DECLARATION

I hereby declare that the summer internship report entitled “STUDY ON ACCOUNTS RECEVIABLE
MANAGEMENT AT VVD & SONS PVT LTD." submitted by me, for the award of the degree of
Master of Business Administration to Dr. M.G.R. EDUCATIONAL AND RESEARCH
INSTITUTE, Chennai a record of bonafide work carried out by me under the supervision of Prof.
G.Bhuvaneswari. I further declare that the work reported in this thesis has not been submitted and will
not be submitted, either in part or in full, for the award of any other degree or diploma in this institute or
any other institute or university.

Place: Chennai GOKULA KRISHNAN R

Date: 06/11/2023
ACKNOWLEDGMENTS
I would like to express my deep thanks to ‘Dr. M.G.R. EDUCATIONAL AND RESEARCH
INSTITUTE’ management for helping me in the successful completion of my Summer Internship.

I am thankful to our Summer Internship coordinator G.Bhuvaneswari, Professor, Department of

Management Studies, and Summer Internship supervisor.

I am gratitude to numerous people who have helped me in completing this project. I take this privilege to
express my sense of gratitude to my beloved parents who have helped and guided me throughout the
project.

I want to acknowledge the contributions of my colleagues and team members who provided assistance
and input during the research and writing process. Your collaboration was invaluable.

I would like to thank my classmates and friends for their cooperation and camaraderie, which made the
research experience more enjoyable and meaningful.

I would like to express my sincere gratitude to VVD & SONS PVT LTD for their invaluable support and
cooperation during the completion of my MBA project report. Your assistance was instrumental in
making this project a success.

I would also like to thank all the employees and staff of VVD & SONS PVT LTD who participated in
interviews, surveys, or provided data, making this project possible. Your contributions were essential in
conducting a thorough analysis.

GOKULA KRISHNAN R

TABLE OF CONTENTS
TITLE page No.
DECLARATION…………………………………………………………………………….

ACKNOWLEDGMENTS…………………………………………………………………...

TABLE OF CONTENTS………………………………………………………………….....

LIST OF FIGURES………………………………………………………………………….

1. CHAPTER I
1.1. Introduction……………………………………………………………………….....
1.2. Scope of the study…………………………………………………………………....
1.3. Objectives of the study………………………………………………………………..
1.4. Limitations of the study……………………………………………………………….

2. CHAPTER II
2.1. Introducing the company…………………………………………………………….
2.2. History of the company……………………………………………………………....
2.3. Hierarchy of the VVD & sons pvt ltd………………………………………………....
2.4. Activities of the company……………………………………………………………....

3. CHAPTER III
3.1. SAP (systems, applications & products in data processing)...............................................
3.2. Invoicing…………………………………………………………………………………
3.3. Collection process……………………………………………………………………….
3.4. Document required for accounts receivable…………………………………………….
3.5. Lifecycle of accounts receivable ………………………………………………………..
3.6. Accounts receivable process …………………………………………………………….
3.7. Why is the accounts receivable process important? .............................................................
3.8. Summary of findings……………………………………………………………………..
3.9. Suggestions……………………………………………………………………………….
3.10. Conclusions.........................................................................................................................

LIST OF FIGURES
S NO PARTICULARS PAG NO
1. HIERARCHY OF THE VVD & SONS PVT LTD

2. VVD GOLD

3. VVD LITE

4. VVD AYURVEDA

5 VVD HERBAL

6. VVD HIBISCUS

7. FINANCIAL REPORT – VVD & SONS PVT LTD

8. INVOICE

9. PURCHASE ORDER (PO)

10. SHIPPING DOCUMENT

11. LIFECYCLE OF ACCOUNTS RECEIVABLE

12. ACCOUNTS RECEIVABLE PROCESS

13. COLLECTIONS MANAGEMENT

 CHAPTER I
INTRODUCTION

1. INTRODUCTION
1.1. BACKGROUND OF THE STUDY
THE MAJOR OBJECTIVE OF THIS STUDY IS FOR THE PROPERUNDERSTANDING
OF THE ACCOUNTS RECEIVA BLE MANAGEMENT OF VVD & SONS PVT LTD, AND TO
 SUGGEST NECESSARY MEASURES TO OVERCOME THE SHORTFALLS IF ANY IN THE
COMPANY.

The Project undertaken is on Receivable Management of VVD & SONS Private Limited". It describes
about how the company manages its working capital and Receivables and the various steps that are
required in the management of Receivables Cash is the lifeline of a company. If this lifeline deteriorates,
so does the company's ability to fund operations, reinvest and meet capital requirements and payments.
Understanding a company's cash flow healthy is essential to making investment decisions. A good way
to judge a company's cash flow prospects is to look at its Working capital and it’s Receivables
Management.

