Accounts receivable management

A

Project Report on

“Account Receivable Management”

Submitted in the partial fulfillment of the requirements of

Post Graduate Diploma in Management

At

Indus Business Academy, Bangalore

Under the guidance of

Dr. Ramesh. S Mr. Lourd Raj

Mentor Manager

Indus Business Academy Sun Management Services

Bangalore -560062 Bangalore - 560047

Submitted By

Shubhransu Kumar Patel (FPB1214/137)

SIP Report On Account Receivable Management

Indus Business Academy

Director’s Certificate

This is to certify that Shubhransu Kumar Patel is a bonafied student of Indus

Business Academy, Bangalore and is presently pursuing his Post Graduate Diploma in

Management.

Under my guidance he has submitted his Project titled “Accounts Receivable

Management” at Sun Management Services in partial fulfillment of the

requirement during the Post Graduate Diploma in Management.

This project has not been previously submitted as part of another degree or diploma of

another Business School or University.

Dr. Subhash Sharma (Dean)


Lakshmipura, Thataguni Post,

Kanakapura Main Road,

Bangalore-560062

Tel: +91-80-28435931/2/3/4

Fax: +91-80-28435935

Email: [email protected]

URL: www.ibainternational.org



Mentor’s Certificate

This is to certify that Shubhransu Kumar Patel is a bonafied student of Indus

Business Academy, Bangalore and is presently pursuing his Post Graduate Diploma in

Management.

Under my guidance he has submitted his project titled “Accounts Receivable

Management” at Sun Management Services in partial fulfillment of the

requirement during the Post Graduate Diploma in Management.

This paper has not been previously submitted as part of another degree or diploma of

another Business School or University.

Dr. Ramesh. S (Mentor)




Bangalore-560062

Tel: +91-80-28435931/2/3/4

Fax: +91-80-28435935

Email:[email protected]

URL:-www.ibainternational.org



Declaration

I Shubhransu Kumar Patel the undersigned, a student of Indus Business Academy,

Bangalore, declare that this project report titled “Accounts Receivable Management”

in partial fulfillment of the requirement for the Summer Internship Program during the

Post-Graduation Diploma in Management.

This work has not been previously submitted by me as a part of any other degree or

diploma of another school or University.

Shubhransu Kumar Patel

FPB1214/137

PGDM 2012-2014




Bangalore-560062



Acknowledgement

I take this opportunity to thank my college, Indus Business Academy, Bangalore and

Mr. Manish Jain (CEO) for giving me a chance to do a summer internship project,

adding the experience of practical knowledge so important to understand and to try and

bridge the gap between theoretical and practical knowledge.

I also express my sincere gratitude to Dr. Subhash Sharma, Director, Indus Business

Academy and Dr. Ramesh. S Faculty of Indus Business Academy for their valuable

inputs.

I am thankful to Sun Management Services for giving me an opportunity to undertake

a project on “Account Receivable Management” and also for providing me all the

information required.

I express my gratitude to Mr. Lourd Raj, Head at Sun Management Services, who

through his vast experience and knowledge has been able to guide me, both ably and

successfully towards the completion of my summer internship project.

I am sincerely grateful for the assistance of several individuals, who have contributed

towards fulfillment of this report. The knowledge, experience, guidance and the most

important factors – support from these people are indeed valuable.

Shubhransu Kumar Patel

Indus Business Academy, Bangalore



Table of Contents Executive Summary ................................................................................................................ 7

Introduction ............................................................................................................................... 8

Industry Profile ......................................................................................................................... 9

India's top 10 telecom service providers in terms of revenue: ................................... 10

Porter's Five Force Model Analysis: ............................................................................... 15

Company Profile .................................................................................................................... 17

Comparative analysis of the Tata Teleservices Competitors: .................................... 21

Ratio Analysis: ................................................................................................................... 21

SWOT Analysis: ................................................................................................................ 25

Organizational Structure: ................................................................................................. 26

Account Receivable Management: ..................................................................................... 27

What is Receivables? ....................................................................................................... 27

Meaning of Account Receivables ................................................................................... 27

Definition of Account Receivables .................................................................................. 27

Importance of Receivables Management: ..................................................................... 28

Objective of Accounts Receivable Management: ......................................................... 29

Goals of Receivable Management: ................................................................................ 29

Different Type Of Cost Associated With Receivable Management: .......................... 30

Different Steps Involved In Debt Collection .................................................................. 33

Account Receivable Working Process Flow ................................................................. 37

Contribution ............................................................................................................................ 43

Aging Analysis ....................................................................................................................... 44

Research Methodology ........................................................................................................ 45

Statement of problem ....................................................................................................... 45

Objectives ........................................................................................................................... 45

Findings .............................................................................................................................. 45

Recommendations ............................................................................................................ 45

Webliography ......................................................................................................................... 47



Executive Summary

The project deals in Account Receivable Management with reference to the study

of Sun Management Services. Receivable management is one of the most

important aspects of the organization, as it deals with the management of the

outstanding. The profit of the company mainly depends on the accounts

receivables. Therefore it needs a careful analysis and proper management.

Debtors occupy an important position in the structure of current assets of a firm.

They are the outcome of rapid growth of trade credit granted by the firms to their

customers. Trade credit is the most prominent force of modern business. Company

in order to maintain its premium position and further to capture a greater amount of

market share in increasing domestic and international competition was compelled to

go by the industry norms and thus it ushered into the new era of credit sales. This

resulted in credit sales going up significantly. A credit limit was sanctioned to every

customer. The customers were required to pay the outstanding amount on the due

date.

This report discusses the importance of managing accounts receivable and provides

proven principles for achieving benefits such as increased cash flow, higher margins,

and a reduction in bad debt loss. The focus is primarily on commercial (business to

business) receivables management. The primary objective of the study was to

understand the mechanism of these processes, and work in the organizational

environment and also maintain the transparency of these processes.



Introduction

Accounts receivable represent the amount due form customers or debtors as a result

of selling goods on credit. Cash sales are totally riskless but not the credit sales, as

the same has yet to be received. To the buyer the economic value in goods and

services process immediately at the time of sale, while the seller expect an

equivalent value to be received later on. The cash payment for goods and services

received by the buyer will be made by him in a future period. The customer from

whom receivables or book debts have to be collected in future are called Trade

debtor and represent the firm’s claim on assets. Accounts receivable collection

becomes necessary when customers or clients do not pay their accounts when they

fall due, and when they become overdue.

