A SIP PROJECT REPORT

ON

A STUDY ON CREDIT MANAGEMENT AND COLLECTIONS

AT

KATE FOOD INDUSTRIES PVT. LTD.

SUBMITTED TO

SAVITRIBAI PHULE PUNE UNIVERSITY

IN THE PARTIAL FULFILMENT OF TWO YEARS FULL TIME

MASTERS DEGREE IN BUSINESS ADMINISTRATION (MBA)

SUBMITTED BY

Sibin Benjamin

(BATCH 2020-2022)

UNDER THE GUIDANCE OF

Prof. Niji Shajan

THROUGH

KES’s

PRATIBHA INSTITUTE OF BUSINESS MANAGEMENT

CHINCHWAD.411019

Pratibha Institute of Business Manageme qnt Chinchwad, Pune

 Department of MBA
Ay 2020-21
Project Outline Report for Summer Internship Project

Name of the student- Sibin Benjamin

Trainee Organization – Finance Intern

Name- Kate Food Industries Pvt. Ltd.
Address- Govind Garden Chowk, Mithila Nagari, Pimple Saudagar, Pimpri-Chinchwad,
Maharashtra, 411057.
Designation – Managing Director
Email- [email protected]
Contact No - +91 9881161020
Beginning date of the SIP: 07/06/2021
Completion (Projected) date of SIP: 30/01/2022
Specialization- Finance
Title of the project- A study of credit management and collections at Kate food Industries
 DECLARATION

I undersigned, hereby declare that the Project Report entitled (A Study on Credit Management and

Collections at Kate Food Industries Pvt. Ltd. written and submitted by me to the Savitribai Phule

Pune University, in partial fulfillment of the requirements for the award of degree of Master of Business

Administration under the guidance of PROF. NIJI SHAJAN is my original work and the conclusions drawn

are based on the material collected by me.

Place: Chinchwad, Pune Sibin Benjamin

Date:
 ACKNOWLEDGEMENT

I own a great deal to PRATIBHA INSTITUTE OF BUSINESS MANAGEMENT for laying the building blocks of
logic and pragmatism in my life. This report, in a way is a reflection of these values. The organization traineeship
segment (OTS) provided us with a unique opportunity of working with an organization. I would like to express my
earnest gratitude and thanks to Dr. SACHIN BORGAVE Director of PRATIBHA INSTITUTE OF BUSINESS
MANAGEMENT for his support and kind blessings.

I like to thank my project guide Prof. Niji Shajan for constant follow-up and valuable suggestions provided
throughout. She has always been an everlasting source of inspiration and guidance. Also, thank to for helping me to
find these nice company for project.

I also thank to Kate Food Industries Pvt. Ltd who have given their valuable time, views and authentic information
for this project.

I am also grateful to all of them who are directly or indirectly involved in driving this project to a success. I would
like to thank my friends, and colleagues for their continuous support sole object of collecting information is of
academic purpose and I sure that collected information is of academic purpose shall be only for fieldwork Report
and nothing else.

Name.

Sign
Certificate
Chapte Titles Page No.
r no
Executive summary

1 Introduction
 Outline of the program
 Objectives scope & limitation of the
study
2 Industry profile

3 Company profile

4 Theoretical background

5 Literature review

6 Research methodology

7 Data analysis and interpretation

8  Findings
 suggestions
9 Learning through projects

10 Conclusion of the project

Bibliography

Annexure
 Executive Summary

This research aims to study and understand the credit research and analysis and the collection
methodologies used. Credit research is the study of a company’s financial position. It also involves
analyzing the company’s financial statements, but the focus is on its capital structure and how capable is
it in managing its finances. The objective behind conducting credit research is to find out if the
company will sustain itself long with its current equity and debt structure and will it be able to make
payments to the debt it has taken.
 Introduction

What is Credit Management?

