Varun Piplani

8/13/2019 Varun Piplani

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A Report on

ANALYSIS OF

FACTORING SERVICES

&

CREDIT CONTROL

FOR

BHARTI TELETECH LTD

Submitted By Submitted To

Sumit G!r" #r$ S!n%ee Se'"!(

I#S)De'r!dun Gener!( #!n!"er) Fin!n*e & A**

Ro(( No$) #B+,+-- B'!rti Te(ete*' Ltd


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CERTIFICATE

I have the pleasure in certifying that MsSUMIT.. is a bonafide student of

IIIrd.. semester of Institute of management studies, Dehradun University Roll

no

She has completed her proect !or" entitled#actoring services and credit control in

$harti Teletech %td. under my supervision.

I certify that this is her original effort. It has not been copied from any other source. This

proect has not been submitted in any other university for the purpose of a!ard of any

degree.

This proect fulfills the re&uirement of the curriculum prescribed by UT T'().

University, for the said course. I recommend this proect !or" for evaluation and

consideration for the a!ard of degree to the student.

Signature

*ame of the guide

Date


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AC.NO/LEDGE#ENT

Indebted too many people !ho helped throughout the proect !or" and in the preparation

of this report. #irst of all I !ould li"e to offer my sincere gratitude to Mr. Saneev

Sehgal, proect director and +eneral Manager -ccounts finance manager of

$)-RTI T'%'T'() %IMIT'D, and IMS for giving me the opportunity to underta"e

this proect.

I !ould also !ish to special than" my proect guide Mr. -marender /ena, proect guide

and (redit (ontrol manager of $)-RTI T'%'T'() %IMIT'D for his valuable

guidance during the course of the proect.

I o!e special debt to #ello! professionals at $''T'% for having shared the "no!ledge

for providing me the consent support and valuable suggestions through the proect.

My than"s are also to Mr. 0radeep Suri !ho has helped in organi1ing this proect.

I am also than"ful to all my friends for providing me the much needed the moral support

during the course of this proect.

IMS Dehradun 2Sumit +arg3

M$-4III Sem


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0REFACE

The present study !as underta"en as a part of the organi1ational training 253 (omponent

of the 0+DM$- course of masters in business studies in financial management.

The obect of this training !as to develop information search s"ills into students. This

enables them to gather information on a given subect in a systematic and consciously

planned manner.

The study !as done as the proect for $''T'% %td, *e! Delhi. $eetel is engaged in

production of range of basic and cordless phones and is also *ational distributor of

Motorola handsets in India.

The study !as carried out during the months of /une4/uly678. Its obective !as to study

the concept of #actoring in detail in conte9t of distribution of Motorola handsets by

$''T'% in India and suggests about the study.


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CONTENTS

Certi1i*!te

A*2no3(ed"ement

0re1!*e

5. '9ecutive summary

:. Introduction;. . (oncept of #actoring

4 $)-RTI

4 $''T'%

?. #actoring benefits

8. @or"ing of #actoring

A. #actoring strategies

B. Methodology

57. $eetel and TD

55. $eetel and UTI $an"

5:. $eetel and *'@ I*DI- I*SUR-*(' +roup

5;. @or"ing and (redit (ontrol in $eetel

5=. Recommendations and suggestions

5>. (onclusion


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E4EC5TIVE

S5##ARY


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E4EC5TIVE S5##ARY

Management of !or"ing capital is a matter of balance. - company must have sufficient

cash on hand to meet its immediate needs !hile ensuring that idle cash is invested to the

organi1ation6s best possible advantage. The most important component of the !or"ing

capital is debtors because the entire operating cycle depends upon the turnover period of

the debtors and here the #actoring concept has !itnesses a heralding revolution during

the recent years. #actoring is proving a po!erful tool in the hands of management for

having 577C control over the debtors of the company.

In the analysis done for $''T'%, a $harti +roup (ompany, it !as found that the debtors

has increased due to drastic increase in sales because of the distribution business of

M


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Ob%e*tie6

O1

T'e Study


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OB7ECTIVES OF THE ST5DY

$efore entering the $eetel, #actoring !as an un"no!n concept to me, so it being the vast

topic is !as really difficult to plan out the obectives. $ut ho!soever the obectives

!hich !ere planned after entering the $eetel and understanding the concept of #actoring

are

Understanding the concept of #actoring

Understanding the strategies related to #actoring

(lient dealingETD dealing

)o! to ma"e factors

(onsiderations !hile ta"ing Insurance cover

Managing credit !ith factoring


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Comp!ny 0ro1i(e

)

BHARTI


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BHARTI ENTER0RISE

B'!rti Enterpri6e6has successfully focused its strategy on telecom !hile straddling

diverse fields of business. #rom the creation of F-irtelF, one of IndiaFs finest brands, to

becoming the largest manufacturer and e9porter of !orld class telecom terminals under

its F$eetelF brand, $harti has created a significant position for itself in the global

telecommunications sector. $harti -irtel %imited is today ac"no!ledged as one of IndiaFs

finest companies, and its flagship brand F-irtelF, has over =7 million customers across thelength and breadth of India.

@hile a oint venture !ith Teletech Inc., US- mar"ed $harti6s successful foray into the

(ustomer Management Services business, $harti 'nterprises6 dynamic diversification

has continued !ith the company venturing into telecom soft!are development. Recently,

$harti has successfully launched an international venture !ith '% Rothschild +roup

o!ned '%R< )oldings India %td., to e9port fresh -gri products e9clusively to mar"ets

in 'urope and US-. $harti also has a oint venture 4 G$harti -H- %ife Insurance

(ompany %td.6 4 !ith -H-, !orld leader in financial protection and !ealth management.

$harti has recently forayed into retail business under a company called $harti Retail 0vt.

%td. It also has a MoU !ith @al4Mart for the cash carries business.


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Hi"'(i"'t6

$harti 'nterprises announces ne! -pe9 level Strategic .?C direct interest of odafone in

$harti -irtel %imited for USJ5.? billion

Sunil $. Mittal chosen for this year6s 0adma $hushan -!ards.

$harti -irtel receives %etter of


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Group Stru*ture


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STR5CT5RE OF THE CO#0ANY


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Comp!ny pro1i(e

)

BEETEL


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BHARTI TELETECH


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today is the largest manufacturer of phones in the +lobe outside (hina. $harti Teletech

commands a lionFs share of over B7C. In the e9tremely competitive $S*%E MT*%

segment.

