Final Copy Nikitha

ISSUES RELATED TO ACCOUNTS RECEIVABLE MANAGEMENT
“ISSUES RELATED TO ACCOUNTS RECEIVABLES

MANAGEMENTS IN PRIMUS GLOBAL TECHNOLOGIES
PRIVATE LIMITED AT BANGALORE”
Project Report submitted in partial fulfilment of the requirements for the

award of the Degree of
MASTER OF BUSINESS ADMINISTRATION
of
BANGALORE UNIVERSITY
By
NIKITHA N
Reg No:1670CMD040
Under the guidance of
Prof. ROHINI SAJJAN
Assistant Professor
Hennur Cross, Kalyan Nagar, Bengaluru – 560 043
1
INDIAN ACADEMY SCHOOL OF MANAGEMENT STUDIES
CERTIFICATE OF ORIGINALITY
This is to certify that the Project Report titled “Issues related to accounts receivable
management” Is an original work of Ms NIKITHA bearing University Register Number
1670CMD040 and is being submitted in partial fulfilment for the award of the Master’s
Degree in Business Administration of Bangalore University. The report has not been
submitted earlier either to this University / Institution for the fulfilment of the requirement
of a course of study.
SIGNATURE OF GUIDE SIGNATURE OF DIRECTOR
Place: Bengaluru
Date:
2
CERTIFICATE FROM THE COMPANY
3
DECLARATION BY THE STUDENT
I hereby declare that “Issues related to accounts receivable management” is the result of
the project work carried out by me under the guidance of Prof. Rohini Sajjan in partial
fulfilment for the award of Master’s Degree in Business Administration by Bangalore
University.
I also declare that this project is the outcome of my own efforts and that it has not been
submitted to any other university or Institute for the award of any other degree or Diploma
or Certificate.
Place: Bengaluru Name:
Date: Reg Number:
4
Plagiarism Certificate
5
ACKNOWLEDGEMENTS
First and foremost, I would like to thank almighty for standing by me throughout the
project and helping me to complete the same within the stipulated time.
The preparation of this project work would not have been possible without the help of a
number of people. I would like to thank my beloved parents for their support, advice and
encouragement during my project.
I would like to thank Bangalore University for giving me opportunism to prepare a
project.
I am very pleased to express my deep sense of gratitude to prof. Rohini Sajjan for her
consistent encouragement. I shall forever cherish my association with his for exuberant
encouragement, perennial, approachability, absolute freedom of thought and action I
have enjoyed during the course of the project.
I am very much obliged and indebted to PRIMUS Global Technologies Pvt Ltd their
approval and valuable suggestions to take up the project, I express my deep of gratitude
to them for their consistent help and personal interest during my project.
Sincerely
Nikitha N
(Reg no. 1670CMD040)
6
Contents
CHAPTER CHAPTER PAGE

NO NO
INTRODUCTION
1.1 Theoretical Background

1.2 Instruments Indicating Receivables
1.3 Cost of Maintaining Receivables 1-17
1 1.4 Components affecting the size of receivables
1.5 Measures of receviable management
1.6 Parts affecting the size of receivables
INDUSTRY PROFILE OR COMPANY

PROFILE/PROFILE OF RESPONDENTS
2.1 Industry Profile

2.2 Company profile
2.3 Background
18-27
2 2.4 Management Principles
2.5 Primus Industries
2.6 Organisational Structure
2.7 Profile Of Respondents
RESEARCH METHODOLOGY
3.1 Statement of the Problem

3 3.2 Need to study the topic
28-30
3.3 Objectives of the Study
3.4 Research Methodology
7
4 DATA ANALYSIS 31-47
RESULTS/OBSERVATIONS, FINDINGS &

SUGGESTIONS
5.1 Observations 48-52

5 5.2 Conclusion
5.3 Recommendations
8
LIST OF TABLES
SL.
NO TITLE
1 Table showing the Credit Policy Objectives

2 Table showing the Credit Risk Analysis
3 Table showing the Variation of Credit Terms
4 Table showing Strategies of Dealing with Overdue Accounts

Table showing the Professional Qualification of Head of
5 Credit Control Department
Table showing the Techniques for Managing Credit Risk
6 Exposure
Table showing the Valve Of Accounts Receivables On Total
Assets
7
8 Table showing the Invoicing System
Table showing Techniques of Dealing with Disputed Invoice
9
9
LIST OF GRAPHS
SL.N
O TITLE
Graph showing the Incentives Used To Encourage Prompt

1 Payment
2 Graph showing the Level of Bad Debts Written Off
3 Graph showing the Average collection period.

Graph showing the Existence of Autonomous Credit Control
Department
4
Graph showing the Techniques for monitoring the quality of

5 accounts receivables
Graph showing the Timing of Invoicing After a Sales

6 Transaction
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CHAPTER: 1
INTRODUCTION
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1.1 Theoretical Background
An offer of credit is an evitable(unavoidable) requirement in the business

universe of today. No business can exist without offering the units in credit. Administration of
exchange acknowledge is generally known as Management of Receivables. Receivables are
one of the three essential parts of working capital, the other being stock and money.
Receivables involve second essential place after inventories and in this manner, constitute a
generous bit of current resources in a few firms. The capital put resources into receivables is
practically of an indistinguishable sum from that put resources into money and inventories.
Receivables therefore, shape around 33% of current resources in India. Exchange credit is a
vital market apparatus (tool). As, it acts like a bridge for mobilization of goods from production
to distribution stages in the field of marketing. Receivables give insurance to sales from
competitions. It acts no not as much as a magnet in drawing in potential customers to purchase
the item at terms and conditions good to them and also to the firm. Receivables administration
requests due thought not budgetary official not just in light of the fact that cost and hazard are
related with this Investment yet in addition for the reason that every rupee can add to company's
total assets.
Whenever products and enterprises are sold under an assertion (agreement) allowing the
customers to pay for them at a later date, the sum due from the customers is recorded as records
receivables. Along these lines, receivables are resources accounts speaking to sums owed to
the firm because of the credit offer of merchandise and ventures in the common course of
business. The estimation of these cases is carried on to the benefits side of the asset report
under titles, for example, debt claims, exchange receivables or customer's receivables. This
term can be characterized as "obligation owed to the firm by customers emerging from offer of
products or administrations in common course of business."
As appeared by Robert N. Anthony, "Accounts receivables are amounts owed to the

