1 Improving Spinning service financials XIME
Voltas Limited
Improving financial utilization of employees and assessment of credit management across branches
Raj Mohan
2 Improving Spinning service financials XIME
PROJECT REPORT
ON
“IPROVING FINANCIAL UTILIZATION OF EMPLOYEES AND
ASSESMENT OF CREDIT MANAGEMENT ACROSS BRANCHES”
VOLTAS LIMITED
COIMBATORE
Submitted in partial fulfilment of the requirement for the award of
POST GRADUATE DIPLOMA IN MANAGEMENT (PGDM)
By
Raj Mohan C P
Roll No. 98, PGDM, 16th Batch (2010-2012)
Submitted on
27 August 2011
Under the guidance of
Mr. Hameed
Project guide
Voltas Limited
And
Mr.Muthu Goplalakrishnan
Project guide
XIME
3 Improving Spinning service financials XIME
Xavier Institute of Management & Entrepreneurship
Electronics City-Phase II, Bangalore-560100
4 Improving Spinning service financials XIME
Acknowledgements
My internship with Voltas Limited was a great learning experience. I learnt a lot about challenges faced
in service industry during my internship.
I thank Voltas’ management and Mr. Kamatchi Sundaram, General Manager, Textile Machinery
Division, Voltas limited for providing me an opportunity to work with Voltas. I also thank Mr. Hameed
and Mr. Dhayala Sundaram for their guidance throughout the project. I thank Mr. C Thangavelu for
getting me this opportunity.
I thank Mrs. Sunitha for providing the data required for my project.
I thank all the Voltas employees at Textile Machinery Division for their immense support, guidance and
for the valuable inputs that they provided.
I thank Mr. Muthu Gopalakrishan for his guidance and support.
I thank XIME for providing me an opportunity to work with Voltas.
5 Improving Spinning service financials XIME
Executive Summary
About Voltas
Voltas Limited offers engineering solutions for a wide range of industries in areas such as heating,
ventilation and air conditioning, refrigeration, electro-mechanical projects, textile machinery, mining and
construction equipment, materials handling equipment, water management & treatment, cold chain
solutions, building management systems, and indoor air quality. Textile Machinery division (TMD) of
Voltas does the sales and provides service for textile machines manufactured by its principals namely
Lakshmi Machine Works (LMW). They operate at ten branches all over India. The service division of
Voltas TMD deputes engineers to textile mills for services and charges the mills on the basis of number of
man-days. Charges per man-day depend on the type of service provided. TMD operates at ten branches
across India, namely Ahmadabad, Coimbatore, Delhi, Hyderabad, Indore, Nagpur, Kolhapur, Mumbai
and Madurai. TMD has annual revenue of Rs.9 crores. TMD has two subdivisions namely spinning and
post spinning. Spinning division provides services to spinning mills. Post spinning division provides
services to weaving mills. I worked with spinning service division.
Objectives
Objectives of this research titled “Improving spinning service financials” at TMD Voltas Limited are
1. To find out the opportunities to enhance service revenue in TMD spinning service by analyzing
the financial utilization of employees.
2. To study the effectiveness of TMD Service credit management across branches.
Results
Analysis of financial utilization of employees
In order to enhance service revenue, the financial utilization of engineers was studied.
I developed worksheets for the analysis of financial utilization of engineers. Using these worksheets,
information regarding the financial utilization of engineers can be obtained in the form of graphs by
feeding the data already available.
As the existing ratios cannot be used to determine the financial utilization of engineers, the following
ratios were used revenue to cost ratio of engineers, earning per man-day and utilization of engineers
6 Improving Spinning service financials XIME
during the financial year 2010-11. Revenue to cost ratio of an engineer is the ratio of the revenue earned
by an engineer to the cost spent on him. Field days are the days during which engineers earn revenue.
Utilization is the fraction of field days in a year. Earning per man-day is revenue earned per field day.
Earning per man-day is the indicator of the type of service for which an engineer is deputed. There are
two types of services, basic services which are charged Rs.2800 and value added services which are
charged at more than Rs.3000. Besides this an engineer might be deputed for free services.
Revenue to cost ratio depends on the utilization of engineers, charges for the service for which engineers
are deputed (this is measured by earning per man-day) and salary cost of employees.
These ratios are calculated for each engineer and then collated branch wise and grade wise.
There are six grades of engineers from M6 to M1. M1 is the highest grade. Higher grade engineers have
lower utilization and earning per man-day. Revenue per man-day of higher grade engineers is low (M2 -
2632) and lower grades high, Except for M5 with revenue of only Rs 2600 which is the lowest.
From the study it was found that higher grade engineers had very low utilization and earning per man-
day. Delhi (1.15), Mumbai (1.36) and Hyderabad (1.40) are the branches that have low revenue to cost
ratio of employees against an overall average of 1.73. These branches have an opportunity for
improvement of financial utilization of engineers. Kolhapur, Chandigarh, Nagpur and Ahmadabad –
revenue to cost ratio around 2 which means that these branches have revenue of twice the staff costs of
engineers,
The average utilization of engineers all over India is 79%. Delhi and Mumbai have a lower utilization of
around 70%. Utilization is 86% at Hyderabad and Ahmadabad. By improving the utilization of engineers
with lower utilization to 80% revenue can be increased by Rs.50 lakhs.
Average earning per man-day of engineers is Rs.2732. By improving earning per man-day of engineers
with lower earning per man-day to Rs.2600, revenue can be increased by Rs. 23 lakhs. Mumbai
Coimbatore and Chandigarh have a higher average earning per man-day of around Rs. 2800. Hyderabad,
Kolhapur and Nagpur have lower earning per man-day of around Rs.2600.