It would be nice if everyone paid their invoices on time but this is the real world.

Some customers are conscientious, others are not

Some are disorganized with paperwork

Some don’t have the money because they

Didn’t budget to pay the bill,

Haven’t themselves been paid by their customers.

In which collection agency is a business that pursues payments of debts owed by

individuals or businesses. Most collection agencies operate as agents

of creditors and collect debts for a fee or percentage of the total amount owed.

Accounts Receivable Management module provides instant access to all of client

customer information.

http://en.wikipedia.org/wiki/Debt

http://en.wikipedia.org/wiki/Creditor



Industry Profile

India possesses a diversified communications system that links all pads of the

country by Internet, telephone, telegraph, radio, and television. None of the

telecommunications forms are as prevalent or as advanced as those in modern

Western countries, but the system includes some of the most sophisticated

technology in the world and constitutes a foundation for further development of a

modern network. The progress and the changes in telecom have been astronomical,

with new and cheaper technologies taking birth almost each year. With an addition of

18 million subscribers every month and contributing to nearly 2% of the Indian GDP,

Indian telecom industry is considered to be the largest telecom markets of the world.

Driven by wireless communication, the telecommunications industry is recognized as

a key to the rapid growth and modernization of the economy and an important tool for

socio-economic development for a nation.

Indian telecommunication industry is the world’s second largest in terms of number of

subscribers, and the world's fastest growing market in terms of number of new

subscriber India has the world's second largest mobile phone users with over 903

million as of January 2012. India has become the world's most competitive and one

of the fastest growing telecom markets.

Most of the telecommunications forms in India are as prevalent or as advanced as

those in modern Western countries, and the system includes some of the most

sophisticated technology in the world and constitutes a foundation for further

development of a modern network. Telecom Regularity Authority of India (TRAI) is

the sole authority empowered to take binding decisions on fixation of tariffs for

provision of telecommunication services.

The primary regulator of communications in India is the Telecom Regulatory

Authority of India. It closely regulates all of the industries mentioned below with the

exception of newspapers and the Internet service provider industry.

As the fastest growing telecommunications market in the world, India is projected to

have 1.159 billion mobile subscribers by 2013. Several leading global consultancies

estimate that India will become the world's largest mobile phone market by

subscriptions by 2013. 'The industry is expected to reach a size of ₹344.921 crore

(US$ 76.92 billion) by 2012 at a growth rate of over 26 per cent, and generate

employment opportunities for about 10 million people during the same period.



According to analysts, the sector would create direct employment for 2.8 million

people and for 7 million indirectly. In 2010-11 the overall telecom equipment revenue

in India stood at ₹136,833 crore (US130.51 billion) during the fiscal, as against

₹15,382 crore (US$ 25.73 billion) a years before.

India's top 10 telecom service providers in terms of revenue:

1. Bharti Airtel

Bharti Airtel retained its leading position among telecom service providers and posted

a growth of five per cent to end 2009-10 fiscal with revenues of Rs 38,800 crore (Rs

388 billion).

The company is structured into four strategic business units -- mobile, telemedia,

enterprise and digital TV.The company has with operations in 18 countries with a

footprint covering 1.8 billion people. Sunil Bharti Mittal is the chairman and managing

director of the company.

In March 2010, Bharti Airtel bought the African operations of Kuwait-based Zain

Telecom for $10.7 billion.

Recently, it has joined a consortium of global telecom operators to announce the

launch of the EASSy cable system -- the 10,000 km undersea cable connecting

Africa to Europe.

2. BSNL

Bharat Sanchar Nigam Limited saw a drop in its revenue for the second consecutive

year to post Rs 30,240 crore (Rs 302.4 billion), a drop of 14 per cent, even though it

retained the number two position among telecom players.

BSNL offers both fixed line and mobile services with broadband connections.With

over 71.68 million subscribers, BSNL currently is the largest wireline service provider

in India.



The company has reported around 6 crore (600 million) 2G connections and

9,73,378 3G connections since February 2010. All major towns and cities are

covered through BSNL network.

Gopal Das is the new chairman and managing director of BSNL.

3. Vodafone Essar

The Indian subsidiary of Vodafone Group, Vodafone Essar recorded 13.7 per cent

growth to emerge as the third largest player with revenue of Rs 23,200 crore (Rs 232

billion).

The company commenced operations in 1994 when its predecessor Hutchison

Telecom acquired the cellular license for Mumbai.

It has operations across the country with over 106.34 million customers.

It is the world's leading international mobile communications group with

approximately 347 million proportionate customers as on 30 June 2010 and has

around 40 partner networks worldwide.

Vittorio Colao is Vodafone chief executive, and Marten Pieters is managing director

and CEO, Vodafone Essar.

4. Reliance Communications

Reliance ADA Group's flagship company, Reliance Communications reported a

negative growth of 3.5 per cent with revenue of Rs 22,130 crore (Rs 221.3 billion).

It is India's largest private sector information and communications company, with

over 100 million subscribers.

It has established a pan-India, high-capacity, integrated (wireless and wireline),

convergent (voice, data and video) digital network, to offer services spanning the

entire infocomm value chain.

Anil D Ambani is the chairman of the company



5. Idea Cellular

Idea Cellular is part of the Aditya Birla Group and has bagged fifth position with a

revenue of Rs 11,390 crore (Rs 113.9 billion).

It is a leading GSM mobile services operator in India with 67 million subscribers. Idea

offers both prepaid and postpaid services.It is a pan-India operator with services

being made available in all parts of the country.

Idea was the first cellular service provider to launch General Packet Radio Service

(GPRS) and Enhanced Data rates for GSM Evolution (EDGE) in the country.

Kumar Mangalam Birla is the chairman of the group.

6. Tata Communications

Tata Communications reported revenue of Rs 11,000 crore (Rs 110 billion).

The company holds leadership position in emerging markets.

Tata Communications leverages its advanced solutions capabilities and domain

expertise across its global and pan-India network to deliver managed solutions to

multi-national enterprises, service providers and Indian consumers.

The Tata Global Network includes one of the most advanced and largest submarine

cable networks, a Tier-1 IP network, with connectivity to more than 200 countries

across 400 PoPs, and nearly 1 million square feet of data center and collocation

space worldwide.