business enterprise, usually by its clients. Sometimes it is broken down into trade accounts
receivables; the former refers to amounts owed by clients, and the latter refers to amounts owed
by employees and others".
12
For the most part, when a concern does not get trade instalment out regard of customary offer
of its items or administrations instantly so as to permit them a sensible timeframe to pay for
the merchandise they have gotten. The firm is said to have allowed exchange credit. Exchange
credit along these lines, offers ascend to certain receivables or book obligations anticipated that
would be gathered by the firm sooner rather than later. At the end of the day, offer of
merchandise using a loan changes over completed product of an offering firm into receivables
or book obligations, on their development these receivables are acknowledged and money is
created.
The book obligations or receivable emerging out of credit has three

measurements: -
• It includes a component of hazard, which ought (should) to be carefully evaluated.

unlike to money deals, credit deals are not chance less as the money instalment remains un-
received.
• It depends on financial matters esteem. The monetary incentive in products and

enterprises goes to the purchaser quickly when the deal is made in kind for an equal financial
esteem expected by the merchant from him to be gotten later on.
• It infers futurity, as the instalment for the merchandise and ventures got.
The customers who speak to the company's claim or resources, from whom receivables
or book-obligations are to be gathered sooner rather than later, are known as borrowers or
exchange account holders. A receivable initially appears at the very occasion when the sale is
influenced. But the funds generated as a result of these sales can be of no utilization until the
point when the receivables are really gathered in the typical course of the business.
Receivables might be spoken to by acknowledgment; bills or notes and so forth due from others
at an assignable date in the proper method of the business. As offer of products is an agreement,
receivables excessively get influenced as per the law of agreement e.g. Both the gatherings
(purchaser and dealer) must have the ability to contract, legitimate thought and common
consent must be available to pass the title of merchandise or more all agreement of offer to be
enforceable must be in composing. Additionally, broad care is should have been practiced for
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separating genuine deals frame what may have all the earmarks of being as deals like bailment,
deals contracts, relegations and so on.
Receivables, as are types of interest in any venture assembling and offering merchandise using
a loan premise, large sum of assets are tied up in exchange borrowers. Henceforth, a lot of
watchful investigation and legitimate administration is practiced for powerful and proficient
administration of Receivables to guarantee a positive commitment towards increment in
turnover and benefits.
1.2 Instruments Indicating Receivables
Harry Gross has proposed three general instruments in a concern that give proof of receivables
relationship. They are quickly examined beneath:
 Open Book Account
This is a passage in the record of a loan transaction, which demonstrates a credit exchange. It
is no proof of the presences of an obligation under the Sales of Goods.
 Debatable (Negotiable) Promissory Note
It is an unconditional composed guarantee marked by the creditor to pay a positive whole of

cash to the carrier, or to arrange at a settled or definable time. Promissory notes are utilized
while granting an expansion of time for gathering of receivables, and account holders are
probably not going to dishonour its terms.
 Increment (Increase) in Profit
As receivables will expand the deals, the business development would positively raise the
minimal commitment proportionately more than the extra expenses related with such an
expansion. This in turn would eventually improve the level of benefit of the concern.
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 Meeting Competition
A concern offering sale of goods on credit basis always falls in the top priority list of individuals
willing to purchase those products. Consequently, a firm may resort giving of credit facility to
its customers in order to shield (protect) sales from losing it to competitors. Receivables goes
about as a drawing in potential customers and holding the more established ones in the
meantime by weaning them away firm the contenders.
 Enlarge Client's Resources
Receivables are important to the customers on the ground that it enlarges their assets. It is
supported especially by those customers, who think that its costly to obtain from different
assets. Consequently, the present customers as well as the Potential lenders are pulled in to
purchase the company's item at terms and conditions positive to them.
 Speedy Distribution
Receivables assume a vital part in quickening the speed of conveyances. As a mediator would
act rapidly enough in activating his portion of merchandise from the creations put for dispersion
with no bother of quick money instalment. As, he can pay everything subsequent to influencing
his deals. Essentially, the customers would rush for acquiring their needful regardless of the
possibility that they are not in a position to pay money in a split second. It is for these
receivables are viewed as a bridge for the development of merchandise shape generation to
dispersions among a ultimate buyer.
15
Figure No. 1.1
(Source: https://www.google.co.in)
 Miscellaneous
The typical practice organizations may depend to credit giving for different reasons like
modern practice, merchants relationship, status of purchaser, customers' necessities, travels
delay and so forth. In nutshell, the general goal of making such responsibility of assets for the
sake of records receivables goes for creating a vast stream of working income and procuring
more than what could be conceivable without such duty. Figure 1.1 further gives a simple
clarification to the reason for which they are maintained.
1.3 Cost of Maintaining Receivables

Receivables are a kind of investment made by a firm. Like different ventures, receivables too
highlight a disadvantage, which are required to be kept up for long that it known as credit
sanction. Credit sanction implies tie up of assets with no reason to settle yet costing certain add
up to the firm. Such expenses related with keeping up receivables are definite beneath: -
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1. Administrative Cost
On the off chance that a firm changes its credit approach for the great reasons of either,
maxsimising sales or minimizing erosion of sales, it brings about two sorts of expenses:
(A) Credit Investigation and Supervision Cost

Because of lenient credit policy, there happens to be a significant increment in the quantity of
account holders. Subsequently the firm is required to investigation and administers a substantial
volume of records at the cost of costs (expenses) related with gaining credit data either through
outside or frame its own staff.
(B) Collection Cost