A. Meaning of Account Receivables

Accounts receivable is an accounting transaction which deals with the billing of Customer who
owes money to a person, company or organization for goods and services that has been provided to the
customers. In most business entities this is typically done by generating an invoice and mailing or
electronically delivering it to the customer, who in turn must pay it within an established timeframe called
credit or payment terms.
B. Definition of Account Receivables
The term receivable management is defined as "debt owed to the firm by customer
Arising from the sale of goods/ services in the ordinary course of business. The receivable represents an
important component of the current assets of the firm. Receivables may be known as accounts
receivables, trade creditors or customer receivable. When a firm its products/services and does not receive
cash for it immediately, the firm has said to be granted trade credit to the customers. Trade Credit thus
creates receivable / book debts, which the firm is expected to collect in the near future. Accounts
receivable are thus amounts due from customers, which bear no interest in essence, a company is
providing no cost financing to the customer to encourage the purchase of the company's product/services.
Thus efficient management of working capital in an important prerequisite for successful working
of a business concern it reduces the chances of business failure generates a feeling of security and
confidence in the minds of personnel in the organization it assurance solvency of steady of the
organization.
1.2. SCOPE OF THE STUDY
The scope of accounts receivable in VVD & Sons Pvt Ltd, a manufacturing company, is primarily
focused on managing and tracking the money owed to the company by its customers. This
includes:
 1. Invoicing: Generating and sending invoices to customers for products or services provided.

2. Credit Management: Assessing the creditworthiness of customers to determine credit limits

and payment terms.

3. Collections: Following up with customers to ensure timely payment and resolving any
payment issues or disputes.

4. Reporting: Maintaining records and reports on accounts receivable, aging of outstanding

invoices, and forecasting cash flow.

5. Cash Flow Management: Optimizing cash flow by ensuring that payments are received on
time.

6. Risk Mitigation: Minimizing the risk of bad debts by monitoring and managing accounts
receivable efficiently.

7. Customer Relationship: Maintaining good customer relationships while ensuring timely

payments.

The scope of accounts receivable management is crucial for VVD & Sons Pvt Ltd to ensure a
steady cash flow and overall financial stability. It involves balancing the need for sales and
revenue generation with the importance of timely collection to meet the company's financial
obligations and growth objectives.

1.3.OBJECTIVES OF THE STUDY

The objectives of managing accounts receivable in VVD & Sons Pvt Ltd, a manufacturing
company, include:

1. Optimizing Cash Flow: Ensuring a steady inflow of funds by collecting outstanding

payments from customers promptly.
 2. Credit Risk Management: Evaluating the creditworthiness of customers to minimize the
risk of bad debts and set appropriate credit limits.

3. Efficient Invoicing: Issuing accurate and timely invoices to customers for products or
services delivered.

4. Reduction of Delinquency: Minimizing the number of overdue accounts through

proactive collections efforts.

5. Customer Relationships: Balancing the need to collect payments with maintaining

positive customer relationships.

6. *Minimizing Costs: Reducing the cost of financing outstanding receivables and the
expenses associated with collections.

7. Improving Working Capital: Enhancing the company's liquidity and working capital
position by managing accounts receivable effectively.

8. Reporting and Analysis: Providing insights through reporting and analysis of accounts
receivable data to support decision-making and financial planning.

9. Compliance: Ensuring compliance with accounting standards and legal requirements

related to accounts receivable management.

10. Supporting Growth: Using accounts receivable as a tool to support the company's
growth and expansion strategies.

These objectives collectively help VVD & Sons Pvt Ltd maintain financial stability, support
operational efficiency, and promote long-term sustainability in the manufacturing industry.

1.4.LIMITATIONS OF THE STUDY

The following are the various limitations involved in the study,

1. The study in limited 1 month performance of the company.

2. The data used in this study have been taken from published annual report only
3. This study is conducted within a short period. During the limited period the study may not
be retailed, fully fledged and utilization in all aspects.

4. Financial accounting does not take into account the price level changes.

5. We cannot do comparisons with other companies unless and until we have the data of
other companies on the same subject.

6. Only the printed data about the company will be available and not the back-end details

FreeCUS

Other Black

7. Current year financial figures & Future plans of the company will not be disclosed to us.

8. Lastly, due to shortage of time it is not possible to cover all the factors and details
regarding the subject of study.
 CHAPTER – II
COMPANY PROFILE
2. COMPANY PROFILE
2.1.INTRODUCING THE COMPANY

“VVD & SONS PVT LTD” is a leading manufacturing sector that has been at the forefront of
innovation and excellence since its inception. Established in 1943, we have consistently demonstrated our
commitment to delivering high-quality products and services to our valued customers.

The legacy of VVD dates back to 1943. An inspiration of Shri Nithyanadham, it was started by
Mr.V.V.Dhanushkodi. Ever since, it has grown substantially into a 200 crore company. The VVD groups
of companies are also renowned in the field of activated carbon, spices, windmills, shipping, finances,
warehousing and packaging. VVD Gold coconut oil was the first of its kind to be sold as package in India
and is still illustrious for its authentic purity.

