PROJECT REPORT

ON

“A Study on evaluation of different techniques of receivables and

payables management”

BY

Syeda Raina Fathima

USN

1NZ18MBA85

Submitted to

DEPARTMENT OF MANAGEMENT STUDIES

NEW HORIZON COLLEGE OF ENGINEERING,

OUTER RING ROAD, MARATHALLI,

BENGALURU
In partial fulfilment of the requirements for the award of the degree of

MASTER OF BUSINESS ADMINISTRATION

Under the guidance of

Mr. Santosh Kumar S

Assistant Professor

2018 - 2020

1
 CERTIFICATE

This is to certify that Syeda Raina Fathima bearing USN 1NZ18MBA85, is a

bona fide student of Master of Business Administration course of the Institute
2018-2020,autonomous program, affiliated to Visvesvaraya Technological
University, Belgaum. Project report on “A Study on evaluation of different
techniques of receivables and payables management” is prepared by her under
the guidance of Mr. Santosh Kumar S, in partial fulfilment of requirements for
the award of the degree of Master of Business Administration of Visvesvaraya
Technological University, Belgaum Karnataka.

Signature of Internal guide Signature of HOD Signature of Principal

Name of the examiners with affiliation Signature with date

1. External Examiner

2. Internal Examiner

2
 DECLARATION

I, Syeda Raina Fathima, hereby declare that the project report on “A Study on evaluation of different
techniques of receivables and payables management” with reference to “Happilo International Private
Limited” prepared by me under the guidance of Mr. Santosh Kumar S, faculty of M.B.A Department, New
Horizon College of Engineering.

I also declare that this project report is towards the partial fulfilment of the university regulations for the award
of the degree of Master of Business Administration by Visvesvaraya Technological University, Belgaum.

I have undergone an industry project for a period of Eight weeks. I further declare that this report is based on
the original study undertaken by me and has not been submitted for the award of a degree/diploma from any
other University / Institution.

Signature of Student: Syeda Raina Fathima

Place: Bangalore.
Date:

3
 ACKNOWLEDGEMENT

The successful completion of the project would not have been possible without the guidance
and support of many people. I express my sincere gratitude to Mr. Prashanth Poojary,
Commercial Manager, Happilo International Private Limited, Bengaluru, for allowing to do
my project at Happilo International Private Limited.

I thank the staff of Happilo International Private Limited, Bengaluru for their support and
guidance and helping me in completion of the report.

I am thankful to my internal guide Mr. Santosh Kumar S, for his constant support and
inspiration throughout the project and invaluable suggestions, guidance and also for providing
valuable information.

Finally, I express my gratitude towards my parents and family for their continuous support
during the study.

STUDENT NAME: Syeda Raina Fathima

USN NO: 1NZ18MBA85

4
 TABLE OF CONTENTS

SL. NUMBER CONTENTS PAGE NUMBERS

1 Theoretical Background Of The Study 6

2 Industry Profile &Company Profile 7

3 Application Of Theoretical Framework 25

Analysis And Interpretation Of Financial
4 37
Statements And Reports
Learning Experience- Findings,
5 58
Suggestions And Conclusion

6 Bibliography 60

5
 CHAPTER 1

THEORITICAL BACKGROUND OF THE STUDY

The sale on credit is evitable necessity in business world. No business will run success without credit.

This is including in working capital. This occupies second important position other than cash. It acts like

bridge in material mobility and also a marketing tool. It provides protection to the sales activity.

Account receivable management incorporates is all about ensuring the customers to pay the invoices. Good

management helps prevent overdue, so effective management of credit is essential.

Payables are liability to creditors. In this modern world most of the purchases is on credit basis. As is expected

for a liability account, normally have credit balance. The terms of account payables may debt collection

period of vendor. The process involves review the amounts are entered in accurate. The documents are

purchase orders, receiving reports and invoices.

Accounts payable and its management is a critical business process through which an entity manages

its payable obligations effectively. Accounts payable is the amount owed by an entity to its vendors/suppliers

for the goods and services received. To elaborate, once an entity orders goods and receives before making

the payment for it, it should record a liability in its books of accounts based on the invoice amount. This

short-term liability due to the suppliers, vendors, and others is called accounts payable. Once the payment is

made to the vendor for the unpaid purchases, the corresponding amount is reduced from the accounts payable

balance.

6
 CHAPTER 2

INDUSTRY PROFILE AND COMPANY PROFILE

INDUSTRY PROFILE

Happilo International Private Limited belongs to food products. It concerns with dry fruits and nuts. It comes
under food processing industry.

This industry belongs to primary sector that is agricultural sector. The food processing is transformation of
agriculture into other food forms. It includes grinding grains to make flour, grinding the food into different
quality. The focused food processing sector are fruits and vegetables, dairy products, poultry, fishery, food
grains and spices.

Food processing industry is sunrise sector in India. It plays very important role in linking farmers to consumers
in the Indian and world market. The ministry of food processing industries making all efforts to encourage
investments in this sector. The warehouse and fast mobility services facility is much needed as it is perishable
product in nature. In recent time food processing industry taken speed in growth due to export promotion and
support government to export the good quality food products to foreign countries.

The subdivisions of different sectors pf food processing industry are as follows:

1. Dairy products- Milk powder, Ice cream, Milk Bi-products.

2. Meat and Poultry- Fish, Frozen meat products.
3. Fruits and Vegetables- Wafers, Dry fruits, Juices, Beverages.
4. Customer foods- Snacks, Biscuits, Ready to eat foods.
5. Grains- Flour, Malt extracts, Cereals and bakeries.

In recent days this industry is complex and global collective of business world. This industry is now moving
ahead to mass production to cater the global demand. And quality of life influence the food processing
industry.

As the food is necessary this industry has more responsible to quality and rules that stated by the authorities.
And technological development in this industry is recently emerged otherwise manual process of food is done
everywhere. Industry needs good support from supply chain retail industries.

History goes long back to prehistoric ages the process used to preserve food were crude for need at the time.
Basic method of preservation includes sun drying, fermenting, roasting and steaming.

This process got developed in 19th century. But in 20th century more food process procedure is developed they
are:
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 1. Frozen food that can be deforested and microwaved.
2. Spray drying.
3. Freeze drying (high vacuum).
4. Dried instant soup mix.

In today’s high speed, efficient machine used to process bulk food. By careful measures, chopping minimizes
the labour and waste. It serves large military needs. In 20th century the rising consumer society in developed
countries contributed to growth of food processing by juice concentrates, freeze, drying and artificial
sweetness.

Current scenario of food processing industries:

Food processing is one of the largest global sectors at $7 trillion annual production. In present only 2% of
India’s vegetable and fruit production is processed.

Key facts:

1. India’s horticulture production is estimated to rise by 1% to make record of 314.67 million tonnes in
2018-19.
2. 176.3 million tons of milk production in 2017-18 with 375 grams per capita in a day.
3. In 2016-17 there was 95.2 billion egg production.
4. 12.6 million tons of fish production was recorded in 2016-17.
5. Food Retail market dominated by Food Grocery CAGR 25% and Food services CAGR 15% was
recorded.

According to data of Department of Industrial policies and promotion (DIPP), the food processing sector
received around 7.54 USD FDI during 2000-17. The confederation of Indian industry (CII) estimates that food
processing sector have the potential to attract 33 billion US$ in next 10 years and gives employment for 9
million.

Major investments are:

1. Amazon entered in food retailing sector.

2. Parle agro pvt ltd launched Frooti, Fizz after success of mango Frooti.
3. Cargill Inc. aims to double its branded business by 2020 as 800 outlets in sunflower oil category.
4. Mad over Donuts (MoD), outlined plans of expanding its operations in India by opening 9 new
MoD stores.

8
Major players of food processing industry:

1. Amul
2. Britannia Industries.
3. Dabur
4. Haldiram’s
5. Marico
6. Heritage foods
7. Hindustan Unilever
8. Mother dairy

COMPANY PROFILE:

Background of the company and nature of the business carried:

Happlio International Private Limited is a health food company and its headquarter is in Bangalore. Happilo
brings an exclusive range of dry fruits, dried fruits, spices, healthy seeds, trial mixes, festive gift hampers and
more. Organisation stands for delivering quality food products of international standards and quality. The
founders have been producing and distributing quality nuts and spices since 1969. With a wide variety of
products that caters to every budget and taste, the best seller has found their way into the homes and hearts of
many households.