A firm should strengthen its accumulation endeavors in order to gather the exceptional bills
particularly in the event of customers who are fiscally less solid. It incorporates extra costs of
credit division brought about on the creation and support of staff, bookkeeping records,
stationary, postage and other related things.
2. Capital Cost
There is no denying that maintenance from claiming receivables by a firm prompts(leads)
blockage of its money related assets because of the tie log that exists between the date of offer
of merchandise to the customers and the date of installment made by the customers. In any
case, the sharp actuality remains that the firm needs to make a few installments to the workers,
providers of crude materials and so forth notwithstanding amid the timeframe slack. As an
outcome, a firm is subject to make courses of action for meeting such extra commitments from
sources other than deals. In this way, a firm throughout growing deals through receivables
clears a path for extra capital expenses.
17
3. Creation and Selling Cost

These expenses are straightforwardly proportionate to the expansion in deals volume. As such,
creation and offering cost increment with the very extension in the quantum of offers. In this
regard, a firm stands up to two circumstances; right off that when the business development
happens inside the scope of existing creation limit, all things considered just factor costs
identifying with the generation and deal would increment. Also, when the generation limit is
added because of development of offers in abundance of existing creation limit. In such a case
incremental creation and offering expenses would increment both variable and settled
expenses.
4. Unfortunate behavior Cost

This kind of cost emerges by virtue of postponement in installment on customers' part or the
disappointment of the customers to make installments of the receivables as and when they fall
due after the expiry of the credit time frame. Such obligations are dealt with as suspicious
obligations. They include: -
• Blocking of organization's advantages for an extended time allotment,
• Costs related with the collection of overheads, remains honest to goodness costs and on
beginning other social affair attempts.
5. Default Cost
Like misconduct cost is default taken a cost. Misconduct cost emerges because of customers
delay in installments of money or his failure to make the full installment from the firm of the
receivables because of him. Default cost rises a consequence of finish disappointment of a
defaulter (customers) to pay anything to the firm consequently of the products acquired by him
on credit. At the point when notwithstanding of the considerable number of debtors, the firm
neglects to understand the sum because of its account holders in view of him finish
powerlessness to pay for the same. The firm regards such obligations as terrible obligations,
which are to be composed off, as can't be recover in any case.
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1.4 Components affecting the size of receivables:

The span of receivables is dictated by various elements for receivables being a noteworthy part
of current resources. As the majority of them fluctuates from business to business as per the
nature and sort of business. Along these lines, to talk about every one of them would
demonstrate irrelevant and time consuming. Some primary and basic components deciding the
level of receivable are plates beneath:
 Stability of Sales:
Stability of sales refers to the components of progression and consistency in the sales. In other
words the seasonal nature of sales violates the continuity of sales in between the year. Along
these lines, the offer of such a business in a specific season would be expansive requiring a
vast a size of receivables. So also, if a firm supplies merchandise on portion premise it will
require a substantial interest in receivables.
 Terms of Sale
A firm may impact its arrangements either on cash commence or utilizing a credit introduce.
Really credit is the soul of a business. It moreover prompts higher advantage level through
augmentation of offers. The higher the volume of offers made utilizing an advance, the higher
will be the volume of receivables and the a different way.
 The Volume of Credit Sales

It assumes the most vital part in assurance of the level of receivables. As the terms of exchange
stays pretty much like a large portion of the ventures. In this way, a firm managing an abnormal
state of offers will have vast volume of receivables.
19
 Credit Policy
stays pretty much like a large portion of the ventures. In this way, a firm managing an abnormal
state of offers will have vast volume of receivables and vice-versa.
• An indulgent (lenient) credit approach prompts more networthy defaults in
installments by fiscally powerless customers bringing about greater volume of receivables.
• Lenient credit strategy empowers the monetarily solid customers to defer installments
again bringing about the expansion in the span of receivables.
 Terms of Sale
The period for which credit is considered to a customer's properly realizes increase or decresase
in receivables. The shorter the credit time frame, the lesser is the measure of receivables. As
here and now credit ties the assets for a brief period as it were. In this way, an organization
does not require holding unecesary investment by method for receivables.
 Cash Discount
Cash discount on one hand pulls in the customers for installments before the slip by of credit
period. As an tempeting offer of lesser installments is proposed to the customers in this
framework, if a customer's prevails with regards to paying inside the stipulated period. Then
again decreases the working capital necessities of the worry. Therefore, diminishing the
receivables administration.
 Collection Policy
The strategy, practice and methodology embraced by a business venture in granting
acknowledge, choosing with regards to the measure of credit and the technique chosee for the
accumulation of the same likewise incredibly impact the level of receivables of a worry. The
more merciful or liberal to credit and accumulation approaches the more receivables are
required with the end goal of venture.
20
 Collection Collected
If an enterprise is efficient enough in encasing the payment attached to the receivables within
the stipulated period granted to the clients. At that point, it will decide on keeping the level of
receivables low. Though, undertaking encountering undue deferral in accumulation of
installments will dependably need to keep up substantial receivables.
 Bills Discounting and Endorsement

In case the firm settles on diminishing its bills, with the bank or grasping the bills to the outcast,
for meeting its duties. In such conditions, it would cut down the level of receivables required
in coordinating business.
 Quality of Clients
If an association deals especially with fiscally strong and credit excellent clients then it would
get each one of the portions in due time. Appropriately the firm can without much of a stretch
do with a lesser measure of receivables than if where an association oversees clients having
financially weaker position.
 Miscellaneous
There are certain expansive variables, for instance, esteem level assortments, manner of
organization sort and nature of business, openness of advantages and the lies that accept
fundamentally basic part in choosing the quantum of receivables.
1.5 Measures of receviable management:
Joseph L. Wood is of the assessment, "The reason for any business venture is simply the
procuring of benefit, credit is used to expand deal, however deals must restore a profit."5 The
essential target of administration or receivables should not be constrained to development of
offers but rather include boost of general rates of profitability. Along these lines, receivables
administration should not be kept to minor gathering or receivables inside the most limited
conceivable period however is required to center due consideration regarding the advantage
cost exchange off identifying with various receivables administration.
21
So as to include productivity, soundness and adequacy to receivables administration, an