Mission

“We commit to achieve a sales turnover of Rs. 250 crores by 2012 with a motivated sales force”. We
determine to be within the Top 3 brands in the product categories present and ensure placement of our
products in 2 lakh outlets by 2011-12. And we have achieved this by combining a dedicated team of
professionals with cutting-edge technology and a customer-centric approach. We take pride in our ability
to adapt to changing market dynamics and to stay ahead of industry trends.

Vision

“To become the preferred brand of consumers with a host of brand building activities and the launching
of a range of products”.

At present, VVD is ranked as the number one coconut oil in Tamil Nadu, and number two in India. We
thank you for your trust in us and we are proud to have nourished, strengthened and perfected your hair.
Being natural and credible, VVD products have been enjoyed and appreciated by millions of women not
only in India but also internationally. And it’s the perpetuity of exceptional quality that VVD offers that
gives generations the heritage of promising hair care.

Over the years, [Company Name] has established itself as a trusted name in the [industry] sector. Our
relentless pursuit of excellence, unwavering commitment to sustainability, and a strong focus on social
responsibility have set us apart from our competitors.

We hold ourselves responsible for higher standards than what consumers expect of us. We have always
given you the best because beautiful women need wonderful care simply because they deserve it.
To persistently produce the pure quality of oil we have been delighting our consumers with. Purity is so
hard to come by these days. We at VVD relish the purity we have given for years and will continue to so
always because that’s what makes us who we are.

To give each hair type what its needs. Each person is unique and each one has a distinct style. VVD offers
the regular VVD Gold, VVD lite, herbal, hibiscus and jasmine… made just for you, the way you like it.

Hair styles and hair trends have changed but the care it needs has not. VVD oils provide the nourishment
that our homes have given… pure, true and perpetual. We are proud to have nourished, strengthened and
perfected your hair.

In this project report, we aim to provide a comprehensive overview of our company, its operations,
achievements, and the specific project [or topic] at hand. We believe this report will offer valuable
insights into our organization and the initiative we have undertaken.

Thank you for taking the time to explore our company through this project report. We are excited to share
our journey and accomplishments with you.

2.2.HISTORY OF THE COMPANY

The legacy of VVD dates back to 1943. An inspiration of Shri Nithyanadham, it was started by
Mr.V.V.Dhanushkodi. Ever since, it has grown substantially into a 200 crore company. The VVD groups
of companies are also renowned in the field of activated carbon, spices, windmills, shipping, finances,
warehousing and packaging. VVD Gold coconut oil was the first of its kind to be sold as package in India
and is still illustrious for its authentic purity.

The VVD Group is a 100 crore company established in 1942. Started by Mr. V.V. Danushkodi in
Tuticorin, Tamil Nadu, the Group owns its salient brand presence to the inspired vision of Shri
Nithyanandham. Besides meeting consumer demand in the Indian market, VVD products meet the
demands of international consumers across markets in the Middle East, Malaysia and Singapore.

Awards / Recognition
Awards

 Outstanding employees all over India are rewarded with the Best Performance Award
 Service Award/Certificate are issued to employees serving for 3 years and more

Recognition

 As a culture in VVD, people are recognized for the efforts which goes beyond their KRA –
abilities immaterial of the results achieved
 Performance is the only recognition for promotion or holding key positions and not age or
experience which takes a secondary seat
 People with positive attitude are recognized with additional responsibilities which gives them a
chance to learn new areas or territories which they have never been exposed to in the past.

2.3.HIERARCHY OF THE VVD & SONS PVT LTD

 Manufaturin

Sales Sales manager

Marketing

Logistics
Accounts Payable
Chairman

(AP)
Finance
Accounts Recievable
President &CEO
Supply Chain (AR)
Management (SCM)

Human Resource
HR

Information
Technology (IT)

Tellicalling

Admin

2.4.ACTIVITIES OF THE COMPANY

a) Introduction
The legacy of VVD dates back to 1943. An inspiration of Sri Nithyanadham, it was started by
Mr.V.V.Dhanushkodi. Ever since, it has grown substantially into a 200 crore company. The VVD
groups of companies are also renowned in the field of activated carbon, spices, windmills,
shipping, finances, warehousing and packaging. VVD Gold coconut oil was the first of its kind to
be sold as package in India and is still illustrious for its authentic purity.
b) Company overview
a) Mission

“We commit to achieve a sales turnover of Rs. 250 crores by 2012 with a motivated sales force”.
We determine to be within the Top 3 brands in the product categories present and ensure
placement of our products in 2 lakh outlets by 2011-12. And we have achieved this by combining
a dedicated team of professionals with cutting-edge technology and a customer-centric approach.
We take pride in our ability to adapt to changing market dynamics and to stay ahead of industry
trends.

b) Vision
“To become the preferred brand of consumers with a host of brand building activities and the
launching of a range of products”.
c) Product and services
a) VVD GOLD

When it comes to hair care there is no substitute for coconut oil. VVD Gold Pure Coconut oil
brings you the goodness of nature in the most pure form. Made from sun dried matured copra’s,
grown in the best coconut groves, it is viscous, pure, unadulterated and completely natural. It
provides all the essential care for your hair.
b) VVD LITE