Srinath Narasimhan is the managing director and CEO of Tata Communications.

7. Tata Teleservices

Tata Teleservices spearheads the Tata Group's presence in the telecom sector. It

has posted revenue of Rs 6,900 crore (Rs 69 billion). Established in 1996, Tata

Teleservices, one of the 96 companies of Tata Group, has its network in 20 circles. It

is the first company to launch CDMA mobile services in India. It launched mobile



operations in January 2005 under the brand name Tata Indicom. It enjoys a pan-

India presence through existing operations in all of India's 22 telecom circles.Tata

Teleservices operates under five different brands -- Tata Indicom (CDMA services),

Tata DOCOMO (GSM services), Virgin Mobile, Tata Walky (which is the brand for

fixed wireless phones), Tata Photon (the company's brand that provides a variety of

options for wireless mobile broadband access) and T24.

Tata Teleservices Ltd, along with Tata Teleservices (Maharashtra) Ltd, serves nearly

70 million customers in more than 450,000 towns and villages across the country.

Anil Sardana is the managing director of Tata Teleservices.

8. Aircel

Aircel recorded the highest growth of 37.2 per cent among operators in 2009-10.

The company posted a revenue of Rs 4,700 crore (Rs 47 billion) to move to the

number eight slot.

It is a joint venture between Maxis Communications Berhad of Malaysia and Sindya

Securities Investments Private Limited, whose current shareholders are the Reddy

family of Apollo Hospitals Group of India.

Aircel commenced operations in 1999 and became the leading mobile operator in

Tamil Nadu.

It emerged a market leader in Assam and in the North Eastern provinces within 18

months of operations.

Today, the company has a foothold in 21 circles including Chennai, Tamil Nadu,

Assam, North East, Orissa, Bihar, Jammu & Kashmir, Himachal Pradesh, West

Bengal, Kolkata, Kerala, Andhra Pradesh, Karnataka, Delhi, UP(West), UP(East),

Maharashtra & Goa , Mumbai, Madhya Pradesh and Punjab.

It has over 43 million customers in the country.



9. MTNL

Mahanagar Telephone Nigam Limited (MTNL)'s revenue dropped nearly by a fifth

highest among the top 10 players -- to Rs 3,650 crore (Rs 36.5 billion).

The company has achieved a customer base of 8.06 million in the two metro cities of

Delhi and Mumbai. The government currently holds 56.25 per cent stake in the

company.

Today it has more than 9,00,000 GSM mobile connections.

The company was in the forefront of technology induction by converting 100 per cent

of its telephone exchange network into the state-of-the-art digital mode.

Kuldip Singh is chairman & managing director of MTNL.

10. TTML

The third Tata group company i nthis arena, Tata Teleservices Maharashtra Limited

(TTML) is ranked number 10, among the top ten telecom players in India, with

revenues of Rs 2,300 crore (23 billion. This helped the group's earning go past the

Rs 20,000 crore (Rs 200 billion) mark.

TTML leads the Tata group's presence in the telephony sector in the telecom circles

of Maharashtra and Goa, including Mumbai.

TTML commenced landline operations in 1998 and has the largest wireline base in

Mumbai and Maharashtra amongst all private operators.

The company has over 600,000 subscribers.

Kishor Chaukar is the chairman of TTML.



Porter's Five Force Model Analysis:

Threat of New Entry:

Time and cost of entry

Specialist in Knowledge

Cost Advantages

Technology Perfection

Barriers to Entry

Porter's Five Force

Model

Threat of New Entry

Buyer Power

Threat of Substitution

Supplier Power

Competitive Rivalry



Buyer Power:

Number of customer

Size of each order

Differences between competitors

Price sensitivity

Ability to substitute

Cost of changing

Threat of Substitution:

Substitute performance

Cost of change

Supplier Power:

Number of suppliers

Size of suppliers

Uniqueness of service

Your ability to substitute

Cost of changing

Competitive Rivalry:

Number of competitors

Quality differences

Others differences

Switching cost

Customer’s loyalty

Costs of living market



Company Profile

Tata Teleservices limited spearheads the Tata Group’s presence in the telecom

sector. The Tata Group includes over 100 companies, over 450,000 employees

worldwide and more than 3.8 million shareholders.

Incorporated in 1996, Tata Teleservices Limited was the pioneer of the CDMA 1x

technology platform in India, embarking on a growth path after the acquisition of

Hughes Telecom (India) Ltd [renamed Tata Teleservices (Maharashtra) Limited] by

the Tata Group in 2002. Over the last few years, the company has launched

significant services CDMA mobile operations in January 2005 under the brand name

Tata Indicom, market-defining wireless mobile broadband services under the brand

name Tata Photon in 2008.

Tata Teleservices Limited also has a significant presence in the 2G GSM space,

through its joint venture with NTT DOCOMO of Japan, and offers differentiated

products and services. Tata DOCOMO was born after Tata Group’s strategic alliance

with Japanese telecom major NTT DOCOMO in November 2008. Tata DOCOMO

received a pan-India license to operate GSM telecom services and rolled out GSM

services in all the 18 telecom Circle where it received spectrum from the Government

of India in the quick span of just over a year.

One of the key milestones in October 2011 was the brand integration exercise at

TTL, which saw the company’s many brands being consolidated under its single

flagship brand, Tata DOCOMO. This helped TTL leverage the benefits of brand

synergies and capitalize on its vast retail and distribution network, which is the

largest amongst all private telecom operators in the country. Tata DOCOMO marks a

significant milestone in the Indian telecom landscape, and has already redefined the

very face of telecoms in India, being the first to pioneer the per-second tariff option

part of its ‘pay for what you use’ pricing paradigm.

Tata Teleservices Limited also became the first Indian private telecom operator to

launch 3G services in India under with the launch of services in November 2010 in all

nine telecom Circle where the company bagged the 3G license. In association with

its partner NTT DOCOMO, the company finds itself favorably positioned to leverage

this first-mover advantage. With 3G, Tata DOCOMO has begun to redefined the very

face of telecoms in India. Tokyo-based NTT DOCOMO is one of the world’s leading

mobile operators in Japan; the company is the clear market leader, used by nearly 55



per cent of the country’s mobile phone users. TTL entered into a strategic partnership

agreement with Indian retail giant Future Group to offer mobile telephony services

under a new brand name T24, on the GSM platform. Tata Teleservices also has a

strategic tie up with Virgin Mobile that primarily caters to youth segment offering

mobility services on both CDMA and GSM platform.