eterprise must make it a point to take after certain entrenched and appropriately perceived
standards of credit administration. "The first of these standards identify with the distribution of
expert relating to credit and accumulations of some particular administration. The second rule
puts weight on the determination of appropriate credit terms. The third standards underlines a
through credit examination before a choice on giving a credit is taken. Furthermore, the last
rule touches upon the foundation of sound gathering strategies and procedures."6 In the light
of this citation the standards of receivables administration can be expressed as:
1. Allocation or Authority
The assurance of sound and compelling credit accumulation strategies administration. The
proficiency of a credit administration in definition and extenuation of credit and accumulation
strategies to a great extent relies on the area of credit office in the hierarchical structure of the
concern. The part of expert designation can be seen under two ideas. According to the primary
idea, it is put under the immediate obligation of finanace officer for it being a capacity
fundamentally financed by nature. Further, credit and accumulation arrangements lay direct
effect on the dissolvability of the firm. "Hence the credit and gathering capacity should be put
under the immediate supervision of the people who are in charge of the company's money
related position." "There are other who recommend that business firms should entirely uphold
upon their business divisions the rule that deals are insolate until the point when the esteem
thereof is realsied. Those favoring this angle argue to put the expert of distribution under the
immediate charge of the showcasing official or the business office. To finish up "the sensibility
to control credit and accumulations strategies might be doled out either to a budgetary official
or to an advertising official or to them two mutually relying on the authoritative structure and
the destinations of the firm."
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2. Choice of Proper Credit Terms

The receivables administration of a venture is required to decide the terms and conditions on
the premise of which exchange credit can be authorized to the customers are of crucial
significance for an endeavor. As the idea of the credit arrangement of a venture is settled on
the premise of segments of credit strategy. These segments incorporate; credit period, money
rebate and money markdown period. Practically speaking, the credit strategy of firms, differ
inside the scope of tolerant. A firm that tends to allow long stretch credits and its account
holders incorporate even those customers whose money related position is far fetched. Such a
firm is said to be following permissive credit arrangement. As opposed to this, a firm giving
credit deals to a generally brief timeframe that too on exceptionally specific premise just to
those customers who are fiscally solid and have demonstrated their credit value is said to be
following stringent credit arrangement.
3. Credit Investigation
A firm if necessities to keep up productive and reasonable receivables association of
receivables must attempt a genuine examination before surrendering credit to a customers. The
examination is required to be continued as for the credit regard and money related soundness
of the record holders, to keep the receivables for falling into the gathering of loathsome duties
later on at the time of total. Credit examination is not exactly as of late carried on up to this
time. Regardless, by temperance of firms rehearsing liberal credit approach such examination
might be required to be driven when an obliged people neglects to make bits of receivables due
on him even after the expiry of perceive course of action to spare capricious duties from
winding up horrifying responsibilities.
4. Sound Collection Policies and Procedures

A firm if desires to maintain effective and efficient receivables management of receivables
must undertake a thorough investigation before deciding to grant credit to a clients. The
investigation is required to be carried on with respect to the credit worthiness and financial
soundness of the debtors, so as to prevent the receivables for falling into the category of bad
debts later on at the time of collection. Credit investigation is not only carried on beforehand.
But in the case of firms practicing liberal credit policy such investigation may be required to
be conducted when a debtors fails to make payments of receivables due on him even after the
expiry of credit sale so as to save doubtful debts from becoming bad debts.
23
1.6 Parts affecting the size of receivables:

The span of receivables is controlled by various elements for receivables being a networthy
segment of current resources. As the vast majority of them differs from business to business as
per the nature and kind of business. In this manner, to examine every one of them would
demonstrate insignificant and tedious. Some fundamental and regular components deciding the
level of receivable are exhibited by method for graph in figure given beneath and are disks
underneath:
Figure 1.2
(Source: https://www.google.co.in)
24
1. Stability of Sales
Dependability of offers alludes to the components of continuity and consistency in the deals.In
other words the seasonal nature of sales violates the continuity of sales in between the year.
Thus, the offer of such a business in a specific season would be vast requiring a huge a size of
receivables. Thus, if a firm supplies merchandise on portion premise it will require a huge
interest in receivables.
2. Terms of Sale
A firm may influence its deals either on money premise or on credit basis. Truly credit is the
spirit of a business. It likewise prompts higher benefit level through development of offers. The
higher the volume of offers made on credit, the higher will be the volume of receivables and
and vice-versa.
3. The Volume of Credit Sales

stays pretty much like the greater part of the enterprises. In this way, a firm managing an
abnormal state of offers will have extensive volume of receivables.
4. Credit Policy
A firm practicing lenient or moderately liberal credit strategy its size of receivables will be
relatively large than the firm with more inflexible or seal credit approach. It is a result of two
unmistakable reasons: -
A lenient credit policy leads to greater defaults in payments by financially weak clients
resulting in greater volume of receivables.
A lenient credit policy encourages the financially sound clients to delay payments again
resulting in the increase in the size of receivables.
5. Terms of Sale
The period for which credit is granted to a customer's appropriately realizes increment or
decline in receivables. The shorter the credit time frame, the lesser is the measure of
receivables. As here and now credit ties the assets for a brief period as it were. Along these
lines, an organization does not require holding superfluous venture by method for receivables.
25
6. Cash Discount
Money rebate on one hand pulls in the customers for installments before the slip by of credit
period. As an tempting offer of lesser installments is proposed to the customers in this
framework, if a customer's prevails with regards to paying inside the stipulated period. Then
again diminishes the working capital prerequisites of the worry. Along these lines, diminishing
the receivables administration.
7. Collection Policy
The arrangement, practice and technique adopted by a business venture in allowing
acknowledge, choosing with regards to the measure of credit and the strategy chose for the
gathering of the same likewise incredibly impact the level of receivables of a worry. The more
permissive or liberal to credit and accumulation approaches the more receivables are required
with the end goal of speculation.
8. Collection Collected
In the event that an endeavor is sufficiently effective in encasing the installment joined to the
receivables inside the stipulated period conceded to the customers. At that point, it will settle
on keeping the level of receivables low. While, endeavor encountering undue postponement in
gathering of installments will dependably need to keep up large receivables.
9. Bills Discounting and Endorsement

