIVABLES MANAGEMENT COMPRISES OF
COSTS OF RECEIVABLES:

1) Cost of Financing: The credit sales delays the time of sales


realization and therefore the time gap between incurring the cost and
the sale realization in extended. This results in blocking of funds for a
longer period. The firm on the other hand, has to arrange funds to meet
its own obligation towards payment to the suppliers, employees etc.
These funds are to be produced at some explicit or implicit costs. This
is known as the cost of financing the receivables.

2) Administrative cost : A firm will also be required to incur


various costs in order to maintain the record of credit customers both
before the credit sales as well as after the credit sales. Before credit
sales, costs are incurred on obtaining information regarding credit
worthiness of the customers; while after credit sales, the cost are
incurred o maintaining the record of credit sales and collection thereof.

3) Delinquency Costs: Over and above the normal and


administrative cost of maintaining and collection of receivables, the
firm may have to incur additional costs known as delinquency costs, if
there is delay in payment by a customer. The firm may have to incur
cost on reminders, phone calls, postage, legal notices etc, Moreover,
there is always an opportunity cost of the funds tied up in the
receivables due to delay in payment.

4) Cost of Default by Customers : If there is a default by a


customer and the receivable becomes, partly or wholly, unrealizable,
then this amount, known as bad debt, also becomes a cost to the firms.
This cost does not appear in case of cash sales.

The total cost of receivables consists of costs of finanacing, which


is a factor of time, plus cost of administration plus cost of delinquency

plus of default. But, the receivables does not result in increasing the
cost only, rather they bring some benefits also to the firm.

INCREASE IN PROFITS: Increase in sales will help the firm


(i) To easily recover the fixed expenses and attaining the break-even
level, and
(ii)Increase the operating profit of the firm. In a normal situation, there
is a positive relation between the sales volume and profit.

EXTRA PROFIT: Sometimes, the firms make the credit sales at a


price which is higher than the usual cash selling price. This brings an
opportunity to the firm to make extra profit over and above the normal
profit.

BENEFITS OF RECEIVABLES:
INCREASE IN SALES: Expect a few monopolistic firms; most
of the firms are required to sell goods on credit, either because of trade
customers or other conditions. The sales can further be increased by
liberalizing the credit terms. This will attract more customers to the
firm resulting in higher sales and growth of the firm,
Thus, the receivables bring some costs as well as benefits to the firm.
Both the cost and the benefits are to be looked carefully and a trade-off
between then m should be attempted.
The receivable management must be attempted by adopting a
systematic approach and considering the following aspects
1. THE CREDIT POLICY
2. THE CREDIT EVALUATION
3. THE CREDIT CONTROL

1. CREDIT POLICY: The credit policy is the set of


parameters and principles that govern the extension of credit to the
customers. This requires the determination of
I. The credit standard
II. The credit Terms.

I. CREDIT STANDARDS are criteria to decide the types of


customers to whom goods could be sold on credit. If a firm has more
slow-paying customers, its investment in accounts receivable will
increase. The firm will also be exposed to higher risk of default. If the
standards are set loosely, it may make the firm to bear loses. Therefore,
the problem is to balance the benefits of additional sales against the
cost of increasing bad depts.
The firms credit standards are influenced by three C of credit:

Character of customer to pay

Capacity of customer to pay and

Customers economic condition.

While setting the credit standards for a firm the following points are to
be noted:

Effect of a particular standard on the sales volume

Effect of a particular standard on the total bad depts. Of the


firms, and

Effects of a particular standard on the total collection cost.

II. CREDIT TERMS: The credit terms refer to the set of


stipulations under which the credit is extended to the customers. The
credit terms specify how the credit will be the offered, including the

length of the period for which the credit will be the offered, the interest
rest on the credit, and the cost of default.
The credit terms may relate to
a. Credit period
b. Discount terms

a)

CREDIT PERIOD: Credit period is an important aspect of the

credit policy. It refers to the lengthy of time over which the customers
are to allowed to delaying the payment. The credit period generally
varies from 3 days to 6 days. Lengthening the credit period increases
the sales by attracting more and more customers. The effect of
changing the credit period is similar to that of changing the credit
standard and hence requires careful analysis. The firm mists consider
the cost involved in increasing the credit period which will result in
increase in the investment in receivables.
b) DISCOUNT TERMS: The customers are generally offered
cash discount to induce them to make prompt payment. Different
discount rates may be offered for different periods. Eg.3/10, 2/20,net
30 means that 3% cash discount if payment made within 10 days:2%
discount if payment made with 20 days; otherwise full payment by the
end of 30 days from the date of sale. This will result in shortening of
the average collection period.
2.CREDIT