Credit management is the function of granting credit terms and making sure money is collected
when it becomes due. Good credit management promotes dialogue between finance and sales
teams to create a balancing act where risk is minimised and opportunities maximised. Businesses
in Singapore have reported credit sales are common practice. It is widely believed throughout the
country that offering credit is important for nurturing business relationships and developing new
ones. Many Singapore businesses also maintain it is more convenient to trade on credit.

Trade credit can be a valuable business tool. Companies that allow payment to be made 30 days
after delivery can be more attractive to some customers than businesses who requirement payment
immediately. However, the risk of non-payment grows greater the longer the credit period is
extended and the size of the sum involved could mean the difference between life and death for the
business offering credit. Credit management seeks to mitigate risk while helping to make a
business as attractive as possible to potential customers.

What is Collections?

Collections is a term used by a business when referring to money owed to that business by a
customer.  When a customer does not pay the business within the terms specified, the amount of
the bill becomes past due and is sometimes submitted to a collection agency.

Extended Definition
When a business sells a product or service to a customer, payment is expected either at the time of
the transaction or within a defined period of time such as 30 days. Unfortunately, some customers
do not pay the business within those set terms and, at this point, the account can be considered in
collections.
 Objective

To check whether he company its goals and objectives with respect to account receivable management.
To study and understand the credit analysis and collections management at Kate Food Industries.
To analyze and evaluate the credit structure and the lending policy of the firm.
To understand and monitor the functioning of accounts receivables for a particular timeframe.
To know the various credit policies adopted by the company.

Scope of the Study

This study focuses on the importance of efficient credit control process and collection management.
The analysis and the data interpretation mentioned in this research provides an in-depth insight on the
financial position of the company.
The study also focuses on the type of credit policies implemented by the company as to maintain a
smooth functioning of accounts receivables.
The Study has taken place in Pimple Saudagar town of Pune district. The data was collected from
correspondents through a structured questionnaire.

Limitations of the Study

The study is done by the information that is provided by the officials at KFI. Hence if they data is
modified according to their convenience, there may be false representation of data then the results have
a tendency to be deceptive.
The data in this study is basically secondary data which is derived from the already available data from
the Accounts Department at KFI.
 Industry Profile

About Food Industry

The Food industry in India comprises various segments such as fisheries, plantations, fruits and
vegetables and confectionery, to name a few. The food industry in India has grown over the last few
years, and its share in global sugar production in 2022 is expected to be 15%, with nearly 32 million
tons.

Details of food industry in India:

India is the second biggest food producer globally, and it has the potential to become the largest
producer of food in the whole world. The Food Industry in India includes milk and milk products,
plantation, alcoholic beverages, vegetables and fruits, fisheries, poultry and meat, grain processing,
chocolates and confectionery.

The Food Industry in India exported products worth around US$ 5.8 billion in 1998, while the total
world food export stood at US$ 438 billion. This shows that although India is one of the biggest food
producers globally, it accounted for only 1.5% of the international trade in food as in 1998.

Through the Ministry of Food Processing Industries (MoFPI), the government endeavors to urge more
investments in the business. It has sanctioned joint ventures (JV) proposals, foreign collaborations,
industrial licenses and 100% export-oriented units. The Indian food processing industry amounts to 32%
of the country’s aggregate food market. It contributes approximately 8.80 and 8.39% of Gross Value
Added (GVA) in Manufacturing and Agriculture, respectively, is 13% of India’s exports and 6% of
aggregate industrial investment.

Reasons for the growth of the food industry:

 Increased urbanization in the country has given a boost to the food industry in India. The
majority of the women in the country are working because families have extra income, which
they are spending on buying food.
 The standard of living in the country has improved as a result of which there has been an
increased demand for food.

1
  Supermarkets and malls have opened all over the country, and this has helped in making
shopping for food is a pleasurable experience.
 The online food delivery players such as FoodPanda, Zomato, TinyOwl and Swiggy build scale
through partnerships as the organized food business has a vast potential and a promising future.
In 2016, the online food delivery industry thrived at 150% year-on-year with an estimated Gross
Merchandise Value (GMV) of US$ 300 million.
 The consumers can select, inspect and pick up food items that they like in a comfortable
ambience. This, too, has helped to boost the sale of food products in the country.

