end collection process and impact on cash flow new2003

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A Project Report

On

END COLLECTION PROCESS AND IMPACT ON CASH FLOW

IN AGCNetworks Ltd.

BY

RAHUL AJITKUMAR DOSHI

Under the guidance of

Prof. Bhagyashree Navare

Submitted to

A PROJECT REPORT

IN PARTIAL FULFILLMENT OF MASTERS DEGREE IN

BUSINESS ADMINISTRATION

All India Shri Shivaji Memorial Societys Institute of Management

Shivajinagar

PUNE: 4110001

2008-2010


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Acknowledgement

Words are indeed inadequate to convey my deep sense of gratitude to all those who have

helped me in completing this summer project to the best of my ability. Being a part of

this project has certainly been a unique and a very productive experience on my part.

I am really thankful to my mentor Mr.Sadanand Ghodgerikar Regional Finance

Manager for making all kinds of arrangements to carry the project successfully and for

guiding and helping me to solve all kinds of queries regarding the project work. His

systematic way of working and incomparable guidance has inspired the pace of the

project to a great extent.

I would also like to thank my project Prof. Bhagyashree Navare coordinator, for

assigning me a project of such a great learning experienceand acquainting

Last but not least I would like to thank all the employees ofAGC Networks Ltd. who

have directly or indirectly helped me with their moral support for the completion of my

project


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Executive Summary:-

The project held in the western region of AGC Networks LTD. Pune. AGC Networks

LTD. is a telecommunication sector company. Registered office is in Mumbai and

corporate office is in Gurgaon. The company has total six region in India. Westernregion,southern region, Northern region, Eastern region,Mumbai, Benguluru.The regional

office of western region is Pune. In this region includes area Maharashtra, Goa, Gujrat,

Madhya Pradesh, chatisgadh. The company is basically dealing with trading in telicom

product as well as in services. The company collecting revenue in selling products and

also from annual maintenance cost (AMC).The main challenge of the company is

collecting Account Receivables in time, Maintaining up-to-date records of accounts

receivables, Initiating collection procedures on overdue accounts, Minimize bad debts

and outstanding receivables, Maintain financial flexibility.

Also understanding procedure of the organization of Account Receivable.


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Index

Particulars Pages

1. Introduction to the topic

2. Company Profile

Business area of the company

Key Executives

Awards/Achievements

Competitors

3. Scope of the project

4. Objective of the project

5. Research Methodology

6. Theory of the Project

Billing process

Collection Process & Documentation

Payment Terms

Ratio Analysis

7. Data Analysis

8. Conclusions and Recommendations

9. Bibliography


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INTRODUCTION

Two years ago, Wall Street titans and the government's most powerful economy ratherthan propping up another failing financial institution; they let 158-year-old LehmanBrothers Holdings Inc. collapse. The main reason of collapsing Lehman BrothersHoldings Inc. was reduced liquidity in the global credit market and also the banking &financial systems.

So in business, there is almost nothing more important than cash!Cash is the essential ingredient that enables a business to survive and prosper. It is alsothe main indicator of business health.

While a business can survive for a short time without sales or profits, without cash it will

die. For this reason the inflow and outflow of cash need to be carefully monitored andmanaged.

The statement cash is king is really true. If you dont have cash on-hand you cant pay

your overhead expenses, vendors or employees, let alone employment taxes and sales

taxes. You may be overwhelmed as a new business owner figuring out how to manage

your cash, but by using good judgment and staying involved; you can reach and achieve

your goals of cash management

What is cash?

It is the beginning and the end of the accounting business cycle (cash-inventory-sales-

cash) and the lifeblood of the business organism.

Cash is the measure of a business ability to pay its bills on time. This, in turn, dependson the timing and amounts of cash flowing into and out of the business each week andmonth i.e. the cash-flow of the business.

High-performing companies have a higher rate of adoption across all activities in this

area of the performance wheel and, in particular, are tackling some of the harder

operational issues. These include tightening the budgeting process and improvingfinancial modeling and reporting.

They have been able to successfully implement cash tax management strategies that

generate additional capital, provide cash savings and protect cash tax assets.
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Receivables:-

The term receivables is defined as debt owned to the firm by customers arising from

sale of goods or services in the ordinary course of business.

When a firm makes an ordinary sale of goods or services

and does not receive payment, the firm grants trade credit and creates accounts

receivables which will be collected in future.

Objectives of receivables management are:

Costs and benefits

Costs:

Major categories of costs associated with the extension of credit and accounts receivable

are:

1) collection cost2) capital cost3) delinquency cost4) Default cost.

Advantages of accounts receivable management services:

Increased recoveries

Reduction in bad debt

Fewer delinquencies

Utilization of advanced technology

Consistency

Unapplied credits eliminated

Increased cash flow

Reduced operating costs

Better control over accounts receivable management Improved customer services


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Efficient cash management processes are pre-requisites to execute payments, collect

receivables and manage liquidity. Managing the channels of collections, payments and

accounting information efficiently becomes imperative with growth in business

transaction volumes. This includes enabling greater connectivity to internal corporate

systems, expanding the scope of cash management services to include full-cycle

processes (i.e., from purchase order to reconciliation) via ecommerce, or cash

management services targeted at the needs of specific customer segments. Cost

optimization and value-add services are customer demands that necessitate the creation of

a mechanism to service the various customer groups.

Banks are increasingly becoming innovative and anticipating the needs of corporate

towards standardization, ERP integration, reconciliation, real-time reporting, providing

an end-to-end view of cash management value chain besides offering the ability to reach

and be reached by their own customers. The mounting pressure from competitors forces

the Banks to look for an Information Technology vendor who can offer better solutions

and services in Cash Management and Internet Banking.

So cash flow management in the business is very important thats why choosing the topicwith respect to financial importance in business is END TO ENTERPRICESCOLLECTION PROCESS AND ITS IMPACT ON CASH FLOW.


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COMPANY/ORGANISATION PROFILE:-

AGC NETWORKS LTD. formerly Avaya GlobalConnect Ltd. (Tata telecom.)August19, 1986 at Mumbai. It is one of Indias leading providers of enterprise communications

solutions, offering converged communication solutions, contact center solutions, andunified messaging systems for enterprises. Already a market leader in contact centersolutions with more than 50% market share, AGC NETWORKS LTD plans to becomeIndias leading provider of converged communications business solutions for enterprises.With 35 service centers spread around the country, the company provides solutions tosome 6,000 customers, employs over 500 associates, and generates $87 million in annualrevenues.

AGC NETWORKS LTD is Indias leading intelligent communications solution providerdelivering business solutions that help organizations accelerate revenue growth, increasemarket penetration, optimize operating costs and improve employee productivity, by

embedding communication in their business processes.

AGC NETWORKS LTD is a subsidiary of Avaya Inc., a global leader in businesscommunications. More than one million businesses worldwide including 90 percent ofthe FORTUNE 500 use Avaya solutions for IP Telephony, Unified Communications(UC), and Contact Centers (CC).

By July of 2002, the company had its ERP system up and running. my SAP CRMcapabilities for presales and lead management came online between October 2002 andMarch 2003.

