Videocon sip ppt

VIDEOCONExperience change
Presented By:
Rajdeep Laha
Calcutta Business School
PGDM 2010-2012
Roll No:- 10011
Project Guide:- Prof. Milan Bhowmick

www.themegallery.com
Project Title
AN ANALYSIS OF ACCOUNTS
RECEIVABLES MANAGEMENT
PRACTICES IN VIDEOCON AND
IMPROVEMENT IN CURRENT
PRACTICES

Abstract
Project summary :
 To study the current account receivable management
practices in Videocon Industries Ltd – Eastern Region, which
will provide an insight into the functioning of the company.
 To conduct the analysis of the current business trends lays
down the barriers and failures in the current practices which
need to be improved for better results in the revenue process
of the company.
 To make recommendations that should be able to capitalize in
the current market situations by addressing pain points of the
current process.

Abstract
Significance of the project :
 The significance of the project lies in the study of the actual
Revenue process of the company and developing techniques for its
improvement which can be implemented to convert near cash asset
into cash as soon as possible for the organization.
 The project is beneficial for the organization as it helps in
understating the end-to-end accounts receivable process and
procedures- data gathering, research, study of barriers and the
business risk imposed by them, better practices and documentation
of market practices.

Purpose and scope of study
 The purpose of the study is to develop key
recommendations in the current revenue process of the
company which will be able to cater to the needs of the
company to the model will be mainly based on research
done on the current practices of the company and
customer suggestions are included at each step.
 The scope of the study is only limited to the Videocon
Industries Ltd- Eastern region.

Research Methodology
 The method used to develop this report and the project
is both primary research and secondary research.
 To study the market trends regarding the Accounts
receivables practices, primary research has been done
and data from various companies collected.
 Major barriers identified are found by rounds of talks with
the major distributors of the company.
 The data about the outstanding and sales is a part of the
secondary data available from company sources.

Facts and Figures
Type Public (BSE: 511389)
Industry Conglomerate
Founded 1979
Founder(s) Nandlal Madhavlal Dhoot
Headquarters Aurangabad, Maharashtra, India
Key people Venugopal Dhoot
(Chairman)
Products Consumer Electronics
Home Appliances
Components
Office Automation
Mobile phones
Wireless
Internet
Petroleum
Satellite television
Power
Revenue US$ 4 billion (2010)
Employees 5,000 (2010)
Website videocon.com
videoconworld.com

Major Achievements of Videocon Industries Ltd
 The largest panel production facility in the world under one
roof providing very high economies of scale
 One of the world's largest and most respected CRT glass
manufacturers
 Firing the largest furnace of its kind in the world with a tank
size of 3300 sq ft
 One of the few companies in the world to convert sand to TV
 One of the largest and most acknowledged CPT
manufacturer in the world
 Manufactured India's first rust-free Washing Machine.

Location
Videocon has eight subsidiaries located in different places in India :
 Videocon Industries Ltd.,
 Videocon Appliances Ltd.
 Videocon Communication Ltd ,all three in Aurangabad
 Applicom (India) Ltd in Bangalore
 India Refrigerator Co. ltd. at Hosur
 Kitchen Appliances India ltd. in Kolkata
 Millennium Appliances ltd. at Ranga Reddy
 Videocon Narmada Glass at Bharuch

Milestones

SURVEY OF ACCOUNTS
RECEIVABLES MANAGEMENT
PRACTICES IN MARKET

Entity primarily responsible for Accounts
receivable Management
Board of
Directors, 2%
Management,
20% Owners,
2%
Treasury, 6%
Finance, 60%
None, 2%
Others, 8%

Does allocation of responsibility give rise to
support and focus challenges?
Yes, to a large
extent, 12%
Yes, to some
extent , 32%
Only to a limited
extent, 26%
No, 30%

To which extent is Accounts receivables optimization
included in targets and financial strategies?
To a large
extent , 28%
To some
extent, 51%
Very little, 17%
Not at all, 4%