The Indian food industry is poised for huge growth, increasing its contribution to world food trade every
year. In India, the food sector has emerged as a high-growth and high-profit sector due to its immense
potential for value addition, particularly within the food processing industry.

2
 Company Profile
Kate Food Industries Private Limited are Private Limited based firm, involved in the manufacturing
of Potato Chips, flavoured kurkure, masala chips and much more. All their products are getting widely
acclaimed among the large clientele for their exclusive designs, superior quality, and reliability. Apart
from this, their ability to maintain timelines as well as quality in the assortment, providing cost
effective solutions and assurance to make timely shipment of the orders placed by customers have
assisted them in positioning their name in the list of top-notch companies of the industry.

Under the visionary guidance of mentor,  “Mr. Avinash Kate (CEO)”, we are able to place a firm
foothold in this highly competitive market. His vast industry experience, managerial skills, innovative
ideas, practical approach and leadership attitude have enabled us to muster a huge client base.

Factsheet
Basic Information:
Nature of Business Manufacturer

Company CEO Bhupendra Pathak

Total Number of
26 to 50 People
Employees

Year of Establishment 2010

Legal Status of Firm Limited Company (Ltd./ Pvt. Ltd.)

Annual Turnover Rs. 5 - 10 Crore

Statutory Profile:
 Vishweshwar Sahakari Bank
Banker  THE VISHWESHWAR SAHAKARI BANK LIMITED

GST No. 27AAFCK4169A1ZP

CIN No. U15500PN2014PTC150147

Packaging/Payment and Shipment Details

3
  Cash
 Credit Card
Payment Mode  Cheque
 Online

Shipment Mode By Road

Why them?

Since their origin is in this market, they are actively committed towards providing their prestigious
patrons with a remarkable range of product.

Few reasons which are responsible for their development in this domain are as follow:

 Extremely reliable range of products

 Well managed services
 Highly experienced team of professionals
 Strict quality standards
 Timely delivery
 Strong vendor base
 Wide distribution network
 Huge warehouse
 Customized packaging
 Competitive price structure

Team

An experienced and well-qualified team of professionals are available with us to support during pros
and cons. Having sound industry experience, we nurture a team of expert professional who ensures that
the high-quality raw material is selected for processing. Our first priority is to satisfy our clients and
take their feedbacks that enable us to assess ourselves. Furthermore, our administrative staff interacts
with varied departments and maintains effective communication that makes sure the smooth functioning
of our organization.

4
Brands they deal in:

Our manufacturing brand is:

 Kate Mega
 Kate Aqua
 Kate Milk
 Kate Diary Products

Resources
Our people are our most important asset. It is the skills of our people that our customers value; in
particular, our ability to deliver complex projects safely, on time and on budget.

The knowledge, domain expertise and experience of our people accelerate the sustainable growth of the
company. Over the years, the capability team of Kate Food Industries has been gradually ramped up and
nurtured keeping in mind- the market and industry, customer requirements and streamlined delivery
processes.

Values Statement:

We will
 Act with honesty and integrity.
 Treat people with respect.
 Conduct all business lawfully.
 Accept individual and corporate responsibility.
 Strive for customer satisfaction.
 Improve and innovate continuously.
 Never be wasteful.
 Always work effectively and efficiently.

5
 Machinery Used

Grinding Machine

6
Thinning Machine

Filters

7
Bottle separator.

A picture of the production line.

8
Labeler Machine

9
Products Brochure

10
11
12
 Theoretical Background

Credit Research and Collections:

Credit research and analysis is a crucial part of Credit Management. This is the first stage in the
Accounts Receivable process. It is part wherein the credit worthiness of the company in question is
evaluated and analyzed, where the riskiness in terms of extending of credit and collecting payments is
assessed on the basis of the customer’s financial history, financial statements, etc.

What is an Accounts Receivable?

If a company has Receivables, then they’ve made a sale, but have not yet collected the money from the
purchaser. Most companies operate by allowing a portion of their sales to be on credit, offering their
clients the ability to pay after receiving the service.