Business area of the company:

Products offered by Avaya:

Avaya Communication Servers & Gateways - The Avaya IP600 Internet ProtocolCommunications Server delivers reliability and full-feature functionality to thecustomer's entire enterprise, by combining voice, fax/messaging, data, and Internet traffic- onto a powerful IP network.

Avaya Communication Manager- Communication Manager delivers on the promise ofIP by offering a no compromise approach to convergence in terms of reliability and

functionality. Designed to run on a variety of Media Servers, Communication Managerprovides centralized call control.

Digital Phones- With their sleek, global styling and user interface, and availability inwhite or gray, these telephones look great in any location. There are a variety of 6400Series models that can meet customers' specific requirements and deliver exceptionalbenefits to their business.


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Unified Access

Conferencing and collaboration

Messaging- Messaging provides a single point of access to all message types - voice

mails, electronic mails or faxes, from virtually any communication device. VideoConferencing & Applications

The company provides Solutions for:

Hospitality

Insurance

Banking

Mutual Fund

Securities

SME Solutions

Key Executives:-

Sr.No. Name Designation

1 S Ramakrishnan Chairman

2 Anil Nair Managing Director

3 Vishal Kohli Company Secretary

4 Anil Batra Director

5 Christopher Formant Director

6 David Manganello Director

7 Hoshang Noshirwan Sinor Director

8 Pamela F Craven Director

9 Amarnath K Pai Vice Chairman


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Awards/Achievements:

Avaya GlobalConnect wins Employer Branding Awards 2007.

Avaya GlobalConnect Declared Best Unified Communications Company. Avaya GlobalConnect wins Frost & Sullivans India ICT Awards. Avaya GlobalConnect wins VARIndia Brand of Excellence Award 2008.

Avaya GlobalConnect wins Voice & Data Leadership Award for Enterprise VoiceSolutions.

Avaya GlobalConnect awarded VARIndia Best Unified CommunicationsSolutions Award 2008.

Avaya GlobalConnect wins the Best Employer award at Sunday Indian MegaExcellence Awards 2009.

Avaya GlobalConnect is Best Enterprise Solution Provider Company. Avaya GlobalConnect wins VARIndia Best Unified Communications Solutions

Award 2009. Avaya GlobalConnect recognized as Reseller of the Year 2009 Award for India &

SAARC by Polycom. AGC Networks Ltd. (formerly Avaya GlobalConnect) Wins INFOCOM CMAI

National Telecom Award for Excellence in Unified Communications

Technology Partners

NICE Systems Polycom Inc. Symon Communications Plantronics, Inc. Sony Extreme Networks IEX Nuance Jabra Motorola Snom Altitude Acme Grandstream HP NEC Bittel Fortinet
http://www.agcnetworks.com/awards.aspxhttp://www.agcnetworks.com/unified-communications-awards.aspx?id=1http://www.agcnetworks.com/ict-awards.aspxhttp://www.agcnetworks.com/var-india-be-award.aspxhttp://www.agcnetworks.com/enterprise-voice-solutions-award-vd.htmlhttp://www.agcnetworks.com/enterprise-voice-solutions-award-vd.htmlhttp://www.agcnetworks.com/best-uc-company.aspxhttp://www.agcnetworks.com/best-uc-company.aspxhttp://www.agcnetworks.com/best-employer-award.aspxhttp://www.agcnetworks.com/best-employer-award.aspxhttp://www.agcnetworks.com/infocom-telecom-award.aspxhttp://www.agcnetworks.com/var-india-be-award-2009.aspxhttp://www.agcnetworks.com/var-india-be-award-2009.aspxhttp://www.agcnetworks.com/PolycomReseller-awards.aspxhttp://www.agcnetworks.com/PolycomReseller-awards.aspxhttp://www.agcnetworks.com/AGCWinsINFOCOMCMAI-awards.aspxhttp://www.agcnetworks.com/AGCWinsINFOCOMCMAI-awards.aspxhttp://www.nice.com/http://www.polycom.com/http://www.symon.com/http://www.plantronics.com/http://www.sony.com/http://www.extremenetworks.com/http://www.iex.com/http://www.nuance.com/http://www.jabra.com/http://www.symbol.com/http://www.snomindia.com/http://www.altitude.com/http://www.acmepacket.com/http://www.grandstream.com/http://www.procurve.com/http://www.nec.com/http://www.bittelcom.com/http://www.fortinet.com/http://www.agcnetworks.com/awards.aspxhttp://www.agcnetworks.com/unified-communications-awards.aspx?id=1http://www.agcnetworks.com/ict-awards.aspxhttp://www.agcnetworks.com/var-india-be-award.aspxhttp://www.agcnetworks.com/enterprise-voice-solutions-award-vd.htmlhttp://www.agcnetworks.com/enterprise-voice-solutions-award-vd.htmlhttp://www.agcnetworks.com/best-uc-company.aspxhttp://www.agcnetworks.com/best-uc-company.aspxhttp://www.agcnetworks.com/best-employer-award.aspxhttp://www.agcnetworks.com/best-employer-award.aspxhttp://www.agcnetworks.com/infocom-telecom-award.aspxhttp://www.agcnetworks.com/var-india-be-award-2009.aspxhttp://www.agcnetworks.com/var-india-be-award-2009.aspxhttp://www.agcnetworks.com/PolycomReseller-awards.aspxhttp://www.agcnetworks.com/PolycomReseller-awards.aspxhttp://www.agcnetworks.com/AGCWinsINFOCOMCMAI-awards.aspxhttp://www.agcnetworks.com/AGCWinsINFOCOMCMAI-awards.aspxhttp://www.nice.com/http://www.polycom.com/http://www.symon.com/http://www.plantronics.com/http://www.sony.com/http://www.extremenetworks.com/http://www.iex.com/http://www.nuance.com/http://www.jabra.com/http://www.symbol.com/http://www.snomindia.com/http://www.altitude.com/http://www.acmepacket.com/http://www.grandstream.com/http://www.procurve.com/http://www.nec.com/http://www.bittelcom.com/http://www.fortinet.com/


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Juniper Audio Codes Verint IP Trade Knoahsoft

Spectrum Symon Communications

Unified Communications is the convergence of real-time and non-real-time businesscommunication applications. These applications include telephony, conferencing, email,voice mail, instant messaging, video, and collaboration across a variety of interfaces be itPC or web-based clients, telephones and mobile devices, or speech.

AGC Networks brings to you Unified Communication and collaboration solutions inclIP Telephony solutions from Avaya solutions that provide integrated, multi-vendor

business communications applications, systems and services in a reliable and securefashion. The result is a superior, seamless user experience across all enterprisecommunication solutions regardless of location, network, or device. UnifiedCommunications from Avaya offers many features and benefits:

Integrated The capabilities of formerly disparate applications are brought togetherinto unified interfaces. The functionality is integrated. For instance, you can click to callthe sender of an email, move from an instant message to a call or a conference call, orreply to a voice message with voice or text. The modalities will be brought together sousers can seamlessly shift between their mobile phones and their desk phones in anyorder while a call is in progress and access the same directories and applications

regardless of their locations or devices.