Analysis of credit management
7 Improving Spinning service financials XIME
Hyderabad and Mumbai have longer average collection period of about 70 days. Indore and Nagpur have
a collection period of about 40 days. Coimbatore and Ahmadabad have an efficient credit management.
(Collection period around 10 days)
Hyderabad and Chandigarh have high percentage of services provided on credit (20%). Delhi, Nagpur and
Indore also provide about considerable amount of services on credit. (10%) Coimbatore and Ahmadabad
have 2 and 3 percentage of services provided on credit respectively.
Receivables older than 90 days are less likely to be paid. Mumbai, Nagpur and Hyderabad have higher
amount of outstanding older than 90 days. Madurai and Kolhapur have 2 lakhs outstanding older than 90
days.
Suggestions
To improve spinning service financials Voltas limited can adapt the following changes
1. Higher level engineers can be used more for value added services which are charged more.
2. Lower level engineers like M4, M5 and M6 can be used more for installation which is charged
less.
3. 32 % of the variation in revenue to cost ratio of engineers is due to utilization. Hence by
improving the utilization revenue to cost ratio can be improved
4. A portion of incentives of managers can be based on the financial utilization of engineers.
5. Engineers can be rewarded for early completion of trainings.
6. Ability to track information from MPMS especially manual debit notes can be improved.
7. Training could be planned during office days.
8. In order to avoid interest losses TMD can charge interests on late payments. This can be based on
the number of days in which most losses occur.
9. A portion of incentives of engineers can be based on average collection period.
10. Ability to track credit information can be improved. For example total value of services provided
on credit cannot easily be tracked.
8 Improving Spinning service financials XIME
11. I have developed a worksheet in which information regarding financial utilization of employees
could be obtained by feeding the corresponding data. Data for every month could be fed to this
book, results can be analyzed and necessary corrective action can be taken.
9 Improving Spinning service financials XIME
About Voltas
Voltas is an engineering solutions provider and a project specialist. It was founded in India in 1954.
Voltas Limited offers engineering solutions for a wide range of industries in areas such as heating,
ventilation and air conditioning, refrigeration, electro-mechanical projects, textile machinery, mining and
construction equipment, materials handling equipment, water management & treatment, cold chain
solutions, building management systems, and indoor air quality. The company had a turnover of Rs.4541
crores and a net profit of 344 crores during the financial year 2010-11.
Voltas runs a number of independent businesses. Textile Machinery division is one of them.
Textile Machinery Division (TMD)
I worked with the spinning division of textile machinery division (TMD) of Voltas Limited.
Voltas has been at the service of India's textile industry for about fifty years. They offer technology
solutions in just about every textiles segment. They work right from installation of machines to quality
improvement.
They work through a network of 16 branch locations, and over 350 textiles engineers. Through these,
Voltas provides sales and service for machinery manufactured by their principals. Textile machinery
division of Voltas is further divided into subdivisions like spinning, weaving and knitting.
Lakshmi Machine Works (LMW) is Voltas’ principal in spinning.
The spinning service division of TMD provides services like erection of machines, trouble shooting and
value added services like productivity improvement and power saving to spinning mills. TMD serves its
customers on request by customers themselves, principals or its own engineers. There are different grades
of engineers from M6 to M1. M1 is the highest and M6 is the lowest.
Refer table 1 for number of engineers. This table shows the number of engineers across different branches
at various levels. For example there are two M2 engineers at Ahmadabad, and a total of 8 engineers at
Ahmadabad. Branch total shows the number of engineers at a particular branch and level total shows the
total number of engineers at a level.
10 Improving Spinning service financials XIME
Table 1: Number of engineers at different branches
Number of engineers
Level\Branch AHD CBE DEL MUM KOH NAG IND HYD CHD Level Total
M2 2 2 1 1 0 0 0 0 0 6
M3 1 10 0 2 0 2 3 3 7 28
M4 3 6 2 0 4 3 7 6 8 39
M5 1 6 0 0 2 1 0 1 0 11
M6 1 6 1 0 1 0 1 4 8 22
Branch total 8 30 4 3 7 6 11 14 23
Billing method
TMD charges its customers on the basis of number of days of service. TMD normally deputes engineers
only on the receipt of advance payment of charges. After the services are provided debit notes are raised
for the services.
There are two types of services as far as charges are concerned
1. Basic Services charged at Rs 2900 per day
2. Value Added Services at Rs 3750 per day.
Basic services include installation of machines and troubleshooting, while value added services include
productivity improvement, quality improvement, power saving etc.
11 Improving Spinning service financials XIME
Objectives
The main objectives of the research are
3. To find out the opportunities to enhance service revenue in TMD spinning service by analyzing
financial utilization of employees and to make worksheet customized for the analysis.
4. To study the effectiveness of TMD Service credit management across branches
Methodology
Methodology for Analysis of financial utilization of engineers
Financial utilization of each engineer is to be analyzed. Since existing ratios cannot be used, following
parameters can be used to measure the financial utilization of engineers.
Revenue to cost ratio gives the financial utilization of engineers directly. Salary cost or staff cost forms
the major portion of expenses.
Utilization gives the fraction of days in a year during which an engineer generates revenue (works on an
assignment). Engineers spend days at office when there are no assignments or at training. Engineers do
not generate revenue during office or training days.