For example, utility companies typically bill their customers after they have received electricity. While
the utility or energy company waits for its customers to pay their bills, the unpaid invoices are
considered Accounts Receivable.

Most businesses operate by enabling their clients to buy goods in credit.  The cost of sales on credit is
what is referred to as Accounts Receivable. Generally, Accounts Receivables (AR), are the amount of
money owed to the company by buyers for goods and services rendered. The Receivables should not be
confused with Accounts Payable (AP).

While AP is the debt a company owes to its suppliers or vendors, accounts receivable is the debt of the
buyers to the company. Accounts Receivables are important assets to a firm, while Accounts Payable
are liabilities that must be paid in the future by the company. Basically, firms choose to offer
receivables to encourage customers to choose their products over the competitor’s products.

It is advisable for a company to setup an AR process to determine the customers that have already paid
and identify any payments that are overdue. The process is a simple turn of events that make the
Receivables traceable and manageable.

13
Four Main Steps for a Typical AR Process:

1. Establishing Credit Practices

2. Invoicing Customers

3. Tracking Payments Received and Payments Due

4. Accounting for Accounts Receivables

However, using economies of scale, the process may differ for large and small firms. Large firms have a
larger cash inflow, so they typically invest in highly skilled credit management teams and IT systems to
help improve and manage the process efficiently.

Step 1: Establishing Credit Practices

The first step is for the company to develop a credit application process.
The company will then decide, based on the credit-worthiness of the applicant, as to whether they will
offer goods on credit. The company might choose to offer the credit to individual customers or other
businesses.

Also, the company will establish terms and conditions for credit sales. The document outlines the
client’s obligations and requirements. The firm must ensure that it complies with Federal laws on credit,
such as full disclosure of the credit practices. For example, the company has to clearly communicate the
interest rates for the credit.

The terms and conditions differ for large and small firms.

Large companies may opt to give a customer longer periods of time.

On the flip side, small firms cannot afford to offer goods on credit for longer periods due to their less
cash flow and low capital. How soon the money is collected on this debt from the client will be a
contributing factor in ascertaining the company’s capital needed to run the business and the cash flow.

Step 2: Invoicing Customers

An invoice is a document provided to the buyer detailing the products and services that have been
rendered, the costs of those products and services, as well as the date payment is expected.
14
Each invoice has to have a unique invoice number for easy retrieval. The customer is then given the
chance to choose whether they want to receive electronic or physical invoices. Large firms prefer to
send both the electronic and paper invoices.

Unlike paper invoices, electronic invoices are less expensive and convenient. As such, small firms
mostly opt to use the mails to deliver the invoices.

The longer a company takes to send an invoice, the longer it takes for the customer to make payments.
The invoice must be sent promptly.

Step 3: Tracking Accounts Receivable

This step is performed by an Accounts Receivables (AR) Officer. The Officer keys out a payment
deposited into the bank account of the supplier, feeds it into the AR system, and then allocates it to an
invoice.

The officer also reconciles the AR ledger to be certain that all the payments are accounted for and
properly posted, and then issues monthly statements to clients. The statement provides details for the
customers about the amounts owed as per previously sent invoices.

The tracking process differs in large and small companies. Smaller companies may not have an
advanced system in place to track payments, and may use manual AR tracking by using tools, such as
Excel. In a manual process, companies use spreadsheets to record when they send the invoices, and
when they receive payments. Small companies also may not have enough staff to appoint an AR
Officer, in which the company may hire a professional accountant to fulfill this function.

Larger companies typically invest in a team of AR Officers to conduct the tracking process, and they
use some form of an accounts tracking software system to help ensure accuracy. The system helps the
AR Officer to be more effective, because it automatically alerts the AR Officer to which debt is
outstanding.

Step 4: Accounting for Accounts Receivable

15
The Collections Officer establishes the due date for payments. After identification of unpaid debts, the
account department makes journal entries to record the sales. The process involves both accounting for
bad debt, or the unpaid debts, as well as identifying early payment discounts.