EVALUATION:

Credit

evaluation

involves

determination of the type of customers who are going to qualify for the
trade credit. Several costs are associated with extending credit to less
credit-worthy customers. When more time is spent investigating the
less credit worthy customers, the cost of credit investigation increases.
Default costs also very directly with the quality of the customers. As
the customers credit rating declines, the chance that the amount will
not be paid on time increases. Collection costs also increases as the
quality of the customers declines. More delinquent customers force the

firm to spend more time and money collecting them. In nutshell, the
decline in customers quality results in increased cost of default,
collection and credit investigation.
Assessment of the credit worthiness of a customer is subjective matter
and a lot depends upon the experience and judgment of the person
taking the decision, there are three basic factor of credit worthiness of
a customer.

First, the character i.e., the willingness and the practice of


the customer to honor his obligations by paying as agreed.

Second, the capacity i.e., the financial ability of the


customer to pay as agreed, and

Third, the collateral i.e., the security offered by the


customer against the credit.

Evaluation of credit worthiness of a customer is a two steps


procedure
(I) Collection of Information and
(II) Analysis of information.

COLLECTION OF INFORMATION: In order to better


decisions, the firm may collect information from various sources on
the prospective credit customers. The following are sources of
information which can provide sufficient data or information about the
credit worthiness of a customer:

Bank Reference: Trough the banks may be reluctant to give


financial information of its customers, yet may be asked to comment
on the financial position of a particular customer. The customer may
also be required to ask his bank to provide necessary information in
this respect.

Credit Agency Report: There are certain credit ratings agencies


which provide independent information on the credit worthiness of
different parties. These agencies gather information on the credit

history of different businessman and sell it to the firms, which want to


extend credit. Obviously, people who have failed to pay their bills in
the past are viewed as greater credit risk than those who have an unblemished credit record.

Published Information: The published financial statements of the


customers for few preceding years may also be taken as a source of
information, as they contain a lot of details regarding the operations.
Various ratios calculated on the basis of these financial statements
maybe throw light on the profitability, liquidity, and debt service
capacity of a customer.

Credit Scoring: If the credit request is large enough, then the firm
can send its own representatives/employees to collect information
about the customer. In this case, the customer may be evaluated
through the use of credit scoring which involves the numerical
evaluation of each of the new customers who receive a score based on
his answers to a simple set of questions. This score is then evaluated
accounting to a predetermined standard, its level relative to the
standard determining whether credit should be extended. The major
benefit of credit scoring is that it is relatively inexpensive and less time
consuming.
Information collected is often costly and therefore, firms also weigh
the benefits of gathering information against its costs. It should, in
particular, gather only as much as information is required and
necessary to find out the credit worthiness of the customer with a
reasonable degree of accuracy.

ANALYSIS OF INFORMATION: Once all the available credit


information about a potential customer has been gathered, it must be
analyses to reach at some conclusion regarding the credit worthiness of
customer. The five well known C`s of credit:

Character
Capacity
Capital
Collateral

Conditions

Provide a frame work for the evaluation o a customer.

These characteristics can throw light on the credit worthiness of a


default0-risk of the customer. Step-by-step analysis of information may
be made and assessment would be made at various to ascertain whether
further analysis is required or not. The firm should go further
information and analysis only if required. If it is evident at any state
that the customer has a satisfactory accredit worthiness, then there is
no need to go for costly exercise of further analysis. Where a
customers credit standing is either favorable or far below e-established
credit standards, the selection or rejection of a customer is an easy job.
The difficult arises in case f those, customer who are marginally credit
worth. In such a a situation, the financial manager must attempt to
balance the potential profitability against the potential loss for the
default.

CONTROL OF RECEIVABLES: If the credit has been


extended to a customer as per the credit policy, the next important step
in the management of receivables is the control of these receivables.
Merely setting of standards and framing a credit policy is not
sufficient; equally important is their effective implementation to
control the receivables. In this reference, the efforts may be required in
two directions as below:

1)THE COLLECTION PROCEDURE: Once the firm


decides to extend credit and defines the terms of credit sales, it must
develop a policy for dealing with delinquent or show paying
customers. There is a cost of both Delinquent customers create bad
debts and other costs associated with repossession of goods, where as
the slow paying customers cause more cash being tied up in
receivables and the increased interest cost. The firm should have a built

in system under which the customer may be reminded a few days in


advance about the bill becoming due. After the expiry of due date of
the payment, he firm should make statements, reminders, telephone
calls and even personal visits to the paying customer. Ultimately legal
action for recovery of due amount may also be resorted to; through it
can be very costly and time consuming. No doubt, those legal actions
may have little effect on the ability of the customer to pay, but it can
definitely speed up the legal relief.