The value of Earning per man-day is an indicator of whether an engineer is deputed on low revenue or
high revenue services. As mentioned earlier there are two types of services namely basic services and
Value added services.
These ratios give a clear picture of financial utilization of engineers. Revenue to cost ratio of an engineer
is influenced by the following factors
12 Improving Spinning service financials XIME
1. Utilization of engineers
2. Charges for the service for which an employee is assigned (given by Earning per man-day)
3. Salary costs and travel expenses
Of these factors the first two can be changed by the allocation of engineers. While staff cost cannot be
influenced as it depends on the experience and performance of engineers. By plotting revenue to cost
ratio, earning per man-day and utilization on the same graph a clear picture of utilization can be obtained.
A worksheet was developed for the above analysis. Using this worksheet, the above analysis can be
obtained just by feeding the data already available.
Flowchart 5: Methodology used in analysis of financial utilization of engineers
Utilization reports and manual debit note reports of different branches for the financial year 2010-11 are
obtained from MPMS. From these reports revenue to cost ratio, earning per man-day and utilization of
These ratios are compared grade wise and branch wise
Revenue to cost ratio and earnings per man-day for each engineers are calculated
These reports are consolidated and manual debit note values added.
Utilization reports for different branches are collected
13 Improving Spinning service financials XIME
each engineer is calculated. These ratios are compared grade wise and branch wise to find the variations.
(Refer flowchart 5)
A worksheet was developed for the above analysis. All the graphs pertaining to financial utilization of
employees can be obtained by feeding the data in the worksheet.
Methodology used for analysis of credit management
Consolidated outstanding report (report of receivables) for all branches is obtained. From these
receivables at each branch is calculated. From these ratios like debtor turnover ratio, interest losses are
calculated and compared across branches. (Refer flowchart 6)
Flowchart 6: Methodology used in analysis of credit management
These ratios are compared across branches.
Outstanding as percentage of sales, debtor turnover ratio, interest losses and collection period of each
branch is calculated.
Consolidated outstanding reports for all branches are collected.
14 Improving Spinning service financials XIME
Results and discussions
Analysis of revenue to cost ratio of individual employees
Revenue to cost ratio of each employee is calculated. The average of revenue to cost ratios of employees
throughout TMD is 1.73 but the standard deviation is 0.84 which means that revenue to cost ratio varies
drastically. This is partly due to the difference in utilization and partly due to salary costs.
Chart 1: Histogram of revenue to cost ratios of employees during the financial year 2010-11
Chart 2: Cumulative frequency of revenue to cost ratios for the financial year 2010- 11
0 0.5 1 1.5 2 2.5 3 3.5 4
0
5
10
15
20
25
30
35
Ratio
Nu
mb
ar o
f en
gin
eers
Histogram of Revenue to cost ratios
0.5, 6 1, 12
1.5, 32
2, 65
2.5, 97 3, 104
3.5, 122 4, 125
0 1 2 3 4 5
Nu
mb
er o
f en
gin
eers
Ratio
Cumulative frequency
Cumulative freuency
15 Improving Spinning service financials XIME
Out of the 125 engineers analyzed 12 engineers have revenue to cost ratio less than 1.0. 32 engineers have
revenue to cost ratio less than 1.5 and 65 engineers have a ratio of less than 2. Comparing the revenue to
cost ratio of different branches would provide further insights. (Refer chart 1 and 2)
Correlation analysis of revenue to cost ratios
Table 2: Correlation analysis of revenue to cost ratios
Staff cost Per day earning
Utilization
Correlation with revenue to cost ratio
-0.54 0.28 0.57
Percentage variation of revenue to cost ratio based on
29 8 32
32 % of variation of revenue to cost ratio is based on utilization of engineers. Hence by increasing the
utilization, revenue to cost ratio can be improved. 29 % of variation of revenue to cost ratio is due to staff
costs but this cannot be controlled. Only 8 % of variation depends on the type of assignment i.e. Basic
Services, Value Added Services or free service. (Refer table 2)
16 Improving Spinning service financials XIME
Branch wise Analysis of revenue to cost ratios
Chart 3: Revenue to cost ratios at different branches during the financial year 2010-11
At Delhi, Mumbai and Hyderabad revenue to cost ratios are 1.15, 1.36 and 1.40. These are lower
compared with the overall average of 1.73. At Delhi this is due to the lower utilization of engineers which
is 69%. In Hyderabad utilization of engineers is 86% but the average revenue per man-day is 1.40 which
means that the engineers are deputed more for free services. (Refer chart 3)
Kolhapur, Chandigarh, Nagpur and Ahmadabad have revenue to cost ratio around 2 against an all India
average of 1.73. Utilization of engineers at Hyderabad and Ahmadabad is greater than 85% the average
utilization across all branches is 79%. (Refer chart 3)
It can be seen from chart 4 that the staff costs as a percentage of revenue at Delhi, Mumbai and Nagpur
are 83%, 71% and 60% respectively. Staff costs are high at these branches. This is also one of the reasons
for low revenue to cost ratios. (Refer chart 4)
1.73 1.94
1.73
1.15 1.40
1.85 1.92
1.36
2.05 2.18
2.721 2.631 2.825
2.498 2.584 2.719 2.600
3.278
2.514 2.842
0.79 0.87 0.77 0.69 0.86 0.74 0.81 0.72 0.78 0.84
Revenue to cost ratio at different Branches FY 2010- 11
Revenue to cost ratio Earnings Per Manday in thousands of rupees Utilization
17 Improving Spinning service financials XIME
Chart 4: Staff costs as percentage of gross margin for different branches
Staff costs refer to salary costs of engineers. Other O&A is the salary costs of managers, office staff and
office expenses.