Get the goodness of the pure coconut oil in the form you would love. VVD Lite pure coconut oil
is non sticky, non greasy, less viscous and absolutely mild, making it an ideal hair oil for today’s
active lifestyle. It provides the benefits of the coconut oil without interfering your trendy routine
hair dos.

c) VVD AYURVEDA

The natural benefits, enrichment and traditional Ayurvedic properties of Bhringaraja, Bakuchi,
Aloe vera, Lemon and few other ingredients are added together with purest coconut oil to give
you the best coconut oil based hair care remedy. Control hair fall and prevent dandruff with VVD
Ayurveda Coconut Oil.
d) VVD Herbal

The natural goodness and nourishing properties of Hibiscus, Neem, Amla, Tulsi and several other
herbs blended together with the purest coconut oil to give you the best coconut oil based hair
care. Get thick, healthy and nourished hair with VVD Herbal Coconut Oil.

e) VVD Hibiscus

Hibiscus is known to have great healing traits and it is widely valued for its extraordinary benefits
to hair. The flower contains vitamins and anti-oxidants that improve scalp, hair health, increases
hair growth and prevents premature greying, by going deep into the root of your hair and
moisturizing them. Get natural dark black and beautiful hair with VVD Gold Hibiscus Enriched
Coconut Oil.
d)Production process
a) Ingredient Sourcing
- Procure high-quality natural ingredients, such as various oils (coconut, almond, olive, etc.),
herbs, and fragrances.

b) Raw Material Inspection

- Check incoming ingredients for quality and purity.
- Reject any substandard materials.

c) Blending
- Mix the different oils and herbal extracts in the required proportions in large mixing vessels.
- Maintain precise temperature and stirring conditions.

d) Heating and Infusion

- Heat the blended oils to allow the infusion of herbal properties.
- Monitor and control temperature to avoid overheating.

e) Filtration
- Pass the infused mixture through fine filters to remove any solid particles or impurities.

f) Fragrance Addition
- Add specific fragrances or essential oils to enhance the aroma and user experience.

g) Quality Control
- Conduct quality tests, such as viscosity, pH level, and aroma, to ensure the product meets
standards.

h) Packaging
- Transfer the final hair oil blend into appropriate containers, such as bottles or jars.
- Label each container with product information and branding.

i) Batch Coding
- Assign a unique batch code to each batch for traceability.
 j) Sealing and Labelling
- Seal the containers to prevent leakage.
- Label the packaging with product details and instructions.

k) Storage
- Store the packaged products in a controlled environment to maintain their quality.

l) Quality Assurance
- Periodically sample and test products from different batches to ensure consistency and
quality.

m) Distribution
- Prepare the products for distribution to retailers or customers.

n) Regulatory Compliance

- Ensure compliance with all relevant regulations and quality standards.

o) Safety Measures
- Implement safety measures in the production facility, including handling ingredients and
machinery safely.

p) Record Keeping
- Maintain detailed records of each batch's production and quality control processes.
e) Human resource
a) Alignment and integration of organization plan with the human resource requirements.
The top-level management must ensure that the HR activities and requirements are
considered while preparing the organization plan to achieve the organization’s overall
objective. The integration of the plan with human resource requirements is essential because
the execution of plans in their intended manner depends on the effectiveness and efficiency of
the human resource.
b) Planning of human resource
 Human resource is a vital factor of an organization that needs planning for its procurement
and deployment. The dynamic business environment where the technology is bringing new
changes in the organisation’s way of working has made it necessary to plan HR activities
properly. The HR management must anticipate the kind of human resource needed by the
organization and accordingly plan for the procurement criteria, salary, training and
development, appraisal, performance bonus, promotion and other benefits to applying to its
human resource.
c) Recruitment of human resource
The organisation’s employees must be carefully recruited as their performance is directly
linked with the organisation’s success. The HR activities include conducting a recruitment
process for selecting the most eligible candidate who can add value to the organization. The
human resource management activities include a personal interview, aptitude test and other
methods to evaluate the knowledge, learning ability, leadership qualities, teamwork spirit and
other parameters.

d) Regular evaluation and monitoring of performance

Another core human resource management activity is to keep a check on the performance of
the employees continuously. The HR management shall perform activities to monitor and
compare the employees’ performance and the target performance and take corrective actions
to fill the gap. The flow of communication and information among the management and
employees shall be free to achieve better and timely results.
e) Taking steps to keep the employees motivated
Human resource management activities shall also focus on maintaining and increasing the
motivation level of the employees. The employees shall be timely, rewarded for achieving
targets within the predetermined deadlines. Monetary benefits such as bonuses, incentives,
promotion, and non-monetary benefits like the best performance award, recognition, and
creative innovation can keep the employees motivated to give their best for the organization.
f) Training and development