$harti became the first company to e9port phones to Sprint Inc. US- 4 recognition of our

!orld class &uality. Today, $TT% is present in ;7 countries across > continents

'9ports are a huge thrust area for $harti. In 5BB5, $harti became the first company to

e9port phones to Sprint Inc. US- recognition of our !orld class &uality. The e9port

operations have been highly successful over the years. In :77;47=, e9ports crossed the

half million mar" 4 a &uantum ump since !e started. Today, !e are present in ;7

countries across > continents despite intense competition from the strongest brands in the

!orld. $rand building initiatives have also ta"en fruit in the global arena. The $eetel

brand is present in ietnam, Iran, (hile,


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$eetel has a range of over ;> models across basic, feature and cordless segments

and continues to add a ne! model every month. @ith a current mar"et share of

over =7C, $eetel is the first choice of the Indian consumer. In the gro!ing

private service provider segment, $harti Teletech commands a lion6s share of

over B7C. In the e9tremely competitive $S*%E MT*% segment, !e have crossed

a mar"et share of >7C. $TT% has successfully met the challenge of providing

&uality products at competitive prices.

#ollo!ing are the ne! products recently introduced in the open mar"et 4

DB -8++4 (aller Id !ith Spea"er

CB ,++++4:.= +)1 (ordless 0hones

CB ,9+++ 4:.= +)1 (ordless 0hones !ith base

dialing


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CB :-+++4:.= +)1 (ordless 0hones !ith color

Screen

CB ;-+++ 4 %o! 0riced :.= +)1 (ordless

0hones

DF


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-fter years of careful and focused brand4building, $eetel is recogni1ed as a

trusted brand in India and is poised to ta"e on global players in the most

competitive international mar"ets.


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CO#0ANY=S VISION=S AND VAL5ES

VISION

To be a leader in Telecom and allied products

in chosen global mar"et.

VAL5ES

(ustomer

@e !ill be responsive to the needs of our

customer

0eople


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@e !ill trust and respect our employees

%earning

@e !ill continuously improve our products and

services4innovatively and e9peditiously

(ommunity 0artners

@e !ill be transparent and sensitive in our

dealing !ith all sta"eholders

>5ALITY 0OLICY


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At B'!rti Te(ete*' ?u!(ity '!6 !(3!y6 been !mon" t'e top priority .

>5ALITY OB7ECTIVES

To meet customers' requirements in terms of functionality, safety, aesthetics, l ife

expectancy and taking effective actions on their feedback's.

To ensure planned results and continual improvements in all operations (processes and

products).


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To increase productivity by reducing rejections non!value adding activities, and

bringing automation.

To effect continuous improvements in "ustomer #atisfaction $ndex.

To ensure t ra in ing of employees as per def ined targets s tudy ing needs and

requirements.

To ensure that all statuary and regulatory re&uirements are complied !ith.

>5ALITY C5LT5RE

%roviding training on &uality education system right across the entire organiation to

carry out continuous $mprovement activity in collaborative ay.

eployment of &uality policy &uality *bjectives through out the *rganiation in a

structured ay is headed by "+* as "hairman of &uality $mprovement Team.

"ross!functional $mprovement teams to promote #ynergy through sharing.

l l the employees alays carry out an $mprovement project, hich leads to improvement

in their individual efficiency.

-earding recogniing the good performers (individual as ell as teams) in monthly

quarterly and yearly functions.

+ncouraging innovation by ay of giving token reard for each suggestion and running

trophy to department giving maximum suggestion per person per month.

'ncouraging people to !or" as a team in Small +roup -ctivities 2T(-s3 and

Ouality Improvement 0roects 2OI0s3


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>5ALITY ACHIEVE#ENTS

/harti Teletech 0imited is a &uality "onscious organiation continuously #trives

for &uality $mprovement through %rocess 1anagement. #ome of the achievements

hich have come out of company's unstinted faith in investing for quality are 2

A3!rd6

3olden %eacock $nnovative %roduct#ervices ard in the Telecommunication #ector

for the year 4554, the 3olden %eacock for $nnovative 1anagement for the year 4556 and

1ost $nnovative %roduct

in 4557.

-ecipient of the +#" ard for +xcellence in +xports in Telecommunication +quipment

in 4558!54 and 4554!59.

:inner of the ;oice ata ard for < by ;oice and ata


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BEETEL=S GRO/TH

$eetelhas established itself as a leader in L#odem6L. $eetel has also entered the LSet

Top Bo@L mar"et and is on foray in this segment.

$harti Teletech has oined hands !ith !orld leaders in their categories for manufacturing

and Distribution of their products through itFs (hannel.

In addition to being manufactures and Distributors of L+' 0honesL in India and select

S--R( countries, today $TT% are *ational Distributors for4

L#otoro(! GS# mobi(e H!nd6et6 !nd A**e66orie6

0o(y*om Audio !nd Video Con1eren*in" Sy6tem6

#i*ro6o1t 4 Bo@ "!min" dei*e6$


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DISTRIB5TION B5SINESS OF

BEETEL

GE 0OLYCO#

4BO4 #OTOROLA


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(


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INTROD5CTION TO THE CONCE0T OF

FACTORING

F!*torin" is a1in!n*i!( 6eri*edesigned to help firms to arrange their receivable better.

Under a typical factoring arrangement a factor collects the accounts on due dates, effects

payments to the firm on these dates and also assumes the credit ris"s associated !ith the

collection of the accounts.

Sometimes the factor provides an advance against the values of receivable ta"en over by

it. In such cases factoring serves as a source of short4term finance for the firm.

In order to provide a gamut of financial services under one roof, (orp. has also started

factoring services. Under the scheme (orporation shall be at the time being only

providing advances or prepayments against receivable and other services provided by the

factor such as debt collection administration of sales ledger etc. shall be ta"en later on.

Under the scheme receivables only arising out of domestic trade shall be considered for

factoring. SupplierE$orro!er shall dra! bills of e9change for goods supplied and the

purchaser shall accept that. -fter acceptance of bills of e9change, (orporation shall ma"e

prepayment of A7C of invoice value after deducting its discount charges P 58C to 5AC

p.a. for period of bill of e9change to supplier. $alance payment of :7C of the invoice

value shall be made after collecting the payment from purchaser. If purchaser fails to pay

the due amount on due dates, the supplier shall ma"e the payment. $orro!erE Supplier

shall submit $ill of '9change along !ith invoice %RERR receipts. Suppliers to be eligiblefor factoring must have minimum trac" record of 7; years !ith consistent profitability

and minimum net !orth of Rs. :>.77 lacs.


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Usually before providing advance payments to supplier an agreement is entered !ith

supplier for arising debts of purchaser to (orporation and (orporation ma"e advances

only against invoices dra!n to this particular purchaser. Sub4limit of each purchaser is

fi9ed and sum of these sub limits is over all limit of supplier. Usually purchaser should

have been dealing !ith supplier for minimum period of t!o years. Ma9imum limit of

each purchaser should not e9ceed Rs. :>.77 %acs at a time.