Chart 5: Pareto chart of non utilized man-days at TMD
37 % of non utilized days are office days and training days. Much cannot be done about leave days as
these are hardly avoidable. Holidays are avoidable only to a small extent. (Refer chart 5)
AHD CHD CBE DEL HYD IND KOH MDU MUM NAG
0.56 0.51 0.49
0.83
0.55 0.58 0.46 0.48
0.71 0.60
0.12 0.13 0.12
0.18
0.14 0.14
0.11 0.10
0.14 0.11
0.32 0.36 0.40
-0.01
0.31 0.28 0.44 0.42
0.15 0.28
Ratio of Net Margin to gross margin
Staff Cost to GM ratio Other O&A to GM ratio Net Margin to gross margin
34.41 28.35
22.86 14.39
34.41
62.75
85.61
100.00
Leave Days Holidays Training Days Office days
Non utilized mandays at TMD
18 Improving Spinning service financials XIME
Grade wise Analysis of revenue to cost ratios
Chart 6: Revenue to cost ratios for different levels during the financial year 2010-11
Revenue per man-day of M2 engineers is Rs.2600 and that of M6 engineers is Rs.2850. Generally
revenue per man-day for higher grade engineers is low and that of lower grade engineers is high except
for M5 engineers with revenue per man-day of Rs.2600. Higher level engineers can be used more for
value added services. Lower level engineers like M4, M5 and M6 can be used more for installation.
(Refer chart 6)
Utilization of M2 engineers is 70% and that of M6 engineers is 83%. Since the staff cost for higher grade
engineers is high they can be utilized effectively. (Refer chart 6)
Overall average
M2 M3 M4 M5 M6 GS MT ST
1.78
1.00
1.63 1.80
2.27 2.82 2.27 1.95
2.58
2.738 2.632 2.724 2.728 2.612
2.854 3.071
2.615 2.745
0.79 0.70 0.80 0.78 0.84 0.83 0.72 0.73 0.60
Revenue to cost ratio and Earnings per for different grades
Revenue to cost Ratio Earnings per manday in thousands of rupees Utilization
19 Improving Spinning service financials XIME
Analysis of revenue to cost ratio at different branches
Ahmadabad
Chart 7: Revenue to cost ratios at Ahmadabad for different grades during the financial year 2010-11
Utilization for the branch as a whole is 87% but earning per man day for the branch is Rs.2631.
M3 engineers have lower revenue to cost ratio of 1.61 against the branch Average of 2.25. This is because
of lower utilization. M3 and M5 engineers have lower earning per man-day less than Rs.2200.
M6 engineers have the highest earning per man-day of Rs.2800 and utilization of 92%. M6 engineers
have the highest revenue to cost ratio of 3.49.
Average revenue per man-day for the branch is Rs.2631. There is scope for improvement of revenue to
cost ratio of the branch. (Refer chart 7)
Branch Average
M2 M3 M4 M5 M6 GS ST MT
2.25
0.00
1.61
2.54 2.62
3.49
0.00 0.00 0.00
2.631
0.000
2.144
2.638
2.208
2.826
0.000 0.000 0.000
0.87
0.00
0.88 0.90 0.88 0.92
0.00 0.00 0.00
Revenue to cost ratio and Earnings per manday in Ahmedabad for different grades
Revenue to cost ratio Earnings per manday in thousands of rupees Utilization
20 Improving Spinning service financials XIME
Chart 8: Pareto chart of non utilized man-days at Ahmadabad
Training days contribute to a relatively higher percentage of 36% to non utilized days at Ahmadabad.
(Refer Chart 8)
Coimbatore
Chart 9: Revenue to cost ratios at Coimbatore for different grades during the financial year 2010-11
36.08 29.93 29.00
4.99
36.08
66.01
95.01 100.00
Training Days Holidays Leave Days Office days
Non utilized mandays at Ahamadabad
Branch Average
M2 M3 M4 M5 M6 GS ST MT
1.73
1.29 1.26 1.60
1.92
3.25
2.27
0.00 0.00
2.825 2.567 2.695
2.856 2.657
3.064 3.071
0.000 0.000
0.77 0.80 0.74 0.72 0.82 0.83 0.72
0.00 0.00
Revenue to cost ratio and Earnings per manday in Coimbatore for different grades
Revenue to cost ratio Earnings per manday in thousands of rupees Utilization
21 Improving Spinning service financials XIME
Revenue to cost ratio for M2 engineers in Coimbatore is 1.29 due to lower earning per man-day of
Rs.2567. M3 engineers have a lower ratio of 1.26 due to lower utilization of 74%. M4 and GS engineers
are also utilized less. They have a utilization of 72%.
Highest utilization of 83% achieved for M6 engineers. Utilization for the branch is only 77% which
means that there is scope for improvement of utilization.
M6 and GS engineers have higher revenue per man-day of nearly 3100. (Refer chart 9)
Chart 10: Pareto chart of non utilized man-days at Coimbatore
Training days account for 27% of non utilized days at Coimbatore. Office days account for a mere 4%.
(Refer Chart 10)
35.60 33.38 26.78
4.24
35.60
68.98
95.76 100.00
Holidays Leave Days Training Days Office days
Non utilized mandays at Coimbatore
22 Improving Spinning service financials XIME
Delhi
Chart 11: Revenue to cost ratios at Coimbatore for different grades during the financial year 2010-11
Utilization and earning per man-day for the branch are 69% and 2500 respectively.