Multi-vendor Avaya concurs with the consensus of many industry analysts whosuggest that Unified Communications is not an all-in-one solution from a single vendor.Avaya offers customers robust interfaces to our market leading communication servers inIP Telephony, Messaging, and Conferencing. Avaya is committed to supportingstandards and integrates its solutions to add value to third-party solutions from Microsoft,IBM, and others. While some communication vendors may also offer base levelintegrations, Avaya extends its customer demanded features into these environments.

Reliable and Secure Demonstrating the capabilities ofUnified Communications is

one thing. Banking on the use of these capabilities across the enterprise requiresreliability that ensures theyll be working when required. Avaya offers customers choicesto make the infrastructure as resilient as desired and to support the scale that is requiredto meet enterprise security standards.

Seamless user experience Employees today have too many devices andcommunication applications to manage. Users are bombarded with phone calls, email,voice mail, fax, and instant messaging. They participate in a variety of conference
http://www.juniper.net/in/en/http://www.audiocodes.com/http://www.verint.com/http://www.ip-tradenetworks.com/http://www.knoahsoft.com/http://www.spectum.com/http://www.symon.com/http://www.juniper.net/in/en/http://www.audiocodes.com/http://www.verint.com/http://www.ip-tradenetworks.com/http://www.knoahsoft.com/http://www.spectum.com/http://www.symon.com/


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interactions including audio with or without video or enhanced by the web. With all thesetools, employees spend too much time managing devices and operating the tools, whichdiminishes the time and quality of communicating and interacting with businessassociates. Avaya Unified Communication solutions bring these applications intoconsolidated easy-to-use interfaces to provide Intelligent Access embedding

communication into what people do as they do it.

Business Benefits

Simplified interactions with customers through single number access to people andresources

Increased availability of associates using features such as find-me/follow-me services orsimultaneous ringing of desk and mobile phones

Greater responsiveness with real-time and non-real-time communications from anywhere

Speed and improved execution with enhanced access to associates

Increased effectiveness and efficiency from expanded communications capability

AGC Networks also brings to you Unified Communication solutions from NEC withcomprehensive solutions right from SME to MME to Large Enterprises. NEC's feature-rich Unified Communications solutions provide a comprehensive approach to resolvingcommunication overload and provide businesses with the right communication and

networking solutions that enable them to succeed. NEC Solutions provide a scalable,secure approach to communications that is both consistent and manageable. NECsolutions are built upon proven platforms and industry standard applications to offerpowerful, low cost options for business continuity issues and to remove communicationbottlenecks by providing constant access to employees. NEC enables people to connectwith one another while lowering the Total Cost of Ownership (TCO) with productivityapplications.

We also provide interesting options on SIP Phones from both SNOM and Grandstream feature-rich yet attractively priced to fulfill your organizational goals of moving intoan IP based Communication infrastructure.

Customer relationship management (CRM) is a business strategy that spans your entire

organization from front-office to back-office. It is a commitment you make to put

customers at the heart of your enterprise. The right CRM strategy and solutions can help

you securely, reliably and consistently:


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Delight your customers every time they interact with your business by empowering

them with anytime, anywhere, and any channel access to accurate information and more

personalized service.

Reach more customers more effectively, increase customer retention and boost

customer loyalty by leveraging opportunities to up-sell and cross-sell and driving repeatbusiness at lower cost.

Drive improvements in business performance by providing your customers with the

ability to access more information through self-service and assisted-service capabilities

when it is convenient for them.

Enable virtualization in your enterprise more of your people and resources extend

beyond your offices and around the world.

Balance sophisticated functionality with rapid implementation effective support for a

faster return on your CRM investment.

Avaya CRM solutions offer tools that can help you empower your customers,

employees and partners, build strong business relationships, improve your bottom line

and differentiate your business. They deliver just what you need to win in today's

challenging customer economy where customers control the relationship. With customers

in control, it is the experience you are delivering across every channel and touch point

that really matters. These experiences will determine whether the value of your company

and your bottom line profitability increase.

Competitors:-

1.Cisco Systems India Pvt. Ltd.

With sales and marketing operations spread across key cities in India and a software

development centre in Bangalore, Cisco leads the networking market in core technologies

of routing and switching, as well as WLAN and network security.

India Market Share Leadership

Core Technologies

Router: 48.76%, Switch: 48.28%, Total LAN: 48.50%(Source: Q4, CY 2009 IDC LAN Tracker, March/April 2010)


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Advanced Technologies

WLAN: 15.5% (Q4, CY 2009, IDC, April 2010 ) Security: 39.63% (Q4, CY 2009, Frost & Sullivan, April 2010) Enterprise Telephony: 23.9% (Q4, CY 2009, Frost & Sullivan, April 2010)

IP PBX: 42.6% (Q4, CY 2009, Frost & Sullivan, April 2010)

2. Alcatel-Lucent in India operates in three countries: India, Bhutan and Nepal. The

company is engaged in R&D, Sales, Marketing, Customer Support, Services, Operations

and Development of Embedded as well as Application Software for Telecom Networks in

the region.

Alcatel-Lucent Enterprise provides communication solutions and services to businesses

of all sizes. Our secure and open portfolio and worldwide industry expertise helps you

interconnect networks, people, processes and knowledge to transform your business into

a dynamic enterprise.

Alcatel-Lucent Enterprise employs over 5,000 people in 130 countries. We work with

more than 2,200 partners worldwide to extend the reach of our solutions and customer

support services.

3. Samsung

The electronics major manufactures PABX too and they sell in India too. HCL

(Hindustan Computers Limited) is Samsung distributor in India which provides all kinds

of PBX right from analog to digital TDM switches.4. Ericcson (Now AASTRA)

AASTRA sells their EPBX in India through HCL Infosystem ltd. HCL has dealer in all

over India.

5. Siemens

Siemens India is Siemens subsidiary in India. They also have their own dealer network tosell their PBX and various voice networking solutions.

6. Tadiran Telecom

Tadiran is Isreal based MNC selling their PBX systems in India for long time now. Theyare tied up with HCL infosystem and BPL telecom.

7. Karrel

Karrel is US based PBX manufacturer selling PBX systems in India through theirdistributor Intellicon Pvt. Limited based in Ahmedabad, Gujarat.

8. Panasonic

Panasonic is another MNC brand selling all over India though their own network.


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9. NEC

NEC has tied up with Syntel, Arbidn Mills Telecom divison and sells all kinds ofEPABX equipments.

Domestic Indian PBX companies

After the demise of C-DOT who is said to have revolutionised Telecom industry in Indiaby designing telephone exchange at very low cost, there was a vacuum in switchmanufacturer in India. But it seems, recently it has found one Indian PBX company withgood R&D and large number of products in Coral Telecom.

1. Coral Telecom

Coral Telecom seems to be the biggest PBX Company in India now with products

ranging from small analog PBX to large VoIP based switches. It has large clients in

BSNL,

SCOPE OF WORK


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1. The project work is done at Western Region of AGC Networks Ltd. Pune.

2. The data is collection and analysis for the quarter in 2008-09 3rd and 4th and

2009-10 1st and 2nd.

3. Company collection Process

4. Cash flow impact.

OBJECTIVES:-


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Creating, and collecting Account Receivables.