The continuous updating of the knowledge and skills of the organisation’s human resource is
an important factor for its success in the long run. The development of human resource is an
important activity performed by human resource management. Regular training of employees
enables them to actively update themselves with the changing needs of the business
environment.
 g) Rewards and compensation
Employees shall be adequately rewarded for their efforts through justified salary, bonus,
incentives and other monetary benefits. Non-monetary benefits like the best performance
award, recognition to creative innovation, trophies can keep the employees motivated to give
their best for the organization. This human resource activity is crucial as if the employees are
not happy with the compensation and benefits that they receive for their work, and then it can
adversely affect their performance.

h) Ensuring safety and well-being of the employees

The human resource management shall perform all activities which are necessary for
ensuring the safety and well-being of its human resources. It is the organisation’s
responsibility to provide a healthy and safe work environment, proper safety measures for
work that require exposure to hazardous situations and adequate health care facilities for the
employees and their families.

i) Involving the employees in the decision-making process

The management shall keep the employees well informed about the organization’s
functioning so that they can effectively participate in the decision- making process. The
support of the employees’ union can help in encouraging the participation of skilful
employees in decision making.
j) Providing job security and growth opportunity to the employees
Human resource management is necessary for the organisation’s growth, but it should also
contribute to the professional development and growth of the individual employees.
f) Financial performance

VVD AND SONS PRIVATE LIMITED is a 24.7 Years old company, incorporated on 17
Mar 1999. It is classified as Private Unlisted Indian Non-Government Company. Its authorized share
capital is ₹7,00,00,000.00 ( ₹7.00 Cr ) and its paid up capital is ₹5,61,39,540.00 ( ₹5.61 Cr ). As per
MCA the main line of business is Manufacture Of Food Products And Beverages.

VVD AND SONS PRIVATE LIMITED's Annual General Meeting (AGM) was last held on 21 Sep
2022 and as per records from Ministry of Corporate Affairs (MCA), its balance sheet was last filed on
31 Mar 2022.
 VVD AND SONS PRIVATE LIMITED's unique Corporate Identification Number (CIN) is
U15141TN1999PTC042072 and its registration number is 42072. It is registered at RoC-Chennai.

The company is registered with email address accountsttn@vvd.in.

The company is incorporated with the address 182; PALAYAMKOTTAI ROADTUTICORIN

628 003; TUTICORIN 628 003; TUTICORIN 628 003; Tamil Nadu; 628003; India.

Operating revenue INR 100 – 500 cr

EDITADA 12.27%
Net worth 6.87%
Debt /equity ratio 0.05
Return on equity 7.85%
Total assets 4.84%
Fixed assets -7.91%
Current assets -1.32%
Current liabilities -4.77%
Trade receivable 0.65%
Trade payable -40.98%
Current ratio 3.78
Financial report – VVD & SONS PVT LTD

Here is a summary of financial information of VVD AND SONS PRIVATE LIMITED for the
financial year ending on 31 March, 2022.

 Revenue / turnover of VVD AND SONS PRIVATE LIMITED is INR 100 cr - 500 cr
 Net worth of the company has increased by 6.87 %
 EBITDA of the company has increased by 12.27 %
 Total assets of the company has increased by 4.84 %
 Liabilities of the company has decreased by -4.77 %
 CHAPTER III

REPORT

3. REPORT
 3.1.SAP BUSINESS ONE SOFTWARE FOR PROCESS THE PAYMENT

SAP Business One is a single and affordable business management system to manage your
entire business from accounting, financials, inventory, sales, warehousing, customer relationships to
reporting and analytics. As an Enterprise Planning Resource (ERP) system, SAP Business One can
streamline key processes to give you better insights into your business and enable you to make data-
driven business decisions with real-time information to drive profitable growth. Used by over 65,000
customers worldwide in 170 countries, SAP Business One is available in 50 localized versions and in 28
languages. With 20-years of solid history, SAP Business One is the preferred business management
solution for businesses worldwide. For small businesses and start-ups, SAP Business One Starter Package
is a very affordable option with 1 to 5 users. It is a simple solution with the capabilities to manage your
small business, including accounting and banking, sales and customers, stock control, analytics, and
reporting. SAP Business One Starter Package is flexible prices to suit smaller budgets. This is to help
lower the cost of ownership and gives you a faster return on investment (ROI). SAP Business One is
meant to grow with you, and thus a smaller investment will help put you on the right footing for bigger
success ahead. SAP B1 was originally developed by TopManage Financial Systems, a company based in
Israel, and was acquired and rebranded by SAP in 2002. More functionality has been added to SAP B1
from acquisitions made by SAP. A reporting and budgeting function called XL Reporter was acquired
from the analytics Systems AS, based in Norway, in 2005. SAP acquired Praxis Software Solutions,
based in Minneapolis, in 2006 and integrated its Web based CRM and e- commerce functions into SAP
B1. SAP B1 was built on and runs on Microsoft SQL server and now also runs on the SAP HANA in-
memory platform. It can be deployed on-premises and in the cloud and it can be accessed remotely via a
mobile app. SAP sells B1 primarily through a partner network, with about 700 value-added resellers in
the network as of 2018. The partner network has also developed more than 500 industry-specific
applications, according to SAP. The vendor claims to have more than 60,000 customers in 2018.