Earning per man-day and revenue to cost ratio are low for higher grades. For example M2 engineers are
utilized 55% and earn revenue of Rs.1597 per day. M6 engineers have a utilization of 65%. (Refer chart
11)
Since the utilization is low Pareto chart can be used to analyze utilization.
Leave days and training days are the major cause of poor utilization in Delhi. By minimizing these two,
utilization at this branch can be improved. (Refer chart 12)
1.154
0.36 0.00
1.57
0.00
2.32
0.00 0.00
1.76
2.498
1.597
0.000
2.762
0.000
2.605
0.000 0.000
2.661
0.69 0.55
0.00
0.76
0.00
0.65
0.00 0.00
0.90
Revenue to cost ratio and Earnings per manday in Delhi for different grades
Revenue to cost ratio Earnings per manday in thousands of rupees Utilization
23 Improving Spinning service financials XIME
Chart 12: Pareto chart of non utilized man-days at Delhi
Hyderabad
Chart 13: Revenue to cost ratios at Hyderabad for different grades during the financial year 2010-11
At Hyderabad Revenue to cost ratio for higher levels is high in anomaly with the general trend at other
branches. Utilization for the branch as a whole is 86%. M5 engineers have the highest revenue to cost
ratio of 1.90. M4 revenue per man-day is Rs.2600. (Refer chart 13)
44.56
20.35 19.82 15.26
44.56
64.91
84.74
100.00
Leave Days Training Days Holidays Office days
Pareto chart of non utilized days in Delhi
1.40
0.00
1.78 1.65 1.90
1.19
0.00 0.00 0.00
2.584
0.000
2.531 2.773
2.558 2.876
0.000 0.000 0.000
0.86
0.00
0.88 0.84 0.91 0.88
0.00 0.00 0.00
Revenue to cost ratio and Earnings per manday in Hyderabad for different grades
Revenue to cost ratio Earnings per manday in thousands of rupees Utilization
24 Improving Spinning service financials XIME
Utilization for the branch is 74% which means that there is scope for improvement. Training days and
leave days account for about 50 % of non utilized days at Hyderabad. (Refer chart 14)
Chart 14: Pareto chart of non utilized man-days at Hyderabad
Indore
Chart 15: Revenue to cost ratios at Indore for different grades during the financial year 2010-11
Utilization for the branch is 74%. M4 revenue per man-day Rs.2617. (Refer chart 15)
39.42
24.93 24.64
11.01
39.42
64.35
88.99 100.00
Holidays Training Days Leave Days Office days
Pareto chart of non utilized days at Hyderabad
Branch Average
M2 M3 M4 M5 M6 GS ST MT
1.85
0.00
1.64 1.81
0.00
3.38
0.00 0.00
2.00
2.719
0.000
2.820 2.617
0.000
2.937
0.000 0.000
2.554
0.74
0.00
0.75 0.72
0.00
0.87
0.00 0.00
0.71
Revenue to cost ratio in Indore for different grades
Revenue to cost ratio Earnings per manday in thousands of rupees Utilization
25 Improving Spinning service financials XIME
Chart 16: Pareto chart of non utilized days at Indore
Office days account for 29% of non utilized days at Indore. This can be reduced. (Refer chart 16)
Nagpur
Chart 17: Revenue to cost ratios at Nagpur for different grades during the financial year 2010-11
39.19 28.50
17.56 14.76
39.19
67.68
85.24
100.00
Leave Days Office days Holidays Training Days
Non utilized mandays at Indore
Branch Average
M2 M3 M4 M5 M6 GS ST MT
1.92
0.00
1.72 1.75
3.24
0.00 0.00 0.00 0.00
2.600
0.000
2.555 2.586 2.689
0.000 0.000 0.000 0.000
0.81
0.00
0.86 0.75 0.87
0.00 0.00 0.00 0.00
Revenue to cost ratio and Earnings per manday in Nagpur for different grades
Revenue to cost ratio Earnings per manday in thousands of rupees Utilization
26 Improving Spinning service financials XIME
Though utilization is 0.81, revenue per man-day for the branch as a whole is 2600. M3 and M4 engineers
have very low revenue per man-day 2500. M3 and M5 engineers have a higher utilization of 86%. (Refer
chart 17)
Chart 18: Pareto chart of non utilized days at Nagpur
Office days account for 17% of non utilized days at Nagpur. (Refer chart 18)
Mumbai
Chart 19: Revenue to cost ratios at Mumbai for different grades during the financial year 2010-11
45.12
18.73 18.73 17.42
45.12
63.86
82.58
100.00
Leave Days Training Days Holidays Office days
Non utilized mandays at Nagpur
Branch Average
M2 M3 M4 M5 M6 GS ST MT
1.36 1.06
1.49
0.00 0.00 0.00 0.00 0.00 0.00
3.278 3.800
3.137
0.000 0.000 0.000 0.000 0.000 0.000
0.72 0.64 0.74
0.00 0.00 0.00 0.00 0.00 0.00
Revenue to cost ratio in Mumbai for different grades
Revenue to cost ratio Earnings per manday in thousands of rupees Utilization
27 Improving Spinning service financials XIME
Utilization for the branch is very low at 72%. Revenue per man day for the branch is higher than 3000. Pareto analysis would provide further insights into utilization. (Refer Chart 19)
Chart 20: Pareto chart of non utilized days at Mumbai
If office and leave days are reduced by half then utilization can be improved by ten percent. (Refer chart
20)
42.11 31.58
20.68
5.64
42.11
73.68
94.36 100.00
Leave Days Office days Holidays Training Days
Pareto chart of non utilized days