Evaluation of customers and setting credit lines.

Maintaining up-to-date records of accounts receivables.

Initiating collection procedures on overdue accounts.

Minimize bad debts and outstanding receivables.

Maintain financial flexibility.


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RESEARCH METHODOLOGY

Approach to Research:

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

carrying on a scientific method of analysis. Research methodology is a way to

systematically solve the research problem. It is important for research to know not only

the research method but also the methodology. The procedures by which researchers go

through their work of describing, explaining and predicting phenomenon are called

methodology.

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

project will be largely depend upon how much accurate you will be able to collect and

how much time, money and efforts will be required to collect the necessary data.

1. Personal interviews 1. Annual reports

2. Observation 2. Books

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

first time and happen to be original in character. I have collected the information and data

through formal and informal discussions with our professional guide in the organization,

and through personal interviews, questionnaire, observation etc. which are methodsavailable for primary data collection

Secondary Data: The secondary data is the data which have already collected and stored.

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

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

Research

Primary

Method

Secondary

Method


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collected the data related to working capital management from annual reports, website of

M&M, newsletters etc.

Annual report Shows financial picture of the company which is the major source forcalculations as well as analysis.

Books- It helped me to understand the financial concepts

Methodology

The data for the research was gathered from different sources both Primary andSecondary sources

Primary data was gathered from informal discussions with employees handling variousfunctions in the company.

Secondary data was gathered by Annual report of the last three years and other companypublications.


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Theory of the Project:-

Customer Requirement and solution offered:-

The procedure is starting from customer enquiry is the customer has any requirement.They have requirement then as per their requirement company gives solution then givesquotation.

In quotation covers area Terms and condition of the company, Delivery period, paymentterm, warranty period, ship to party, bill to party.

When customer approves the quotation then he gives P.O. (Purchase Order).Once P.O.comes it logs it to the system. Then system checks customer has any outstanding or not,

also system checks terms and condition of the company. Then order gets internalapproval then it gets clear order billing (C.O.B.).

C.O.B. is approved then the company get back to back ordering to the original equipmentmanufacturer (O.E.M).O.E.M. get billing and delivery to the company as per terms andcondition.

The period from P.O. to delivery is around 2 to 3 weeks.

After delivery of material to the site, the responsibility of site ready and installation is byprojects. The installation period is an average 1 month. After completion of the project

Customer gets I.T.C. (Installation, testing and commissioning). I.T.C. is the lastdocument as written in the P.O. after collecting the I.T.C. then collecting R.R. (Revenuerecognition).After this project handover to technical support team.

Billing process:-

Billing process start from quotation, P.O., and then C.O.B. actually billing process startafter C.O.B. is done. C.O.B. is an internal procedure within the organization, it approvesby higher authority there is some flexibility in terms and condition for special customer.Some changes in the process or procedure for that approver from higher authority. Thenfinally billing is done.

Billing of an organization is done by


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Product/Supply (Hardware as well as software it is in INR.)

Annual Maintenance Contracts (AMC)

Singapore (Sales to SEZ/STPI)

Product/Supply :-

In this process Hardware as well as software billing is done is in INR.

Mostly billing of customer is in this type.

Annual Maintenance Contracts (AMC) :-

Singapore (Sales to SEZ/STPI):-

Cost associated with a credit policy:-

Credit Department Costs

Credit Evaluation Costs

A/R Carrying Cost

Discounted Payments

Selling and Production Cost

Collection Expenses

Bad Debts


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The Credit Decision Process

Marketing contact

Credit investigation

Customer contact for information

Finalize written documents, e.g.. security agreements

Establish customer credit file

Financial analysis

COLLECTION PROCESS & DOCUMENTATION

The objective of COLLECTION PROCESS & DOCUMENTATIONGUIDELINES is to have common collection process across all regions of AGCNetworks LTD. and to have proper follow up documentation which may require forfuture legal recourse; credit evaluation and any other negotiation purposes.

These guidelines will be applicable for all segments of businesses including butnot limited to services/ AMC business.

Once commercial in the region receives the invoices from the logistics,commercial will prepare a covering letter stating the details of invoices, paymentterms and due dates and due amount. Commercial will forward the invoices alongwith the covering letter to the customer and take acknowledgement of the same.

Where customer is not giving the acknowledgement, the commercial immediatelyafter the submission of invoices along with the covering letter, send an email to thecustomer and a copy to AMT stating the submission of invoice and attach the soft

copy of covering letter.

Commercial of the region will maintain a master file for each customer, in whichhe will keep a copy of Purchase order(s), copy of invoices(s); the copy ofacknowledgement, e-mail and any other correspondence send to customer.

Commercial will make a phone call and send e-mail to the customer before thedue date reminding him about the payment which will fall due in few days.


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In case commercial receives any communication from the customer relating toany issues he will immediately notify / forward the same to concerned AMT/ SOG fornecessary action and keep a copy of the same in customer master file.

Commercial will keep follow up on phone and by email for the due payment and

will visit customer if required.

If the payment is not received within 7 days from the due date, commercial willsend a 1st reminder letter to the customer stating the amount is overdue for 7 daysand immediate release of the same. Along with the 1st reminder letter, a copy ofacknowledgement and copy of all relevant invoices to be attached. This reminderletter can be send by courier and POD to be kept in file for record purposes.Commercial will keep doing follow up with customer by making phone calls andvisiting customer, if required.

In case the amount is still unpaid for 15 days, a 2nd reminder Letter will be sendto customer byspeed postalong with the copy of Acknowledgement and 1st reminder.

A copy of the same will be forwarded to concern AMT for his record proposes.

If by 30th day from the due date amount is still not paid by the customer, thecommercial will inform the concerned AMT and AMT will send a 3rd reminderletter to process owner at the customers end along with the copy ofAcknowledgement, 1st reminder and 2nd reminder stating the seriousness and urgencyto release the payment. A copy of the same will be marked to one level higher to theprocess owner from customer side.

Even by the end of 45th days from the due date customer has not paid amount duethen 4th and Last reminder letter will be send from Regional Directors office to the

process Owner in customers office with a copy to either CFO or CEO or Head ofoperations of the customer for immediate action to release the overdue payment givingreferences of various reminders on the same. The same letter needs to be send eitherby hand or by Registered post. Acknowledgement copy needs to be obtained in case ofhand delivery or AD of the same need s to be file in customer file.

In case the payment still not collected by 60th day from the due date the casealong with the complete details will be forwarded to Head- business Finance forinitiating the legal action as per Legal action process.

Apart from the above commercials need to send a statement of account (customer

account statement from SAP) to all the customers on quarterly basis through courier.Also, a confirmation of balance needs to be taken at least once a year. Where there is adifference between AGC statement of account and per customer records, the sameneeds to be reconciled immediately and differences identified need to be informed toFACS department for proper actions in AGCs books, if required.

At all time commercial needs to keep updated customer files with all correspondence, e-

mails and records in form of minutes of meeting for all the telephonic calls and visits.


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Also, all the letters, emails or any other communication received from the customer in

relation to the outstanding payment a copy of that must be kept in the customer master

file.