Usually limit for factoring is calculated on the basis of the proected receivables on credit

sales of the company and deducting e9isting billsEboo"s debts limits enoyed by the

company from ban". Ma9imum limit shall not e9ceed t!o months average turnover of

the supplier as per last audited balance sheet or proected turnover of current year subect

to ma9imum of Rs. 577.77 %acs.

Cre!tie A(tern!tie Fin!n*in" #e*'!ni6m

The !ord LfactorL comes from the %atin LfactareL meaning Lto ma"e or to doL. This

financing mechanism dates bac" to the time of )ammurabi. It has been part of the basic

fabric of all trade.

The concept of Lma"ing it happens no!L continues. 'ssentially it is the sale or

assignment of a sale, trade, or accounts receivable account for immediate cash. $y

definition, it provides any business from start4up to mature companies 2at any si1e3,

access to immediate cash and improved cash flo! for e9pansion or gro!th but !ithout

diluting e&uity or incurring debt.

The reasons for using this financial tool are ust as numerous as they are varied

ta"e advantage of trade discounts or other early payment options !ith suppliers or

vendors and

ability to re4invest immediately to ac&uire ne! sales opportunities


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Since the factoring firm effectively assumes the credit evaluation ris" of accounts

receivable that may translate into decreased internal costs for accounts receivable

administration, more efficient and effective customer accounts collection 2&uic"er pay3,

and better information for management on the credit !orthiness of the firmFs clients

increased !or"ing capital turnover as !ell as a reliable source of immediate

financing and


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*otification and non4notification to the receivable account that a factoring

transaction has occurred.

/ust li"e all financing options, the business firm must evaluate its o!n individual needs

and re&uirements including a focused evaluation of all actual or potential advantages

versus the costs in the transaction. In most circumstances and at every stage of

development, factoring, if properly utili1ed, can be a very valuable financial tool to

achieve e9panded sales and company gro!th.

*ot all factoring companies are ali"e, often !ith !ide variations in terms, conditions, and

rates depending on your firmFs needs and accounts receivable 2as !ell as si1e and

geographic coverage6s 4local, regional, and national3.

F!*torin" is often used synonymously !ith accounts receivable financing or debtor

financing or invoice financing. #actoring is a form of commercial finance !hereby a

business sells its accounts receivable2in the form of invoices3 at a discount. 'ffectively,

the business is no longer dependent on the conversion of accounts receivable to cash from

the actual payment from their customers, !hich ta"es place on typical ;7 to B7 day terms.

$usinesses benefit from the acceleration of cash flo! by obtaining cash from the factor

e&ual to the face value of the sold accounts receivable, less a factorFs fee.

#actoring is considered o11 b!(!n*e 6'eetfinancing in that it is not a form of debtor a

form of e?uity$ This fact ma"es factoring more attainable than traditional ban" and

e&uity financing.

Debtor 1!*torin"has been established as a method of raising !or"ing capital for some

:77 years.


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)E!r(y 0!yment6 2including overpayments in some cases3

) Credit Contro(

) S!(e6 Led"er Admini6tr!tion

) Non Re*our6e Credit 0rote*tion

The first is an E!r(y 0!yment against the credit invoices that they raise. @hen a

business first ta"es up a factoring facility there !ill normally be an outstanding sales

ledger of unpaid invoices. The factoring company !ill ma"e available a prepayment

against these invoices, often up to A>C of their value, and this can create a substantial

cash inection for the business. -s the business continues to raise invoices, they are

passed to the factoring company !ho !ill provide further funds against those invoices.

The factors early payments are then repaid as the invoices are paid by the customers. Inthis !ay the facility is of a rolling nature that !ill gro! in line !ith the sales that the

business ma"es. This can be considerably more attractive than traditional overdraft

lending !hich is often much less fle9ible. These funds can be put to good use !ithin the

business e.g. settling supplier invoices early in order to receive further discounts.

Credit Contro(is a collections service !hereby the factoring company !ill employ letter

and telephone based chasing techni&ues to ensure that payments are received from

customers on a timely basis. Indeed, a factoring company can often improve the overall

debt turn 2the average number of days in !hich sales invoices are paid3 of its client !hich

creates a further cash flo! benefit. The other advantage of outsourcing debtor credit

control is that a factor can often offer this at a fraction of the cost of employing one or

more members of staff. This can translate into another tangible saving for a client. 'ven

!here the o!ners of small businesses handle the credit control themselves, it has to be

carried out during office hours and this is time that the factor can free up for the o!ner,

enabling them to spend that prime time see"ing ne! sales.

S!(e6 Led"er Admini6tr!tionis a service !hereby the factor !ill create and maintain a

debtor sales ledger for the clientFs business. -s invoices and cash are received so the
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factor !ill post them to the ledger and the factor !ill provide this information to the

client either via electronic lin"s or paper print outs.

Non Re*our6e B!d Debt 0rote*tionis an optional additional service!hereby the factor

!ill insure the client against non payment by customers that the factor has pre4approved.

The client !ill normally advise the factor of the details of ne! customers that they !ish

to trade !ith and the factor !ill investigate the credit standing of that business in order to

grant a credit limit. The client can choose to e9ceed the level of the limit that is granted

but if they trade !ithin the limit they !ill enoy the peace of mind that comes from

"no!ing that they !ill get paid by the factor should the customer go bust or fail to pay by

reason of protracted default.

The number of businesses that use debtor factoring has continued to gro! significantly

year on year and on average a client6s stay !ith their providers for a number of years.

This supports the case for factoring as a cost effective !ay of saving money and raising

!or"ing capital for e9pansion.

C'!r!*teri6ti*6 o1 1!*torin"

Usually the period for factoring is ;7 to B7 days. Some factoring companies allo!

even more than 5>7 days.

#actoring is considered to be a costly source of finance compared to other

sources of short term borro!ings.

#actoring receivables is an ideal financial solution for ne! and emerging firms

!ithout strong financials. This is because credit !orthiness is evaluated based on

the financial strength of the customer 2debtor3. )ence these companies can

leverage on the financial strength of their customers.

(redit rating is not mandatory. $ut the factoring companies usually carry out

credit ris" analysis before entering into the agreement.
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(ost of factoringQfinance cost operating cost. #actoring cost vary according to

the transaction si1e, financial strength of the customer etc. The cost of factoring

depending upon the financial strength of the clientFs customer.

Indian firms offer factoring for invoices as lo! as Rs5777.