Percentage of non utilized days
Cumulative percentage of non utilized days
28 Improving Spinning service financials XIME
Kolhapur
Chart 21: Revenue to cost ratios at Kolhapur for different grades during the financial year 2010-11
Revenue per man-day for the M2 grade engineers at Kolhapur is very low. Utilization of M4 engineers is
also low (Refer chart 21)
Chart 22: Pareto chart of non utilized days at Kolhapur
Training days account for 36% of non utilized days at Kolhapur. (Refer Chart 22)
Branch Average
M2 M3 M4 M5 M6 GS ST MT
2.05
0.00 0.00
1.61
2.87 3.07
0.00 0.00 0.00
2.514
0.000 0.000
2.369 2.666 2.681
0.000 0.000 0.000
0.78
0.00 0.00
0.75 0.81 0.82
0.00 0.00 0.00
Revenue to cost ratio and Earnings per manday in Kohlapur for different grades
Revenue to cost ratio Earnings per manday in thousands of rupees Utilization
36.08 29.93 29.00
4.99
36.08
66.01
95.01 100.00
Training Days Holidays Leave Days Office days
Non utilized mandays
29 Improving Spinning service financials XIME
Chandigarh
Chart 23: Revenue to cost ratios at Chandigarh for different grades during the financial year 2010-11
Revenue to cost ratio for the branch is greater than 2. Average revenue per man-day for M4 engineers is
nearly 3000. Utilization for the branch is 84%. M3 engineers are utilized to the highest level of 87%.
Ahmadabad utilizes employees efficiently. (Refer chart 23)
Chart 24: Pareto chart of non utilized days at Chandigarh
Branch Average
M2 M3 M4 M5 M6 GS ST MT
2.18
0.00
2.12 1.92
0.00
3.20
0.00
2.58 1.98
2.84
0.000
2.820 2.962
0.000
2.732
0.000
2.745 2.684
0.84
0.00
0.87 0.84
0.00
0.81
0.00
0.60 0.72
Revenue to cost ratio and Earnings per manday in Chandigargh for different grades
Revenue to cost ratio Earnings per manday in thousands of rupees Utilization
36.71 25.49
20.05 17.76 36.71
62.20
82.24
100.00
Leave Days Holidays Training Days Office days
Non utilized mandays
30 Improving Spinning service financials XIME
Projected profit improvements
Chart 25: Projected profit improvement on increasing utilization
The above graphs show the projected profit improvement on increasing utilization to 80% at all
employees. The total projected profit improvement Rs 50 Lakhs. M2 and M4 engineers can be utilized
better. (Refer chart 25)
Chart 26: Projected profit improvement on increasing earning per man-day
This graph shows the projected profit improvement on increasing the earning per man-day of engineers
with low earning per man-day to 2600. The total projected profit improvement Rs. 23 Lakh. (Refer chart
26). M2, M3 and M4 engineers can be deputed for high value services.
6
0
16
4
11 8
1 3 3
5
Projected profit improvement in Rs Lakhs
Projected profit improvrment in Rs Lakhs
M2 M3 M4 M5 M6
18
9
19
1
5
Projected Profit improvement in lakhs
Projected Profit improvement in lakhs
Ove
rall …
AH
D
CB
E
DEL
HYD
IND
NA
G
MU
M
KO
H
CH
D
2 3
6
2
4
1 1 0
2 0
Projected profit difference in Rs Lakhs
Projected profit difference in Rs Lakhs
M2 M3 M4 M5 M6
7.3 6.6 5.4
3.9
0.7
Projected Profit improvement in Rs
lakhs
Projected Profit improvement in Rs lakhs
31 Improving Spinning service financials XIME
Level wise analysis
M2
Chart 27: Revenue to cost ratios for M2 at different branches during the financial year 2010-11
Utilization and revenue per man-day for M2 is low especially in Delhi. (0.36 and 1597)
Earning per man-day for M2 engineers is highest in Mumbai. Earning per man-day for M2 engineers is
highest in Mumbai. (Chart 27)
Lower utilization of M2 engineers is mainly due to leave days and holidays. (Refer Chart 28)
1.00
0.00
1.29
0.36 0.00 0.00 0.00
1.06
0.00 0.00 0.00 0.00
2.632
0.000
2.567
1.597
0.000 0.000 0.000
3.800
0.000 0.000 0.000 0.000
0.70
0.00
0.80 0.55
0.00 0.00 0.00
0.64
0.00 0.00 0.00 0.00
Revenue to cost ratio and Earnings per manday for M2 in different branches
Revenue to cost ratio Earnings per manday in thousands of rupees Utilization
32 Improving Spinning service financials XIME
Chart 28: Pareto analysis of non utilized man-days for M2
M3
Chart 29: Revenue to cost ratios for M3 at different branches during the financial year 2010-11
Earning per man-day for M3 engineers in Hyderabad and Nagpur is very low. (Around 2600).They can be
used more for value added services. (Refer chart 29)
34.41 28.35
22.86 14.39
34.41
62.75
85.61
100.00
Leave Days Holidays Training Days Office days
Non utilized days for M2 Engineers
1.63 1.61 1.26
0.00
1.78 1.64 1.72 1.49
0.00
2.12
0.00 0.00
2.724
2.144
2.695
0.000
2.531 2.820
2.555
3.137
0.000
2.820
0.000 0.000
0.80 0.88 0.74
0.00
0.88 0.75 0.86 0.74
0.00
0.87
0.00 0.00
Revenue to cost ratio and Earnings per manday for M3 in different branches
Revenue to cost ratio Earnings per manday in thousands of rupees Utilization
33 Improving Spinning service financials XIME
Utilization of M3 engineers at Ahmadabad, Hyderabad, Chandigarh and Nagpur is very high.