The product innovation over the years and production volumes were made possible with main manufacturing
units at Bangalore. The gourmet brand Happilo is available across all leading modern retail and general trades.
They are the most popular dry fruit brands searched in e-commerce website. They have a wide range of
distribution network across India with more than 30 channel patterns. To cover the entire length and width of
the nation, coupled with ability to capitalize on quality, food safety, great taste and other health benefits of
nuts, more growth can surely expect. They will continue reaching out to wider base of customer across the
Asia and continue developing more exciting product.

Happilo has always tried in experimenting new product to offer some innovative and healthy products with
changing tastes of customers. These innovative strategies from Happlio have resulted in the new Trial mix
series, Healthy seeds and Snack packs.

Happilo products has been a perfect substitute for all the junk foods which are offered in the market. The most
important factor which have contributed to the growth and success story of this organisation at new products,
aggressive strategies, listening and fulfilling customer requirements.

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VISION, MISSION, VALUE AND QUALITY POLICY:

Vision:

The vision is, “To inspire a healthier and happier communities by connecting people to the natural healthy
food”.

Mission:

The mission is to be, “The world’s premier food company, offering nutritious and healthy food products”.

According to Happilo being the premier food means being the best and finest in terms of consumer value,
customer service, consistency and predictable growth of company and business pattern.

Value:

“To inspire healthier & happier community by connecting people to natural healthy food”.

Quality:

Happilo provides a wide range of outstanding products and unsurpassed service that together, delivers
premium value.

Customer community:

The company has developed and will keep on developing relationships that will make a positive difference in
customer’s lives.

Integrity:

The company has and will uphold the highest and maximum standards of integrity in all the other actions.

Team work:

It has got a great team which is one of the major reasons for their success. The team at Happilo work together
across boundaries to meet the needs of all the consumers and thereby achieving their mission.

PRODUCTS PROFILE:

PRODUCTS

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 Dry fruit, berries & Nuts & mix Healthy seeds

Dry fruits, berries & exotics:

1. Premium dried Californian blueberries.

2. Californian premium sweet dried whole cranberries
3. Californian premium sweet dried sliced cranberries
4. Premium international dried Himalayan gojiberries
5. Premium international exotic dry mulberry
6. Premium dried Afghani anjeer
7. Premium dried Turkish apricots
8. Premium international Omani dates
9. Dried and pitted premium Californian prunes
10. Premium international seedless Afghani green raisins
11. Premium Afghani black raisins

Nuts and berries:

1. Premium dried whole blueberries cranberry duet

2. Premium dried super mix berries
3. Premium international healthy nut mix
4. Premium international nuts and berries
5. Premium international salted party mix
6. Premium international party mix
7. 100% natural Californian almonds
8. 100% natural whole cashew nuts
9. Roasted and salted Californian almonds
10. Roasted and salted cashew nuts
11. Roasted and salted Californian pistachios
12. 100% natural premium deluxe walnut kernels
13. 100% natural premium Californian inshell walnut
14. 100% natural premium Kashmiri walnut kernels
15. 100% natural premium Californian walnut kernels

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Healthy seeds:

1. Premium raw authentic chia seeds

2. Premium natural sunflower seeds
3. Premium lightly salted & roasted pumpkin seeds
4. Premium international white quinoa seeds
5. Premium natural flax seeds

New product launches of Happilo:Happilo has entered a stage where the product requires diversification.
The list of few new products are as follows:

1. Peanut butter
2. Almond butter
3. Choco spread
4. Apple cider vinegar

Area of Operation

Happilo International Private Ltd has its operations in two places i.e., in Bangalore and Tumkur.

Nature of business

1. Production

2. Packing & Labelling

3. Grading & Standardization

4. Distribution

5. Marketing

6. Selling

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Operations in brief:

production

supply chain warehouse &

management distribution

marketing
consumer
plan

Supply Chain Management:

Supply Chain Management involves the management of flow of goods and services which involves the
movement and storage of raw materials, work-in-progress inventory and finished goods from the point of
production to point of consumption. The Supply Chain Management process in Happilo includes the
following:

• Integrating activities from different departments

• Involves the continuous information flow between buyers and sellers
• Forecasting the consumer demands

1. Production Process:
Production process combines various material and immaterial inputs in order to produce something
for consumption. It is nothing but the act of creating an output, a good or service which has value.
The Production process of Happilo involves the following: -
• Developing the basic concept of production
• Developing the design for the product

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 • Testing of the prototype
• Actual manufacturing of the product
• Assembling the manufactured product
• Final product from the production (Output)

2. Warehousing & Distribution:

Goods are stored at a place for further distribution which is known as Warehousing. A Warehousing
requires a good place to store the goods.
The Warehousing and Distribution of Happilo involves the following:-
• Observation of movement of goods between distributors and retailers
• Quality storage of the dry fruits and berries
• Healthy relationship between the distributors and retailers
• Fixing the margin for the distributor’s
3. Marketing Plan:
A Marketing plan of any company basically involves the market research, advertisement and
promotion of products. The core purpose of this is to basically increase the sales and thereby customer
base.
The Marketing Plan of Happilo involves the following: -
• Conducting market research to understand the changing demands of consumers
• Promotion of the company’s products and increasing the goodwill of the company
• Choosing the right promotional channel
• Identifying the best retailers
4. Consumer:
All the above operations done at Happilo is to deliver the product to someone that is the consumer.
Once the product reaches the consumer the operations of the business comes to an end.
Delivering the final products to the consumers at Happilo involves the following: -
• Identifying the best retailers
• Assessment of the margin provided by the distributor to the retailer

About the unit

World class manufacturing set up in Bengaluru

1. ISO 22000:9001 certified unit.

2. In- house cold storage and in-house lab.

3. Automated grading and sizing.

14
 4. Automated and manual cleaning.
5. Integrated process for grading, sorting
6. Metal detectors, De stoners installed.

7. Vacuum packaging and bulk packaging for export and domestic

8. Multi Head- robotic high speed automatic PFS machine with speed up to 90 pouches per
minute, untouched by hand.
Sales and marketing uniqueness

1. International trading

2. Corporate and marriage gift packs of nuts and dried Fruits.

3. Snaking range with snack packs.

4. Pan India availability and distribution.

5. Recipe ready range for bakery and ice cream industries.

Range of products

1. Seeds and Berries

2. Nuts and Berries

3. Fusions of nuts and berries

4. Dates

5. Roasted nuts and pistachios

6. Seeds

7. Peanut and almond butter

8. Snack pack

9. Nutritional seeds and seed mix

10. Natural nuts

11. Dried fruits and raisins

12. Trial mix, Party mix and Healthy nut mix

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Network of Happilo

Happilo has its network almost at all places in India. Happilo has built a great network within a short span of
time. Happilo has its network within India as well as globally. Happilo has developed a great customer base
at various places.

Capital

Happilo International Private Ltd has the following capital: -

Authorized Capital: 1000000

Paid-up Capital: 1000000

Happilo Network within India

1. Ahmedabad
2. Jaipur
3. Jorahat
4. Kolkata
5. Kohima
6. Mumbai
7. Mangalore
8. Nainital
9. Pune
10. Parighat
11. Patna
12. Pondicherry
13. Ranchi
14. Shillong
15. Siliguri
16. Sangli
17. Shimla
18. Trivandrum
19. Tripura
20. Tinsukia
21. Udupi

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Global Procurement of Happilo:

1) Australia
2) Bhutan
3) Chile
4) China
5) Dubai
6) India
7) Italy
8) Sri Lanka
9) Turkey
10) Thailand
11) United Kingdom
12) United States of America

Retail partners:

1. Food World
2. Modern Bazaar
3. Reliance Retail
4. SPAR Hypermarket
5. Aditya Birla Retail
6. D-Mart
7. Namdhari’s Fresh
8. LuLu’s Foods
9. Air Asia
10. Nature’s Basket
11. Cafe Coffee Day

Online Partner’s:

1. Bigbasket
2. Flipkart
3. Snapdeal
4. Amazon
5. Paytm mall

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 6. Zopnow
7. Shopclues
8. Grofers
9. Zotezo

Ownership Pattern:

The company is managed by 2 key directors namely, VIKAS DHANMAL NAHAR & DHANMAL J
NAHAR.

Ravi Hulikoti is working as the National Marketing head.