In the event that the firm settles on marking down its bills, with the bank or underwriting the
bills to the outsider, for meeting its commitments. In such conditions, it would bring down the
level of receivables required in directing business.
10.Quality of Clients
If a company deals specifically with financially sound and credit worthy clients then it would
definitely receive all the installments in due time. Accordingly the firm can serenely do with a
lesser measure of receivables than in the event that where an organization manages customers
having financially weaker position.
26
11. Extraordinary
There are sure broad factors, for example, price level variations, state of mind of administration
sort and nature of business, accessibility of assets and the falsehoods that assume significantly
imperative part in deciding the quantum of receivables.
27
Chapter-2
INDUSTRY PROFILE OR COMPANY
PROFILE AND PROFILE OF
RESPONDENTS
28
2.1 Industry Profile
Service Sector in India today accounts for more than half of India's GDP. According to data
for the financial year 2006-2007, the share of services, industry, and agriculture in India's GDP
is 55.1 per cent, 26.4 per cent, and 18.5 per cent respectively. The fact that the service sector
now accounts for more than half the GDP marks a watershed in the evolution of the Indian
economy and takes it closer to the fundamentals of a developed economy.
Services or the "tertiary sector" of the economy covers a wide gamut of activities like trading,
banking & finance, infotainment, real estate, transportation, security, management & technical
consultancy among several others. The various sectors that combine together to constitute
service industry in India are:
 Trade
 Hotels and Restaurants
 Railways
 Other Transport & Storage
 Communication (Post, Telecom)
 Banking
 Insurance
 Dwellings, Real Estate
 Business Services
 Public Administration; Defence
 Personal Services
 Community Services
 Other Services
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There was marked acceleration in services sector growth in the eighties and nineties,
especially in the nineties. While the share of services in India's GDP increased by 21 per cent
points in the 50 years between 1950 and 2000, nearly 40 per cent of that increase was
concentrated in the nineties. While almost all service sectors participated in this boom,
growth was fastest in communications, banking, hotels and restaurants, community services,
trade and business services. One of the reasons for the sudden growth in the services sector in
India in the nineties was the liberalisation in the regulatory framework that gave rise to
innovation and higher export from the service sector.
The boom in the services sector has been relatively "jobless". The rise in services share in
GDP has not accompanied by proportionate increase in the sector's share of national
employment. Some economists have also cautioned that service sector growth must be
supported by proportionate growth of the industrial sector, otherwise the service sector grown
will not be sustainable. In the current economic scenario, it looks that the boom in the
services sector is here to stay as India is fast emerging as global services hub.
IT Sector
India's IT Services industry was conceived in Mumbai in 1967 with the foundation of the Tata
Group in association with Burroughs. The principal programming send out zone, SEEPZ – the
forerunner to the current IT stop – was built up in Mumbai in 1973. More than 80 percent of
the nation's product sends out were from SEEPZ in the 1980s.
The Indian economy experienced major monetary changes in 1991, prompting another period
of globalization and worldwide financial combination, and yearly monetary development of
more than 6% from 1993– 2002. The new organization under Atal Bihari Vajpayee (who was
Prime Minister from 1998– 2004) set the improvement of Information Technology among its
main five needs and framed the Indian National Task Force on Information Technology and
Software Development.
n 1991 the Department of Electronics broke this impasse, making a partnership called Software
Technology Parks of India (STPI) that, being possessed by the administration, could give
VSAT interchanges without breaking its restraining infrastructure. STPI set up programming
30
innovation stops in various urban areas, each of which gave satellite connects to be utilized by
firms; the nearby connection was a remote radio connection. In 1993 the administration started
to permit singular organizations their own particular devoted connections, which permitted
work done in India to be transmitted abroad specifically. Indian firms soon persuaded their
American clients that a satellite connection was as dependable as a group of software engineers
working in the customers' office.
2.2 Company profile
Who is PRIMUS?
At PRIMUS, they unite the ideal individuals, learning, philosophy, and advancements required
for the undertaking hand.
Regardless of whether you require proficient, Healthcare or IT staffing, technique counselling,

innovation combination (offsite or on location, time and materials or settled offer activities) or
seaward advancement arrangements – PRIMUS can take care of business.
They give the correct answer for their organization, be it enrolling the correct individual or
group to work specifically for outsourcing the whole task to PRIMUS. They create redid
arrangements that surpass customer's desires and They do it on time and on budget plan.
PRIMUS gives cost - compelling arrangements. Since they have specialists in practically every
industry – media communications, budgetary, social insurance, security, transportation,
counselling, coordination’s, cutting edge, oil and gas, government and neighbourliness – They
guarantee you that they will allot a group to extend that comprehends industry and requirements
that can remain aggressive in the computerized economy.
31
2.3 Background
PRIMUS Global Services, Inc., established in 2002, gives skill in Professional, Healthcare and
IT Staffing.
The PRIMUS administration group has over 50 years joined aptitude in counselling, framework
mix, outsourcing and staffing. Official group has a cosy comprehension of the difficulties
standing up to organizations in the present dynamic market. With more than 1000 specialists
worldwide and PMIUS confirmed task administrators on staff, they guarantee customers
achievement.
PRIMUS is sufficiently little that each task is imperative, and sufficiently substantial to
guarantee that each venture will complete, on time and on spending plan.
PRIMUS is a minority – affirmed business and an equivalent open-door manager.
Mission
The mission of PRIMUS is to be a global leader of technology – enabled business solutions