16
 Literature Review
According to the facts of BPP Press Financial Management (2009), accounts receivable is
a organization’s claim for purchaser assets. Accounts receivable represents a big proportion of the
cutting-edge belongings of several organizations and represents investment.

2. Paul, Salima Y, (2007): If it impacts credit score control. Therefore, the control of this
characteristic have to be the variety of typical desires, and should be suitable for
professional methods.
It is widely universal in the credit management literature, such as the product surroundings,
frequency of dissemination, and permitting businesses to benefit from monetary prudence.
The different influencing elements that have an effect on the credit control feature are that
the time spent on each function of the credit score function funding and credit score control
technique has been extensively typical for the control of business enterprise overall
performance.

Waweru (2011) carried out a study on the relationship between receivables management and the value
of companies quoted at the NSE. The study used secondary data obtained from annual reports and
audited financial statements of companies listed on the NSE.

4. Wimely, C J. (Mar/Apr 2012): It represents the single largest capital investment on the
balance sheet. While the age- old battle of whether or not long term debt should be
considered part of the capital structure of an organization is commonly acknowledgment
credit policy based on financial analysis and non-financial data, Lower credit standard
boost credit are (5C): character, capital, capacity, conditions and collateral.

5. Stevenson, Paul, (2005): average collection period is uniform in the sample units. The
integration on recognition function within another department may be desirable.
Nevertheless, these must a struggle of awarenessamongst credit objectives and others.
There would incentives for the sales department, for instance, to maximize the turnover
and thus sales staff may offer more generous credit terms than the industry norm or offer
credit to risky customers.

17
6. RamaduJanki P. & Rao Durga S. (2007); disclosed in their study - "Management of
receivables within the Indian commercial automobile enterprise" - that the enterprise has
appreciably reduced management, but a few person agencies scored far worse in this
area.

18
 Research Methodology

Research definition:

Systematic investigative process employed to increase or revise current knowledge by

Discovering new facts. It is divided into two general categories:
(1) Basic research is inquiry aimed at increasing scientific knowledge, and
(2) Applied research is effort aimed at using basic research for solving problems or
Developing new processes, products, or techniques.

Research Methodology:

Meaning:
Research Methodology is a way to find out the result of a given problem on a specific matter
or problem that is also referred as research problem. In Methodology, researcher uses different criteria
for solving/searching the given research problem. Different sources use different type of methods for
solving the problem. If we think about the word “Methodology”, it is the way of searching or solving
the research problem. (Industrial Research Institute, 2010). According to Goddard & Melville (2004),
answering unanswered questions or exploring which currently not exist is a research. The Advanced
Learner’s Dictionary of current English lays down the meaning of research as a careful investigation or
Inquiry especially through search for new facts in any branch of knowledge. Redmen & Mory (2009),
define research as a systematized effort to gain new knowledge. In Research Methodology, researcher
always tries to search the given question systematically in our own way and find out all the answers till
conclusion. If research does not work systematically on problem, there would be less possibility to find
Out the final result. For finding or exploring research questions, a researcher faces lot of problems that
can be effectively resolved with using correct research methodology (Industrial Research Institute,
2010).

Research methodology is a way to systematically solve the research problems. It comprises of

The various steps adopted by the researcher along with the logic behind it.

19
Following steps were involved:
1. Research Design
2. Method of data collection
3. Source of data collection
4. Selecting sample size
5. Area and period of study
6. Limitation of study

1. Research Design

Method used: Descriptive method

2. METHOD OF DATA COLLECTION

• The study is based on facts and figures collected by the secondary sources.

Sampling

• In order to collect the reliable information, I have analyzed and evaluated the company’s credit
and collection policies and activities.

Sampling Size:

Sample size refers to the number of participants or observations included in a study. ... The sample size,
or n, in this scenario is 100. The study's findings could describe the population of all runners based on
the information obtained from the sample of 100 runners.