CEO- Vikas Dhanmal

Nahar & Dhanmal J
Nahar

National head South:

Ravi Hulikoti
Board committee

RSM- South: Anil

RSM- East:
Koushik Sen Gupta

Head finance:
Vinay K

Logistics:
Vinay Kumar Jain

INTERNAL

Strengths

Strengths are those which an organization excels and wins at and separates itself from the competition.
Company survives in the market through its strength. Strengths are different for each company even if they
are into the same industry. Happilo has its own strengths which has given the power to differentiate itself from
competitors. The strengths of Happilo are as follows: -

1. Availability of Raw materials-

Happilo has its strength in the procurement of raw materials. Happilo obtains quality raw materials at
low cost from the best suppliers available.
2. Globally recognized brand-

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 Happilo has been one of the globally recognized brands and has created a great brand awareness
through effective marketing and promotion strategies.
3. Loyal customer base-
Happilo has always focused on the frequent buying customers and has created a good loyal customer
base by providing effective products and service.
4. Packing of Products- Happilo has the best packing of the dry fruits products and it has got the best
shelf-life compared to its competitors.
5. Network-
Happilo has developed its network not only within India but also globally which is one of its great
strength.

Weaknesses

Weaknesses are those which will stop an organization in giving its best performance. Always there are areas
in the organization which requires improvement to remain competitive in the market. Happilo has the
following weaknesses which are to be considered to stay competitive in the market.

1. Lacking in scale of operations-

Happilo must increase its scale of operations so that large scale production decreases the costs.
2. Lack of Information Management-
Happilo should consider the better channels of information and should consider proper management
of information.

3. Adequate Marketing Techniques-

There are various marketing channels and techniques available in the market. Happilo should choose
the best one to reach out their targeted customers.
4. Poor relationship between R&D and Industry-
R&D team of Happilo should try to increase their relationship with Industry which means R&D team
should continuously track the changes and development of the industry and market.

EXTERNAL

Opportunities

Opportunities refer to the factors which are favourable to the organization and are external in nature. A
company can make use of these opportunities available in the market to gain competitive advantage in the
market. Happilo has plenty of opportunities available in the market which it can make use of to grow in the
industry.

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 1. Introduction of New products-
One of the core opportunities available for any companies are their innovation of new products. There
is a plenty of scope for entry of new products into the market for which customers are waiting. Happilo
should develop a R&D for their innovation of new products.
2. Branding of Products-Creating a Brand is very difficult in the market. Happilo has done well in
creating its brand but it has got plenty of opportunities in the market to develop the brand for further
heights.
3. Availability of Labour-
India is a country which has lot of skilled and unskilled labours. Happilo has the opportunity choose
and select the best labours who fits the organization.
4. Technology Integration-
In the present era there is a rapid growth in technology. Everything is automated now. Happilo should
make use of the best technology available so that it reduces the process time and helps to stay
competitive in market.

Threats

Threats are those factors which has a high potential of harming an organization and are external in nature. An
organization should always be aware of the present as well as future threats to stay competitive. The threats
which are dangerous to Happilo are as follows:-

1. Global players competition

There is a stiff competition from the global market which is a high threat at present as well as future
growth of the organization. Happilo should be aware of this threat and try to convert it into opportunity.
2. Availability of Trained Labour
There is a high threat of availability of the trained labours in the market. There is a high demand for
trained labours. Happilo should try to identify and hire those labours before their competitors.
3. Competition from unorganized dry fruit vendors
India consists of various unorganized sectors in every industry. Even in dry fruit industry there are
various unorganized vendors who pose a threat to Happilo in its growth. Happilo should try to
overcome those vendors through various strategies of pricing, packing etc.

Functional departments

1) Human Resource Department

2) Marketing Department
3) Finance Department
4) Operations Department
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HR Department

The HR Department in Happilo is involved in maintenance of healthy relationship between employees and
employer, recording the information of employees and reviewing the performance of the employees and their
contribution to the company

Structure

HR
Department

HR Manager

Assistant HR
Manager

Organization Structure of HR Department

Roles & Responsibilities:

1. Ensuring accurate and complete recruitment and selection procedures

2. Providing diversity profile data availability
3. Training and developing new and unskilled employees
4. Management of employee and industrial relations
5. Maintenance of employee records in the organization

Marketing Department

In Happilo International Pvt Ltd Marketing department is involved in conducting the market research and
identifying consumer needs and changes in tastes and behaviour of consumer. Happilo has a great marketing
team in conducting the research and promoting the products.

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Structure

National
Marketing
Head

Regional
Marketing
Head

Sales
Executive

Organization Structure of Marketing Department

Roles & Responsibilities

1. Identification of customer needs

2. Maintenance of channels both internally and externally
3. Tracking the changes in the market
4. Promoting company’s products and services
5. Coordinate efforts with marketing partners
6. Work and transmit brand values

Finance department

The Finance department in Happilo is involved in maintaining the records of goods supplied, claims raised by
distributors, stock available and investments made in various other departments.

Roles & Responsibilities

1. Maintenance of sales invoice of the company

2. Maintenance of stock quantity
3. Preparation of ledger accounts and balance sheet
4. Identification of claims
5. Records of stock returned to the company

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Operations Department

Operations department of Happilo is involved in conducting the smooth processing of the manufacturing,
production, processing (Packing and labelling) activities of the company.

Roles & Responsibilities

1. Maintaining healthy labour relations

2. Identification of machinery equipment’s required
3. Training of the labour’s regarding the use of equipment
4. Maintenance of hygienic operation place

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 SWOT ANALYSIS:

Weakness: lacking in scale

Strengths: Raw materials
of operations, lack of
availability, globally
information management,
recognised brand, Loyal
adequate marketing
customer base, market
techniques, poor
leadership, Product
relationship between R&D
packaging.
team.

SWOT

Opportunities:
Threats: global players,
introduction of new
availibity of trained
product, branding of
labours, competition from
products, expansion on
unorganised dry fruit
untapped markets, labour
vendor.
availability.

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 CHAPTER 3

APPLICATION OF THE THEORITICAL FRAMEWORK

There are many techniques to manage the receivables so which are the best method and has most effective,
efficient is the findings of this problem.

The company may have difficulty in receiving payments from the customers. To determine the reason for
delay of payments and check payments are receiving correctly in time. Finding the number of delays and
return on equity is favorable. It shows also financial strength and credit analysis. This is done through
analysis of secondary data. The receivable and payables are problem because more working capital is
required and loss of funds due to bad debts, lag in payment also makes additional funds required for daily
operations. So the result of best technique helps to reduce burden on receipts and payments.

Need of the study

As receivable and payable management is the important activity of business. There are various techniques to
manage them. We need to access which is the best method to manage the receivables and payables. This
helps to construct good credit policy.
In an organization there are various transactions occurred on account receivables and payables. So to manage
them efficiently and have the control on it best receivable and payable management is required.
By good credit policy revenue will increases and good relationship can be maintained. .
It fosters the credit awareness and understands the need for the credit policy. The financial statements
analysis and contributions of receivables to fair position is done by good management of debtors and
creditors.
Allow too much credit and not managing the credit policy is results in irrecoverable debts and cause loss to
the company. So this study helps manage funds for profit and healthy business.
This study helps to manage sales process and measure the trends that competitors are achieving. How best a
calculation of receivable fit your business needs.
Importance of study

1. Determining the customer’s credit rating in advance

2. Frequently scanning and monitoring customers for credit risks

3. Maintaining customer relations

4. Detecting late payments in due time

i. Detecting complaints in due time

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 5. Reducing the total balance outstanding (DSO)

6. Preventing any bad debt in receivables outstanding

Objective of the study

1. To know the different techniques of receivables and payables management in the organization.
2. To evaluate all the different techniques and finding out the best and most profitable alternative among
all.
3. To find out the impact of credit system on financial health of organization.
4. To find out the chances of cost of credit and optimize amount of sales
5. To understand the long term relationship with stakeholders with credit sales and win-win business
strategy.
6. To understand the impact of working capital in the company. .

Methodology of the study

Since the study is based on secondary data there is no sample size. And the inputs will be the receipts
and payment invoices of one year. Many other data also supports to study. They are bad debts,
collection period of different vendors.
There is less scope for sampling in this study. Only the analysis part has more weightage.

Source of the study

Data collection is integral part of research design. For the study of Evaluation of techniques of
receivables and payables management the data will be secondary data. Secondary data are
indispensable for organizational research. And data is available at the organizations sales data. The
data collection can be office inquiry and past data.
The financial report also helps some elements to analysis like bad debts, these are the source that
available internally and there is less need for external data. The advantages of secondary data are time
saving and more accurate data will be available.
Method of data collection

Data will collect by past records and invoices made for customers. In secondary data there is no need
for Questioner and survey is also not to be conduct. So Good preparation for our actual need for data
and enquire for the data will be best suite in this research.