The overall collection procedure of the firm should neither be too


lenient (resulting in mounting receivables) nor too strict (resulting
sometimes even loss of customers). Strict collection policy can affect
the good will and damage the growth prospects of the sales. If a firm
has a lenient credit policy, the customer with a natural tendency
towards slow payments, may become eve slower to settle his accounts.
Overly aggressive collection policy may offend good customers who
inadvertently have failed to pay in time. One possible way of ensuring
early payments from customers may be to change interest on over due
balances. But this penal interest and the rate thereof must be agreed in
advance and better written in the sale document. Thus, the objective of
collection procedure and policies should be to speed up the slow
paying customer and reduce the incidence of bad

2)MONITORING OF RECEIVABLES: In order to control


the level of receivables, the firm should apply regular checks and there
should be a continuous monitoring system. The financial managers
should keep a watch n the credit worthiness of all individual customers
as well as on the total credit policy of the firm. For this, numbers of
measures are available as follows:

a)

A common method to monitor the receivables is the collection

period or number of days outstanding receivables. The average


collection period may be found by dividing the average receivables by
the amount of credit sales per day i.e.

Average collection period = average receivables/credit sales per


day Number of days sales outstanding may be calculated,

b)

Aging Schedule: Is another technique available for

monitoring the receivables. The quality of the receivables of a firm can


be measured by looking at the age of receivables. The order the
receivables, the lower is the quality and greater the likelihood of a
default. In the aging schedule, the total outstanding receivables on a
particular day (at the end of a month or a year) are classified with
percentage of total receivables that fall in each age group. By
comparing the aging schedules fro different periods, the financial
manager can get ideal of any required change I the collection
procedure and can also point out these customers, which require
special attention. However, a basic shortcoming of the aging schedule
is that it is influenced by the change in sales volume.

c) Lines of Credit: Another control measure for receivables


management is the line of credit which refers to the maximum amount
a particular customer may have as due to the firms at any time.
Different lines credit may be allowed to different customers. As long as
the customers unpaid balance remain within this maximum limit, the
account may be routinely handled. However, if a new order is going to
increase the indebtedness of a customer beyond his line of credit, then

the case must be taken for a approval for a temporary increase in the
line of credit.
The lines of must be reviewed periodically fro all the
customers. This review of credit lines, however, need not necessarily
mean that credit lines must be changed. Rather, the credit line may
remain unchanged or may increase or reduced. In a extreme case, the
credit lines after a review may even be suspended if the experience
request for a review of credit line order to obtain more credit or more
liberal credit terms. Such a request should be looked into properly and
costs and benefits of extending credit terms should be evaluated.

d)

Accounting Ratios: Accounting information may be of

good help in order to control the receivables. Though, several ratios


may be calculated in this regard, two accounting ratios, in particular
may be calculated to find out the changing pattern of receivables.
These are
I. Receivables Turnover Ratio, and
II. Average collection period

Receivables Turn Over:


This is also called as Debtors Turnover or debtors Velocity. Of the
various methods of sales adopted by business concerns, one most
common method is t6o sell on credit. Every concern formulates a
credit policy and goods are sold to customers on credit in accordance
with such credit policy. Customers to whom goods are sold on credit
are called Debtors or Book-Debts in accounting language. In America,

they are called asAcconts Receivables. Sometimes, goods are sold to


such customers who are prepared to give their acceptance for bill or
Hundi in consideration of sales payments. The bills or Hundies
received from such customers are called Bills Receivables. In America,
these are called as Notes Receivables. Thus, total receivables of a
concern include book-debts or debtors and bills receivables. In short,
these two will be termed Recei
Average collection period:
It is most essential that a reasonable quantitative relationship between
outstanding Receivables and Sales should always be maintained. While
analyzing the operational efficiency of the concern, it is useful to
compare those debtors and bills receivables with sales. For this
purpose, Receivables turnover is found out. Receivables turnover
measures the number of times the receivables rotate in a year in terms
of sales Since it is calculated to measure the efficiency of credit policy
and credit collection, it is also sometimes expressed in terms of period
[ no. of days, weeks or months]