Tata Teleservices is the undisputed market leader in the fixed wireless telephony

market amongst private operators. In the wireless mobility space, the company in the

past has been rated as the ‘Least Congested Network’ in India for eight consecutive

quarters by the Telecom Regulatory Authority of India through independent surveys.

Today, Tata Teleservices, along with Tata Teleservices (Maharashtra) Limited, has a

reach in more than 450,000 towns and villages across the country, with a bouquet of

telephony services encompassing Mobile Services, Wireless Desktop Phones, Public

Booth Telephony and Wire line Services.

In December 2008, Tata Teleservices announced a unique reverse equity swap

strategic agreement between its telecom tower subsidiary, Wireless TT Info-Services

Limited, and Quippo Telecom Infrastructure Limited with the combined entity kicking

off operations with 18,000 towers, thereby becoming the largest independent entity in

this space and with the highest tenancy ratios in the industry. Today, the combined

entity which has been re-christened as VIOM Networks has a portfolio of nearly

60,000 towers.

The company in the recent past has won many awards. TTSL was named The Best

Emerging Markets Carrier by Telecom Asia, and received 8 awards at the World

HRD Conference, including 5th Best Employer in India. The company also received 3

awards at the Telecom Operator Awards 2010 from Tele.net; Best Company, CEO of

the Year and Best Quality of Service, and Business Standard award for 'Most

Innovative Brand of the Year'. Tata DOCOMO was recently recognized as the best

“Utility VAS Service Provider” and “Best Mobile Broadband Service Provider” for the

year 2012 by Frost & Sullivan.

In which Sun Management Service is the only authorized collection agency in

Bangalore for all the products collection like wireless, walky, CDMA, VDATA..etc and

the monthly collection is in the range of 1.5 to 2 Crore and sun management is the

part of Tata Teleservices for all the collection.



History

Tata Teleservices (TTSL) is an Indian broadband and telecommunications service

provider based in Mumbai, Maharashtra, India at 1996. It is a subsidiary of the Tata

Group, an Indian conglomerate. It operates under the brand name Tata DoCoMo in

various telecom circles of India.

In November 2008, Japanese telecom giant NTT Docomo picked up a 26 per cent

equity stake in Tata Docomo a subsidiary of Tata teleservies for about 130.7

billion (US$2.2 billion) or an enterprise value of 502.69 billion (US$8.6 billion).

In February 2008, TTSL announced that it would provide CDMA mobile services

targeted towards the youth, in association with the Virgin Group on a franchisee

model basis.

Tata Teleservices provides mobile services under the following brand names:

Tata DoCoMo (CDMA & GSM mobile operator, wireless broadband)

Virgin Mobile (CDMA & GSM mobile operator)

T24 Mobile (GSM mobile operator)

Sun Management Services is started at July 6th 2010 for the collection of accounts

for Tata Teleservices. Sun Management Services is the authorized collection agency

for TATA Teleservices. Sun Management has been collecting from clients overdue

accounts for more than 3 years, and in this time sun management have met this

challenge despite boom-and-bust economies, as well as truly remarkable technical

changes too. But, throughout all of these years, sun management have always

understood that they are good at the last overdue account collection successfully.

In today's difficult economic times where sun management are witnessing unusually

high levels of personal and company debt, it is essential that make contact with the

customers quickly before they skip their address and move on owing invoice money.

Fortunately, when you find yourself with a debtor that has gone away from their given

address, sun management have both the experienced people and the technology to

trace the debtor’s in new address.

http://en.wikipedia.org/wiki/Broadband_Internet_access

http://en.wikipedia.org/wiki/Telecommunication

http://en.wikipedia.org/wiki/Tata_Group

http://en.wikipedia.org/wiki/Tata_Group

http://en.wikipedia.org/wiki/NTT_Docomo

http://en.wikipedia.org/wiki/Enterprise_value

http://en.wikipedia.org/wiki/Virgin_Group

http://en.wikipedia.org/wiki/Tata_DoCoMo

http://en.wikipedia.org/wiki/Virgin_Mobile_India

http://en.wikipedia.org/wiki/T24_Mobile

http://en.wikipedia.org/wiki/Indian_rupee

http://en.wikipedia.org/wiki/Indian_rupee



Market share

With the new players coming in, the intensity of competition in the industry has

increased, especially over the last four year. The market share of telecom operators

of the telecom companies reflects the fragmented nature of the industry, with as

many as 15 players. As on January 2013, Bharti telecom led the market with 24.7%

share, Reliance 14.5%, Vodafone 19.9%, Idea 16.2%, BSNL 8.0%, Tata 6.5%, Aircel

5.5%, with the remaining share being held by the small operator.

Bharti is far ahead with close 25% market share in India, followed by Vodafone

19.9%.Where the Idea 16.2% having battle with Vodafone 19.9%. Aircel has the

close competition with TATA with 1%. Similarly Reliance has a close competition with

Idea.

Company’s Performance Analysis:

Net sales have increased tremendously over the year 2010-2011 but have

remained stagnant thereafter because of heavy competition from other players.

Sun Management annual collection is the get increased from 14 Crores to 23

Crores from the year 2012 to 2013

Bharti Airtel 24.7%

Reliance 14.5%

Vodafone 19.9%

Idea 16.2%

BSNL 8.0%

TATA 6.5%

Aircel 5.5%

Market Share



Name Last Price Market Cap

(Rs. Cr)

Sales

Turnover

(Rs. Cr)

Net Profit /

Loss (Rs.