Literature review
For the investigation of Evaluation of Different strategies of receivables and payables the board the

26
writing might be different articles on receivables and payables.
Brief of various articles that distributed are beneath,

As indicated by Elionora kontus under the title "The board OF ACCOUNTS RECEIVABLE IN A
COMPANY" He proliferates money due administration legitimately impacts the gainfulness of an
organization. The motivation behind the experimental piece of the examination is to break down
records receivable and to show a relationship between the records receivable level and gainfulness
communicated as far as Return on Assets (ROA) of test organizations. Furthermore, based on research
result, a numerical model for computing net investment funds and following an update of credit
strategy, has

been created and with this model an organization can consider diverse acknowledge approaches just
as changes in credit arrangement so as to improve its pay and benefit and set up a credit strategy that
outcomes in the best net gainfulness.

He broke down the structure of receivables utilized by test organizations in 2010, money due
proportions alongside reliance between records receivable levels and gainfulness just as changes in
credit arrangement. He dissected receivables and record receivables utilized by Croatian
organizations in the proportion structure and the connection between records receivable level and
gainfulness. He clarifies corporate model as the relations between free factors which decide net
investment funds from changes in acknowledge strategy as a needy variable, another corporate model
has been presented and with the assistance of recipe it very well may be examined.

He gave the end as new corporate model for computing net investment funds from changes in credit
strategy and showing of the connection between records receivable levels and benefit. What's more,
a fitting acknowledge strategy just as researching methods for accelerating accumulations and paying
off terrible obligations. The corporate model can be utilized as a device to think about changes in
credit strategy and to utilize records of sales so as to accomplish most extreme return at a worthy
degree of hazard.
As per Samuel Tabot Enow under the title "The records payable administration practices of little,
medium and smaller scale undertakings in the Cape Metropolis, South Africa" he spreads 70% of the
inspected SMMEs buy just on money premise. Of the tested SMMEs, 22% buy on both money and
credit, while 8% buy just using a loan premise. Those that buy using a loan, 72% compensation their
lenders immediately to exploit rebate offices. To deal with their records payable, 52% of the SMMEs
use PCs. Just 43% settled records payable on the most recent day that the instalment is expected.
Furthermore, absence of work force and time are the principle factors that hinder the SMMEs from

32
dealing with their records payable adequately. At that point closed as given that most SMMEs favored
buying on money premise, and paying expeditiously to exploit limits, and remembering that the
majority of those that obtained on layaway utilized PCs to deal with their records payable records,
those elements seem to have dealt with their records payable successfully. Furthermore, study
prescribes that leaders of SMMEs ought to assess their records payable .

Concurring Shaikh Masrick Hasan under the title" Efficient Receivables Management Case Study of Siemens
Bangladesh Limited" he inquired about the suitable credit strategy for the clients to decrease the expense for
such credits including awful obligation misfortunes and the measure of late. The examination endeavors to
locate the triumphant techniques for records receivable administration in SBL – as illustrative of the perfect
business practice. While its significant commitment towards the current information, the creators bring up that
further research activity could be taken to further test and guarantee the ebb and flow study finding by taking
more case commitment. The discoveries can have a powerful approach, whenever joined by exact vigorous
examination.
As indicated by Duru Anastesia Nwakaego under the title "The executives of Accounts Payable on
the Financial Performance of Industrial/Domestic Manufacturing Companies in Nigeria." He looked
into the issue as a portion of the assembling firms that are still in business and are recorded in Nigeria
stock trade can't pay profit to investor in their organizations. What's more, the outcomes is been
expressed as the examination demonstrated that the connection between records payable proportion
and gainfulness is measurably positive and huge. This demonstrates when the payables of these
organizations increment, their benefit proportion don't increment in any event, when the normal pace
of their payables goes up,
Still the payables they make don't have effect on company's gainfulness in Industrial/Domestic
Nigerian assembling organizations.

As indicated by Francis Kakeeto and Timbirimu Micheal under the title "Records Receivable Management
and Organizational Profitability as a Function of Employee Perception in Gumutindo Coffee Cooperative
Enterprise Limited (GCCE), Mbale District Uganda, He examined impact of Accounts Receivable
Management on Organizational Profitability, by testing the speculation: Accounts Receivable Management
has a huge constructive outcome on authoritative productivity. Utilizing a clear research structure and a
contextual investigation procedure, test size of 181 was taken from the number of inhabitants in 345 staff.
Likert type scale surveys were utilized to gather information from the respondents as far as the two factors.
He gathered reactions for record receivable and authoritative benefit examined in theory by

<.01 importance. Uncovered that connection coefficient (R) utilizing indicator money due
administration is 0.309, and balanced the R2 of 0.090. This suggests 9% (0.090*100) varieties in
gainfulness are clarified by records receivable administration while the staying 91% is clarified by
33
different factors and records Receivable Management has a huge constructive outcome on
hierarchical benefit is acknowledged.

He reasoned that the vast majority of GCCE‟s deals were on layaway to remote clients and now and
again paid providers before conveyance of products. These offered ascend to records of sales that
required powerful administration to keep up great benefit. As to records of sales turnover, account
holders regularly paid inside a quarter of a year. Records receivable administration as rehearsed by
GCCE was satisfactory. Records receivable administration emphatically added to GCCE gainfulness
with a coefficient of assurance of 9%.This was minimal commitment when contrasted with other
working capital parts. The investigation prescribes improvement in records receivable administration
by offering money limits to remote clients to whom GCCE has not been offering limits. In spite of
the fact that GCCE had not experienced difficulties of terrible obligations, the fund administrator may
advocate for an elective technique of offering money limits for faster instalments to quicken
instalment accumulation.
As indicated by MUKHOMA HORACE KENNEDY under the title "Records RECEIVABLES
MANAGEMENT AND FINANCIAL PERFORMANCE OF MANUFACTURING FIRMS IN
NAKURU COUNTY, KENYA" He investigated records receivable of a firm is a legitimately
enforceable case for instalment from a business to its clients. A framework must be set up to track
records of sales. This ought to incorporate equalization advances, posting of every open receipt and
age of month to month explanations to clients. The motivation behind the investigation is to set up
how Accounts receivable administration attempts to limit the measures of cash tied up in type of
records receivables and hence returns the association to its unique set objectives. The examination
portrays target populace involving all the assembling firms in Nakuru district which is the example
and evaluation will be utilized as the populace is under 30. There are

25 assembling organizations inside the district. The records receivable will be estimated utilizing
proportions, for example, turnover proportion which is a bookkeeping measure used to evaluate firms
viability in broadening acknowledge just as gathering obligations. The investigation will be founded
on speculations, for example, exchange off hypothesis and pecking request hypothesis. Spellbinding
overview research configuration will be received.. In this manner, the investigation will utilize a
purposive examining, accordingly judgment testing to be specific. The principle wellspring of data
will be the auxiliary.
He broke down insights of money related execution factors i.e., mean, standard deviation and greatest
estimations of different proportions. He broke down connection with Return on Equity. Also,
discoveries are the discoveries demonstrated that stock turnover period and normal instalment period

34
is averagely 29.16 days and 107.30 days individually. This investigation suggests that there ought to
be appropriate stock administration framework in assembling firms to keep away from over load of
stock coming about effective result of speculation. The board of assembling firms ought to likewise
ensure certain benchmarks 34 and levels which will quit heaping up of stock. What's more, association
with providers ought to keep up.
As indicated by Benjamin Malingu Achode and Gladys Rotich under the title "Impacts of records
Payable as Source of Financing on Performance of Listed Manufacturing Firms at the Nairobi
Securities Exchange", looked into firms are consolidated, value capital is the most accessible source
from the advertisers. Value financing comprise of customary offer capital, inclination shares, and
held income. As business improves, extra capital might be required and obligation choice is typically
the quickest given there are less administrative obstructions. In the on-going years the presentation
of certain organizations recorded at the NSE, has been horrid because of their elevated level of
obligation contrasted with value. That examination was to survey the impacts of records payable on
monetary execution of openly recorded assembling organizations at NSE, Kenya. Enumeration
examining strategy was utilized and the investigation utilized optional information, which was
acquired from the organizations' insights and diaries at the Nairobi Securities Exchange. SPSS was
utilized to complete the elucidating investigation of the factors, imperative examination and propelled
examination of the information. What's more, A numerous relapse model was utilized to test the
connection between the Accounts payable and firm execution.