CHAPTER-4
FINDINGS,CONCLUSIONS
&SUGGESTIONS

SALES FOR THE PERIOD 2005-2009


PER DAY SALES IN LAKS
PARTICULARS
CUSTOMER PROFILE
OTHER CUSTOMER

2005-06

2006-07

2007-08

2008-09

Carraro india

2.91

3.32

3.59

2.03

Caterpiller

0.34

0.64

1.02

0.85

Escorts ltd

1.56

2.91

3.63

3.62

HV Axles

1.32

1.08

0.73

0.49

JCB India ltd

0.02

0.08

0.14

0.09

New Holland tractors

2.37

3.82

6.22

6.07

Shakthi Prec-others

2.14

0.37

0.2

0.55

TAFE

2.32

1.27

3.57

2.14

TATA Motors

1.26

1.23

1.39

1.68

Sub trotal-A

14.24

14.72

20.06

17.53

AL-Ennore

5.75

7.33

7.59

4.68

AL-Hosur1

6.17

4.77

4.7

1.93

AL-HOsur2

2.1

4.1

1.76

1.49

AL-Bhandara-others

0.9

1.11

0.85

0.69

Sub total-B

14.92

17.30

14.90

8.80

TOTAL

29.16

32.03

35.36

26.32

ASHOK LEYLANDS

PER DAY SALES (OUTSIDE CUSTOMERS)

X-AXIS-companies

Y-AXIS-rs in lakhs

PER DAY SALES (A L CUSTOMER PROFILE)

X-AXIS-companies
lakhs

Y-AXIS-rs in

INTERPRETATION (TOTAL SALES)


The company has sold goods worth RS 29.16 lakhs during 2005-06,
RS 32.03 lakhs during 2006-07 and RS 35.36 lakhs during 2007-08
but there is only sale of 26.32 lakhs during the year 2008-09. There is
a decrease of sale in the year 2008-09 worth RS 9.04 lakhs when
compare to the sale of 2007-08.As per company the decrease in sale
was due to market recession.

AVERAGE DEBTORS

IN LAKS

200506

200607

200708

200809

364.69
32.52
218.53
74.56
0.69
161.8
125.02
185.09
52.88
1216.3
9

429.47
34.31
260.72
98.87
3.04
212.87
26.93
129.33
61.93
1257.4
5

437.83
43.3
299.81
69.18
5.77
348.07
13.84
259.2
111.61
1585.6
2

261.61
30.3
291.94
54.92
7.5
430.56
50.97
287.5
138.48
1553.7
8

439.11
332.95
289.8
142.62
1204.4
8

462.45
295.43
198.01
140.79
1096.6
9

275.35
125.15
53.11
76.12

Sub total -B

378.48
302.73
266.62
130.11
1077.9
2

TOTAL

2294.3
1

2461.9
3

2682.3
1

2083.5
2

CUSTOMER PROFILE
OTER CUSTOMER
Carraro india
Caterpiller
Escorts ltd
HV Axles
JCB India ltd
New Holland Tractors
Shakthi Prec-Others
TAFE
TATA Motors
Sub total-A
ASHOK LEYLAND
AL-Ennore
AL-Hosur1
AL-HOsur2
AL-Bhandara-Others

529.74

AVERAGE DEBTORS

X-AXIS-companies
lakhs

(OUTSIDE CUSTOMERS)

Y-AXIS-rs in

AVERAGE DEBTORS

X-AXIS-companies

(A L CUSTOMERS)

Y-AXIS--rs in lakhs

INTERPRETATION (TOTAL SALES)


The company has sold goods worth RS 2294.31 lakhs during 2005-06,
RS 2461.91 lakhs during 2006-07 and RS 2682.31 lakhs during
2007-08 but there is only sale of 2083.52 Lakhs during the year 200809. There is a decrease of sale in the year 2008-09 worth RS 598.79
lakhs when compare to the sale of 2007-08.As per company the
decrease in sale was due to market recession.

AVERAGE COLLECTION PERIOD (DAYS)


PARTICULARS

2005-06

2006-07

2007-08

2008-09

CUSTOMER PROFILE
OTHER CUSTOMERS
Carraro india

125

129

123

129

Caterpiller

96

53

42

36

Escorts ltd

140

90

83

81

HV Axles

57

62

91

112

JCB India ltd

42

36

42

85

New Holland Tractors

68

56

56

71

Shakthi Prec-Others

59

72

69

92

TAFE

80

102

73

135

TATA Motors

42

50

80

82

AL-Ennore

66

60

61

59

AL-Hosur1

49

70

63

65

AL-HOsur2

127

71

112

36

AL-Bhandara-Others

145

129

166

110

ASHOK LEYLAND

AVERAGE COLLECTION PERIOD

(OUTSIDE

CUSTOMERS)