3.2.INVOICING
The purpose of presenting an invoice (also called billing) to a customer is to secure payment for having
provided a product or service (or as a deposit on the future provision of a product or service). The
invoicing function in many companies is highly automated, requires little manual intervention, and is
often overlooked. However, invoicing accuracy is the single most important determinant of effective and
efficient receivables management.

Accurate invoicing has been the central theme in our discussions of the quotation, contract administration,
pricing, and order processing functions. Accuracy in billing cannot be achieved unless the aforementioned
functions are performed properly.

Accurate invoicing directly drives:

 Lower receivables delinquency and increased cash flow

 Reduced exposure to bad debt loss
 Lower cost of administering the entire revenue cycle
 Fewer concessions of disputed items
 Enhanced customer service and satisfaction

In fact, many customers, in rating their vendors, measure invoice accuracy. The reason is that inaccurate
invoices raise their internal cost of paying bills and, therefore, are part of the total cost of buying from a
vendor.

The two key objectives of invoicing are accuracy and speed. Accuracy is defined as meeting the
customer's requirements for timely payment of an invoice. Companies often complain how difficult it is
to conduct business with government agencies or with large, bureaucratic companies, citing slow
payments.

3.3.COLLECTION PROCESS
Overview

The collection process executes the portfolio strategy for each segment. To achieve best results. the
collection process should vary by segment. Examples of how the process can be varied were presented in
the preceding section.

Best Practices

While elements of the collection process should be tailored to each portfolio segment, there are tools and
techniques that are common to all or most segments.

Collection Timeline

The starting point for the collection process of each segment is the collection timeline, also known as an
escalation protocol. The collection timeline defines which steps are taken at which points in time and by
whom in both:

 The normal collection process

 The increasing severe actions that will be taken with a customer who is seriously past due It is
important that this timeline is agreed to by all of senior management, so that when it is time to
invoke its more severe remedies, sales, general management, and finance present a united front to
the customer.

Customer Contract Timing

The timing of customer contact is an integral part of the collection process. The general rule of thumb for
collection contact is: More (contact) is better than less, and earlier (contact) is better than later. Promoting
enforcement of payments terms is a Best Practice that improves results and educates customers of your
experience. A good basic posture is to expect every penny to be paid by the due date. In reality, that will
not occur, but it is a good way to approach the management of the receivable asset.

Customer Contract Methods

The most effective method of customer contact is made via telephone, which can elicit a timely or, it is
hoped, immediate response. Once you have the proper person on the phone, you are well positioned to
secure a commitment to pay or determine the reason for nonpayment. In our experience, e-mail is a very
effective method of communicating with accounts payable departments. Many people respond more
promptly to e-mails than voice mails, and the e-mail message is much better at conveying invoice
numbers, amounts due, and so on.
Collection letters have limited effectiveness. They are best used with low-priority, small- balance
accounts that probably will not receive a call or personalized e-mail. For such accounts, a collection letter
is better than no contact at all. A small percentage of letters do elicit a payment or report of a dispute.
Collection letters also help when escalating action with a delinquent customer. Strong action is
appropriate when it follows repeated collection contacts that were ignored. It is easier to justify holding
orders when you can cite prior collection letters and calls to the customer. In the final analysis, the
justification of collection letters is that they are better than nothing. With praise like this, who needs
criticism? Since collection letters are of low value, they must be automated to ensure that the time and
cost expended on them is minimal. An experienced, very successful director of customer financial
services at a $2 billion test equipment manufacturer says that he has never seen truly automated collection
letters. They always involve some manual processing.

Customer visits have two objectives:

 To introduce or reinforce a business relationship between a collector and the customer's accounts
payable person
 To discuss the status of the customer's account and clearance of open items

Two tools can be used for this purpose:

 A reconciliation pack of the customer's account.

 An end-of-month account statement.

In all cases, the document must be sent well in advance so the customer can prepare a response. In
addition, you must be make it clear to the customer that you expect the research to be completed before
the meeting, so the meeting will focus on resolution and clearing of the open item.

Customer visits should be conducted by the collector, accompanied by the sales representative An
invitation should be extended to the collection manager as well.

Preparation for the visit should include thorough review of these materials:

The reconciliation pack or statement sent to the customer along with all supporting documentation. Items
that have cleared should be identified the day before the meeting to save time during the meeting

 An up-to-date statement of account.

  A perspective of the customer's prevailing payment habits (quantified if possible).
 A list of key people in the accounts payable department with their phone numbers,
 Authorization of bargaining power to concede items when necessary

The meeting itself should focus on agreeing how to clear open transactions on the customer's account,
whether via payment or adjustment. After the meeting, the collector should send an e- mail or letter
thanking the customer for his or her time and summarizing the actions agreed to by both parties. Then the
actions should be initiated as soon as possible to reinforce credibility with the customer.