and services.
2.4 Management Principles
Their central goal requests that they make a flat-out sense of duty regarding magnificence in
execution. They accomplish their central goal by watching these standards.
• They focus on customer fulfilment as most imperative business objective.
• They perceive that PRIMUS's achievements are crafted by the general population who
contain PRIMUS. They energize activity, perceive singular commitment, approach every
individual with deference and decency, and manage the cost of adequate open door for
proficient development.
• They required the higher models of polished skill and specialized ability from the
people.
32
• They will keep up the most noteworthy benchmarks of morals and business direct and
work constantly inside the laws of all nations in which they work together.
• They will proactively seek after new business openings, and focus on accomplishment
in each endeavour.
Their prosperity as an organization requires that they accomplish money related execution
predictable with these standards and similar with an authority position in industry.
IT Solutions
PRIMUS has created fruitful systems to convey custom and bundle arrangements in a
circulated advancement condition. PRIMUS joins neighbourhood specialized advisors and
PMI ensured venture administrators with round-the-clock government advancement abilities.
PRIMUS' worldwide operations make it the ideal specialist organization for companies
cantered so as to-advertise. PRIMUS' advancement display has brought about a faithful and
regularly developing customer's base in the focused innovation showcase space. PRIMUS has
abilities to serve its customers at each of the 5 venture administration forms.
PRIMUS' broad aptitude incorporates:
• Enterprise asset arranging, execution, customization, relocation and transformation.

• Client server application advancement and administration.
• Network framework support and overhauls.
• Project administration.
• Configuration management
Strategic Consulting
Outlining the IT procedure for business achievement.
Effective IT procedure requires thoughtfulness regarding points of interest as well as

occasional survey of "the 10,000 foot view". With each expanding connecting of business
primary concern with effective IT technique, it has turned out to be basic to have viable,
obviously characterized objectives for all current and arranged IT frameworks.
33
In the present IR commercial centre there are various alternatives accessible locally and
additionally all around. A brilliant IT technique should consolidate efficiencies from various
alternatives, bringing about a mixed, ideal arrangement that can be transformed into activities
and accountabilities.
With its worldwide capacities, PRIMUS vital counselling group helps business/IT leaders
make a thorough, well ordered approach for saddling IT assets to meet the general business
goals.
IT product development
With a point of wide enhancement, primus is creating items that are sold straightforwardly to
organizations in the Rail business. We presently have two products accessible RailCarx and
Maintenance Advisor. These items improve efficiency while sparing cash. RailCarx was
intended to build efficiencies, throughput and amplify benefit for rail repair shops. Support
Advisor was produced to help gear proprietors and upkeep dependable gatherings rapidly and
effortlessly get to hardware wellbeing in view of open EHMS alarms, early Warnings, and
DDCT occurrences.
2.5 Primus Industries
Industries
 Rail
Primus most recent programming item – RailcarRx conveys an inventive, extensive, cloud-
empowered answer for deal with the basic parts of a Railcar Repair Shop and fundamentally
enhance throughput and benefit. This product is intended to expand efficiencies, throughput
and augment gainfulness for rail repair shops.
34
 Banking, Financial Services & Insurance
The budgetary and saving money industry has turned out to be considerably more
intricate as expanding control requires extra procedures on a continuous premise.
 High Tech / e-commerce
Keeping in mind the end goal to remain receptive to an unpredictable, requesting customers
base in an exceptionally aggressive market, High Tech and online business organizations
must grasp visit change, quicken development forms and make winning thoughts that
convert into income. PRIMUS's cutting-edge advisors take a goal; orderly way to deal with
innovative counselling that empowers organizations to make extra an incentive from their
answer and business forms, while decreasing expense and limiting danger and disturbance.
A portion of the space particular offerings for our cutting-edge customers include:
 End-to-end supply chain solutions from CRM to logistics.
 Software Product Engineering Solutions.
 Internet of Things
 Next Generation Product Engineering Offerings (Cloud Adoption)
 Mobility
 Big Data & Analysis
Manufacturing / Engineering
Contending more on a consistently extending scale, makes must be able to react rapidly to any
move in the commercial centre.
35
 Telecom / Embedded
The telecommunication industry is aggressive and keeping in mind the end goal to
contend, suppliers need to consistently enhance.
 Healthcare
While Healthcare associations keep hunting down approaches to convey more

productive care, they rely upon their IT frameworks.
2.6 ORGANISATIONAL STRUCTURE
SENIOR LEVEL MANAGEMENT
CEO
SUNIL KILARU
Director Staffing & Operations

CHANDRA MOHAN KANNURU
Associate Manager - HR
AMI BABU TC
Manager - Finance
GIGIL SEBASTIAN
36
Areas of operations
1. USA
 Dallas
2. India
• Hyderabad
• Bangalore
• Vishakhapatnam
• Pune
(source official Primus website)
2.7 Profile of Respondents
This was a census study targeting services sector located and operating within PRIMUS. Out
of 52 questionnaires administered, 34 respondents filled and returned the questionnaires. The
response rate was therefore 65% which is considered significant enough to give reliable
findings for this study. According to McBurney (2001), an above 50% response rate is
acceptable for the study because low response rate could have a potentially biasing effect on
the study results.
37
Chapter 3: -
RESEARCH METHODOLOGY
38
3.1 Statement of the Problem
Many businesses do not have the time expertise or resources to appropriately administer the
accounts receivable and the closely related business functions. Effective management of the
credit and accounts receivable process involves cooperation among sales, credit control
marketing, finance and accounting function staff. Management of accounts receivable is made
complex by the fact that it involves credit control, sales, Invoicing and finance functions of the
business. These four functions must therefore strike a balance against their conflicting interests
for the management of this important asset to be effective. If these important functions are not
effectively managed, the company can be exposed, to potentially fatal long-term losses. It is
therefore crucial that management formulate principles and practices that result to effective and
efficient management of this sensitive yet important asset of accounts receivable so as to ensure
that high turnover resulting from credit sales actually result to improved cash flows and higher
profitability.
3.2 Need to study the topic:

Measurement is another component within account receivable management. Traditional ratios,
such as turnover will measure how many times you were able to convert receivables over into
cash.
The need for presenting is Fostering credit awareness, Understanding the need for a credit
policy, understanding financial statements, applying financial analysis of financial
statements, allowing too much credit, or not managing the credit policy carefully enough,
could result in irrecoverable debts. This represents a loss of income to the company, affecting
both profitability and cash flow. So credit management has to be done. And also To reduce
administrative cost, enhance office productivity and To manage sales process more
effectively.
39
3.3 Objectives of the Study

The real goal of the examination was to research the measures and practices got a handle on
by social occasion firms in PRIMUS for appropriate association of records receivables.
 To analysis the principle of credit extension on management of receivable
 To study the principle effectiveness of credit collection in receivables
 To study the applicability of credit control techniques used to monitoring the
receivables
 To analysis the impact of sales in receivable management
 To study the maximum profitability attainment of an organisation.
3.4 Research Methodology
 Sampling
A census was carried out and hence the Five Clients firms in PRIMUS were used in the study.
 Tools for Data Collection

Primary data was collected using semi-structured questionnaire administered to the chief
finance officer and key credit control department personnel in the selected companies to
collect both qualitative and quantitative information. The drop-and-pick later approach was
used in this study and was considered an appropriate method because it gave the
respondents time to complete the questionnaire and also gave the researcher an opportunity
to review the questionnaire before picking to ensure completeness of the responses. Where
necessary, personal interviews and documentary analysis was conducted to enhance
validity. Secondary data was obtained from financial statements maintained by the
companies
 Tools for Data Analysis

Data gathered from the primary data and secondary sources was analysed by writing survey.
Diagrams, charts and tables were utilized to show the discoveries.
40
Chapter – 4
DATA ANALYSIS
41
CORPORATE MODEL
To enable us model the relations between independent variables which determine net
savings from changes in credit policy as a dependent variable, a new corporate model has been
introduced.
Consequently, the main findings is new corporate model for calculating net savings
from changes in credit policy.
NS = (SP–VC)xAU–SP xAUxBD - (CU+AU)+UC(1) – CU x UC(0) x RR

100 ART(1) ART(0) 100
Whereby dependent variables UC(0) and UC(1) are defined by
UC(0) = FC + VC
UC(1) = (FC + VC) x CU + VC x AU

CU + AU
The new corporate model is a mathematical model designed to determine an optimal

decision from among different credit policies and involves a set of equations for calculating
net savings from changes in credit policy. This model helps management better understand the
business and its functional relationships as well as helping to improve decision-making ability
in management of accounts receivable.
A financial manager may decide to liberalize credit policy only if the net advantage of
relaxation in credit standards occurs and must ensure that in his decision to change a credit
policy this condition is met:
Net savings from changing in credit policy > 0.
The decision rules would then be defined as follows:
If NS > 0 extend credit
If NS = 0 probably extend credit (marginally acceptable)
If NS < 0 do not extend credit.
42
This was a census study targeting all services sector located and operating within PRIMUS.
Out of 52 questionnaires administered, 34 respondents filled and returned the questionnaires.
The response rate was therefore 65% which is considered significant enough to give reliable
findings for this study. According to McBurney (2001), an above 50% response rate is
acceptable for the study because low response rate could have a potentially biasing effect on
the study results.
Credit Policy Objectives
The respondents were required to rate their firms credit policy objective on a rating of
1- for “very important” 2- for “important”,3- for “necessary” and 4- for “not important” from
among the listed objectives. The responses are presented in the table below
Table 1: Credit Policy Objectives
AVERAGE FREQUENC PERCENTAGE OF

OBJECTIVE RATING Y RESPONDENTS (%)
Elimination of bad clients 1 34 100
Minimize credit costs 2 34 100
Tool to gain competitive advantage 2 34 100
Earn interest on overdue accounts 4 34 100
The study found that on average, elimination of bad clients is considered the most
important objective of having a credit policy. Minimization of credit costs and credit as a
tool to gain competitive advantage are considered as important credit policy objectives. On
the other hand, earning interest on overdue accounts is not considered an important objective
of having a credit policy.
43
Credit Risk Analysis
The respondents were required to rate the requirements that a credit client should meet
for credit appraisal on a rating of 1- for “very important” 2- for “important”,3- for
“necessary” and 4- for “not important” from among the listed requirements.
The responses are presented in the table below
Table: 2 Credit Risk Analysis
REQUIREMENT FOR AVERAGE FREQUENCY PERCENTAGE OF