X-AXIS-companies

Y-AXIS--rs in lakhs

ASHOK LEYLAND CUSTMORS

X-AXIS-companies

Y-AXIS--rs in lakhs

NUMBER OF DELAY DAYS


CREDIT
PERIOD

200506

200607

200708

Carraro India

90 DAYS

35

39

33

39

Caterpillar

30 DAYS

66

23

12

Escorts ltd

72 DAYS

68

18

11

HV Axles

30 DAYS

27

62

61

82

JCB India ltd

30 DAYS

12

12

55

New Holland Tractors

30 DAYS

38

26

26

41

Shakthi Prec-Others

60 DAYS

28

25

47

TAFE

45 DAYS

35

57

28

90

TATA Motors

30 DAYS

12

20

50

52

AL-Ennore

30 DAYS

36

30

31

29

AL-Hosur1

30 DAYS

19

40

33

35

AL-HOsur2

30 DAYS

97

41

82

AL-Bhandara-Others

30 DAYS

115

99

136

80

PARTICULARS

200809

CUSTOMER PROFILE
OTHER CUSTOMERS

ASHOK LEYLAND

NUMBER OF DELAY DAYS(OUTSIDE


CUSTOMERS)

X-AXIS-companies
lakhs

Y-AXIS-rs in

ASHOK LEYLAND
CUSTOMERS

X-AXIS-companies
lakhs

Y-AXIS-rs in

INTERPRETATI0ON OF DELAY DAYS


The finance deportment informed that the company has taken
several steps in action to collect the money as per due date.
Step 1
The company has appointed local resident representative in order to
collect the money as per due date As and When amount are due.
Step 2
Company has demanded for AT-PAR cheques DEMAND DRAFT S
against their payments from customers in order to credit the payment
immediately soon after deposit of payments received.
Step 3
Company has taken further steps in collecting payments through
RTGS\ ELECTRONIC TRANSFER
supplier account in the banks.

from customer account to

Step 4
There is a time to time reconciliation with the customers in order to
confirm the due amounts from the customer.
Step 5
In case

of differences in due amount, the disputed amounts are

informed to the marketing department with a copy to head of


marketing , head of the plant and a copy to resident representative to
take necessary action to clear the disputed supplier or payment.

DATA & INTERPRETATIONS


SALES VALUE FOR THE FINANCIAL YEAR 20052009 (TOTAL SALES)
PERIOD

VALUES

2005-2006

10643.00

2006-2007

11691.08

2007-2008

12906.34

2008-2009

9610.38

INTERPRETATION (TOTAL SALES)


The company has sold goods worth RS 10643 lakhs during 2005-06,
RS 11691.08 lakhs during 2006-07 and RS 12906.34 lakhs during
2007-08 but there is only sale of 9610.38 lakhs during the year 200809. There is a decrease of sale in the year 2008-09 worth RS3295.96
lakhs when compare to the sale of 2007-08.As per company the
decrease in sale was due to market recession.
.

SALES VALUE FOR THE FINANCIAL YEAR 2005-2009


(OUTSIDE CUSTMERS)

PERIOD

VALUES

2005-2006

5195.95

2006-2007

5374.93

2007-2008

7466.96

2008-2009

6398.1

INTERPRETATION (OUT SIDE CUSTOMERS)

The company has sold goods worth RS 5195.95 lakhs during 2005-06,
RS 5374.93 lakhs during 2006-07 and RS 7466.96 lakhs during 200708 but there is only sale of 6398.10

lakhs during the year 2008-09.

There is a decrease of sale in the year 2008-09 worth RS1068.86 lakhs


when compare to the sale of 2007-08.As per company the decrease in
sale was due to market recession.
SALES VALUE FOR THE FINANCIAL YEAR 2005-2009
(ASHOK LEYLAND CUSTOMERS)
PERIOD

VALUES

2005-2006

5447.05

2006-2007

6316.15

2007-2008

5439.38

2008-2009

3212.28

INTERPRETATION (ASHOK LEYLAND (units))


The company has sold goods worth RS 5447.05 lakhs during 2005-06,
RS 6316.15 lakhs during 2006-07 and RS5439.38 lakhs during but

there was out side company demanded more material. Hence ashok
Leyland sales have come down. And 2007-08 but there is only sale of
3212.29lacs during the year 2008-09. There is a decrease of sale in the
year 2008-09 worth RS2227.09 lakhs when compare to the sale of
2007-08.As per company the decrease in sale was due to market
recession.