Do you work according to a structured method to
optimise Accounts Receivables?
Not relevant,
4%
Yes, 46%No, 46%
Don't know,
4%

Where do you think the greatest potential
improvements lie in relation to AR management?
11%
14%
18%
14%
43%
In compliance with
already existing internal
processes
In optimising customer
conditions
In optimisng stock
In optimising supplier
conditions
In redesigning and
optimising internal
processes

Is communication of key data and figures for AR
included in management reporting ?
Yes, to a large
extent, 36%
Yes,to some
extent, 35%
Only to a
limited extent,
21%
No , 6% Not known,
2%

Is AR management included as part of individual goals
and/or remuneration for the company’s management
and employees?
13%
15%
6%
56%
10%
Yes, for Top level
Management
Yes, for Middle level
Management
Yes, others
No
Not known

On a scale from 1-5, where 5 is the best, rate your company, in
relation to the best utilization of the company’s potential for
optimizing Accounts receivables
7%
13%
20%
27%
33%
1
2
3
4
5

Rate your performance within AR management
compared with peers
Best in class, 2%
Above average,
21%
Average, 52%
A little below
average, 17%
Much worse
than average,
2%
Not known, 6%

How many days is your estimated Days Sales
outstanding (DSO)?
23%
35%
18%
14%
8%
2%
0-14
15-30
31-45
46-60
61-90
>90

How many days is your estimated Days Payable
Outstanding (DPO)?
2%
33%
36%
24%
5%
0%
0-14
15-30
31-45
46-60
61-90
>90

Does your company work actively with the
relationship between DSO and DPO?
25%
42%
31%
2%
Yes, both generally
and in the
individual markets
Yes, but only at a
general level
No
Not known

My company has adequate policies and
business procedures for DSO.
8%
48%
15%
19%
10%
Agree
Partly agree
Neither agree or
disagree
Partly disagree
Disagree

Policies and business procedures
concerning DSO are complied with.
8%
40%
19%
23%
10%
Agree
Partly agree
Neither agree or
disagree
Partly disagree
Disagree

What are your standard payment terms for
customer?
8%
23%
22%13%
6%
6%
22%
0-14 days
15-30 days
31-45 days
46-60 days
More than
60 days
No standard
terms
Other

State the percentage of invoices that require
individual handling owing to error
33%
19%
19%
29%
0-1%
2-5%
6-10%
Not
known

Do invoices that go through individual
handling show any improvement ?
58%
42% Yes
No

When do you start the reminder procedure?
10%
39%
35%
4%
4%
8%
1-2 days after the
due date
3-7 days after the
due date
8-20 days after the
due date
More than 20 days
after the due date
Not Known
Other

Percentage of payments received only after one
or more reminders have been sent?
12%
16%
8%
16%
20%
28%
0-10%
10-20%
20-30%
30-40%
40-50%
> 50%

Debtor processes, now and in three years
0% 10% 20% 30% 40% 50% 60% 70%
Do use evaluation credit tools
Does your customer agree on
payment type ( in-payment form,
direct debit etc) when placing
order ?
Are terms of payment manged
centrally
Handling Orders
Today
In 3
yrs

0% 20% 40% 60% 80% 100%
Do you contact customers before the due
date, if you have experienced problems ?
Does the level of reminder fees and interest
reflect the cost of tied up capital and
administration ?
Is there structured co-operation with a debt
collection company ?
Is remuneration of sellers linked to incoming
payments ?
Do you have a systematic , differentiatred
approach to the use of reminder tools
(letter,telephone,email etc ) ?
Reminders and debt collection
Today
In 3
yrs

0% 10% 20% 30% 40% 50% 60% 70%
Do you actively encourage
customers to use cash discounts ?
Do you work actively to improve
terms of payment ?
Does your company's competitive
situation permit improvement of
tems of payment ?
Policies
Today
In 3 yrs