PAYMENT TERMS -

Local supplies (excluding tender cases) and Bond to Bond Sale

1) Minimum 80% within 7 days of delivery (including advance) & balance within 7 daysof ITC.

OR

2) Under LC with interest free credit not exceeding 60 days from the date of dispatch /Invoice

OR

3) 100% within 60 days from the date of dispatch / Invoice.

High Seas sale

100% within 60 days from the date of dispatch ( HAWB )Under LC with interest free credit not exceeding 60 days from the date of dispatch( HAWB )

Singapore Sale

100% within 60 days from the date of dispatch ( HAWB )100% in advance by wiretransfer.

OR

100% through irrevocable LC with maximum credit period of 30 days from the date ofHAWB

Tender Business

Minimum 80% within 7 days of delivery and balance within 7 days of ITC.


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Indirect Business (Channel)

45 days credit from the date of invoice against PDC.

For all types of orders -

If PO does not allow prorate payment, then conscious decision on partial shipment /billing needs to be taken keeping in mind the project requirement and impact oncollection. RD can recommend such cases to all India commercial head / RBFM forapproval.

Maintenance Revenue

If payment is not received within 7 days from due date, stop service intimation shall besent and if payment is not received within next 10 days, service should be stopped.

Deviation Approving Authority

a) Deviation in payment terms.

For all orders up to 25 L - RBFM.(Maximum period allowed is up to 90 days.) Above 25 L & up to 50 L National Coml Head.

Above 50 L Director Finance / Head BF.

b) Shipment without advance (Advance value) .

Up to 10 L RBFM on recommendation from RD. Above 10 L & up to 25 L National Coml Head. Above 25 L Director Finance / Head BF.

Note : Installation should be done only after confirmation from coml on receipt of

bal advance payment if any and delivery payment.

c) Installation without receiving advance payment Director Finance.

d) Installation without receiving delivery payment.

Up to 10 L - RBFM on recommendation from RD.


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Above 10 L & up to 25 L National Coml Head. Above 25 L Director Finance / Head BF.

General

System block for new shipment if credit limit exceeds and /or o/s > 4 months ismore than 5% of the present order. System block for invoicing for non receipt of AMC within 15 days from due date.

(System support will be required for a & b) If we do not have new order in hand, need to look at stopping service in case ofnon receipt of o/s payment within 15 days from due date and / or non receipt of cform as per statutory requirement.

RTU billing only after H/W supply Logistics to work as a gate control. Short shipment with full billing Only if written confirmation from customerconfirming no impact on collection.

For AMC Business

For Annual Maintenance Contracts (excluding Government cases), normal acceptable

payment terms are quarterly in advance. Any deviation needs to be approval as follows:

For AMC up to Rs. 5 Lakhs - Client Manager - for payment up to quarterly inarrears. Business Development manager-Service/Service Operations Group Head -payments up to half yearly in arrears. Others if any by National Sales manager-Services. For AMC up to Rs. 20 Lakhs - Business Development manager-Service/ServiceOperations Group Head - for payment up to Quarterly in arrears. National Salesmanager- Services - for payments up to half yearly in arrears. Others, if any, by VPSales For AMC over Rs. 20 Lakhs - National Sales manager- Services - for paymentsup to half yearly in arrears. Others by VP Sales.

Credit Evaluation

Credit evaluations are for the purpose of establishing the maximum credit limit for new

customers and for re-evaluating the credit limit for an existing customer. Credit

evaluations are used in the following cases:


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Customers requiring a credit limit in excess of INR 10, 00,000. Credit files needto be maintained for all customers (basis of granting credit) even in the absence offinancial information. All credit reviews are to be performed at least once a year. Periodic review of credit risk for existing customers when deteriorating paymenthabits are experienced or the customer is known to be financially unsound.

Requests to increase a customers credit limit. Part of the annual evaluation process of a customers account.

Evaluation Process

The credit evaluation process requires the preparation of a credit file for all customers. In

some cases, an electronic file may substitute for a paper file.

The credit evaluation process begins with a request for an extension of credit. This is

accomplished through requests from the Sales or Marketing team.

Credit limits may be established based on certified rating companies like CRISIL etc., or

a credit investigation or past experience with the customer.

In case of Global customer, where Avaya Inc has already given any rating, the same can

also be one of the inputs to establish the credit limit.

Each credit file, whether electronic or other should contain at least one of the following:

Two fiscal year end financial statements. Credit rating agencys report. Avaya Inc credit rating Credit justification duly approved by authorized personnel for authorizing creditlimit in the absence of the above.

The extent of the credit evaluation will be dictated by the size of the exposure beingundertaken by AGC. Additional information that should be considered in completing thecredit evaluation include but not limited to the following:

Customers business operations, including history, business plan and forecast. Expected volume of business with AGC. Prior payment history with AGC.

The outcome of the credit evaluation is dependent upon the information that is available.

Every effort will be made to honor the credit request or to provide alternative solutions


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Approval Process

Once the credit evaluation has been completed, a credit approval (Appendix B) is

completed. The credit approval consists of four parts.

Recommendations. Executive summary Financial Highlights Authorization.

The recommendation indicates the credit limit and the payment terms, and in cases of

existing customers will also include the previous credit limit and payment terms.

The executive summary provides an overview of the information obtained in the credit

evaluation. This should be in bullet form and is followed by financial highlights,

wherever applicable.

Credit Limit Review Process

All customer credit limit greater than INR 10, 00,000 should be evaluated at the

minimum, on an annual basis. The following represents the process that should be

followed in order to ensure that all customers are reviewed on a regular basis.

Credit limits greater than INR 300 lacs

Customers in this category should be reviewed on a quarterly basis for any significant

events that may require a full credit evaluation. This may include any available

information on hand, payment history etc at the time of quarterly review. The purpose of

this review is to ensure that no significant events have occurred in the quarter that would

require a change in credit limit. This review should be identified as a quarterly review

and a hard copy placed in the customer file. The level of detail will depend on the

information available considering that requirements in India may be different. At the veryleast, these customers should undergo a full credit evaluation annually.

Credit limits between INR 150 lacs and INR 300 lacs

Customer in this category should be treated identically to customers in the category

above, except that instead of quarterly, the review should take place semi-annually. These


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customers should also undergo a full credit evaluation annually.

Credit limits less than INR 150 lacs

Customers in this category should undergo a full credit evaluation annually. The depth of

detail will be determined by the size of the credit limit that is required.

Credit Holds

Credit holds and the resulting held orders are an effective means of ensuring that risk of

loss or severe delinquency does not grow to unacceptable levels. Improperly

implemented, they can be an unnecessary interruption to the order fulfillment process.

Therefore, the intent of the held order process is to intercept only those orders where

there is truly a risk of loss, or where this provides AGC with leverage to collectoutstanding balances.

Customer orders may be placed on credit hold due to either an insufficient credit limit or

delinquent invoices. This order block occurs automatically in SAP system. Deviation, if

any, shall be approved by National Business Finance Manager / Credit manager

Insufficient Credit Limit

If the order is blocked for shipment due to insufficient credit limit (AR and open orders)

regardless of whether the AR is due or not, blocked orders are reviewed to determinewhich orders can be released. This may be accomplished by performing credit evaluation

and raising the credit limit, or by releasing the order and allowing the customer to

temporarily exceed the credit limit. The customer will be allowed to exceed their credit

limit by the lesser of 10% of the approved credit limit or INR 10, 00,000, without the

approval from the authorized personnel for the credit limit authorization.