OUTSIDE CUSTOMERS
SALES VALUE FOR THE FINANCIAL YEAR 20052009
(CARRAO INDIA)
PERIOD

VALUES

2005-2006

1063.76

2006-2007

1211.68

2007-2008

1301.22

2008-2009

742.67

INTERPRETATION (CARRARO INDIA)

The company has sold goods worth RS 1063.76 lakhs during 2005-06,
RS 1211.68 lakhs during 2006-07 and RS 1301.22 lakhs during 200708 but there is only sale of 742.67

lakhs during the year 2008-09.

There is a decrease of sale in the year 2008-09 worth RS 558.55 lakhs


when compare to the sale of 2007-08.As per company the decrease in
sale was due to market recession.

SALES VALUE FOR THE FINANCIAL YEAR


2005-2009
(CATERPILLAR)
PERIOD

VALUES

2005-2006

124.14

2006-2007

234.57

2007-2008

372.72

2008-2009

310.52

INTERPRETATION (CATERPILLER)

The company has sold goods worth RS 124.14 lakhs during 2005-06,
RS 1234.57 lakhs during 2006-07 and RS 372.72 lakhs during 2007-08
but there is only sale of 310.52 lakhs during the year 2008-09. There
is a decrease of sale in the year 2008-09 worth RS 62.2 lakhs when
compare to the sale of 2007-08.As per company the decrease in sale
was due to market recession.

SALES VALUE FOR THE FINANCIAL YEAR 20052009


(ESCORT LTD)
PERIOD

VALUES

2005-2006

569.18

2006-2007

1062.22

2007-2008

1324.88

2008-2009

1321.49

INTERPRETATION (ESCORTS LIMITED)


The company has sold goods worth RS 569.18 lakhs during 2005-06,
RS 1062.22 lakhs during 2006-07 and RS 1324.88 lakhs during 200708 but there is only sale of 1321.49

lakhs during the year 2008-09.

There is a decrease of sale in the year 2008-09 worth RS 3.39 lakhs

when compare to the sale of 2007-08.As per company the decrease in


sale was due to market recession

SALES VALUE FOR THE FINANCIAL YEAR 2005-2009


(HV AXLES)
PERIOD

VALUES

2005-2006

480.17

2006-2007

392.94

2007-2008

265.56

2008-2009

179.56

INTERPRETATION (HV AXLES)


The company has sold goods worth RS 480.17 lakhs during 2005-06,
RS 392.94 lakhs during 2006-07 and RS 265.56 lakhs during 2007-08

but there is only sale of 179.56 lakhs during the year 2008-09. There
is a decrease of sale in continuously fall down. Why because, as per
company the decrease in sale was due to market recession

SALES VALUE FOR THE FINANCIAL YEAR 2005-2009


(JCB INDIA LTD)
PERIOD

VALUES

2005-2006

6.00

2006-2007

62.325

2007-2008

50.02

2008-2009

32.34

INTERPRETATION ( JCB INDIA LIMITED )

The company has sold goods worth RS 6 lakhs during 2005-06, RS


30.45 lakhs during 2006-07 and RS 50.02 lakhs during 2007-08 but
there is only sale of 32.34 lakhs during the year 2008-09. There is a
decrease of sale in the year 2008-09 worth RS 17.68 lakhs when
compare to the sale of 2007-08.As per company the decrease in sale
was due to market recession

SALES VALUE FOR THE FINANCIAL YEAR 2005-2009


(NEW HOLLAND TRACTORS)
PERIOD

VALUES

2005-2006

864.41

2006-2007

1395.65

2007-2008

2269.77

2008-2009

2216.26

INTERPRETATION (NEW HOLLAND TRACTORS)

The company has sold goods worth RS 864.41 lakhs during 2005-06,
RS 1395.65 lakhs during 2006-07 and RS 2269.77 lakhs during 200708 but there is only sale of 2216.26

lakhs during the year 2008-09.

There is a decrease of sale in the year 2008-09 worth RS 53.51 lakhs


when compare to the sale of 2007-08.As per company the decrease in
sale was due to market recession

SALES VALUE FOR THE FINANCIAL YEAR 2005-2009


(SHAKTHI PREC & OTHERS)

PERIOD

VALUES

2005-2006

781.64

2006-2007

136.26

2007-2008

72.97

2008-2009

202.08

INTERPRETATION (SHAKTHI PREC & OTHERS)

The company has sold goods worth RS 781.64 lakhs during 200506,but here compare to other products are demanded fallowing 2 years
RS 136.26 lakhs during 2006-07 and RS 72.97 lakhs during 2007-08
but there is only sale of 202.08 lakhs during the year 2008-09. There is
a increase of sale in the year 2008-09 worth RS 129.11

lakhs when

compare to the sale of 2007-08.As per company the increase in sale


was demand of product.