Outcomes from this exploration proposed that in the vast majority of the assembling firms recorded
at the NSE, there was an immediate positive connection between Accounts Payable and the reliant
variable, Profitability and Liquidity, supporting the Pecking Order Theory. He given the end as the
examination additionally uncovered that practically 80.0% of the fluctuation in execution of the
assembling firms recorded at the Nairobi Securities Exchange could be clarified by the records
payable as a wellspring of financing. The examination suggests that money administrators and
monetary officials of organizations ought to build up a long haul association with their providers so
as to access exchange credit an all the more simple and quick way, as expanded utilization of
exchange credit improves execution of organizations through expanded benefit.
As indicated by Ilya Bezuglov under the title "Improvement of receipt dealing with at records
payable" spreads look into technique, which was utilized in this proposal, was subjective contextual
investigation. Case organization's receipt taking care of was evaluated and dissected with the use of
important bookkeeping writing audit and subjective research.
Subjective research included information from semi-organized meetings with organization agents and
strategy for direct partaking perception. Semi-organized meetings were held with bookkeeping
division and activities office agents. Direct taking an interest perception was held on the off chance
35
that organization's activities office where genuine receipt dealing with occurs. The proposition
recommends approaching receipt taking care of advancement plan that will enable the case to
organization to conquer current difficulties just as improve interior operational precision and
proficiency. The arrangement comprises of a few stages and plans to destroy shortcomings of current
dealing with framework.

Tools of Analysis
1. Data will be analyzed with comparison of different technique of receivable and payable management
and also finding which technique is best to evaluate receivables and payables.
2. Analyzing these techniques on the basis of cost and accessibility. Also focusing and analyzing the
debtor turnover ratio and debt collection period.
3. The analysis of statistical will be correlation and use of bivariate descriptive analysis.
4. The individual method will analyzed with sample that collected and compared
all the techniques and represent the result.
5. The analysis will separately do to receivables and payables and receivables have more prefer to this
study. Weather is it profitable and impact to business high will analyzed.
6. Different technique may need different parameters and that will conclude in universal applicability to
the business health.
Limitations of the study

1. Based on manual calculation.

2. More relay on secondary data

3. Difficult to conclude with different parameters.

4. No sampling will be done leads to less accuracy in results.

This research will yield the results of which is the best method to control credit and
enhance the income from receivables and lesser the burden of payables.

36
 CHAPTER 4

ANALYSIS AND INTERPRETATION OF FINANCIAL STATEMENTS AND

REPORTS

Data is to be analyzed through different technique calculation and representation. We are taking
consideration of individual technique and evaluate it.

1) Different techniques of receivables and payables management in the organization.

Currently Happilo International Private Limited is not following any technique of receivable and
payable management. The organization is following only the credit period given to debtors and
by creditors.
The different techniques of receivable management they can follow are

Technique 1: Ratio analysis for receivables

We can follow ratio analysis to manage the receivables that can be calculated with the help of formula
1. Debtor turnover ratio= credit sales/average debtors
2. Average credit period= average debtors*365/credit sales
These formulas can help to measure the efficiency in management of receivable and trend over the
period.
Calculation of Debtor Turnover Ratio with reference to organization

1. Debtors turnover ratio= 320000000/35000000

Debtors turnover ratio= 9.14times

2. Average credit period= 35000000*365/320000000

Average credit period= 40 days

Ageing Schedule:
The ageing Schedule is prepared based on collection pattern. The total balance of debtor is classified
into their age i.e. outstanding period which amount is uncollected. This provides full information for
access the company’s liquidity position and credit control. This also helps in compare with previous
age.
This analysis will help to decision for old debts. For better control in receivables ageing schedule will
prepare and analyze to identify overdue amounts. It will prepare according to various periods
outstanding for example less than 30 days, 30 days to 45 days, 46 days to 60 days, 61 days – 90 days.
The ageing will do by manually or by computer mode. In manual mode kept one separate file for
37
receivable invoices and file them according to ages and due date or billing date. In computer mode
using tally software is best tool so it can be sort by ageing. We can easily get the report of overdue
amounts and date.
Ageing Schedule with reference to organization Age
analysis of debtors as on 31st march 2019

No, of outstanding Amount % of total No. of % of total

days debtors accounts accounts

<30 days 192000000 60 39 65

31-45 64000000 20 12 20
46-60 38400000 12 6 10
61-90 25600000 8 3 5

This ageing schedule defines the organization can receive the amount that is overdue in above
schedule this can be do according to preference also and based on discounts availed to the debtors.
Calculation according to discounts.
Discounts and period Amount % of total No. of % of total
Debtors accounts accounts
<30 days (15% 160000000 50 36 60
discount)
31-45 (7% discount) 96000000 30 18 30
>45 no discount 64000000 20 6 10

Technique 2: ABC analysis of receivables

This is the technique mainly formed for effective control of inventory. This application can
manage receivables also. And it gives good results for the firm with huge number of accounts.

38
Illustration of ABC analysis pertaining to Happilo

Category % of total % of total No. of

Accounts Debtors accounts

A 40 50 24
B 35 35 21
C 25 15 15
D 100 100 60
In this ABC analysis we can observe category A debtors that only 40% of accounts generate 50% of
income to the organization and they are given more weightage in receivable accounts and a close
scrutiny of these accounts and realization of dues in time will cost only moderately and improves the
efficiency of debtors collection and also improve the liquidity of the firm and avoids unnecessary
blockage of funds in debtors balances which can be invested elsewhere to obtain the opportunity cost
of funds. To large extent it avoids the administration costs also.
Category B debtors are needs moderate control and category C are large number but small revenue.
The managerial attention should not be diverted to these balances.
However, it also requires moderate attention for efficient management of debtors. In this ABC
analysis we can know who is important and more flow of revenue is in which category. So it helps to
concentrate more on big holders and efficient management of all the receivable accounts.
Technique 3: Discriminate analysis and Credit scoring discriminate analysis

This is an important tool used for discriminate between good and bad accounts taking into account
the readily available information from financial data relate to size, liquidity and credit payment
period. Table that showing discriminate analysis

No. of Size Liquidity Credit

Companies payment

Period

12 Big Good <30 days

30 Medium Good 30 days

18 Small Average 45 days

39
Interpretation: As per this discriminate analysis 12 companies are big companies generate
more income and we are giving more discounts so credit period is less so these are good
category companies that we have to concentrate more.
And another two medium and small are more companies generates less revenue are given
less discounts and credit period is more so it will not maintain long period relationship and
their liquidity position is less.
Credit Scoring

This technique is discriminating the accounts based on their past repayment and default
experience relates to individual customer. The score is given to each customer and based on
that credit facility is decided. If extend also in relates to cut-off score.
Criteria for rate the score

• Volume of transaction

• Discount allowed for customer

• Credit period

• Successful repayments

• Defaults and set off history

Table of Credit Scoring
Company Preference Credit Score
A High 80
B High 65
C Medium 75
D Low 55

Interpretation: This is based on their past repayment and volume of transaction the company A
is high priority and credit score is good so we can give more credit period and efficient
management can happen.
But company D credit score is low and priority is also low so we restrict to give more credit
periods. And high preference low score company will decide by management and according to
their capacity to pay the credit period will be given.

40
Technique 4: Credit utilization report
Credit utilization report the total limits of credit offered to each customer and extend which it is utilize will be
reviewed in period and observe how much is utilized all information in a report called credit utilization report
Credit utilization report in the organization.

Customer Credit credit utilized % of utilization

sanctioned
A 1500000 1200000 80
B 900000 400000 44
C 700000 700000 100
D 100000 80000 80
E 300000 200000 67

Interpretation: In this case A is more trusted customer and have big business so we give more credit
limit but he utilized only 80% in this year.
The medium preferred customer C utilized full limit so, this credit utilization report will help in
access the credit limit can be given to individual.
This report will also contain the other information, such as day sales outstanding and so on. This report will
reveal the following:

• Number of customer who want more credit limit.

• The extent that company is exposed to its debtors

• The strong credit policy.

• Degree of exposure to different customers.

Technique 5: Cost benefit analysis of collection expenses

A company has to incur some routine like send reminders, telephone expenses, Personal visit
expenses, commission and fee payable to legal, agencies etc.