#or delayed payments beyond the approved credit period, penal charge of around

54:C per month over and above the normal cost is charged 2it varies li"e 5C for

the first month and :C after!ards3

TY0ES OF FACTORING

A Noti1ied or 1u(( 6eri*e 1!*torin"

@ith notified factoring, the debtors are a!are of the finance facility as the factoring

company normally does the credit control, that is, collects the outstanding debts.

B Con1identi!( or inoi*e 1in!n*e

@ith invoice finance 2sometimes called confidential or non4notification factoring3, the

factoring facility is undisclosed, !ith the seller usually retaining the credit control

function.

C Re*our6e 1!*torin"

Recourse factoring is no! the most common type of factoring transaction. This factoring

transaction allo!s the factor to go bac" to the seller if payment is not received 2normally

after a B7 day period3. The credit ris" does not transfer to the factor during the recourse

factoring process.


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-s a result of factoring services, the enterprise can concentrate on manufacturing

and selling.

The ris" of bad debts is eliminated.

The factoring institution also provides advice on business trends

Increase (ash #lo! @ithout Increasing or -dding Debt

#ast and 'asy 0rocess

(ash Received for Kour Invoices in := )ours or %ess

'liminate %ong $illing (ycles

-dd (apital to Kour $usiness That is *ot a %oan

0ay


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the transfer of the additional payment to client account. In case of delay by the debtor

factor send reminder notices, contact the debtor by phone and in !riting, monitor the

status of the receivable and ta"e steps aimed at collection of the outstanding amount.

This !ay, factor !ill help client to save time and costs connected to handling and

administrating the receivables, and to be able to concentrate fully on your core business

or sales activity.

#actor regularly provide clients !ith chec"lists of important data, so that client have a

complete overvie! of the purchased receivables, repayments of debtors, and other

information important for client.

-dministration is e9actly the feature of factoring that differentiates factoring from other

forms of receivable financing 2forfaiting, the discount purchase of receivables or specific4purpose financing3

COSTS INVOVLED IN FACTORING

The cost of a factoring transaction is determined by three criteria. #irst, the credit

!orthiness of your customers. Second, the length of time that your invoices ta"e to get

paid. %astly, the monthly factored volume.

Kour cost, actually called a discount, can be as lo! as 5.>C or as high as 5:C per

transaction depending on ho! you fit the previous criteria

#actoring fee

- factoring fee is a fee for the e9penses related to the administration of the

processing of assigned receivables. The fee is stipulated by a percentage rate, as a


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one4off fee from the amount of the assigned receivables, depending, in particular,

on the demands for processing and the scope of the services.

Interest rate

Interest is applied to the advance payments paid for the assigned receivables the

interest rates are at the level of rates on short4term ban" loans.

#ee for the e9ecution and processing of contractual documentation.

0ARTIES INVOVLED IN FACTORING

Se((erof the product or service !ho originates the invoice.

Debtoris the customer of the seller 2i.e. the recipient of the invoice for servicesrendered !ho promises to pay the balance !ithin the agreed payment terms3.

F!*tor 2the factoring company3.

HO/ DOES INVOICE FACTORING /OR.S

$nvoice factoring is very simple

5. you generate invoices for your products or services.

:. Kou submit the invoices to your clients and to the factoring company.

;. The factoring company advances you up to A>C of the gross value of your invoices

2the remaining is "ept as a reserve to offset disputes3.

=. C

reserve and charges their fee. #actoring is best described !ith an e9ample

5. let6s say that you sell services to (ompany - and (ompany $. -s soon as you provide

the services, you invoice them.

:. -t the same time, you send copies of the invoices to the factoring company, !ho buys
http://factoring.qlfs.com/http://factoring.qlfs.com/


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them and provides you !ith an advance payment for them.

;. The factoring company !aits to get paid by your customers.


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The follo!ing is an e9ample of ho! factoring !or"s. -ctual rates !ill vary based upon

the nature of the advance si1e and the customers.

5. #actor !ill complete its due diligence on theclientand the customers

:. #actor and the client!ill enter into a #actoring and Security -greement, as !ell

as some additional documentation.

;. #actor !ill notify the customers of the change of address for remittance of

payments.=. The client!ill submit an advance re&uestfor J57,777to M0 Star along !ith the

invoices, the supporting documentation and assignment.

>. The factor!ill verify the advanceto ensure that the invoices are complete and

that the accounts receivableare due and payable.

?. #actor !ill multiply the advance re&uest of J57,777 times the advance rate of

A7Cor JA,777and subtract the initial feeof ;.>Cor J;>7 for a total funding to

the client of J8,?>7.

8. The invoicesare then mailed to thecustomers.

A. @hen the customer sends payment to the loc"bo9in ;7 days.

B. The factor!ill ta"e from the payment the amount advancedand the initial fee.

The factor!ould then remit to the clientthe balance left over !hen the reserve

settlementis released.

In this e9ample using an advance rate of A7C and an initial fee of ;.>C for an initial fee

period of thirty days the factor !ill advance A7C of the J57,777 advance re&uest or

JA,777 less the initial fee of ;.>C or J;>7 for a total advance of J8,?>7 to the client.

In this case that !ould be J57,777 44 J8,?>7 44 J;>7 Q J:,777

To e9tent that some invoices are not paid in thirty days, then additional late fees are
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charged on only the invoices unpaid for each late fee period that an invoice is

outstanding.

FACTORING STRATEGIES

@hen more fle9ible terms factoring begins, the client can increase prices to its customers

by 5C to >C to help cover the cost of factoring.

In many industries, customers e9pect to pay a fe! percentage points higher to get fle9ible

sales terms. - client can see" a cash discount from a supplier in return for prompt

payment, much time from :C up to 57C 2depending on the industry standard3. @hen a

client ma"es cash payment on the day of purchase from suppliers, the client can profit

from a large cash discount.

@ith benefits availing to both the supplier and the customer, the cost of factoring can be

covered by using smart factoring strategies.

A /'en to u6e F!*torin"

If any of the follo!ing t!o statements are true, then accounts receivable factoring should

benefit the company.

5. Comp!ny *!nnot !11ord to 3!it + to ,+ d!y6 to "et p!id by *u6tomer6$ If the

company6s biggest problem is that company need money sooner than the usual ;7 to ?7

days it ta"es for the clients to pay, then factoring is the ideal product for the company. -

factoring company can eliminate the !ait and ma"e company6s cash flo! predictable.

:. Comp!ny need6 money to p!y 6upp(ier6 or emp(oyee6$ (ompanies that need money

to pay for ongoing e9penses, such as employees or suppliers, can really benefit from

invoice financing. Invoice financing !ill streamline cash flo! and help to meet ongoing


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obligations. )o!ever, companies that need the funds to purchase e&uipment or to buy

real estate !ill usually not benefit much from factoring. There are other products in the

mar"et that !ill be better.