SALES VALUE FOR THE FINANCIAL YEAR 2005-2009


(TAFE)
PERIOD

VALUES

2005-2006

846.70

2006-2007

462.61

2007-2008

1302.05

2008-2009

780.09

INTERPRETATION (TAFE )

The company has sold goods worth RS 846.70 lakhs during 200506,but here compare to other products are demanded so sale are fall
down. RS 462.61 lakhs during 2006-07 and RS 1302.05 lakhs during
2007-08 but there is only sale of 780.09 lakhs during the year 2008-09.
There is a decrease of sale in the year 2008-09 worth RS 521.96lacs
when compare to the sale of 2007-08.As per company the increase in
sale was due to market recession.

SALES VALUE FOR THE FINANCIAL YEAR 2005-2009


(TATA MOTORS)
PERIOD

VALUES

2005-2006

459.95

2006-2007

448.56

2007-2008

507.76

2008-2009

613.1

INTERPRETATION (TATA MOTERS)

The company has sold goods worth RS 459.95 lakhs during 200506,but here compare to other products are demanded so this year sales
are fall down. RS 448.56 lakhs during 2006-07 and RS 507.76 lakhs
during 2007-08 but there is only sale of 613.10 lakhs during the year
2008-09. There is a increase of sale in the year 2008-09 worth RS
105.34

lakhs when compare to the sale of 2007-08.As per company

the increase in sale was demand of product.

ASHOK LEYLAND COMPANYS


SALES VALUE FOR THE FINANCIAL YEAR 20052009(AL-Ennore)
PERIOD

VALUES

2005-2006
2006-2007
2007-2008
2008-2009

2099.99
2675.00
2770.32
1708.00

INTERPRETATION (ASHOK LEYLAND (ENNORE))

`The company has sold goods worth RS 2099.99 lakhs during 200506, RS 2675 lakhs during 2006-07 and RS 2770.32 lakhs during 200708 but there is only sale of 1708 lakhs during the year 2008-09. There
is a decrease of sale in the year 2008-09 worth RS 1062.32 lakhs when
compare to the sale of 2007-08.As per company the decrease in sale
was due to out side company demanded more material. Hence ashok
Leyland sales have come down

SALES VALUE FOR THE FINANCIAL


YEAR 2005-2009(AL-Hosur I)

PERIOD

VALUES

2005-2006
2006-2007
2007-2008
2008-2009

2253.72
1741.60
1714.92
706.08

INTERPRETATION (AL-HOSUR I)

The company has sold goods worth RS 2253.72lacs during 2005-06,


RS 3893.755 lakhs during but there only sales are fall down of 2 years.
2006-07 and RS 3486.710 lakhs during and 2007-08r RS 706.08
lakhs during the year 2008-09. As per company the decrease in sale
was due to out side company demanded more material. Hence ashok
Leyland sales have come down

SALES VALUE FOR THE FINANCIAL


YEAR 2005-2009(AL-Hosur II)

PERIOD

VALUES

2005-2006
2006-2007
2007-2008
2008-2009

764.89
1495.66
646.93
544.72

INTERPRETATION (AL-HOSUR II)

The company has sold goods worth RS 764.89 lakhs during


2005-06, RS 1495.66 lakhs but here compare to other products are
demanded so sale are fall down during 2006-07 and RS 643.93 lakhs
during 2007-08 but there is only sale of 544.72 lakhs during the year
2008-09. There is a decrease of sale in the year 2008-09 worth RS
99.21lacs when compare to the sale of 2007-08.As per company the
increase in sale was due to market recession.

SALES VALUE FOR THE FINANCIAL


YEAR 2005-2009(AL-Bhandara &
Others)
PERIOD

VALUES

2005-2006
2006-2007
2007-2008
2008-2009

328.45
403.89
310.21
253.48

INTERPRETATION (AL BHANDARA & OTHERS)


The company has sold goods worth RS 328.45 lakhs during 2005-06,
RS 403.89 lakhs but here compare to other products are demanded so

sale are fall down during 2006-07 and RS 310.21 lakhs during 2007-08
but there is only sale of 253.48 lakhs during the year 2008-09. There is
a decrease of sale in the year 2008-09 worth RS 56.73lacs when
compare to the sale of 2007-08.As per company the increase in sale
was due to market recession.