Any increase in exposure greater than these amounts requires approval from the

appropriate personnel for credit limit authorization i.e. National Business Finance

Manager/ Credit manager.

The conditions for allowing the customer to exceed their credit limit on a temporary basis

are as follow:

There is a payment in transit, and the customer history indicates that this can berelied upon.


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There are credits or accounts payable in the customers favor that offset theoutstanding accounts receivable. The customer has a valid dispute with AGC with respect to quantities shipped,quality of product or price. Any other reason justifying the business necessity,

Cost of Receivables:-

1. Cost of Financing: The credit sales delays the time of sale realization and

therefore the time gap between the cost and the sales realization extended. This

results in the blocking of funds for a longer period. The firm on the other hand,

has to arrange funds to meet its own obligation towards payment to the supplier,employees, etc. these funds are to be procured at some explicit or implicit cost.

This is known as the cost of financing the receivables.

2. Administrative Cost: A firm will also be required to incur various costs in order

to maintain the record of credit customers both before the credit sales as well as

after the credit sales. Before credit sales, cost are incurred on obtaining info

regarding credit worthiness of the customers; while after credit sales the cost are

incurred on maintaining the record of credit sales and collection thereof.

3. Delinquency Cost: Over and above the normal administrative cost of maintaining

the collection of receivables, the firm may have to incur additional cost known as

delinquency cost. If there is delay in payment by a customer. The firm may have

to incur cost of reminders, phone calls, postage, legal notice, etc. Moreover, there

is always an opportunity cost of the fund tied up in the receivables due to delay in

the payment.

4. Cost of Defaults by Customers: If there is a default by a customer and the

receivables becomes partly, or wholly, unrealizable, then this amount, known as

bad debt as becomes a cost to be the firms. This cost does not appear in the cash

sales.

Benefits of receivables:

a. Increase in sales: Except a few monopolistic firms, most of the firms are req. to

sale goods on credit, either because of trade customs. The sales can further be

increase by liberalizing the credit terms. These will attract more customers to the

firm resulting in higher sales and growth of the firm.


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b. Increase in Profits: To easily recover the fixed expenses and attaining the

breakeven level and increase the operating profit of the firm.

c. Extra Profit: Some times, the firms make the credit sales at a price which is

higher than the usual cash selling price. These bring an opportunity to the firm to

make extra profit over and above the normal profit.

Thus, the receivables bring some cost as well as benefits to the firm. Both the cost

and the benefits are to be looked carefully and a trade-off between them should be

attempted.

Trade- Off on Receivables: Firms offer credit to the customers for a no. of reasons, but

the ultimate objective is to generate sales that would not have occurred otherwise; either

because the customers do not have the cash to pay for the product or because the credit

increases the likely hood of higher sales. The cost associated with the offering credits are

twofold : In the first place, as already said above, granting credit exposes the firm to the

possibility that the customer default, resulting in the losses of the firm (in the form of bad

debts and the collection costs).

The firm also has another cost in the form of interest foregone between time of sales and

the time of sales realization.

The trade of receivables can be applied to find out whether to liberalize the credit terms

or not.

More liberal credit terms may be expected to generate higher sales to revenue and higher

profits; but they increase the potential cost also. If the firm net benefit expected

liberalizing the credit terms is positive, the firm may offer such a terms otherwise not.

When a firm adopts more liberal credit policies the sale increases resulting in higher

profits.

The changes of bad debts will also increase and there will be decrease in liquidity of the

firm. In other hand, the stringent credit policy reduces the profitability but may increase

the liquidity of the firm.

In any firm, the quantum of receivables is determine by several factors

1. The percentage of credit sales to total sales affects the amount of receivables. This

factor is an important determinant, yet it is not within the control of the financial

manager.


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2. The credit and the collection policies i.e. in the terms of sales. The quality of the

customers and the collection efforts; and these policies are however, under the

control of financial manager.

The receivable management must be attempted by adopting a systematic approach and

considering the following aspects of receivable management.

1. The credit policy

2. The credit evolution

3. The credit control

1. Credit Policy: A firm makes significant investment by extending credit to its

customers and thus requires a suitable and effective credit policy to control level of total

investment in the receivables. The basic decision to be made regarding the receivables

decide how much credit be extended to a customer and on what terms this is known ascredit policy.

The credit policy may be defined as the set of parameters and principles that govern the

extension of credit to the customer. This require the determination of

(i) the credit standards

(ii) the credit terms:

a. Credit period

b. Discount terms

Credit Evolution:

The receivables are generally considering a relatively low risk asset. The basic risk is due

to the possibility that firm will not be able to collect all that is due by the customer. The

total bad debts losses a firm will experience can be forecast with reasonable accuracy,

especially if the firm sells the large no. of customer and does not change its credit

policies. The real risk arises from the possibility that a significant no. of customer may

suddenly become bad debts.

The credit evolution involves determination of the type of customers who are going to

qualify for the trade credit. Several costs are associated with extending credit to credit


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worthy customers. When more time is spent investigating the less credit worthy

customers, the cost of credit investigation increases.

Evolution of credit worthiness of a customer is a two step procedure,

i. Collection of information

ii. Analysis of information

Collection of information: In order to make better decision the firm may collect info from

various sources on the prospective credit customers, the following are sources of

information which can provide significant data

a. Bank reference

b. Credit agency report

c. Publish information

d. Credit scoring

Analysis of Information: - Collection of information in respect of any customer isnot going to serve any purpose in itself. Once all the available credit information about a

potential customer has been gathered, it must be analyzed to reach at some conclusion

regarding the credit worthiness of a customer.

Based on five C's of Credit

Character

Capital

Capacity

Collateral

Conditions

Determine risk classification system

Link customer evaluations to credit standards.


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Grant-Granting Sequence:-

Cash Flow Statement

The cash flow statement is designed to convert the accrual basis of accounting used to

prepare the income statement and balance sheet back to a cash basis. This may sound

redundant, but it is necessary. The accrual basis of accounting generally is preferred for

the income statement and balance sheet because it more accurately matches revenue


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sources to the expenses incurred generating those specific sources.

However, it also is important to analyze the actual level of cash flowing into and out of

the business. Like the income statement, the statement of cash flow measures financial

activity over a period of time. And the cash flow statement also tracks the effects of

changes in balance sheet accounts. The cash flow statement is one of the most usefulfinancial management tools you will have to run your business. The cash flow statement

is divided into four categories:

Net cash flow from operating activities: Operating activities are the daily internal

activities of a business that either require cash or generate it. They include cash

collections from customers; cash paid to suppliers and employees; cash paid for operating

expenses, interest and taxes; and cash revenue from interest dividends.

Net cash flow from investing activities: Investing activities are discretionary

investments made by management. These primarily consist of the purchases (or sale) of

equipment.

Net cash flow from financing activities: Financing activities are those external sources

and uses of cash that affect cash flow. These include sales of common stock, changes in

short- or long-term loans, and dividends paid.