Invoice financing is a great tool that can help ma"e payments predictable. This allo!s the

company to plan for gro!th and enables to capitali1e on ne! and e9citing gro!th

opportunities.

#actoring is mostly used by large, established corporations that solve in a long4term

perspective the issue of the daily administration of their receivables and fle9ibility of

financing through factoring. #actoring is also used by companies !ith a high gro!th

potential !hich are going through a certain restructuring phase or companies !hich face

substantial seasonal fluctuations of production. #urthermore, !e are addressed by small4and medium4si1ed enterprises, as !ell as suppliers of multi4national retail chains !ho

determine the payment and price conditions for their suppliers.

B I6 1!*torin" 1it 1or t'e bu6ine66

0roducts are &uic"4turnover products

0roducts are delivered regularly to a large number of buyers

$uyers have been re&uested to provide !ith deferred maturity There is no o!nership, economic or personal connection bet!een the business

the buyer

The business is a manufacturing or trade company or a company delivering services

The business is engaged in automotive, !ood products, the te9tile or food industries,

manufacture machines and e&uipment, electrical appliances, furniture, etc.

0!r!meter6 1or re*ei!b(e6

They arise from a business contract based on the supplies of goods or delivery of

services,

Their maturity is bet!een ;7 and 5:7 days,


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They are before maturity,

They are free of any rights or claims of third parties,

Their assignment is not limited 2e.g. pursuant to a business agreement3,

0repayment invoices are not concerned,

They are payable and enforceable in the amount and currency specified on the invoice,

They may not be set off against the buyer6s receivables,

The annual volume of receivables suitable for assignment !ill be at least (N ;7

million.

F!*torin" ! better option t'!n bu6ine66 (o!n

Many business o!ners !ho need financing start their financing search by loo"ing for a

business loan or a business line of credit. -lthough business loansand lines of

credit are !ell "no!n products, they are very hard to get. -nd in reality, fe! business

o!ners actually manage to get them.

In certain instances, Invoice factoringmay be a better and easier to obtain alternative.

There are three conditions that can determine !hether factoring is a better alternative

than a business loan

5. -re the clients6 slo! payments hurting the gro!th Do they ta"e up to ?7 days to pay

:. Is company turning a!ay bigger sales because company lac"s !or"ing capital

;. @ith the right financing, does the business have significant gro!th potential

If the ans!er is yes to these &uestions, then chances are that factoring the invoices !ill be

better for than more traditional business financing products. Invoice factoring provides

company !ith financing based on its invoices, eliminating slo! payment cycles and

providing it !ith money to pay rent, meet payroll and e9pand its business.

Since factorinis tied to the sales potential, it does not have the arbitrary use limits that
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business loans have. The more the business gro!s, the more financing the company

&ualify for. This ma"es it an ideal product for businesses that have significant gro!th

potential.

#actoring 2or recei!able factorinas it is also "no!n3 is easy to use.


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to develop a comfort 1one or Vpreferred specialtyW !hen it comes to client si1e. @hen

selecting a factor, al!ays as" about the si1e of their typical client. Ideally, the si1e of the

business should not be significantly belo! or above that figure.

#ont'(y #inimum6

Most factors !ill only ta"e clients that commit to transact a minimum financing volume

every month. The advantage of committing to monthly minimums is that the factor !ill

offer the company better terms. The main disadvantage is that if the factored volume

drops, your company could be liable for ma"ing up the difference in fees. @hen selecting

a factor, be sure to select one !hose minimums are !ell belo! the e9pected minimums,

or better yet, try and find a factor !ith no minimums.

Re*our6e 6$ Non Re*our6e

Recourse is a term that defines the ability of a factor to resell the invoices bac" to a client

if an invoice does not get paid !ithin a given period of time. Most factoring companies

prefer to operate in recourse mode. )o!ever, there are a number of factors !ho offer

non4recourse agreements. Under a non4recourse agreement, the factor !ill absorb the

losses on an invoice if the account debtor becomes financially insolvent or ban"rupt. In

effect, non4recourse factors offer some protection against bad debt. -lthough generally

better !ith a non4recourse factor, most recourse agreements !or" !ell enough.

Contr!*t Dur!tion

Typically, receivable factoringcontracts re&uire a minimum term of one year or more.

@hereas longer4term contracts enable a factor to offer you better pricing, they can also

loc" your company into a factoring arrangement that outlives its usefulness. Kour best bet

is to try and find a factor that !ill allo! you to easily terminate a contract 2giving

reasonable notice3 once the service has outlived its usefulness.

Fee Stru*ture
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-ccounts receivable factoringfees vary significantly across the industry and are usually

dependent on

a3 The financial strength of your customers

b3 your monthly volumes

c3 the duration of your contract and

d3 the payment cycle of your receivables.

The fee 2also "no!n as VdiscountW3 can be close to ;C per month for small tic"et deals

2less than J;7N per month3 to as lo! as a 5.>C for companies that !ish to factor several

hundred thousand of dollars. -lso, be sure to understand your factors fee structure

thoroughly before signing the agreement as some factors have comple9 fee structures.

Lee( o1 Seri*e

- very important criterion !hen selecting an invoice factoringcompany is choosing a

company that !ill give you the appropriate level of service. The industry is very diverse,

and there are many factors that charge very lo! fees and provide a very impersonal

Vmass approachW to service. (onversely, there are factors that provide a Vhigh touchW

level of service, for slightly higher rates. Most companies tend to choose the factor !ith

the lo!est rates 2and usually lo!est level of service3 thin"ing that they !ill save money.

In the long run, they end up regretting the decision. Kou are usually better off loo"ing for

a factor that offers a better service, even if it comes at a slight premium.

S'ou(d *omp!ny 3or2 3it' ! 1!*torin" bro2er*on6u(t!nt


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the company by saving time. The process of evaluating a factoring company can be both

tedious and time consuming. - bro"er can help sidestep the issue since they !ill do all

the !or" of finding the best factor for the company. %astly, most factoring bro"ers are

compensated through a finder fee by the factoring company, so company !ill not have to

pay them any fees for their service.


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#ETHODOLOGY


54/87

#ETHODOLOGY

The study is based on personal decision, intervie! schedules, documentary observation the

data has been collected from the e9ecutives of the organi1ation and through the published

sources.

RESEARCH

The research !or" is restricted only to the $''T'% DISTRI$UTI


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-fter the problem formulation the obectives should be clear through !hich specific type of

information can be collected. The obective of this is to study about the concept of #actoring

used in distribution business.

STE0 Determine 6our*e d!t!