Cr)

Total Assets

(Rs. Cr)

Bharti Airtel 305.5 115,805.68 41,603.80 5730.00 63,559.00

Idea Cellular 145.80 48,258.14 19,275.32 576.54 23,072.72

Reliance

Comm 143.90 29,701.35 12,135.00 156.00 73,068.00

Tata Comm 172.85 4926.23 4091.77 171.34 8087.80

Tata

Teleservices 7.10 1356.50 2470.25 -517.55 4237.96

Tulip

Telecom 10.45 152.25 4057.96 433.06 4115.30

MTNL 17.25 1089.90 3373.25 -4109.78 12,184.20

TATA Teleservices faces severe problem with the competition from all

these companies

Comparative analysis of the Tata Teleservices Competitors:

Ratio Analysis:

-40%

-20%

0%

20%

40%

60%

80%

100%

Total Assets (Rs. Cr)

Net Profit / Loss (Rs. Cr)

Sales Turnover (Rs. Cr)



Profitability

Ratio(%) Mar-12 Mar-11 Mar-10

Operating Profit

Margin 20.71 11.15 21.42

Gross Profit Margin -1.28 -22.13 -2.13

Net Profit Margin

Ratio -20.65 2.19 -13.44

Gross profit ratio may be indicated to what extent the selling price of goods per unit

may be reduced without incurring losses operations. It reflects efficiency with which a

firm produces its products. As the gross profit is found by deducting cost of goods

sold from the net sales, higher the gross profit better it is. However the gross profit

earned should be sufficient to recover all operating expenses and to build up

reserves after paying all fixed interest charges and dividends. While comparing to

past year of 2011 the TATA Teleservices profit margin get increased from -22.13 to -

1.28 even though it is in negative the profit earning was much higher. It can be

because of over valuation of opening stock or under valuation of closing stock.

Net profit ratio is used to measure the overall profitability and hence it is very useful

for the proprietors. The ratio is very useful as if the net profit is not sufficient, the firm

shall not be able to achieve a satisfactory return of its investment. This ratio also

indicates the firm’s capacity to face adverse economic conditions such as price

competition, low demand, etc. Obviously, higher the ratio the better is the profitability.

The net profit for the year 2012 has drastically down while compare to the year 2011.

Operating Ratio is calculated in order to calculate the operating efficiency of the

concern. As this ratio indicates about the percentage of operating cost to the net

sales, so it is better for a concern to have this ratio in less percentage. The less

percentage of cost means higher margin to earn profit. It means for each Rs 100 of

sales the company is incurring Rs 93 as an expense, the profit will be Rs. 7.

In the liquidity ratio tell us whether a business is able to meet its short term obligation

my measuring whether it has enough assets to cover its liabilities. A high current ratio



means that management has large amount of cash on hand, they may be doing a

poor job of investing it. Acceptable current ratios vary from industry to industry and are

generally between 1.5 and 3 for healthy businesses. Low values for the current ratios (values

less than 1) indicate that a firm may have difficulty meeting current obligations. Low values,

however, do not indicate a critical problem. If an organization has good long-term prospects, it

may be able to borrow against those prospects to meet current obligations. TATA

Teleservices has the current ratio greater while comparing to previous year from 0.14 to 0.35

i.e., in the year from 2010 to 2012.

Quick ratio gives us an idea on the ability of a company to meet its short-term

liabilities with its short-term assets. Can be used to compare the quick ratio with the

current ratio. If the current ratio is significantly higher, it is a clear indication that the

company's current assets are dependent on inventory. It is a liquidity indicator.

Inventory turnover ratio measures the velocity of conversion of stock into sales.

Usually a high inventory turnover/stock velocity indicates efficient management of

inventory because more frequently the stocks are sold; the lesser amount of money

is required to finance the inventory. A low inventory turnover ratio indicates an

inefficient management of inventory. A low inventory turnover implies over-

investment in inventories, dull

Business, poor quality of goods, stock accumulation, accumulation of obsolete and

slow moving goods and low profits as compared to total investment.

52%

27%

21%

Current Ratio Analysis

Mar'12 Mar'11 Mar'10



The inventory turnover ratio is also an index of profitability. Where a high ratio

signifies more profit. a low ratio signifies low profit, if the inventory keeps on moving,

the profit margin tends to increase.

41%

37%

22%

Inventory Turnover Ratio Analysis

Mar'12

Mar'11

Mar'10



SWOT Analysis:

Strength

•Huge customer potential

•High return on investment

•High growth rate

•Low capital expenditure

•Liberalization effort by Govt

Weakness

•Payment beyond terms

•Pending order

•Dispute Invoice

Opportunities

•More quality services

•Telecom Equipment Export

•Value added services (VAS)

•3G Telecom services and 4G Services

Threats

•Short payment

•Telecommunication Policies

•Decline of average revenue per user

•Partiality on the part of the Govt.

•Content Piracy



Organizational Structure:

Collection

Manager

Manager

Supervisor

Administrative

Support

Administrative

Assistant

Assistant

Manager

Executives Accounts

Clerk

Accounts

specialist



Account Receivable Management:

What is Receivables?

Accounting term for amount due from a customer. Receivables are classified as

accounts receivables, note receivables, etc., and represent an asset of the firm.

Meaning of Account Receivables

Accounts receivable is an accounting transaction which deals with the billing of

customer who owes money to a person, company or organization for goods and

services that has been provided to the customers. In most business entities this is

typically done by generating an invoice and mailing or electronically delivering it to

the customer, who in turn must pay it within an established timeframe called credit

or payment terms.

Definition of Account Receivables

The term receivable management is defined as ―debt owed to the firm by customer

arising from the sale of goods/ services in the ordinary course of business. The

receivable represents an important component of the current assets of the firm.

Receivables may be known as accounts receivables, trade creditors or customer

receivable. When a firm its products / services and does not receive cash for it

immediately, the firm has said to be granted trade credit to the customers. Trade

credit thus creates receivable / book debts, which the firm is expected to collect in

near future. Accounts receivable are thus amounts due from customers, which bear

no interest in essence, a company is providing no cost financing to the customer to

encourage the purchase of the company’s product/services



Importance of Receivables Management:

It can be argued that revenue generation is the most critical function of a company.

Dot-com companies that created exciting new products but failed to generate

significant revenue burned through their cash and ceased operating. Every

company expends substantial resources to generate increasing levels of revenue.

However, that revenue must be converted into cash. Cash is the lifeblood of

any company. Every Rupee of a company’s revenue becomes a receivable that

must be managed and collected. Therefore the staff and processes that manage

your receivables asset:

Manage 100% of your company’s revenue.

Serve as a service touch point for virtually all your customers. (Only Sales

and Customer Service speak more with your customers.)

Can incur or save millions of dollars of bad debt and interest expense.

Can injure or enhance customer service and satisfaction, leading to

increases or decreases in revenue.

If increasing revenue, enhancing customer satisfaction, and reducing expenses are

important to you, read on.