Net change in cash and marketable securities: The results of the first three calculations

are used to determine the total increase or decrease in cash and marketable securities

caused by fluctuations in operating, investing and financing cash flow. This number is

then checked against the change in cash reflected on the balance sheet from period to

period to verify that the calculation has been done correctly

RATIO ANALYSIS


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Ratio analysis is a common method used to understand the financial strength of the

company. It is a crucial part of fundamental analysis of a company.

Ratios provide an easy way to compare the present performance with the past. Ratios

depict the areas in which a particular business is competitively advantaged or

disadvantaged through comparing ratios to those of other businesses of the same size

within the same industry.

Ratios are generally divided into the following

Asset management Ratios

Liquidity Ratios

Structure health ratios

Asset Management Ratios

1. Working Capital Turnover Ratio : This ratio helps to measure the efficiency of

the utilization of net working capital. It compares the net sales with net working

capital of the business firm. The indication given by this ratio is the number of times

working capital is turned around in a particular period.

2. Inventory Turnover Ratio: The ratio establishes relationship between the sales

with average stock. This ratio indicates the effectiveness and efficiency of the

inventory management. The ratio shows how speedily the inventory is turned into

accounts receivable to sales. The higher the ratio, the more efficiently the inventory is

said to be managed and vice versa.

3. Current Assets Turnover Ratio: This ratio indicates efficiency with which current

assets turnover into sales. A higher ratio implies by and large a more efficient use of

funds. Thus, a high turnover rate indicates reduced lockup of funds in current assets. An

analysis of this ratio over a period of time reflects working capital management of a firm.


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Liquidity Ratios:

1. Current Ratio: The current ratio is a measure of firms short-term solvency. It

indicates the availability of current assets in rupees for every one rupee of current

liability. This ratio indicates the extent of the soundness of the current financial position

of an undertaking and the degree of safety provided to the creditors.

2. Liquid/Quick/Acid Test Ratio This ratio is also known as Liquid Ratio or Acid

Test Ratio .It expresses the relationship between quick current assets and current

liabilities. While calculation of quick ratio, inventories or excluded from current assets,

since inventories converted into cash in short time without loss of values. It is a refined

tool to measure the liquidity of an organization.

Structural Health Ratio:

1) Current Assets to Total Net Assets: This ratio explains the relationship between the

current assets and total investment in assets. A business enterprise should use its current

assets effectively because it is out of the management of these assets that profits accrue.

A business will end-up in losses if there is any lacuna in managing the assets to the

advantage of business.

2) Debtors Turnover Ratio: This ratio indicates the efficiency of the company to

collect the amount due from debtors. Generally, the higher the value of debtors turnover,

the more efficient is the management of credit.

3) Inventory Turnover Ratio: This ratio indicates the efficiency of producing and

selling its product. The average inventory is the average of opening and closing balances

of inventory. In a manufacturing company inventory of finished goods is used to

calculating inventory turnover.


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Cash flow statement for the year ended September 30, 2009

September 30,

2009

September 30,

2008

Rupees in Crores Rupees in Crores

A. CASH FLOW FROM OPERATING ACTIVITIES

Profit before tax 23.05 28.28

Adjustments for:

Depreciation 8.48 10.16

Interest expense 1.06 1.09

Loss / (profit) on Sale / Write-off of Fixed Assets 0.24 -0.05

Provision for warranties -0.51 0.11

Provision for doubtful debts (net) 1.51 1.67

Bad Debts 0.01 0.36

Liabilities for earlier years no longer required written

back -0.21 -2.29

Interest income -5.26 -5.09

5.32 5.96

Operating profit before working capital changes 28.37 34.24

Increase/ (decrease) in trade payables -10.6 32.06

(Increase)/ decrease in trade receivables 10.07 -22.69

(Increase)/ decrease in inventories 17.79 16.71

(Increase) / decrease in loans and advances -0.26 -11.14


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17 14.94

Cash generated from operations 45.37 49.18

Income tax paid -15.9 -29.63

NET CASH FROM OPERATING ACTIVITIES 29.47 19.55

B. CASH FLOW FROM INVESTING ACTIVITIES

Purchase of fixed assets -3.59 -12.82

Sale of fixed assets 0.34 0.36

Interest received 5.26 5.09

Disposal of Investments 0.09

NET CASH USED IN INVESTING ACTIVITIES 2.1 -7.37

C. CASH FLOW FROM FINANCING ACTIVITIES

Repayment of other borrowings -0.19 -0.21

Interest paid -1.06 -1.09

Dividend paid -5.81 -11.17

NET CASH USED IN FINANCING ACTIVITIES -7.06 -12.47

NET DECREASE IN CASH AND CASH

EQUIVALENTS 24.51 -0.29

Cash and cash equivalents as at October 1, 2008 87.18 87.47

Cash and cash equivalents as at September 30,

2009 111.69 87.18

24.51 -0.29

Cash and cash equivalents comprise of

Cash in hand 0.04 0.07

Cheques on hand and remittance in transit 2.44 7.61

Balances with scheduled banks

In Unclaimed Dividend Accounts (Restricted) 0.27 0.25

In Deposit Accounts 56.74 50.95

In Current Accounts 44.02 21.76


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Balances in other banks 8.18 6.54

111.69 87.18

Interpretation:- Last year (30th sept 2008) profit before tax is more than this year(30th sept 2009)

but Net cash from operating activities is approx. 10 cr. more than last year. Interest income is came down which is a good sign of positive cash movement. Provision for doubtful debts (net) has come down by 10% which indicates

collection flow old dues have improved.


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Balance Sheet is at 30 sept.2009

Particulars Schedule Rupees in

Crores

As at 30-09-

2008

Rupees in

Crores

Sources of funds

Shareholders' funds

Capital 1 14.23 14.23

Reserves and surplus 2 219.89 210.35

234.12 224.58

Loan funds

Unsecured loans 3 0 0.19

0 0.19

Total 234.12 224.77

Application of funds 4

Fixed assets

Gross block 73.9 80.11

Less: Depreciation 55.43 57.27

Net block 18.47 22.84

Capital work in progress 0.28 1.38

18.75 24.22

Investments 5 15 15.09

Deferred Tax Assets 6 12.21 14.31

Current assets, loans and advances

Inventories 7 48.82 66.61

Sundry debtors 8 126.38 137.97

Cash and bank balances 9 111.69 87.18

Loans and advances 10 69.54 58.95

356.43 350.71

Less: Current liabilities and provisions

Liabilities 11 156.55 166.64

Provisions 12 11.72 12.92

168.27 179.56

Net current assets 188.16 171.15

Total 234.12 224.77


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Ratio analysis

1 Current Ratio=current assets/current liabilities356.43168.27

2.118203

Current Ratio

2.11:

1Interpretation- Ideal current ratio is 2:1 i.e. current assets should bedouble of current liabilities. A current ratio of 1.33:1 is considered bybank as the minimum acceptable level for providing working capital

finance. This ratio reflects the financial stability of the enterprise. Thestandard of the normal ratio is 2:1 but in most of companys standard istaken according to Tandon Committee which is taken as 1.33:1. It canbe seen from the data available that the company was successful inmaintaining a steady current ratio during the last year.