The third step includes the collection of data, !hich is from the source i.e. primary secondary

data. -fter the collection of data, it should be organi1ed and analy1ed to chec" !hether the

obectives are fulfilled or not.

-fter analy1ing the data investigation of research had !or"ed out !ith the help of follo!ing

steps

Research design

Tools techni&ues

RESEARCH DESIGN

- research is an arrangement of conditions for the collection analysis of data in a manner

that aims the research purpose and achievements of goal !ith economy in procedure

depending on research problem. The study of #actoring is generally based on documentary

evidences.

TOOLS AND TECHNI>5ES

In order to conduct the study the follo!ing methods !ere adopted.

9$ 0er6on!( Di6*u66ion They are certain information related to the subect !ho is

"no!n employees of the office so through connecting the employees and e9ecutives

the information is gathered.

8$ Dire*t 0er6on!( Interie36 The investigator personally approaches to the

person and as"s them to furnish information, !hich is of material input for the


56/87

en&uiry. Therefore these ideas, suggestions vie!s are collected on the topic through

intervie!.

$ Do*ument!ry ob6er!tionThe investigator consulted the secondary sources

li"e boo"s, unpublished material from library, internet and the area office.

COLLECTION OF DATA

0rim!ry d!t! are those that are collected for the first time by the investigator and the

primary data used ad collected for this study are4

Direct 0ersonal Intervie!

Indirect


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FACTORING

O0ERATIONS

&

CREDIT CONTROL

IN BEETEL


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0ARTIES INVOVLED IN THE FACTORING 0ROCESS5SED BY BEETEL= FOR THE DISTRIB5TION OF

#OTOROLA= HANDSETS

$harti Teletech %td. (ompany 2Insured3.

To!n Distributors 2TD3 $uyer.

UTI $an"4 #actor.

The *e! India -ssurance (o. %td. at radius 4 (redit Insurance

company.


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BEETEL AND THE TO/N DISTRIB5TORS JTD=SK

B'!rti Te(ete*' Ltd JBTTLK is an e9isting established (ompany engaged in the

manufacture and trade, including e9port, of a large range of telecommunication

e&uipmentsEproducts and spare parts and accessories thereof and is appointed as a

distributor by MEs. Motorola India 0vt. %td., 2M


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(opy of the IT pan *umber

(opy of the Memorandum and article of association in case of 0vt or %td company,

copy of the partnership deed in case of partnership firm

#our blan" che&ues in the name of $harti Teletech %td -greement copy duly signed by TD.

%ast three months ban" statement.

- letter containing the list of all the authori1ed signatories !ho sign the purchase

order.

(opy of last three year audited balance sheet and 0E% account including any

provisional financial for the current year.

(ertificate of net !orth or personal balance sheet of proprietorEall partner 2certified

by a chartered accountant3.

$TT% 0R


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BEETEL AND THE NE/ INDIA INS5RANCE CO$

$TT% has ta"en credit insurance from T'e Ne3 Indi! A66ur!n*e Co$ Ltd$ The

insurance policy is ta"en on a turnover for R69:++ *r at premium of +$99 on the

insurable turnover.The percentage for !hich the claim is reimbursed is -+subect to

condition mentioned in the anne9ureattached.

In most of the cases the sales 2invoice3 of BTTLare covered under the credit insurance

policy.

-ccording to Ne3 Indi! A66ur!n*e Co$ Ltdthe To3nDi6tributoris a person or legal

entity !ho is legally liable to pay the $TT% for the goods deliveredEservices provided

and

$TT% collected information on the financials of To3n Di6tributor6, the various

documents !hich are verified and assessed regarding its credit assessment form, financial

of the last three years, and net !orth certificate.


62/87

T'ere!1ter Ne3 Indi! A66ur!n*e Co$ Ltd 6'!(( reie3 6et !nd endor6e t'e Credit

Limit on b!6i6 o1 do*ument6 proided by BTTL !(on" 3it' re*ommend!tion6 o1

BTTL=6 Credit Contro((er6$

The $TT% declare all In6ur!b(e Turnoerpertaining to the preceding month for all the

TD=6. -ll this information has to reach the policy issuing office on or before the 5> thday

of each calendar month.

If no sale has been made during a month, a Gnil6 declaration shall nevertheless be

submitted to the Insurance (ompany. BTTLalso declare details of the /'o(e Turnoer

every &uarter in the form prescribed by the Insurance (ompany, so as to reach the policy

issuing office !ithin 5> days of the end of the &uarter.

$TT% has to submit its sales conditions to Ne3 Indi! A66ur!n*e Co$ Ltdfor approval.

T'e Ne3 Indi! A66ur!n*e Co$ Ltd$ may re&uire changes andEor the insertion of any

clause that the (ompany deems useful. -ny change in the BTTLgeneral sales conditions

must be submitted to TheNe3 Indi! A66ur!n*e Co$ Ltd$for approval.

BTTL has to furnish to T'e Ne3 Indi! A66ur!n*e Co$ Ltd$ promptly, any further

information that the Insurance (ompany may from time to time re&uire, in respect of

sales made during the policy period.

Ma9imum period of credit of ;7 days !hich BTTLgrant to any TD 2at or prior to the

original due date of payment3 beyond the original due date !iththe prior !ritten approval

of Ne3 Indi! A66ur!n*e Co$ Ltd$

If the payment is not given by the TD!ith in ;7 days then $TT% initiate for recovery

!ith TD and if the recovery doesn6t ma"e in ne9t ?o days from the date of Due Date then

$TT% go for file the provisional claim to *e! India -ssurance and in the mean time the

further billing of that particular default TDis stopped by $TT%.


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If during the validity of the policy, the Insured agrees to grant longer payment terms

than that mentioned in the proposal formEschedule to the policy, the (ompany

reserves the right to revise the premium rate applicable to the relevant turnover.

B Turnoer De*(!r!tion

The Insured shall also declare all In6ur!b(e Turnoer pertaining to the preceding month,

buyer4!ise, so as to reach the policy issuing office on or before the 5> thday of each calendar

month, in the form agreed by the (ompany. If no sale has been made during a month, a Gnil6

declaration shall nevertheless be submitted to the (ompany. The Insured shall also declare

details of the /'o(e Turnoerevery &uarter in the form prescribed by the (ompany, so asto reach the policy issuing office !ithin 5> days of the end of the &uarter.

C De*(!r!tion o1 oerdue p!yment6

BTTLhas to declare to Ne3 Indi! A66ur!n*e Co$ Ltd, on or before the 9:t'o1 eery

*!(end!r mont', all invoices !hich remain !holly or partially unpaid for more than ,+

days from the due date of payment, in respect of the sales made during the policy period

and such declarations shall continue to be made to Ne3 Indi! A66ur!n*e Co$ Ltdeven

after the e9piry of the policy period, so long as any such payment remains unpaid.