The benefits of effectively managing the receivables asset are:

Increased cash flow

Higher credit sales and margins

Reduced bad debt loss

Lower administrative cost in the entire revenue cycle

Decreased deductions and concessions losses

Enhanced customer service

Decreased administrative burden on sales force

These benefits can easily total millions in profit and tens of millions of cash flow in a

year.



Objective of Accounts Receivable Management:

Creating, presenting and collecting accounting receivables.

Evaluation of customers and setting credit limits.

Ensure prompt and accurate billing.

Maintaining up-to-date records.

Goals of Receivable Management:

The basic goal of credit management is to maximize the value of the firm by

achieving a tradeoff between the liquidity (risk and profitability). The purpose of credit

management is not to maximize sales, nor to minimize the risk of bad debt. If the

objective were to maximize sales, then the firm would sell on credit to all. On the

contrary, if minimization of bad debt risk were the aim, then the firm would not sell on

credit to anyone. In fact, the firm should manage its credit in such a way that sales

are expanded to an extent to which risk remains within an acceptable limit. Thus to

achieve the goal of maximizing the value, the firm should manage its trade credit.

The efficient and effective credit management does help to expand sales and can

prove to be an effective tool of marketing. It helps to retain old customers and win

new customers. Well administrated credit means profitable credit accounts. The

objectives of receivable management is to promote sales and profits until that point is

reached where the return on investment is further funding of receivables is less than

the cost of funds raised to finance that additional credit.

Granting of credit and its management involve costs. To maximize the value of the

firm, these costs must be controlled. These thus include the credit administration

expanses, b/d losses and opportunity costs of the funds tied up in receivable. The

aim of credit management should be to regulate and control these costs, not to

eliminate them altogether. The cost can be reduced to zero, if no credit is granted.

But the profit foregone on the expected volume of sales arising due to the extension

of credit.

Debtors involve funds, which have an opportunity cost. Therefore, the investment in

receivables or debtors should be optimized. Extending liberal credit pushes sales and



thus results in higher profitability but the increasing investment in debtors results in

increasing cost. Thus a tradeoff should be sought between cost and benefits to bring

investment in debtors at an optimum level. Of course the level of debtors, to a great

extent is influenced by external factors such as industry norms, level of business

activity, seasonal factors and the degree of completion. But there are a lot of internal

factors include credit terms, standards, limits and collection procedures.

Different Type Of Cost Associated With Receivable

Management:

Receivables are a type of investment made by a firm. Like other investments,

receivables too feature a drawback, which are required to be maintained for long that

it known as credit sanction. Credit sanction means tie up of funds with no purpose to

solve yet costing certain amount to the firm. Such costs associated with maintaining

receivables are detailed below:

Administrative Cost:

If a firm liberalizes its credit policy for the good reasons of either maximizing sales or

minimizing erosion of sales, it incurs two types of costs:

Credit Investigation and Supervision Cost:

As a result of lenient credit policy, there happens to be a substantial increase in the

number of debtors. As a result the firm is required to analysis and supervises a large

volume of accounts at the cost of expenses related with acquiring credit information

either through outside specialist agencies or forms its own staff.



Collection Cost:

A firm will have to intensify its collection efforts so as to collect the outstanding bills

especially in case of customers who are financially less sound. It includes additional

expenses of credit department incurred on the creation and maintenance of staff,

accounting records, stationary, postage and other related items.

Capital Cost:

There is no denying that maintenance of receivables by a firm leads to blockage of its

financial resources due to the tie log that exists between the date of sale of goods to

the customer and the date of payment made by the customer. But the bitter fact

Cost Associated

With Receivable

Management

Administrative Cost

Capital Cost

Delinquency Cost

Default Cost



remains that the firm has to make several payments to the employees, suppliers of

raw materials and the like even during the period of time lag. As a consequence, a

firm is liable to make arrangements for meeting such additional obligations from

sources other than sales. Thus, a firm in the course of expanding sales through

receivables makes way for additional capital costs.

Delinquency Cost:

This type of cost arises on account of delay in payment on customer's part or the

failure of the customers to make payments of the receivables as and when they fall

due after the expiry of the credit period. Such debts are treated as doubtful debts.

They involve: -

Blocking of firm's funds for an extended period of time,

Costs associated with the collection of overheads, remainders legal expenses

and on initiating other collection efforts.

Default Cost:

Similar to delinquency cost is default cost. Delinquency cost arises as a result of

customers delay in payments of cash or his inability to make the full payment from

the firm of the receivables due to him. Default cost emerges a result of complete

failure of a defaulter (customer) to pay anything to the firm in return of the goods

purchased by him on credit. When despite of all the efforts, the firm fails to realize the

amount due to its debtors because of him complete inability to pay for the same. The

firm treats such debts as bad debts, which are to be written off, as cannot be

recovers in any case.



Different Steps Involved In Debt Collection

Step 1-Collect the Outstanding list

First step is to collect the outstanding list in which the customer who has not yet paid

the bill amount for the respective account number. Once this list is prepared then it

will be easy to keep track of the particular bill and amount.

Collect the Outstanding list

Take out Customer wise Statement

Reconcile and identify the bills

Make documents for write off proposals if required

Take Print outs of Invoice bills as duplicate copy

Collect Money

Finalize Reconciliation with customer

Fix an appointment with the Customer



Non- arranging of customer wise statement

ACCOUNT_NO Customer ACCOUNT_PRODUCT BILL_PERIOD HIGHER_BUCKET

Net_Billing_May13

909860390 GOODTIMES MARKETING

Standard Wireless

M15 361 to 720

17,978.00


Standard Wireless

M25 151 to 180

12,657.00

208476272 GOOGLE Level DID PRI M25 361 to 720

9,438.00

911543219 GOOGLE Standard Wireless

M03 121 to 150

10,964.00

900251640 GODREJ & BOYCE

ISDN BRI LINE D28 >720 11,030.00

209258217 GODREJ PROPERTIES

Standard Wireless

M25 361 to 720

10,112.00

909440843 ERICSSION Centrex Wirelin M25 241 to 360

12,972.00

909538853 ERICSSION VDATA M25 241 to 360

3,545.00

207771899 ESSAR MH-Conference D28 >720 2,665.00

207771973 ESSAR COMMON D28 Credit Balance

2,239.00

Total 93,600.00

Arranging of Customer wise statement

ACCOUNT_NO Customer ACCOUNT_PRODUCT BILL_PERIOD HIGHER_BUCKET

Net_Billing_May13


Standard Wireless

M15 361 to 720

17,978.00


Standard Wireless

M25 151 to 180

12,657.00

Step 2-Take out Customer wise statement

This is the second step in account receivable, If the customer wise accounts are get

separated it will be easy for the organization to know which customer having the

most outstanding payment bills. Below are the list with some of the companies

account receivable without arranging in customer wise account, this make the

complex situation to track the customer wise record. If the organization follows the

customer wise statement then it will be easy to track the outstanding payment bills.