Sampling Size Responses Received Positive Responses Negative Responses

Received Received
100 80 50 30

20
Duration

Collected data from companies financial records for the last three financial years.

AREA OF STUDY: The area of my study is within the company premises. I studied the various process
involved in approving credit and collections and understand the importance of efficient account
receivables management.

21
 Chapter VII
Data Analysis & Interpretation

22
 Trend of Sales

Sales trend analysis is the review of historical revenue results to detect patterns. It is a useful
budgeting and financial analysis method that can indicate the onset of changes in the near-term
revenue growth rates of a business. It is rarely adequate to simply plot the total sales of a business
on a trend line and expect to obtain any significant information from it.

Year Sales

2017-18 2,16,90,990

2018-19 5,71,99,258

2019-20 7,53,63,739

2020-21 11, 88,05,980

2021-22 12, 88,05,980

23
 Trend of Sales
12.8
11.8
Amount in Crores

7.5

5.7

2.1

2017-18 2018-19 2019-20 2020-21 2021-22

Axis Title

Trend of Sales

INTERPRETATION:

The sales over the last 5 years have been continuously increasing. This is a good sign for the company
that there is an upward trend of sales over the last 5 years.

24
 Trend Of Debtors

 A debtor is a party that owes money to another party.

 On a personal level, it can describe a person who’s borrowed money from a friend and hasn’t
paid it back yet.

 In business, a debtor is an individual, business or any other entity that owes money to another
entity because they’ve been provided with a service or product or borrowed money from an
institution.

 In every case, the debtor owes money and remains a debtor until they’ve paid the full amount
back. They have responsibility for that specific debt.

Year Debtors

2017-18 11,62,722

2018-19 13,56,224

2019-20 20,25,566

2020-21 31,48,049

2021-22 42,60,569

25
 Series 1
Series 1
35

30

25
Amount in Lakhs

20

15

10

0
2 0 1 7 -1 8 2 0 1 8 -1 9 2 0 1 9 -2 0 2 0 2 0 -2 1 2 0 2 1 -2 2

Years

Interpretation:

There is a rise in debtors every year. As the debtors increase the company has to manage more
receivables and high increase in the receivables can lead to inefficiencies.

26
 DEBT COLLECTION PERIOD:

In accounting the term Debtor Collection Period indicates the average time taken to collect trade debts.
In other words, a reducing period of time is an indicator of increasing efficiency. It enables the
enterprise to compare the real collection period with the granted/theoretical credit period.

Year Debtors Sales Period

2017-18 11,62,722 2,16,90,990 18 days

2018-19 13,56,224 5,71,99,258 42 days

2019-20 20,25,566 7,53,63,739 37 days

2020-21 31,48,049 11, 88,05,980 38 days

2021-22 42,60,569 12, 88,05,980 30 days

𝐷𝑒𝑏𝑡 𝑐𝑜𝑙𝑙𝑒𝑐𝑡𝑖𝑜𝑛 𝑝𝑒𝑟𝑖𝑜𝑑 = 𝐷𝑒𝑏𝑡𝑜𝑟𝑠 / 𝑆𝑎𝑙𝑒

Analysis: The debt collection period in the year 2017-18 was 18 days and in the year 20181-19 it
increased to 42 days. After that it is showing a decreasing trend which is a good sign that the debtors
amount is collected early though it is fluctuating in nature.

27
 Debt Collecti on Period
45

40

35

30

25
Days

20

15

10

0
2017-18 2018-19 2019-20 2020-21 2021-22

Year

Debt Collection Period Linear (Debt Collection Period)

28
 Analysis of Overdue Payments:

A past due invoice is a billing that has not been paid as of its due date. If a business extends credit to
its customers, it is likely to experience situations where it must collect a past due invoice. It is essential
to do so, since not receiving payments on time can cause major cash flow problems

Years Overdue Payments

2017-18 3,22,344

2018-19 2,56,665

2019-20 4,74,573

2020-21 5,55,611

2021-22 8,34,003

29
 Overdue Payments

13%
2017-18
2018-19
34% 10% 2019-20
2020-21
2021-22

19%

23%

Overdue Payments
Overdue Payments Linear (Overdue Payments)