3.4.DOCUMENT REQUIRED FOR ACCOUNTS RECEIVABLE

 INVOICE
 PURCHASE ORDERS (PO) CUSTOMER ACKNOELEDGMENTS
 SHIPPING DOCUMENT

INVOICE
 An invoice is an itemized commercial document that records the products
or services delivered to the customer, the total amount due, and the preferred
payment method.

PURCHASE ORDER (PO)

 A purchase order is a legal document form used by a buyer and sent to a
supplier for an order. A purchase order specifies items, quantities, prices, and
credit terms for a purchase from the vendor. A PO becomes a legally binding
contract when a vendor accepts the purchase order.

SHIPPING DOCUMENT
In shipping, shipping documents are documents that provide information about the
goods being shipped. They may include information such as the origin and
destination of the items being shipped, their weight and dimensions, and other
details that might be useful to those who handle them in transit

3.5. LIFECYCLE OF ACCOUNTS RECEIVABLE

 The accounts receivable (AR) process is a structured sequence of actions that a company
undertakes to invoice clients, monitor payments, and secure the collection of funds owed for goods or
services provided. This process is not a standalone activity; rather, serves as a vital link between sales and
revenue, ensuring that business transactions are not merely initiated but also successfully concluded
through timely payments. This conversion from sales to actual revenue is what keeps the business
financially healthy and capable of growth.

Faster Invoicing
Automation allows for the instant generation and dispatch of invoices as soon as an order is confirmed via
their preferred method—be it email, EDI, or even traditional mail. This not only speeds up the invoicing
process but also sets the stage for quicker payments.

Automated Collections

Gone are the days of manual follow-ups for overdue payments. Automation enables you to automate the
entire collections management workflow, from segmenting customers and prioritizing accounts to auto-
sending correspondences based on the payment terms, significantly reducing the time and effort involved
in collections.

Real-Time Payment Processing

Automated payment gateways facilitate real-time payment processing, which means you get to update
your records instantly and improve cash flow. It supports multiple payment methods, including ACH,
wire transfers, and credit cards, providing both you and your customers with flexibility.

Accurate Record-Keeping

Automation ensures that all transactions are recorded accurately and in real-time. This is particularly
beneficial for cash reconciliation, wherein it automatically matches payments to open invoices, even
when remittance information is missing or incomplete. This ensures that your records are always accurate
and up-to-date.

Advanced Reporting and Analytics

Automation provides advanced reporting features, including real-time analytics. With predictive
analytics, you can forecast cash flows, analyze customer payment behavior, and even predict potential
bad debt, enabling data-driven decision-making.

Better Customer Experience

Automation enhances the customer experience by offering self-service options and instant pre-built
responses. Customers can view invoice statuses, make payments, and raise disputes or queries, all through
automated customer portals.

Cost Savings
By reducing manual labor and errors, automation can result in significant cost savings. The initial
investment in an automated system is often quickly offset by the long-term benefits.

Enhanced Scalability

As your business grows, automation allows your accounts receivable process to scale seamlessly. You
can handle a larger volume of transactions without a proportional increase in manpower or resources.

3.6.ACCOUNTS RECEIVABLE PROCESS

Below, we break down the process into 8 comprehensive steps, providing you with a roadmap for
effective AR process management..

Step 1: Customer Order Placement

When a customer decides to make a purchase, they’ll typically send a purchase order. Upon approval, a
sales order is generated, which serves as a binding agreement detailing the goods or services, their
quantity, price, and other terms of the sale. Before proceeding, it’s crucial to assess the customer’s
creditworthiness.

Step 2: Credit Approval

Before you even send out an invoice, it’s crucial to assess the creditworthiness of your customers. This is
especially important if transactions involve significant sums and extended payment terms.A thorough
credit application process is essential to assess the credit risk associated with each customer. Based on
your company’s credit policy, you may approve or deny credit, or suggest alternative payment methods.
Also, this process may vary depending on whether it’s a new or existing customer.

I. New Customers:
Implement a credit application process that aligns with your company’s documented credit policy. This
process may take a few days and should assess the customer’s financial stability and payment history.
Related Read: How to Assess the Creditworthiness of a New Customer: Step-by-step Guide

II. Existing Customers:

Periodically review the credit terms for existing customers, especially if their order volume increases or
their payment behavior changes. This ensures that you’re not exposing your business to unnecessary risk.

Step 3: Invoice Dispatch

An invoice serves as the definitive record of a customer’s purchase, outlining how much is owed and the
payment due date. The quicker you can send out the invoice, the sooner your payment terms begin, so it’s
beneficial to automate this step as much as possible.

Step 4: Collections Management

Late payments are an unfortunate reality. A structured collections process helps in following up with
customers who have overdue invoices. The frequency and nature of these follow-ups can vary based on
the customer’s payment history and the amount due.

Below are some time frames commonly used by companies for carrying out their collections outreach:

Step 5A: Writing Off Uncollectible Debts

When you’ve exhausted your outreach efforts (including passing off the debts to a collection agency or
legal counsel) and determine the payment is uncollectible, you’ll write off the receivable as bad debt.