41
When company incurs more cost on collection of debts it will be less cost on bad debts and vice-
versa. If company goes on increasing the cost of collection of debts after some point it will not further
decrease of bad debts that point is called as “saturation point”. If the company incurs collection
expenses beyond this point, it cannot benefit the company in reducing its bad-debt losses.
Interpretation: In the company Happilo there is negligible amount of bad debts are there they are
investing more on reduction of bad debts in the form of allowing discounts and set off to agreed
amount. So in this case cost benefit analysis is not plays a very important role in receivable
management.
Technique 6: Measuring day’s sales In terms of Debtors
The debtor Turn over method will helps in measuring day’s sales in terms of debtors. There are three
ways to represent total debtors
1. Debtor Turnover method = Total Debtors * 365/Credit sales
2. Count back method: This method is based on assumption that debtors balance
relates to most current period sales.
Illustration with reference to organization
Debtors balance as on 31 March 2019 is 320000000 and March month sales is 30000000, February
is 29000000, and January is 35000000. In this case 50% January sales is not received.

42
Calculation
total debtors as on 31st march 2019 320000000
Less: march sales 30000000
290000000
Less: February sales 29000000
261000000
Less: January unpaid sales 17500000
243500000

Calculation of debtors balance in days

March (entire turnover) 31 days

February (entire turnover) 28 Days

January unpaid 15 days

43
Partial month period
This method analyses each months sales and unpaid portion these are aggregate together to get days sales of
debtors.
Calculation of outstanding debt in partial month method
Month sales Unpaid Days Days

Unpaid
March 30000000 30000000 31 31
February 29000000 24650000 28 23.8
January 35000000 17500000 31 15.5
December 35000000 7000000 31 6.2
November 25000000 0 30 0
October 50000000 0 31 0
The partial month method not only provides the overall debtors ageing figure but also provides
month-wise debtors outstanding.
Interpretation: This partial month is giving the summarized report of all receivables and that
helps month wise collection of debts and overdue maintenance.
These are the different technique that an organization can follow and illustrations that considers the
research organization in this Technique 1 is best suited to organization because there is less cost and
very easy method compare to other methods.
Technique 1: Ratio analysis for receivables and ageing schedule: This technique is best suited for the
organization because this can be calculated easily and need not to depend on any external sources of data.

Debtor Turnover Ratio is 1.882 and debt collection period is 183 days. In ageing schedule we can
analyse through pie chart (3.1)

This is chart of share of different credit period and this shows company is giving <30 days credit
period to most of its customers, this can helps analyse the credit receipt in the organization.

Technique 2: ABC analysis of receivables

This is also good technique that we made the group like A, B and C that based on importance and
different criteria’s. A is most important and C is less preferable. We are classified and analyzed
number of accounts holding number of debtors and this shows the summarized view of different
accounts receivable.
Technique 3: Discriminate analysis and Credit scoring discriminate analysis
This technique is discriminate with different accounts categories based on their size liquidity,
and credit period. This will give the report of liquidity of customer and size of business so
44
this technique is also a measuring tool in receivable management in the organization.
Credit scoring

This is a technique that gives score to individual customers based on their repayment history and
defaults.

Technique 4 utilization report

This is the report that customer utilization of credit limit in the given period. A limit is given to the
may fully utilized or some portion of amount may left as utilized.

This is the credit utilization of each customer and percentage of credit utilization. This can help
organization by how much credit is needed for individual customer and individual attention can be
drawn.

Technique 5- Cost benefit analysis of collection expenses

This is the technique that access the cost involved in collection of debts. If the company invest more on
collection the percentage of bad debts will come down so company is to be concentrating on collection of
debts in the way of agencies, collection centers and online transfers.
Technique 6: Measuring day’s sales In terms of Debtors
Measuring days sales can be calculated by Debtor Turnover method and other two methods can bring the
suggestion today’s sales. In this organization the debtor turnover method gives 43 days sales.
The another method count back method that calculates past three months debts and less the amount
on total debtors

45
Find out the impact of credit system on financial health of organization.

The credit system in the organization defines how best the organization is managing the credits.
In the credit system four components are important. They are
• Credit eligibility
• Credit terms

• Documentation

• Collection

So we can analyse all four components gives the importance of credit system in financial health.
1. Credit eligibility standards: the Credit scoring method is a standard for the eligibility in
credit. And credit utilization report is also an eligibility standard.
2. Credit terms: Consider industry practices and the creditworthiness of individual customers
when crafting your policy. In some industries, new customers might start with a “net 30”
standard, allowing them 30 days before payments become delinquent. But one size doesn’t
necessarily fit all. Your best customers may warrant longer payment terms, such as 60 to
90 days. Some industries have their own billing practices, such as the construction
industry, where customers are usually billed with a series of invoices.
3. Documentation: the repayment history and default is the documentation for the credit
system.
4. Collection: This is the important task of credit management so different ways of collection
can be done to recover the maximum.

The impact of credit system means the non-recovery of debts will disturbs the financial aspects of the
organization that is bad debts are like an additional expense to the company. The impact is also
showing fewer amounts of profits and more non- operating expenses.
These are the main facts of impact on financial health of business.

The cost of credit is expenses incurred for collection of debts so the cost of credit is to be reduced.
The cost may incur at point of collection and the fee payment to legal and collection agencies.
Strategies for reduce the cost of credit.

46
 • Given the option to payment through various modes.

• Doing the electronic billing and send reminder through the mails and apps.

• Evaluate credit and financial history.

• Frame clear credit terms

• Outsource receivable management and set up a separate department for credit

management.
• Hold more control on discount and more care on top receipts.

Understand the long term relationship with stakeholders with credit sales and win- win business strategy.

The long term relationship with customers can achieved only through giving good credit period and
flexible payment terms. So ABC analysis will give the clear picture of longterm relationship with the
customers and credit utilization report is also a tool to access the individual customer.

47
Analysis of relationship with customers
This is analysis of different customer credit limit and their utilization of credit. In this report “A”
customer is highly important customer and revenue generation is high.so, we given him large amount
of credit and he did not utilize full credit limit. We can reduce the credit limit but for long relationship
we have to maintain this credit limit to customer “A”. Customer “C” is medium preference customer
and he utilized full credit limit. And he is demanding for extend the limit. So we can extend the limit
with small amount that makes good relationship with the customer.
Customer “D” is low business scale and we provided him according to his capacity. He did not
utilized full amount of credit and repayment history is also good so they can be convert as more
preference customer to concentrate the retail sector of the market.
Understand the impact on working capital in the company
The working capital is funds needed for the daily working of the company. In working capital our
Current assets like Bills receivable and cash balance will there. And also it contains current liabilities
like creditors.
Understanding the working capital in the company makes how working capital is important in this
organization and in the view of receivable management in the organization.
The working capital impact is measured by correlation and regression analysis but in point of
receivable and payable management the analysis will be the ratio of different aspects like purchase
and sales, debtors and creditors etc.
Analysis for impact on working capital

1. Sales and purchase ratio

Sales = 320000000

Purchase = 250000000
Ratio of sales to purchase is 1.28 times

2. Debtors to creditors Ratio

Debtors = 3,00,00,00,000
Creditors= 2, 50,00,00,000
Debtors to creditor’s ratio1.2

This calculation shows the bills are recovered time to time and as the ratio of sales same the ratio of
debtors so current position in receivable management is good and not much the impact on working
capital is recorded. The analysis in previous head cost of collection shows that organization invest

48
more funds on debt collection procedure that will impacts the working capital of the company.