2 Acid test ratio=C.A.-(Stocks & prepaid expenses/C.L.-Bank O/D)188.16168.27

1.118203

Acid test ratio

1.18:

1

Interpretation- It measures the ability of the company to meet its current obligations, as

bank overdraft is secured against stock hence remaining current assets and liabilities are

considered. Quick ratio must be 1 or more than 1.

It is the ratio between quick liquid assets and quick liabilities. The normal value for such

ratio is taken to be 1:1. It is used as an assessment tool for testing the liquidity position of

the firm. It indicates the relationship between strictly liquid assets whose realizable value

is almost certain on one hand and strictly liquid liabilities on the other hand. Liquid assets

comprise all current assets minus stock.


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Profit & loss account for the year ended 30 sept.2009

Previous

year

Particulars Schedule Rupees in

Crores

Rupees

in

Crores

Income

Sales and services (Gross) 13 514.4 573.07

Less: Excise duty 2.95 6.12

Sales and services (Net) 511.45 566.95

Other operating income 14 4.2 3.38

Total 515.65 570.33

Expenditure

Raw materials and components consumed 15 25.39 41.42

Purchase of traded items 265.55 292.33

Manufacturing and other expenses 16 173.63 184.12

Excise duty 0.68 1.12

Decrease/(Increase) in stock of

finished goods and work-in-progress 17 17.73 16.9Depreciation 8.48 10.16

Interest and finance charges (net) 18 -4.2 -4

Total 487.26 542.05

Profit before exceptional item 28.39 28.28

Exceptional item:

Expenditure on Separation of Employees 5.34 -

Profit before tax 23.05 28.28

Provision for tax:

Current tax [including wealth tax Rs. 0.01

Crore

5.77 10.78

(previous year Rs. 0.01 Crore)]

Excess provision of tax for earlier years -0.7 -0.02

Deferred tax 2.11 -0.93

Fringe benefit tax 0.5 1.24

7.68 11.07

Profit after tax 15.37 17.21

Balance brought forward from previous year 55.36 48.98


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Amount available for appropriation 70.73 66.19

Appropriations:

Proposed dividend 4.98 4.98

Corporate dividend tax 0.85 0.85

Transfer to General Reserve 8 5

Balance carried to Balance Sheet 56.9 55.36Total 70.73 66.19

Basic and Diluted Earnings per share 10.8 12.09

(Refer note no. 11 of Schedule 20)

Nominal value per share in Rs. 10 10


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Provision for bad debt:-

Time period AmountProv.of bad

debt Diff.of provision of 2 querters

As of 30th Sep 2009 80,993,108.25 2,848,240.46

As of 31st Dec 2009 68,641,252.00 2,638,599.97(209,640.49

)

As of 30th march2010 41,720,824.83 2,376,320.85

(262,279.12)

As of 30th June 2010 82,514,766.48 2,139,244.16(237,076.69

)

Interpretation: - As per the data provision for bad debt is in negative in next quarter.It is good sign for the organisation.this means collection collected from the customer ismore than 30th sept 2009 quarter.


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Days sales outstanding:-Outstanding AR/ Average credit sales

Time Period DSO

As of 31st Dec 2009 57.57As of 31st March 2010 53.42

As of 30th June 2010 62.07

Interpretation- The debtors collection period shows the Days sales outstanding it takes

for the company to recover a payment from a customer. The lower this is the better it is

considered to be. Still there should be a target number of days within which the company

should recover all the payments. The actual collection period can be compared with the

stated credit terms of the company. This helps to understand whether the company is

functioning according to the terms given.

It can be seen there has been no great change in the collection period of the company


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during the last three quarters.The graph shows days sales outstanding of the organisation

is in between 55 to 65 days

Billing :-

Time period Amount

Wk 1 Oct 09 2327849.2

Wk 2 Oct 09 3070660.19

Wk 3 Oct 09 1443650.98

Wk 4 Oct 09 6442471.48

Wk 1 Nov 09 1657405.4

Wk 2 Nov 09 6290146.5

Wk 3 Nov 09 19566567

Wk 4 Nov 09 4557942.57

Wk 1 Dec 09 7539652.29

Wk 2 Dec 09 7701325.21

Wk 3 Dec 09 10901677.58

Wk 4 Dec 09 22452542.69

Interpretation:- The graph shows billing process of the company in 3rd querter in 2009.

The maximum billing was held in3rd week of Nov. and 4th week if the querter.


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Time period Amount

Wk 1 Jan 10 3028166.67

Wk 2 Jan 10 3675627.05

Wk 3 Jan 10 2111062.86Wk 4 Jan 10 5076935.01

Wk 1 Feb 10 4478095.34

Wk 2 Feb 10 1605001

Wk 3 Feb 10 11694337.93

Wk 4 Feb 10 1452897.09

Wk 1 Mar 10 4052371.99

Wk 2 Mar 10 2801479.1

Wk 3 Mar 10 10655627.63

Wk 4 Mar 10 6503706.59


The maximum billing was held in3rd week of Feb. and 3th week if the quarter.

Time period Amount

Wk 1 Apr 10 2346301.65

Wk 2 Apr 10 9438429.21

Wk 3 Apr 10 6549233.77

Wk 4 Apr 10 3188295.97

Wk 1 May 10 2732920

Wk 2 May 10 1706183.97


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Wk 3 May 10 5981089.99

Wk 4 May 10 6247504.23

Wk 1 June 10 3536255.94

Wk 2 June 10 18215233.42

Wk 3 June 10 19293181.32

Wk 4 June 10 14456643.33


The maximum billing was held inlast month of the querter. This means that maximun

target was complet in last month in 2nd quarter in 2010.

Total collection period:-

Time periodAmount(Rs.)

July 17631137.9

August 37021735.92

September 43876967.7

October 36340995.7

November 40593160.3

December 34628797.7

January 15548973.6


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Interpretation:- From above data it is seen that 43% amount is collected from 100% on

delivery.23% amount was collected from 100% on delivery(30 days), 10% amount was

collected from 80% on dev.,20% on inst.. Most of the amount collected from 100% on

delivery.

Overall Performance:-

TimeperiodTotal Funnel(TotalAR+Billing) Total Coll %

Q3-09 18.6012.4

0 66.64368

Q4-09 16.007.8

0 48.74875

Q1-10 19.20

12.3

6 64.375

Q2-10 14.2710.2

0 71.47053


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Interpretation:- In 3rd querter in 2009 the amount received as compared to total

funnel(Opening A.R.+ Billing) is 66.64%. In 4 th querter in 2009 the collection collected

as compered to total funnel is 48.74% it is less than 3rd querter in2009.

The collection collected in this period is in between 48% to 75%. collection collected

provess goes above 70% it is good collection, in this collection compaired with total

funnel.


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Conclusion:-


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Recommendations:-


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Bibliography

1. Books:

1. R.P.RUSTAGI, FINANCIAL MANGEMENT, Galgotia Publishing

Company NEW DELHI. 3rd EDITION 2009.

2. Websites:

1. www. agcnetworksltd.co.in

2. www.agcltalkies.co.in

end collection process and impact on cash flow new2003

Documents