Outstanding Payment bill list

ACCOUN

T_NO

Invoice

No

Custo

mer

ACCOU

NT_PR

ODUCT

BILL

_PER

IOD

Net_Billi

ng_May1

3

HIGHER_BU

CKET

90792265

1

20929514

5

GOOG

LE

Flexi-

Toll M03

101,067.

00 361 to 720

20600764

9

20931135

4

GOOG

LE

ISDN

PRI

LINE

D28 163,108.

00 361 to 720

Total 264175.00

Step 3- Reconcile and identify the bills

In Accounting process the reconcile is used to compare two sets of records to ensure

the figures are in agreement and are accurate. Reconcile is the key process used to

determine whether the money leaving an account matches the amount spent,

ensuring that the two values are balanced at the end of the recording period.

In this once they pay the bill amount, the amount can be check whether they pay

exactly as per the invoice number and account, If they pay exactly as per the bill

amount then in the status tab, It should be mentioned as account has cleared. If they

haven’t paid as per the bill amount then it should filed separately to go for the next

process of receivable.

Step 4 - Take Print outs of Invoice bills as duplicate copy

In this step the invoice bill duplicate copy is prepared to check with the amount and

Invoice number whether the customer as pay the correct amount as per the bill, The

main purpose to undergo this step is to cross check the bill amount.

Step 5 - Fix an appointment with the Customer

Next step of duplicate copy is fix an appointment with the customer by either through

mail or by call to ensure about the payment that they made for invoice bill. This step

will be applicable only for the customer who made the short payment while

comparing to invoice bill generated.



Step 6 - Finalize Reconciliation with customer

After completion of fixing an appointment with customer then finalize the

reconciliation with customer. In this step the both creditor and debtors will finalize the

amount for the respective product usage.

Step 7 - Collect Money

Once they finalize the reconciliation with customer, then the customer will ready to

pay the amount either by check or by NEFT etc.

Step 8 - Make documents for write off proposals if required

The last step of account receivable is to make a document, In which amount

collected from the customer for the respective invoice number. This is to make sure

that which customer has paid the bill and still which customer is in pending.



Account Receivable Working Process Flow



Invoicing

The purpose of presenting an invoice (also called billing) to a customer is to secure

payment for having provided a product or service (or as a deposit on the future

provision of a product or service). The invoicing function in many companies is

highly automated, requires litt le manual intervention, and is often overlooked.

However, invoicing accuracy is the single most important determinant of effective

and efficient receivables management.

Accurate invoicing has been the central theme in our discussions of the quotation,

contract administration, pricing, and order processing functions. Accuracy in billing

cannot be achieved unless the aforementioned functions are performed properly.

Accurate invoicing directly drives:

Lower receivables delinquency and increased cash flow

Reduced exposure to bad debt loss

Lower cost of administering the entire revenue cycle

Enhanced customer service and satisfaction

In fact, many customers, in rating their vendors, measure invoice accuracy. The

reason is that inaccurate invoices raise their internal cost of paying bills and,

therefore, are part of the total cost of buying from a vendor.

The two key objectives of invoicing are accuracy and speed. Accuracy is defined as

meeting the customer’s requirements for timely payment of an invoice. Companies

often complain how difficult it is to conduct business with government agencies or

with large, bureaucratic companies, citing slow payments. While it is true that

accurate invoices are some- times lost or paid slowly, the predominant cause of

delinquent receivables from this type of customer is failing to meet their invoicing

requirements. Often a government agency or large customer’s invoicing

requirements may be different from the majority of customers. You may feel that the

requirements are outdated, unnecessary, or arcane, but in order to receive timely

payment, they must be met. Even if customized processing is required to generate

an invoice that meets requirements, it is usually worth the extra expense, especially

since you will end up producing a “customized” invoice in the resolution of a dispute.

Speed is defined as presenting an invoice to the customer as soon as permissible

under the terms of the business agreement (usually after shipping a product,

rendering a service, or achieving a milestone). Invoice presentation can be



accelerated by electronic presentation. Many companies begin the countdown to

the due date on receipt of the vendor invoice, so speed of invoicing is critical to

maximize receivables asset turnover. Speed, however, is less important than

accuracy, as an inaccurate invoice will typically delay payment by several weeks.

A delay of a few days to ensure accuracy is worth the avoidance of weeks of delay

caused by a disputed invoice.

An accurate invoice will usually be paid by the customer around the due date with no

further effort or perhaps one collection follow up re- minder. An inaccurate invoice

will generate at least one collection follow up, then an investigation into the dispute,

resolution, and correction via issuing a credit memo. Resolution of an inaccurate

invoice will require much more time and can impact several individuals. In addition,

there is the interest cost of receivables delinquency of the inaccurate invoice. In a

high-invoice-volume environment, this will be a serious cost and delinquency

problem.

Best Practice is for the invoice to clearly display this information:

Bill-to address: customer company name, address.

Bill-to approval authority (where applicable) or department (accounts

payable) at the customer to whom the invoice must go.

Ship-to address.

Invoice number and date.

Customer account number.

Date product shipped or service delivered.

Total amount due.

Payment terms.

Due date.

Remittance addresses (post office box or lockbox for regular mail, street

address of lockbox for courier deliveries, and bank information for wire transfers

and other electronic payments).

Phone number (and/or name) of person to call if the customer has a

question about the invoice, with phrase “Questions about this invoice should be

directed to.

Tear-off remittance portion, with instructions to include invoice number,

amount paid for each invoice, customer account number, how to pay with a credit or

procurement card, a change of address section, and any Optical Character

Readable (OCR) number or bar code for scanning. Also include a request to return

the remittance portion or list the information on the check or electronic payment.



Boldface message in large font, stating “Please pay ₹ xxxx.yy by month, day,

year.”

Attachments as required by customer.