M4
Chart 30: Revenue to cost ratios for M4 at different branches during the financial year 2010-11
Earning per man-day for M4 engineers Kolhapur is low (Rs. 2369). Utilization of M4 engineers at Indore
and Coimbatore is low. (72%)
Revenue per man-day for M4 engineers at Chandigarh and Coimbatore is nearly 3000. Ahmadabad
(90%), Chandigarh (84%) and Hyderabad (84%) utilize M4 engineers well. (Refer Chart 30)
1.80
2.54
1.60 1.57 1.65 1.81 1.75
0.00
1.61 1.92
0.00 0.00
2.728 2.638
2.856 2.762 2.773 2.617 2.586
0.000
2.369
2.962
0.000 0.000
0.78 0.90 0.72 0.76 0.84 0.72 0.75
0.00
0.75 0.84
0.00 0.00
Revenue to cost ratio and Earnings per manday for M4 in different branches
Revenue to cost ratio Earnings per manday in thousands of rupees Utilization
34 Improving Spinning service financials XIME
M5
Chart 31: Revenue to cost ratios for M5 at different branches during the financial year 2010-11
Earning per man-day for M5 is low especially at Ahmadabad. (2208) average 2612. Utilization of M5
engineers is high in all branches. (84%) (Refer chart 31)
2.27 2.62
1.92
0.00
1.90
0.00
3.24
0.00
2.87
0.00 0.00 0.00
2.612 2.208
2.657
0.000
2.558
0.000
2.689
0.000
2.666
0.000 0.000 0.000
0.84 0.88 0.82
0.00
0.91
0.00
0.87
0.00
0.81
0.00 0.00 0.00
Revenue to cost ratio and Earnings per manday for M5 in different branches
Revenue to cost ratio Earnings per manday in thousands of rupees Utilization
35 Improving Spinning service financials XIME
M6
Chart 32: Revenue to cost ratios for M6 at different branches during the financial year 2010-11
M6 revenue per man-day and utilization in Delhi are low. (2605 and 65%) Low utilization Delhi is mainly
due to leave days and holidays. Earning per man-day of M6 engineers is high especially at Indore and
Coimbatore. (Around 3000) (Refer chart 32).
Level Average AHD CBE DEL HYD IND NAG MUM KOH CHD
2.82
3.49 3.25
2.32
1.19
3.38
0.00 0.00
3.07 3.20
0.00 0.00
2.854
2.826 3.064
2.605
2.876 2.937
0.000 0.000
2.681 2.732
0.000 0.000
0.83 0.92 0.83 0.65
0.88 0.87
0.00 0.00
0.82 0.81
0.00 0.00
Revenue to cost ratio and Earnings per manday for M6 in different branches
Revenue to cost ratio Earnings per manday in thousands of rupees Utilization
36 Improving Spinning service financials XIME
Analysis of outstanding
Absolute value of outstanding amount is not the right indicator of the financial performance of a branch.
So the following ratios can be used.
Debtors’ turnover ratio
Debtors’ turnover ratio or accounts receivable turnover ratio indicates the velocity of debt collection of a
firm. In simple words it indicates the number of times average debtors (receivable) are turned over during
a year.
The higher the value of debtors’ turnover the more efficient is the management of debtors or more liquid
the debtors are. Similarly, low debtors’ turnover ratio implies inefficient management of debtors or less
liquid debtors. It is the reliable measure of the time of cash flow from credit sales.
Hyderabad, Mumbai and Nagpur have very low debtors’ turnover ratio. These branches have to improve
the management of debtors.
Average collection period
Average collection period indicates the rapidity or slowness with which debts are collected. The
approximate amount of time taken for a business to receive payments owed, in terms of receivables, from
its customers and clients.
This ratio measures the quality of debtors. A short collection period implies prompt payment by debtors.
It reduces the chances of bad debts. Similarly, a longer collection period implies too liberal and inefficient
credit collection performance.
37 Improving Spinning service financials XIME
Chart 33: Debtors’ turnover ratio for different branches during the financial year 2010-11
Hyderabad and Mumbai turn debts 5 times a year. Indore and Nagpur turn debts about 10 times a year.
Ahmadabad and Coimbatore branches turn debts more than 30 times a year. (Refer chart 33). Ahmadabad
and Coimbatore branches have an efficient credit management.
Chart 34: Average collection period for different branches during the financial year 2010-11
Overall average
CBE HYD KOH MUM
15
31 35
16
5
9
18 16
5
10
Debtors' turnover ratio
Debtors' turnover ratio
Overall average
CBE HYD KOH MUM
25
12 11
23
71
39
21 23
75
37
Average collection period in days
Average collection period in days
38 Improving Spinning service financials XIME
These ratios are only conservative estimates, since the exact amount of sales provided without advance is
difficult to track. Hyderabad, Indore, Nagpur and Mumbai have longer average collection period.
Coimbatore and Ahmadabad have an efficient credit management. (Refer Chart 34)
Outstanding ratio and interest loss ratio
Outstanding ratio is a measure of the proportion of services provided on credit.