CHAPTER-4

FINDINGS

During the project study we examine that the Receivables


Management performs it activities of how the various credit
policies are been maintained and controlled and how the
various credits are been provided to various individual
performing its functions.
The study generally refer to how the various credit polices,
costs, floats and aging schedules operates its functions and
manages in an organization structure and in order to develop
the performance of various policies and standards. which in
orderly develop and increases the organization structure and
develops its production.
The receivables management also study of how various cost
features and standards are handled and maintained in order to
provide credit various individuals and help in developing its
performance and maximizing its profits.

The HINDUJA FOUNDRIES LTD(DCU),HYD, as it is the one


of the largest casting unit in allover india which is in orderly
has to maintain the Receivables and to develop the cost of

various structures by providing the credits to various


individuals and institutions in order to perform its activities
well.

This

Receivables

management

work

efficient

in

an

organizational unit and also enhances the individuals and other


organizational units by providing the credit and by properly
maintaining the cost structure in an organization .It also found
that they are various Floats which helps in performing of
activities efficiently and effectively by properly maintaining the
Floats structure which helps in understanding individuals
properly in re-paying of its debts and bills which are been
incurred and have to re-pay at the time of due date. Thus this
type of proper maintenance will help in developing the
performance and maximizing the profits of an organizational
structure.

SUGGESTIONS
The receivables management which is generally laid out and
maintained in an organization for the maintaining the
relationship of various credit policies and other costs. So when
maintain receivables management maintained in providing
credit I suggest the HINDUJA FOUNDRIES LTD(DCU), must
have to do credit analysis through obtaining credit information
from banks, credits bureaus internal external sources etc. with
the help of which the organization can maintain a sustainable
and attain profit maximization.

According to me view I suggest the HINDUJA FOUNDRIES


LTD(DCU), must have to open a internet banking mechanism
in order to reduce the cost of collections and credits lended and
various float in cheque receipt, cheque deposit and its
clearance.

The organization HINDUJA FOUNDRIES LTD(DCU), while


maintaining the receivables management while providing the
credit to various individuals and owes assets to others must also
have to maintain a proper records and must have to carry out
the credit evolution of the customers by studying the credit

worthiness certificate from the bankers or any other consultants


etc, to know that how far the credit can be allowed to the
customers. By maintaining this proper records of various
individuals to whom the credit has been provided the
organization must maximize its profits and also enhance its
development in production.

As the various forms of acquiring the Assets & Liabilities has


been increasing the organization there will be various
opportunities of developing the production and maximizing the
profits can be enabled and can also lead to the development of
organization sector by enhancing more credits and evaluating
the cost structure.

To generate more profits in an organizational context


management of receivables whose main function is to provide
the credit forms to various individuals and organizations, I
would suggest that while providing the credit they must have to
provide the cash discounts. So that they can make a effective
and early recoveries and enhance in the development of the
organization and also to play a key role in developing the
organization in maximizing its profits and achieving its goals.

CONCLUSION
As we observed during the project study of Receivables Management
in the HINDUJA FOUNDRIES LTD (DCU), organization which the
main function is to operate various forms of credits to various
institutions and individuals and performing the various costs related
functions in the organization structure. The receivables management
owes a credit to various individuals in the form of the credit and will
improve its various forms of performance in an organizational unit.
This

receivables management will function according to the

developing the various forms by outlaying the credit to different


structure in an organizational limit .HINDUJA FOUNDRIES
LTD(DCU), is also with the receivables management is obtaining lot of
loans for working capital requirements and incurring lot of expenditure
towards interest payment due to which the cost per unit of generating is
gradually increasing. During the study of receivables management the
credit which has been given to various institutions shall be retained
with less than six months can be said as the good debts and from the
provided float chart in the study we can be said that HINDUJA
FOUNDRIES LTD (DCU), is taking lot of time for billing float and the
credit period float are found very large. Except these two floats all
other floats can be said to be reasonable. The receivables management
while providing the credit for the up liftment and developing the

performance at the same time it must have to recover it in time and


improve its performance in order to develop the production and
maximize the profits and achieve its goals.

CHAPTER-5
BIBOLIOGRAPHY

BIBLIOGRAPHY

1) References:
1. Financial Management by I.M.Pandey
2.Cost and Financial mgmt by S.N.Maheshwari
3.Financial Management
by K.Prasanna Chandra

2)

HINDUJA FOUNARIES ANNUAL REPORTS:

ANNUAL REPORT
ANNUAL REPORT
ANNUAL REPORT
ANNUAL REPORT

2005-2006
2006-2007
2007-2008
2008-2009

3)WEBSITES:

www.Hindujafoundaries.com