The timing for this can vary by industry and should be in line with your company’s financial policies. For
some industries, like transportation services, for example, an average days sales outstanding (DSO) of
above 50 days is normal. If late payments are common in your line of work, it makes sense to wait before
writing off an invoice as bad debt.
Step 5B: Payment Processing

Business buyers pay their invoices in several ways, including:

 ACH or EFT
 Wire transfer
 Debit, credit, or virtual card
 Checks

Efficiently processing these payments is essential for accurate financial records

Businesses that want to accept payments online will need a payment processor, payment gateway, and at
least one merchant account, not to mention a platform to support e-commerce or self-service customer
payments. Some payment service providers will wrap all of this up into one offering.

Most B2B businesses still accept a significant volume of paper checks, with a recent survey by AFP
pointing to 92% of organizations continuing to use checks for incoming payments. To support this,
businesses will often resort to managing multiple lockboxes (where a bank receives and processes checks
for you).

Note that although lockbox services eliminate the need for you to receive checks at your office, they don’t
take away the effort involved in processing them. Going through lockbox files to apply payments to
invoices still takes work.

Step 6: Cash Application

Once a payment is received, it needs to be posted to the corresponding invoice(s). However, this process
can sometimes be challenging due to factors such as missing remittance advice or discrepancies between
the provided payment information and open invoices.

Step 7: Dispute Resolution

Invoice disputes can delay payments significantly. If a customer raises an issue, it’s crucial to initiate the
dispute resolution process promptly to prevent further delays and maintain good customer relations.

Customers will often pay the portion of their invoice that’s not in dispute (a short payment), which adds
another layer of complexity for your AR team. They’ll have to confirm why the short payment happened,
whether it was for a valid reason, and how to apply the payment in your accounting system.

Step 8: Reporting and Analytics

During the month-end close process, your finance team will check that they’ve recorded all transactions
and put the closing balance of all general ledger accounts into a report (a trial balance). This allows you to
put together financial statements for that period to report to the rest of the company.

Regular reporting on the status of your accounts receivable is crucial for financial planning and for
assessing the effectiveness of your AR process. Metrics like Days Sales Outstanding (DSO) and
Collections Effectiveness Index can provide valuable insights.
 3.7.WHY IS THE ACCOUNTS RECEIVABLE PROCESS
IMPORTANT?
The accounts receivable (AR) process is far more than just a set of administrative tasks; it’s a critical
component of your company’s financial health. While the core activities may seem straightforward—

 Sending out invoices

 Managing collections
 Processing payments
 Posting them to your Enterprise Resource Planning (ERP) system

Each of these tasks can be highly intricate, especially if your AR team is navigating manual
workflows.

It’s not merely about keeping tabs on individual transactions; in the broader context, the AR process is
about cultivating ongoing relationships and securing a consistent cash flow.

3.8.SUMMARY OF FINDINGS

Here is a summary of financial information of VVD AND SONS PRIVATE LIMITED for the
financial year ending on 31 March, 2022.

 Revenue / turnover of VVD AND SONS PRIVATE LIMITED is INR 100 cr - 500 cr.
 Net worth of the company has increased by 6.87 % in the following year.
 EBITDA of the company has increased by 12.27 % in the following year.
 Total assets of the company have increased by 4.84 % in the following year.
 Liabilities of the company has decreased by -4.77 % in the following year.
 Debt /equity ratio of the company has increased by 0.05 in the following year.
 Return on equity of the company has increased by 7.85% in the following year.
 Trade receivable of the company has increased by 0.65% in the following year.
 Trade payable of the company has decreased by -40.98% in the following year.

3.9.SUGGESTIONS
 Firstly the company should set up some restrictive credit standards, credit terms and
 Credit policy regarding the credit to its any type of customer.
 The management has to take initiative to collect the funds from the debtors without any
Interference.
 The company has to first analyses the credit worthiness of its customers before giving
credit facilities.
 After providing the credit facilities to its customers, the company has to take corrective
measures in realizing its debt, so the company profitability can be better improved.
 The company has to maintain the ideal cash ratio i.e. 1.5:1
 Companies have to undertake an green coins control system in an effort to be capable of
put money into profitable companies.
 The company has to achieve the operational efficiency by increasing the sales of the
company.
 The company has to identify the incremental return which a firm may gain by changing
Its credit policy and should be compared with the cost of funds invested in receivables.
 The company can be more effective in utilization of available resources.
 The company can also appoint an committee in which to have a clear idea about the
Receivables management and take suggestions accordingly and to be incorporated in the
Company.

3.10. CONCLUSIONS
 Accounting is one of the vital functions of today’s business world. Accounting, analysis and
interpretation done through scientific way can enlighten the present uncertain business environment.
Account receivables analysis is one of the most widely used to control the debt blockings. It is also
helpful in controlling of bad debts.
Accounts receivable is one of the devices which can be used to control the funds management and also
to assign certain responsibilities to the management to control the funds that are misused and blocking of
funds.
The company is also advised to tighten its credit periods, so that the company’s credit policy can be
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