D #!n!"ement o1 *redit (imit 1or t'e indiidu!( TD=S

#ollo!ing heads are covered under this agreement

9 App(i*!tion


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-pplication for Credit (imit6in respect of each buyer has to be made to the (ompany in the

prescribed format. The (ompany !ill inform the Insured in !riting about its decision

i. To acceptErefuse the Credit (imitre&uested for any buyer.

ii. -bout the amount of Credit (imitsanctioned for each buyer and the period of cover.

The Insured must furnish details of buyers !ho have consistently paid late 2i.e. more than ;7

days after the due date3 in the last 5: months and any other information, !hich may affect the

decision of the (ompany to grant cover.

-pplication for e9tension of cover in respect of any Approed Buyershould be made one

month before the e9piry of the period of cover. In such cases, the cover for the buyer !ill be

maintained until the NE/ INDIA INS5RANCE CO#0ANYrefusesEreduces cover for the

buyer, in !riting.

8 Oper!tion

The (redit limit decision !ill ta"e effect from the date of commencement of the policy if the

application for the limit is received !ithin one month of commencement of the policy. #or all

other applications, the limit !ill be effective from the date mentioned in the credit limitdecision.

The Credit (imit is a revolving limit and !ill become automatically available to cover

further sales as payments are received against outstanding invoices.

The revolving limit !ill ho!ever cease to operate under the follo!ing circumstances

2I3 @here there is already due from the Approed buyer a debt older than ?7 days.

2ii3 @hen the credit limit for the Approed buyerhas been cancelled.

C!n*e((!tion o1 t'e *redit (imit o1 t'e TD


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The NE/ INDIA INS5RANCE CO#0ANYmay reduce, cancel or suspend limits for any

TDat any time !ithout assigning any reason. Such decisions !ill be conveyed to the BTTL!riting. )o!ever, all In6ured Debt6e9isting at the time of conveying the decision shall

stand covered.

The (redit limit shall stand automatically cancelled under the follo!ing circumstances

@hen a provisional claim is filedE should have been filed under the policy.

@hen the -pproved buyer becomes insolvent.

@hen a credit limit has been refused. - total refusal is e&uivalent to a cancellation of

credit limit. In such cases !here the credit limit has been cancelledErefused, includingautomatic cancellation, the BTTLmust reapply for credit limits if at a later date he

!ishes to continue selling to this TD.

E T'e TD 3i(( be*ome in6o(ent in t'e 1o((o3in" mentioned

6itu!tion6)

X5Y INSOLVENCY M of the approved buyer The buyer shall deemed to be

insolvent for purpose of this policy !hen

The buyer is declared ban"rupt from the competent court of urisdiction.


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-n effective resolution has been passed for voluntary !inding up provided that this

resolution is not merely for the purpose of reconstruction or amalgamation.


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given. If the reference spea"s for a smaller figure, then the NE/ INDIA INS5RANCE

CO#0ANYshall be liable for the In6ured 0er*ent!"eof half the amount spo"en for.

iii. +ood trading e9perience obtained !ithin a 5:month period preceding the

establishment of an In6ured Debt$ TheCredit (imitgiven should not e9ceed 5:>Cof

the ma9imum outstanding debt recorded !ith the Insured and satisfactorily paid. +ood

trading e9perience is !here each month the buyer pays no later than ;7 days after the due

date for payment, subect to the payment of a minimum of three invoices !ithin the due

date of payment.

G Credit Contro(

i. The Insured must strictly follo! the credit control procedures that are endorsed in!riting to the policy, or if none, those that are detailed in the proposal form. 0roof

of this shall be submitted to the (ompany at the time of ma"ing of claim under the

Di6*retion!ry Limit.

ii. The Insured shall not ma"e any settlement, arrangement or compromise for an In6ured

Debtunless a !ritten agreement to this effect is obtained from the (ompany.

iii. The Insured hereby agrees to monitor the payment performance of all Approed

Buyer6by "eeping an age4!ise receivables record of all amounts due and all buyer

e9posures against individual Credit Limit6 sanctionedEestablished and ta"e all

reasonable measures to recover the Insured Debt6. The Insured hereby agrees to

prevent any loss arising and should any loss arise, minimi1e it.

iv. The Insured shall act in good faith and promptly inform the (ompany about any

changes that they may become a!are of in their or their buyer6s circumstances,

including

-ny idea or reason to believe that the buyer might not pay its debts.


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@here other suppliers stop delivering to a buyer because their payment record is poor

2or they have concerns about the buyer6s solvency3

If a buyer as"s for e9tra time to settle a debt or to pay by installments.

If the buyer as"s to e9tend the term of the bill of e9change @hen a buyer6s draft or bill of e9change or che&ue is not paid on the date it is due or

presented 2regardless of late payment3.

If the Insured desires to start proceedings or action against a buyer.

@hen a debt is partially or !holly unpaid beyond ?7 days

H Stop Coer

(over for ne! deliveries shall be stopped in circumstances !here

- payment due from a buyer is unpaid for more than ?7 days 2!hether the payment is

insured or not3.

The BTTLhas received notice from a responsible source that a default is li"ely to

occur in respect of an e9isting or future outstanding payments.

@hen the NE/ INDIA INS5RANCE CO#0ANYnotifies the BTTLof stopping

cover.

@hen the credit limit for the buyer is cancelled as detailed in clause ,Gof the 0olicy.

@hen a che&ueEbill has not been honored at maturity or !here che&ues have been

returned unpaid.

@hen legal proceedings have been instituted against the buyer for

insolvencyEdefault in payments.

I C(!im 0ro*edure in *!6e o1 de1!u(t m!de by t'e TDBTTLhas to


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+ive prompt notice to Ne3 Indi! A66ur!n*e Co$ Ltd in !riting upon the

occurrence of a defaultEdelay in payment or the discovery of any event or

circumstance li"ely to give rise to a claim under this policy.

+ive prompt notice in !riting to Ne3 Indi! A66ur!n*e Co$ Ltdif any amount

becomes overdue by a period e&ual to the #!@imum E@ten6ion 0eriod 2 egg4 8days

or 5> days or ;7days3 from the original due date. If @ith in ?7 days from the date

of its discovery $TT% does not inform Ne3 Indi! A66ur!n*e Co$ Ltdthen the

claim amount !ill not remain liability under this policy.

'nsure that all rights in respect of the contract of sale and the In6ured Debtare

properly preserved and e9ercised.