6
Amount in Lakhs

0
2 0 1 7 -1 8 2 0 1 8 -1 9 2 0 1 9 -2 0 2 0 2 0 -2 1 2 0 2 1 -2 2

Years

30
Interpretation:

If we look closely at the above chart and pie the data clearly suggests that there’s an upward trend in the
overdue payments in the last three financial years. In the financial year 2018-19 there was a slight
decrease in the amount of overdue payments but the company failed to capitalize on the situation and as
the sales increased the invoices past due also increased.

31
 Analysis of Receivables Outstanding:

Receivables refer to debts owed to a company. If a business agrees to provide its products or services
and accept payment later, such as 30-day or 90-day payment terms, those items qualify as outstanding
receivables until such time as they are paid off.

One common receivable is the credit account -- if the business sells items on credit, the accounts
become outstanding receivables until they are settled.

Year Receivables Sales No. of Days Days Sales Outstanding

2017-18 32,53,648 2,16,90,990 360 54

2018-19 74,35,903 5,71,99,258 360 46

2019-20 90,43,648 7,53,63,739 360 43

2020-21 1,66,32,837 11, 88,05,980 360 50

2021-22 1,15,92,538 12, 88,05,980 360 32

Days Sales Outstanding

Days Sales Outstanding
60
54
52
50
50 46
43
40

30
Days

20

10

0
2017-18 2018-19 2019-20 2020-21 2021-22
Years

32
Analysis and Interpretation:

i. Receivables are in range of Rs. 32,53,648 – Rs. 1,15,92,538.

ii. Sales are in range of Rs. 2,16,90,990 – Rs. 12, 88,05,980.

iii. No. of working days is fixed to 360 days.

iv. Days Sales Outstanding are in range of 32 to 54.

v. The above graph shows the trendline is fluctuating in nature. In general, DSO of below 45 days
is considered favorable for any business.

33
 Chapter IX
Observation, Findings and Suggestions

34
 Observation:

 There are no regular follow ups for overdue invoices by the collection team.

 The credit policy and payment terms of the company are not rigid. The company should set
some restrictive credit standards, limits, etc to critical customers so as to make sure there is
smooth flow in the accounts receivable management.

 There is no clear communication between the company and the customers regarding the
payment terms and credit policy.

 There are no proper ways undertaken by the company to identify the credit worthiness of the
customer.

35
 Findings:

 In the analysis of the growth of sales it is found that the sales of KFI is been increasing year by
year which may result in good profit for the company.

 The Receivables are increasing every year as the sales are increasing which means that the
chances of delinquent payments, overdue payments are more and certain alterations in the
payment term and credit policy is required as to make sure that there’s no provision for bad
debts.

 Days Sales Outstanding are around 32 to 54 days which means they are in a good position in
terms of debt holding and the trendline is downward sloping.

 Even though the DSO is downward sloping the number of overdue payments are increasing
every year. The company should alter their credit and payment terms in order to recover the
pending receivables.

36
 Suggestions:

 Firstly, the company should set up some restrictive credit standards, credit terms and credit
policy regarding the credit to its any type of customer.

 The management has to take initiative to collect the funds from the debtors without any
interference. The company has to first analyze the credit worthiness of its customers before
giving credit facilities.

 The company has to achieve the operational efficiency by increasing the sales of the
company. The company has to identify the incremental return which a firm may gain by
changing its credit policy and should be compared with the cost of funds invested in
receivables.

 The company can be more effective in utilization of available resources.

 The company can also appoint a committee in which to have a clear idea about the
receivables management and take suggestions accordingly and to be incorporated in the
company

37
 Chapter X
Learning through the Project

Learning:
 The project has helped me to learn the art of report writing
 Through this project I learned to work on MS Excel MS Word.
 Time Management is the one thing which I learnt through this project.
 The project helped me to understand the inventory management.
 The project helped me to understand the whole credit and collections process.