Invoice should have a header similar to vendor company letterhead, showing

name, address, logo.

The phrase “Original Invoice” should appear on the invoice.

To ensure your invoice is easy to handle, put yourself in the shoes of the accounts

payable clerk who has to review the invoice and match it to a PO and receiving

document. The invoice should be clear, easy to read, highlight the most important

information, and convey a message of what action you want (i.e., pay in full by

specified date to lockbox).

Best Practice is to present invoices electronically (Electronic Data Interchange [EDI],

Electronic Invoice Presentation and Payment [EIPP], or other electronic means), to

bill as quickly as possible, and to ensure it is accepted by the customer. If a

customer claims not to have received invoices, it is prudent to check the electronic

confirmation of receipt with a phone call to the customer to ensure the invoices

were routed to the proper department within the customer.

Earlier we stated that accuracy is more important than speed in invoicing. Having

said that, the level of unbilled receivables must be constantly monitored and

managed so it can be minimized. Unbilled receivables occur most frequently in

service industries, where service is rendered, but invoices are generated weekly or,

in extreme cases, monthly. Accelerating accurate billing will increase cash flow.



Invoice Sample copy



Deductions Processing

A deduction occurs when a customer pays an invoice less than the full amount.

Deductions are also called short payments. Customers take deductions when they do

not agree with the amount of the invoice or if they believe they are owed money by

the vendor. Instead of waiting for the vendor to issue a credit memo, which would be

applied to their next remittance, companies take the deduction because it puts

money in their pocket now rather than waiting weeks for the credit memo. Some

customers may withhold payment of the entire invoice until it is resolved to their

satisfaction (via a corrected invoice or credit memo), but most will deduct.

Examples of disagreements with the invoice are:

Price: gross, promotional, discount

Quantity of products or service hours received

Quality: damaged or inferior products or services

Examples of deductions taken because the customer is owed money by the vendor:

Volume or other rebates

Cooperative advertising support

Return of products not yet credited (We have seen cases where the returns

were not shipped, yet the deduction was still taken.)

Shelf space charges

Charges for special handling of mislabeled or poorly packaged products, or

products delivered to the wrong location

Customers, especially large retailers, have become very creative and very

aggressive with deductions. Deductions are taken unilaterally by customers, based

on their perception of whether the invoice was correct, the shipment proper, and so

on. Even if a vendor conformed to all customer specifications and invoiced 100%

accurately, it would still incur deductions.

For many companies, the volume of deductions taken by their customers can number

in the thousands every month. Unless such companies have an efficient process for

handling deductions, they will be overwhelmed by the volume. There are two major

perils of not processing deductions well or on a timely basis:

Revenue and profit margins will decrease because of invalid deductions taken

by customers.



Revenue and receivables will be overstated in financial reports. This is

critically important with the passage of the Sarbanes-Oxley Act of 2002.

The three dilemmas in managing deductions are:

The volumes can be huge, and the damage can be serious if they are not

managed well.

The cost of processing and managing deductions can be substantial.

The yield or payback can be small. Typically, customers are correct on

approximately 95% of the deductions they take. It is not cost efficient to expend a

large amount of resources and expense to scrutinize every deduction, when 95% of

them will be conceded. If you do nothing, however, some customers will become

more aggressive in taking deductions, and margins will suffer.

The challenge is to process deductions promptly so they do not distort financial

reporting, to catch and recover invalid ones, and not to spend a lot of money to

process adjustments 95% of the time. It is a daunting challenge, and the resolution

must balance the cost/benefit trade-off in a way that fits an individual company’s

strategy and profitability.

Contribution



Aging Analysis

Why an Aging Schedule is Important?

An aging schedule is a way of finding out if customers are paying their bills within

the credit period prescribed in the company's credit terms. Every day that a customer

is late making payment on their account costs your company money from a cash flow

point of view, so preparing an aging schedule and acting upon with regard to your

collections policy is an important financial management step for a business firm.

If you find that a high percentage of your customers are slow in paying their bills, you

should re-evaluate your credit and collections policies and make some changes.

An accounts receivable aging report summarizes receivables based on their age

that is, how long they have been outstanding.

The aging schedule is a useful tool for analyzing the makeup of the accounts

receivable balance. Analyzing the schedule allows auditors to spot any problems in

accounts receivable early enough to protect the business from major cash flow

problems.

http://bizfinance.about.com/od/glossaryc/g/credit-period.htm

https://www.boundless.com/accounting/definition/receivable

https://www.boundless.com/accounting/definition/cash-flow



Research Methodology

Statement of problem

Following are the problems faced by the company:

Delay in receiving payments.

Outstanding payment disputes.

Payments mismatch.

Objectives

Finding out the root cause of the problem:

Findings

Delay in receiving payments, occurs mainly due to the delay in processing the

invoice to the customers by the Field Executives.

Outstanding payment disputes occur due to the non-clearance of invoice amount

received from the customers. Non updation of collected amount from the clients leads to

double outstanding amount and confusion at the end of the next month, while actually the

amount has been collected and it creates customer discontentment.

Payment mismatch occurs due to, non-receipt of exact invoice amount, the

unmatched amount gets transferred to suspense account, which needs manual assistance

for rectification, consuming lot of time and manpower resource.

Recommendations

Introduce Incentive Systems in their salary structure for Field Executives.

Company can refer Applications based process rather than manual process.



Conclusion

This project helped to understand the accounts receivables management activities

under the company sun management services atmosphere. Company’s most

activities which have performed, was totally based on manual. If they used

applications to collect outstanding payments bill then the accuracy, speed, tracking of

customer will be much easier and faster and effective manage resource by using the

application, the company can reduce the manpower and generate more profit to the

business.

Account receivable application is the one time investment, which take very less time

as compare to manual process to create outstanding bill.

This project helped to understand the account receivable management process and

gave the knowledge in manual collection of account receivable, this is very essential

to understand for fresher employee. Many companies are using application to collect

the account receivable, which reduce the cost of company as well as quicker in

sending remainder mails to the customer. It also helped me to understand the risk

and controls in the process and how to mitigate the risks involved.



Webliography

http://www.nseindia.com

http://www.moneycontrol.com

http://money.rediff.com

http://www.tatateleservices.com

http://www.trai.gov.in

Sunmanagementservices.com

http://www.moneycontrol.com/

http://money.rediff.com/

Accounts receivable management

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