Analysis of sales growth and purchases in the year

Purchase
Months Amount
April -
May 2,10,00,000.00
June 1,70,00,000.00
July 1,70,00,000.00
August 2,00,00,000.00
September 2,90,00,000.00
October 3,20,00,000.00
November 1,75,00,000.00
December 2,50,00,000.00
January 2,60,00,000.00
February 1,80,00,000.00
March 2,80,00,000.00

Sales
Months Amount
April -
May 1,80,00,000.00
June 1,75,00,000.00
July 2,80,00,000.00
August 2,70,00,000.00
September 2,90,00,000.00
October 5,00,00,000.00
November 2,50,00,000.00
December 3,50,00,000.00
January 3,70,00,000.00
February 2,90,00,000.00
March 3,00,00,000.00

49
In this sales and purchase there are much variation in the monthly figure. To manage these there
should be good technique. These sales can be managed by ageing schedule and debtor turnover ratio.
Manage with the receipts and payments are done by credit period. Normally organization is giving
credit period of 30 days and more important customer may get 45 days credit. And if organization
gives discount the credit period will be lesser than usual. So the receipts that received will utilize to
pay the creditors. Company is having 30 days credit period from its creditors and that will manage
by separate department. The sales variation and large amount of purchase will manage by bank
overdraft and short term loan from the bank.
Evaluation of different technique of payable management
In payable management we have look for better credit period and flexible credit terms. The technique
of payable management is same as the technique of receivable management.
Technique 1: Creditors turnover Ratio and Credit payment period
1. Creditors Turnover Ratio: Credit purchases/Average creditors
2. Average Credit period: Average Creditors * 365/Credit purchase
These formulas help to find out efficiency in management of payables and know the trend over the
period.
Calculation with reference to organization

1. Creditors Turnover Ratio=250000000/35000000

Creditors Turnover Ratio: 7.14 times

2. Average Credit period: 3,50,00,000 * 365/250000000

Average Credit period: 51 days

By this analysis the turnover is high and also organization is getting good credit period by 51 days. So this is
favourable to the organization view and repayment has little free days in suppliers.

50
Ageing schedule

The ageing schedule is a system that sort the payment by due date. The number of days in the credit
term will differ from one supplier to another. So ageing will give the correct date of payment by the
organization this will prepare based on payment pattern.
To clear the old debts this ageing is much helpful. And for better control over payments and overdue
by company this technique is helpful. This will be preparing based on credit period given by supplier.
Calculation of credit ageing
% of No. of % of
No, of outstanding Amount total accounts total
days Creditors accounts
<15 days 87500000 35 15 47
15-30 112500000 45 30 14
30-45 37500000 15 21 7
>45 12500000 5 6 4

This is the calculation of ageing for the payment for purchases and number of accounts that
organization is buying are 72. The ageing is according to organization relationship with the suppliers.
Technique 2: ABC analysis of payables

This is the important technique of payable management. In this technique grouping of payables
accounts in preferential manor. In this technique we group creditors as A, B and C category.
The analysis of ABC technique is below

% of Total % of Total No. of

Category Accounts Creditors Accounts
A 56 60 40
B 28 30 20
C 17 10 12
Total 100 100 72

This is the ABC analysis chart for payment to creditors. In this ABC analysis we divide suppliers
into three categories. A is more preferable and very important supplier and B is medium supplier
and number of accounts are less compare to A. The C category suppliers are retail suppliers they
did not much preference in the organization

51
Interpretation: The ABC analysis shows the bulk and small quantity suppliers in its charts. A
category has more number of suppliers and more amounts to pay. They are giving more credit period
and major goods supplied by them only.
The B category has comparably less accounts and amount but they are supplement to the
daily operations of the business. For example packing cover and cylinder for packing machine. So
they are comes under medium priority.
The C category are least preferred and they supply the small amount of goods, they are mostly retail
business holders and rare purchase will happen.so the C category have less amount and we have to
pay them as soon there will be less credit period.
Technique 3: Credit term analysis

This is the technique that analyze which supplier give the good credit term and rate the supplier
according to their flexible business pattern. The credit term analysis is difficult method to follow but
the most profitable tool to manage the credit payment.
The analysis can be done through various collections of information and request for quotation. This
may be tedious process but create most saving in cost of goods.

Company Credit Period Cost of goods Discount offered

A 15 days 100000 15%

B 30 days 150000 5%

C 30 days 175000 10%

D 45 days 200000 0

This is analysis of Different vendor that offer the goods with certain facility. So the organization has
to look for better goods at good price and more discounts. In this case the B Company can be chosen
because credit period is good and after discount the price will be better among all.

52
Discriminate analysis: This is the technique that discriminates with the supplier based on various
criteria’s. The supplier condition to supply goods and profitability of transaction will be analyzed and
take the decision to maintain further relationship.
The discriminate analysis can be done as

Company size of business credit Period Discount offered

A big 30 days 15%

B medium 30 days 5%

C medium 15 days 10%

D small 10 days 20%

This is the analysis of company profile and their credit offerings. So In this analysis the organization
most prefers the company B and most of the buying will happen with the company B. this is the
summarized report of each company’s offerings and this analysis helps to discuss the further credit
terms with its suppliers.
The discrimination analysis is quite difficult analysis because individual company data and other
information are required.
Technique 4: Credit analysis
This is the analysis of credit limit given by different supplier and how much is needed by us is shown
in credit analysis. In this analysis we are calculate credit limit given by suppliers and utilization of
credit in the given period.
Analysis of credit (Table 3.16)

Supplier Credit limit Credit utilization % of utilization

A 1000000 1000000 100
B 500000 400000 80
C 350000 3650000 100
D 100000 80000 80
E 200000 200000 100

In this credit analysis we utilized full credit of some customer and with some customer due to discount we
did not use full credit.
Interpretation: In this limit analysis we can get to know that we need more credit from suppliers

53
and much is efficiently used in operations. So this is an important tool to analyze the credit amount
in business. This method also a proof of efficient manages the payment and negotiates with supplier.

Technique 6: measuring purchase in terms of creditors

This is the tool that measures the purchase turnover and monthly purchase payments in the
organization. In this technique we calculate in three ways. They are
1. Creditor turnover

2. Count back method

3. Partial month method

Calculation of credit turnover
Credit turnover= total creditors/credit purchase*365
Credit turnover= 40000000/250000000*365
Credit turnover= 58 days
This technique is helps to know the creditor turnover days in the given period. As per this analysis
the company is having 58 days credit in an average. And this is fair position to the company that can
utilize funds in other activities.
Calculation of count back method
Happilo has creditors balance on 31st march 2019 is 40000000, and purchases in March is 2800000, February
is 17000000, and January is 26000000.
Calculation table
Total creditors as on 31st
march 2019 40000000
Less: March purchases 28000000
12000000
Less: February
Purchases 17000000
0
Less: January purchases 26000000
0
In this analysis the company has the due amounts for only one month and small portion in the second
month. So by this analysis we come to know that company is in good position in payment to creditors.
Partial month period

This method analyses the each month purchases and un unpaid portion of purchases. These are
54
aggregated together and get the unpaid amount.
Calculation of partial month period

Days
Month Purchase Unpaid Days Unpaid
March 28000000 28000000 31 31
February 17000000 12750000 28 21
January 26000000 6500000 31 8
December 25000000 0 31 0
November 17500000 0 30 0
October 32000000 0 31 0

This is the analysis of unpaid portion in each month this gives the outstanding amount and the days
also.
Interpretation: This analysis gives the fair picture of payables in the organization. And by this analysis
we come to know that company is maintaining good payables record. The
Record of monthly credit purchase and paid also given by this analysis. So this is also a good tool to
manage the payables in the organization.
The technique 6 i.e., average creditors and partial period is gives the position of payables and past
record of payment. So we can adopt this technique in the payable management.
For manage the payables some strategies and tools that helps without any calculation they are below
1. Negotiate with price, cash discount and credit period
For the better business and attain the more profit concentrate on cost reduction is required. So by
choosing the supplier who gives more discount and low price it can be achieved. This is the important
strategy to follow good payable terms and getting the goods for low price.
2. Calculate the cost of trade credit and analyze the benefits
Analyzing trade credit should be availed or discount should be taken or bank finance to be availed is needed.
For that he should calculate the cost of trade credit and compare it with other financing options and then take
the appropriate decision. If trade credit is utilized, having a higher cost of funds in comparison to bank finance,
it will diminish the profits and profitability of the business.
3. Strengthen the suppliers’ relationships.
This is function of an AP Manager looks little contradictory to the first two but it is of utmost
importance. It is an accepted fact that one business is dependent on other business. The buyer of raw
materials and other components is also dependent on the supplier. While managing and negotiating
55
with suppliers, the manager should not try to take unreasonable benefits out of them. That will hamper
the relationships which will have a bad impact on supply chain and hence on sustainable development
also.
4. Ratios for managing accounts payables and trade credit.
There are various ratios quite useful for manage the accounts payable. Those ratios give strategic and
normal benefits for losses and payments. The ratios are analyzed in payables analysis part and the
position of the company is also good.
Accounts payable to total current asset ratio
This ratio gives the extent of current assets financed by the accounts payable or trade credit. Lower
this ratio, higher will be the liquidity. It is somewhat reciprocal to current ratio. While managing or
stretching the trade credit, the liquidity position of a whole business should also be kept in mind.
CALCULATION
Accounts payable to current assets= Accounts payable/Current assets
= 20000000/35000000
= 0.5714 times
Interpretation: this ratio shows good liquidity in payable position of the company it is near to 1:2
ratios of payables.
Accounts payables to total current liability ratio

This ratio indicates the dependence on trade credit as a financing means. Please note that current
liability here includes the short-term bank financing as well. A banker or potential investor may also
infer that the business is facing difficulty in raising external financing and smell some problem in
the business.
CALCULATION
Accounts payable to current liabilities= Accounts payable/ Current liabilities
= 20000000/28000000
= 0.714times

Interpretation: The share of accounts payables in total current assets is 71% so this indicates that
low depend on bankers fund and more depend on credit period given by suppliers.
Accounts payables to sales ratio
With the help of this ratio, two firms of similar nature or two different periods of the same firm can
be compared. That would indicate the extent of trade credit utilized by the business to generate sales.
CALCULATION
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 Accounts payable ratio= Accounts payable/Total sales
= 20000000/32000000
Accounts payable = 0.0625
Interpretation: This shows 0.0625 of trade credit utilized in generated sales. This will helps to analyze the
funds for payment to creditors with the sales revenue.