Chart 35: Outstanding ratio at different branches during the financial year 2010-11
This ratio is calculated only as a conservative estimate because the net credit sales cannot exactly be
figured out. The graph shows outstanding as a percentage of total revenue. Hyderabad and Chandigarh
have high percentage of services provided on credit. Delhi, Nagpur and Indore also provide more services
on credit. (Refer chart: 35)
AHD CHD CBE DEL HYD IND KOH MDU MUM NAG
3.19
6.27
2.88
9.81
19.33
10.56
5.71 6.23
20.58
10.07
Outstanding Ratio for different branches
39 Improving Spinning service financials XIME
Interest losses as a percentage of profit would provide further insights.
Chart 36: Interest losses as a percentage of profit during the financial year 2010-11
When the payments are delayed the money locked with debtors can have alternative uses. This amount
might be used by TMD or other divisions. Based on this opportunity costs interest losses are calculated.
As the absolute value of this might not provide the right picture, interest losses as a percentage of profit is
calculated. Hyderabad, Nagpur and Mumbai lose considerable amount of profit on interest costs.
In order to avoid interest losses TMD can charge interests on late payments. This can be based on the
number of days in which most losses occur. (Refer chart 36)
Overall average
AHD CBE MDU HYD IND KOH CHD MUM NAG
4 2 3 2
17
2 3 3
36
11
Interest losses as a percentage of profit for FY 2010-11
Interest losses as a percentage of profit
40 Improving Spinning service financials XIME
Chart 37: Interest losses at TMD in Rs versus days during the financial year 2010-11
Interest losses are not only indicators of opportunity cost but also the amount of credit sales and the time
taken in collecting the amount back. (Refer chart 37)
Chart 38: Interest losses in Rs versus days at Hyderabad during the financial year 2010-11
Most interest losses in Hyderabad are due to credits in the period of 60 to 90 days. So Hyderabad branch
can charge an interest on credits older than 60 days. This will not only compensate the losses but also
reduce the average collection period. (Refer chart 38)
0 to 15 15 to 30 30 to 60 60 to 90 90 to 180 180 to 365
365 to 999
38,004 58,364
133,384
367,453
206,288
263,368
208,538
Interest losses in Rs vs Days
Interest losses in Rs
0 to 15 15 to 30 30 to 60 60 to 90 90 to 180 180 to 365 365 to 999
3,931 2,418 26,203
225,596
58,496 44,370
4,144
Interest losses in Rs vs Days
Hyderabad
41 Improving Spinning service financials XIME
Chart 39: Interest losses in Rs versus days at Mumbai during the financial year 2010-11
Most of the interest losses in Mumbai are due to credits older than 180 days. Mumbai branch can charge
interests on credits older than 180 days. (Refer chart 39)
Chart 40: Interest losses in Rs versus days at Nagpur during the financial year 2010-11
Nagpur branch can charge interests on outstanding payments older than 90 days, since they contribute
more to interest losses. (Refer chart 40)
0 to 15 15 to 30 30 to 60 60 to 90 90 to 180 180 to 365 365 to 999
3,679 906 0
10,633 5,430
79,327 71,710
Interest losses in Rs vs Days
Mumbai
0 to 15 15 to 30 30 to 60 60 to 90 90 to 180 180 to 365 365 to 999
1,403 2,153
9,625 2,957
33,799 34,366
53,836
Interest losses in Rs vs Days
Nagpur
42 Improving Spinning service financials XIME
Receivables older than 90 days as a percentage of sales
Chart 41: Receivables older than 90 days as a percentage of sales
Receivables older than 90 days are less likely to be paid back. Mumbai, Nagpur and Hyderabad have
higher amount of outstanding older than 90 days. Madurai and Kolhapur have 2 % outstanding older than
90 days. (Refer chart 41)
Overall average
AHD CBE MDU HYD IND KOH CHD MUM NAG
2.97
0.43 0.59
2.53
4.07
0.00
1.98 1.26
10.40
5.47
Payments older than 90 days as a percentage of sales
Payments pending for more than 90 days as a percentage of revenue
43 Improving Spinning service financials XIME
Suggestions
1. Higher level engineers can be used more for value added services. (Value added services are
charged more.)
2. Lower level engineers like M4, M5 and M6 can be used more for installation. (Installation is
charged less.)
3. 32 % of the variation in revenue to cost ratio of employees is due to utilization. Hence by
improving the utilization revenue to cost ratio can be improved. In other words financial impact
of allotment of engineers should be considered during the deputation
4. A portion of incentives of managers can be based on the financial utilization of employees.
5. Engineers can be rewarded for early completion of trainings.
6. Ability to track information from MPMS especially manual debit notes can be improved.
7. Training could be planned during office days.
8. In order to avoid interest losses TMD can charge interests on late payments. This can be based on
the number of days in which most losses occur.
9. A portion of incentives of employees can be based on average collection period.
10. Ability to track credit information can be improved. For example total value of services provided
on credit cannot easily be tracked.
11. A worksheet for the analysis of financial utilization of employees was developed. In this
worksheet information regarding financial utilization of employees could be obtained by feeding
the corresponding data. Data for every month could be fed to this book, results can be analyzed
and necessary corrective action can be taken. The worksheets are shown in the forthcoming
pages.
44 Improving Spinning service financials XIME
Worksheets
Worksheet 1: Worksheet for the analysis of financial utilization of employees
Worksheet 2: Worksheet showing graphs automatically generated
45 Improving Spinning service financials XIME
Worksheet 3: Worksheet showing graphs automatically generated
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