38
 Contribution to the host organization:

 I was taking care credit approval process and collections.

 My day to day activities and responsibilities involved analyzing and evaluating the customer’s
credit worthiness and granting credits based on the credit information obtained, contacting
customers and taking follow ups for payments and make sure they fulfill their debt obligations,
emailing the invoices to the customer, setting or altering the payment terms as per the needs and
requirements of the organization.

 I was a crucial part of the Accounts Receivables team.

39
Chapter 11 Conclusion

40
 Conclusion

 Accounting is one of the vital functions of today’s business world. Accounting, analysis and
interpretation done through scientific way can enlighten the present uncertain business
environment.

 Account receivables analysis is one of the most widely used to control the debt blockings. It is
also helpful in controlling of bad debts.

 Accounts receivable is one of the device which can be used to control the funds management
and also to assign certain responsibilities to the management to control the funds that are
misused and blocking of funds.

 The company is also advised to tighten its credit periods, so that the company’s credit policy can
be enhanced and can receive its debt amount easily.

41
 Bibliography

 Suk, H., Kim, S., & Rowland. (1992). Japanese groups' working capital exercise within the United States.

Financial Practice and Education, 2, 89-92.

 Julius K. [2001] Basic Financial Management, First Edition,

 MY Khan and PK Jain, 2002 Edition, ISBN zero-07-048379-five, New Delhi, Tata McGraw Hill Publishing

Co., Ltd. - 110008,

 Gupta Shashi K and Gupta Anuj, 2103 Edition, ISBN 978-93-272-2749-nine, Kalyani Press, New Delhi –

110002 Deloof, M. (2003). Does running capital control have an effect on the profitability of Belgian

businesses? , Business JournalsFinance and Accounting, 30(three-4), 573-587.

 Reddy YV & S. Patkar (2004), “Factoring Working Capital and Liquidity Management: A Comparative Study

of SBI and Canbank Factors”, Managerial Accounting, 39, No. Five Pp. 373-378.

 JanPJankiRamadu and S Durga Rao (2007), "Management of money owed receivable in industrial vehicles in

India", IUP Applied Finance.  Vadakarai (2007), “Research on Management Variables of Accounts Receivable

and Plant and Machinery Investment”, Journal of International Studies, Journal of Social Science and

Management, vol. 1, no. 7.

 Ramachandran A, &Janakiraman, M (2009). The relationship between running capital management efficiency

and EBIT, handling global transformation, Vol. 7(1)sixty one-74

 Garcia-Teruel, Pedro , J. And Pedro, Sorano, (2007).The impact of working capital control at the profitability of

SMEs.International Journal of Management Finance, 3,(2), 164-177.

 Grzegorz M, M (2008) Profit Management Approach in Accounts Receivable Management, Southeast

European Economic and Business Journal, Vol. 3, No 2, PP. 89- 96.

 Padachi, K. (2006). The Trend of Working Capital Management and Its Impact on Firm Performance - An

Analysis of Mouritian Small Manufacturing Enterprises . International Business Research Review Article, 2(2),

45-forty eight.

 Robert, N. And Anthony. (unknown). Management Accounting, Op.Cit.  Sinha, K., Sinha, A., and and S. S.
(1988). Indian working price range control. New Delhi: JanakiPrakashan.  Mathur.SB. (12 months 2002).

Working Capital Management and Control - Principles and Practices . New Delhi: New Age International.
ANNUXURE AND QUESTIONNAIRE
ANNUXURE
 QUESTIONNAIRE

Q.1 What are the steps undertaken to analyze the credit worthiness of a customer?

Q.2 What is Cash in advance?

Q.3 Explain the OTC cycle?

Q.4 How should the company collect all the receivables within the stipulated time frame?

Q.5 Which payments should the company prioritize first?

Q.6 From where was the data collected for sampling?

Q.7 What are the main constituents of credit sale?

Q.8 What should the company do if the DSO is more than 55 days?

Q.9 How can the company help the customers to fulfill their debt obligations?

Q.10 What is the ideal credit policy?