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Has your company outsourced
invoicing and/or collection ?
Is payment type shown on the
invoice ?
Is the due date shown on the
invoice ?
Do you send out paper Invoices ?
Can the number of credit notes be
reduced ?
Is the Data re-used electronically
from order to invoicing ?
Invoicing
Today
In 3
yrs

Summary
 The starting point of this survey was to investigate the status of companies’
use of Accounts receivable management and identify the challenges the
companies encounter in this area.
 The objective was to gain greater insight into this field and identify potential
areas for optimization.
 A large number of the participating companies rated their own Accounts
receivable collection process performance as about average
 Focus on optimizing AR management among the participating companies
 Greatest potential for improvement lies within the optimization of internal
processes.
 A general response from the majority of the participants was that many
important processes in debtor management can be improved.

STUDY OF THE ACCOUNT
RECEIVABLE PRACTICES AND
POLICIES AT VIDEOCON
(EASTERN DEPARTMENT)

Accounts Receivable Assessment
 Historical trend analysis of the accounts receivable aging
and days sales outstanding.
 Invoice terms including discount policy.
 Credit approval process.
 Collection process.
 Order entry process including first pass yield
measurements and major barriers.
 The number and amount of sales credits processed each
month.

15 months data starting from March
2010 to May 2011. (in Thousands)

Percentage

ANALYSIS OF KEY PROCESSES
 Credit Worthiness And Grant Of Credit To Customers
 New Applicants
 Existing Customers
 Order To Dispatch
 Collection of Orders
 Order processing
 Database management
 Invoice generation
 Invoice adjustment
 Invoice To Due
 Early Payment Trade Discount
 Cash Discount policy
 Account maintenance and balance confirmation
 Return and repairs
 Over Dues

REVENUE CYCLE PROCESS

ANALYSIS OF KEY PROCESSES
Process Description
Order entry process
Sales taking order to entry into the
system
Customer credit limit Decision to grant credit on order
Billing process
Dispatch of product to bill mailed to
customer
Collection process
Process to ensure collection of
outstanding accounts receivables
Credit and return process
Decision to issue a credit/return to
a customer
Cash process
Process for receiving and applying
customer remittances

KEY OBSERVATIONS/ FINDINGS
 Collections representatives are releasing sales orders for customers
with past due accounts or who are exceeding their credit limit
 There currently are no formal policies and procedures for the
collections and deductions processes
 Incorrect information on the company documents
 Customer Credit Is Incorrectly Granted
 Customer Order is incorrectly entered
 Customer order is entered without a purchase order
 Customer Orders Dispatched without Credit Approval
 Wrong Product Is dispatched To A Customer

Key Recommendations
 Introduce Quotation Pricing
 Feasibility/deliverability of offering
 Clear commercial terms and conditions agreed by both
parties.
 “Voice of customers”
 Proper Credit evaluation for new customers
 Introduce Credit Insurance
 Proper Debt Collection Techniques And Procedures

Credit Insurance
1
• Secure quotes from providers, including an identification of which of your customers
would be ineligible for coverage.
2
• Calculate the percentage of revenue sold to the ineligible customers
3
• Calculate the percentage of revenue sold to the ineligible customers .Perform a
modeling exercise taking the last three years of write-offs and compute how much
these write-offs would have been reduced by the proposed credit insurance, net of
deductibles, coinsurance, and premiums
4
• Forecast revenue and bad debt loss for the upcoming year. Calculate the reduction in
bad debt loss covered by the insurance versus the total cost of the insurance. Include
an estimate of bad debt loss for “ineligible” customers
5
• This analysis will reveal if the total cost of the insurance is higher or lower than the
historical/forecast bad debt loss covered by the insurance.

Debt Collection Techniques And Procedures
 STEP 1: Analyze the Size, Composition, and Complexity of the
Receivables Portfolio.
 STEP 2: Segment the Portfolio.
 Size of customer determined by sales volume or open receivables
 Line of business or division
 Risk rating or payment history
 Type of customer: distributor/dealer versus end user
 Geography or time zone
 STEP 3: Formulate an Approach for Specific Segments.

Videocon sip ppt

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