If re&uired by the Ne3 Indi! A66ur!n*e Co$ Ltd, ta"e any measures that may be

re&uired including the institution of legal proceedings.

@ithin B7 days of the due date of the first unpaid invoice, BTTLhas to submit a

0roi6ion!( *(!imas follo!s

Submit a filled in claim form as prescribed by Ne3 Indi! A66ur!n*e Co$ Ltd.

BTTL shall also submit support documents such as proof of non4receipt ofpayment and &uantum of payment due, proof of de(ierysuch as invoiceE%R etc.

and such other documents to establish proof of actual sale. -ll documents shall

be duly certified by a competent (hartered -ccountant.

In the case of an insolvency claim, the BTTLshall submit a duly filled in claim

form !ithin > days of becoming a!are of the event. BTTL shall submit

confirmation of debt from the li&uidator, trustee in case of ban"ruptcy, or other

authori1ed agent, to receive payments.

7 Re*oery 0ro*edure


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Recoveries consist of any amount received by BTTL from TDor from any other source

!hatsoever to!ards the payment of the In6ured Debt.

-ll recoveries received by and on behalf of the Insured in respect of any debt of the buyer

to the Insured shall be treated as recoveries hereunder regardless of any designation as tothe application of funds or source from !hich such payments are received and shall be

applied chronologically against the outstanding In6ured Debtin order of the due dates.

2


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If, at the time of cancellation of the policy, the In6ur!b(e Turnoer falls short of the annual

estimated turnover, refund of premium shall be made for the difference, subect to a

minimum retention of >7C of the 0roi6ion!( 0remium.

This 0olicy shall stand cancelled automatically on the insolvency of the BTTL. In this event,

the NE/ INDIA INS5RANCE CO#0ANYshall be entitled to retain all premiums paid,

and receive and retain all premiums due and payable up to and including the effective date of

such insolvency.


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BETEL AND THE 5TI BAN.

$TT%, engaged in the business of manufacturing and mar"eting of !ide range of

Telephones and mar"eting distribution of +SM 0hones, DS% Modems other allied

$roadband products and set top bo9es and supplies the same to the sales channel

intermediaries, corporate, institutions etc., has approached the ban" and ban" has agreedto purchase receivables from its buyers, !ithout R'(


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The agreement can be terminated by one party if the other party is declared

ban"rupt by the court of la!.

0ROCED5RE FOLLO/ED BY THE BEETEL FOR

THE FACTORING B5SINESS

M


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$TT% is carrying its distribution business of M


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Regional sales manager of the M


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of the invoices. If the $TT% follo!s the credit limit set by the *'@ I*DI- I*SUR-*('

(


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the same to the UTI $-*N !ith in ;7 days of the date of purchase of invoice.

TD6S have to ma"e payment to the UTI ban" at their agreed centers. -ll the TD6S operate

through specific accounts !ith the UTI $-*N.

UTI $-*NS sends a report on the payment pending against the TD6s to the $TT%, on the

daily basis. The credit controller of the $TT% goes through these reports and follo!s up !ith

the TD6s for the pending payments by them to UTI $an".


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FINDINGS AND OBSERVATIONS

#actoring services provide solution to the problem of li&uidity. It can be used effectively toproduce fruitful results !ith the limited capital. It enables a company to carry out its

operations rather than spending time for chasing debtors. #actoring is an effective tool in the

hands of management for increasing their sales by providing credit to their customers.

#actoring helps the $TT% in generating cash for meeting their re&uirements !ithout any

other additional liability as factoring is not a loan. UTI ban" purchases the receivables of the

$TT% that $TT% generates against credit sales to the TDs and ma"es payment to the $TT%

for the same.

In short factoring benefits the $TT% in the follo!ing !ays4

A ACCELERATED CASH FLO/)

UTI $-*N advances $TT% cash on &ualified accounts receivable immediately, so that

$TT% can ta"e care of operating e9penses, ta9es and other financial obligations rather than

bloc"ing its money in the debtors.

B NO NE/ DEBT INC5RRED)

$ecause factoring is not a loan, $TT% assume no ne! debt or interest to pay. It merely

e9changes one asset 2accounts receivable3 for another asset 2cash3 !ith the UTI ban".


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C5NLI#ITED /OR.ING CA0ITAL)

#actoring is the only source of business financing that gro!s as company6s sales increase.

The more accounts receivable company generates, the more immediate cash company can

access. In this !ay factoring helps the $TT% in increasing its sales.

D NO COLLETERAL SEC5RITY RE>5IRED)

*o (ollateral Security is needed to avail finance. (ompany pays interest only on the actual

funds utili1ed. )ence $TT% is getting additional money !ithout any colleteral security.

E CONCENTRATE ON ITS O/N B5SINESS)

The more the company6s sales boo" gro!s, the more the UTI $-*N helps the $TT% to turn

their invoices into cash. This !ill enable the $TT% to respond more &uic"ly to mar"et

opportunities. (ollection of receivables is also managed by UTI $-*N enabling $TT% to

concentrate on its o!n core business activities.

F HIGH ADVANCE)

UTI $-*N is offering the highest advance rates to the $TT%. (ompany is obtaining up to

B7C of the face value of the invoices !ith the TDs.


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Su""e6tion6

&

Re*ommend!tion6


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S5GGESTIONS

$efore entering the $TT%, #actoring !as an un"no!n concept to me, so it !as really

difficult to plan out the suggestions. $ut ho!soever the suggestions !hich !ere planned after

studying the #actoring operations in the $TT%, and understanding the concept of #actoring

are

(ompany should consider the scope of the receivables factoring on the basic and the cordless

phones that it manufactures as the factoring on the M


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0rocedure and the documents re&uired for the registration, of the ne!ly established

companiesEpartnership firms and the businesses, as the eligible buyer or the TD should be

clarified. The list of the documents re&uired for the registration as a TD includes the last

three year6s (- (ertified balance sheets !hich a ne!ly established business !ill not be

having.

CONCL5SION


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CONCL5SION

-fter the analysis of the factoring business of the $''T'% it can be concluded that the

company is using the factoring services of the UTI ban" very efficiently to convert their

receivables in instant cash. Under this #actoring agreement, UTI ban" purchases all the

receivables of the approved buyers up to the prescribed credit limit from $TT%, !ithout any

recourse, and credit their account !ith the net amount on the same day. In this !ay, $TT% is

able to generate constant cash flo! !ithout any additional liability and having tension for

chasing the debtors for the payment resulting in a clam situation to concentrate on its main

business. $TT% has also entered into an agreement !ith the *'@ I*DI- I*SUR-*('

+R


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the company a lot in its operations and it should also consider the factoring for the basic and

the cordless phones that it manufactures.

Varun Piplani

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