Changes in accounts payables to changes in sales Ratio

This is indeed a crucial one. This indicates the correlations between sales and trade credit. In general,
an increase in sales will increase the levels of accounts payable as well. Important is to see, increase
in sales by 1% is increasing the accounts payable by how much percentage. Accounts payable
manager should try to keep this ratio on the lower side i.e. below 1 for effective management of
accounts payable.

In reference to Happilo organization that started in last year so the changes in sales ratio is could not
be calculated. But from next year onwards it could be calculated.

The above analysis will helps in study the impact of payables in working capital of the company.
And if the receivable is not managed in proper way, that found difficult to manage payables in the
company.

But in the above analysis organization is maintain good payables and receivables also managed in
good manner, but not as efficient as payables. The ratios calculated above are important to payables
but not much important to receivables.
Understand the long term relationship with stakeholders with credit purchases and win- win
business strategy.

This is one of the important aspects of payables management and this is also analyzed in earlier
stages of payables tools analysis. The long term relationship will be managed by good credit payment
and purchase in large quantity.

The process of finding the new supplier is need more analysis of different criteria’s while start the
business with them. The discount analysis and getting the expected quality of goods is more
considered aspect in relationship management

57
 Chapter-5
Learning experience
Findings:
• The deals development is high and maintainability is useful for this association.
• Company is utilizing current innovation and programming in its tasks
• Good and gifted work in the association
• The item development and effective propelling make the separation with different contenders.
• Good position as far as payables and receivables.
• Company is getting adaptable credit terms and keeping up long haul association with its providers.
• There are six helpful procedures in receivables the board and that can adjust to the association.
• Receivable administration apparatuses and payables the executives devices are same somewhat and just
change in information recorded in organization has the effect.
• The organization is giving more credit period to its clients and more sums in the credit furthest reaches that
isn't completely used.
• The turnover time of payables is higher than the receivables, so this demonstrates organization's vital bit of
leeway in receivable and payable administration.
• The use deals add up to compensation its leasers is low, so organization can focus on use for instalments.
• In estimation of day's deals and buys the turnover of buys is higher than the business day's turnover.
• Some procedure are following in the association is to be redesigned.
• There is prerequisite for workers for the tasks.
• Clear and specialized administration of stock is required.
• More infrastructural office is required.

• Use of programming for participation and increasingly brought together HR the executives is
Required.
Suggestion

For the research of “Different techniques of receivables and payables management” we

analysed different tools of receivable and payable management. In this analysis we found out
some tools that help to manage the receipts and payments. In receivables management the
technique Debtors turnover ratio and ageing schedule is the best tool to be used for the
organization. In payables management the technique purchase days calculation is the best tool
to manage the payment to the suppliers.

In payables management the ABC analysis is also a good technique that organization can follow. In
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 the analysis of customer and supplier the data require is more and organization has to spend more
time on collect the data, so those are the least preferred tools to adopt in the organization.

The analysis of credit utilization is need to be revised and cut off the credit limit to customers i.e.,
more in not utilized part. The company can demand for more limits from suppliers because the
payment is more good and utilization also good. Some updated strategies have to be followed for
better management of credit in the organization. The investment on bad debts i.e., set off accounts
is should be minimized, so that can reduce the cost of credit and use of more updated technology to
manage the receivables and payables in the organization.

The tools of receivables and payables management are based on graphical analysis, so this is easy
to understand and implement in the organizational operations.

Conclusion

Company should adopt the ageing schedule for manage the receivables in the organization and can
adopt days purchase technique to manage the payables. More number of employees is needed to run
the operations smoothly. Use technical way of manage the inventory and specific tool to manage the
space of the organization

They should concentrate more on minimize the amount of return in the business. Proper verification
of invoice amount and goods supplied should be maintained. The old technique of manage the
receivables and payables is to be replaced with updated techniques.

These are the major recommendation to the organization and by practice the same will helps in
generate more profit and smooth flow of work in the organization.

59
 CHAPTER – 6

Bibliography

https://www.indiamart.com/happilointernational/aboutus.html
https://www.ibef.org/archives/detail/b3ZlcnZpZXcmMzcxNTImNDk0
https://www.intechopen.com/books/organic-farming-and-food-production/production-and-dis
tribution-of-organic-foods-assessing-the-added-values
https://www.cbi.eu/market-information/processed-fruit-vegetables-edible-nuts/channels-segm
ents/edible-nuts-dried-fruits/
About Us | Happilo

60
Annexure

STATEMENT OF PROVISIONAL PROFIT AND LOSS

M/S HAPPILO INTERNATIONAL PRIVATE LIMITED

STATEMENT OF PROVISIONAL PROFIT AND LOSS FOR THE
PERIOD ENDED WITH 31ST MARCH 2019 ( FY 2018-19 )

Particulars (Amount in Rupees)

I. Sales 28,97,08,841.00
II Other Incomes 46,495.91
.
II Total Revenue (I - IV) 28,97,55,336.91
I.

I Expenses:
V.
Cost of Materials Consumed 19,90,07,512.55
Business Promotion & Marketing Expenses 3,71,77,826.91
Discount Allowed -
Marketing Expenses -
Employee Benefit Expenses 1,86,19,183.64
Finance Costs 3,596.59
Depreciation and Amortization Expenses -
Freight Charges -
Listing Fees 8,35,584.00
Office Maintenance 12,00,298.75
Electricity Charges 3,01,768.00
Postage & Courier Charges 1,12,513.25

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 Printing & Stationery 6,04,218.88
Processing Cost 37,68,182.03
Preliminary Expenses- W/o 4,000.00
Rates & Taxes 3,94,159.00
Repairs & Maintenance 3,39,001.00
Rentals 7,77,600.00
Sampling & Promotions 18,50,600.00
Transportation Charges 43,44,327.00
Telephone Expenses 37,122.22
Wastage, Expiry & Scrap 1,50,86,413.45

Total Expenses 28,44,63,907.27

Profit Before Tax (IV-V) 52,91,429.64

V Net Profit Ratio(PBT) 0.02

.

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 STATEMENT OF PROVISIONAL BALANCE SHEET

M/S HAPPILO INTERNATIONAL PRIVATE LIMITED

STATEMENT OF PROVISIONAL BALANCE SHEET FOR THE
PERIOD ENDED WITH 31ST MARCH 2019 ( FY 2018-19 )

Particulars (Amount in Rupees)

I. EQUITY AND LIABILITIES:

1 Shareholder's Funds:
(a) Share Capital 10,00,000.00
(b) Reserves and Surplus 52,50,209.64

2 Non-Current Liabilities:
(a) Long-Term Borrowings -

3 Current Liabilities:
(a) Short - Term Borrowings 38,42,156.00
(b) Trade Payables 2,90,03,601.50
(c) Other Current Liabilities 19,36,531.72
(d) Short-Term Provisions -

TOTAL 4,10,32,498.86

II. ASSETS:

1 Non-Current Assets
(a) Fixed Assets 17,68,954.90
82
 (i) Tangible Assets -
(ii) Intangible Assets -

(b) Long-Term Loans and Advances -

2 Current Assets
(a) Inventories 1,46,25,751.00
(b) Trade Receivables 2,24,34,869.09
(c) Cash and Cash Equivalents
14,86,923.87
(d) Other Current Assets 7,16,000.00

TOTAL 4,10,32,498.86

83