CREDIT APPRAISAL RATING RESPONDENTS (%)
Character 1 34 100
Capacity 1 34 100
Capital 1 34 100
Collateral 2 34 100
Condition 3 34 100
The study found that on average, capacity; that is the clients‟ ability to pay the
requested credit, character, that is, the applicants record of meeting past obligations and
capital, which is the financial strength of the applicant as being the most important
requirements for credit appraisal. Collateral, which is the asset the applicant has available
for securing credit is considered as an important requirement for credit appraisal. Condition,
which is the impact of general economic conditions, is considered as only necessary
requirement for credit appraisal.
44
Variation of Credit Terms
The respondents were required to indicate whether their firms‟ normally vary its
credit terms for particular clients, particular products, or particular season. The responses
are presented in the table below:
Table 3: Variation of Credit Terms
TARGET YES NO
FREQUENCY PERCENTAGE FREQUENCY PERCENTAGE OF
OFRESPONDENTS RESPONDENTS (%)
(%)
Particular 32 94 2 6
clients
services
season
Credit terms are the stipulations under which the firm sells on credit which may have
an impact of stimulating sales for different clients, different products and different seasons.
More than fifty percent of the respondents vary their credit terms for different clients,
different products and also different seasons. The study found that credit terms for clients
are varied depending on the ability of the clients to pay, the length of time the clients has
traded with the firm and the amount of credit being sought. Credit terms for services are
varied depending on whether the services is fast or slow moving and its perishability or
obsolescence. Credit terms are varied depending on the demand in different seasons.
45
Credit Collection Policy
Strategies of Dealing with Overdue Accounts
The respondents were required to rate the various strategies adopted by their firms
in dealing with overdue accounts on a rating of 1- “for mostly used”, 2- for “averagely
used”,3- for “rarely used” and 4- for “never used”. The responses are presented in the table
below:
Table 4: Strategies of Dealing with Overdue Accounts
STRATEGY AVERAGE NUMBER OF PERCENTAGE OF
RATING RESPONDENTS RESPONDENTS
Sending reminder notes 1 34 100
Making telephone calls 1 34 100
Use of debt collection 3 34 100
Agencies
Institute legal proceedings 3 34 100
Leave Clients alone to 4 34 100
decide when to pay
Put the accounts on hold 2 34 100
and stop further sales
Factor the account 4 34 100
Write off the accounts as 3 34 100
bad debt
Charge interest on overdue 3 34 100
Accounts
46
The study found that on average, sending reminder notes and making telephone calls
were the mostly used strategies in dealing with overdue accounts whereas putting the account
on hold and stop further sales is averagely used. The least used strategies are leaving the
clients alone to decide when to pay and factoring the accounts.
Incentives Used To Encourage Prompt Payment
The respondents were required to indicate the incentive they give their clients to encourage
prompt payment. The responses are presented in the figure below.
Figure 1: Incentives Used to Encourage Prompt Payment
10%
Trade Discounts
Promotional Gifts
90%
Cash discount which is the price reduction given for early payment is the mostly used
incentive to encourage prompt payment with thirty-one of the respondents which represent
ninety-one of the respondents indicating its use as compared to trade discount and
promotional gifts with nine percent and zero percent of the respondents respectively. The
study also found out that cash discounts and trade discounts are being used simultaneously
by some firms to encourage large sales and prompt payment.
47
 Level of Bad Debts Written Off
The respondents were required to indicate the level of bad debts written off for each
of the five years under study. The figure shows average number of respondents for the
different levels of bad debts written off.
Figure 2: Level of Bad Debts Written Off
3%1%
12%
Below 5%
5%-10%
10%-20%
Above 20%
84%
On average, twenty-nine of the respondents which represent eighty five percent of the
respondents indicated to have written off less than five percent of their accounts receivable as
bad debts while none had written off more than twenty percent of their accounts receivable as
bad debts.
48
Figure 3: Average collection period.
60
53
50
40
30
20
20 18
12
9
10 7 6
4 3 2
0
0-15 15-30 30-45 46-60 Above 60 days
FREQUENCY PERCENTAGE OF RESPONDENTS (%)
It can be observed that a majority, eighteen of the respondents which represent fifty
three percent of the respondents had an average collection period of between thirty and forty-
five days and only two of the respondents which represent six percent of the respondents had
an average collection period of above sixty days.
49
Credit Control and Monitoring
 Existence of Autonomous Credit Control Department
The respondents were required indicate whether their firms had

autonomous credit control department. The responses are presented below
Figure 4: Existence of Autonomous Credit Control Department
70
60
62
50
40
38
30
20
21
10 13
0
With credit department Without credit department
This question intended to establish the number of firms that have an independent credit
department to exclusively deal with management of accounts receivable. As can be depicted
from the table above, thirteen of the respondents which represent thirty eight percent of the
respondents had an established autonomous credit control department. The study found out that
those firms with autonomous credit departments had shorter average collection period and low
incidences of bad debt write off.
50
 Professional Qualification of Head of Credit Control Department
The respondents were required to give the relationship between professional training
in credit management and the level of efficiency in the management of accounts receivable in
those firms with an independent credit control department.
The responses are presented in the table below.
Table 5: Professional Qualification of Head of Credit Control Department
QUALIFICATION LEVEL OF NUMBER OF PERCENTAGE OF
EFFICIENCY RESPONDENTS RESPONDENTS
Degree and above Very good 13 38
Diploma in credit Good 7 21
Management
Certificate in credit Average 5 15
Management
Certified accountant Good 9 26
Total 34 100
Thirty eight percent of the respondents indicated that personnel with a degree and
above were very good in the management of accounts receivable. Twenty one percent of the
respondents indicated that personnel with a Diploma in credit management were good and
fifteen percent of the respondents indicated that personnel with a certificate in credit
management were average in credit management. However, even without a professional
training on credit management, the level of efficiency of a certified accountant was as good
as that of one with a Diploma in credit management.
51
Techniques for Managing Credit Risk Exposure
The respondents were required to rate the various techniques for managing credit risk
exposure on a rating of 1- for “very important”,2- for “important”,3- for “necessary” and 4-
for “not important”. The responses are presented in the table below:
Table 6: Techniques for Managing Credit Risk Exposure
TECHNIQUE AVERAGE FREQUENCY PERCENTAGE OF
RATING RESPONDENTS (%)
Debt collection 2 34 100
services
Credit insurance 2 34 100
Letters of credit 1 34 100
Factoring 2 34 100
Instituting legal 3 34 100
Proceedings
The study found that on average, letters of credit is a very important technique
for managing credit risk exposure. Use of debt collection services, credit insurance and
factoring of accounts were found to be important techniques for managing credit risk
exposure. The least important technique was found to be instituting legal proceedings
against defaulters.
52
Techniques for Monitoring the Quality of Accounts Receivable
The respondents were required to indicate the method commonly used to monitor
the quality of their accounts receivable from among the three listed. The responses are
presented in the figure below:
Figure 5: Techniques for monitoring the quality of accounts receivables
60
50
50
40
30
29
20
17 18
10
10
6
0
Immediate After one day Within one week
Fifteen of the respondents which represent forty four percent of the respondents
indicated that they used Payment pattern monitoring, which is the normal timing in
which a firms clients pay their accounts. Eleven of the respondents which represent
thirty two percent of the respondents indicated that they used aging of accounts
receivable where the accounts receivables are classified by the number of days
outstanding. Eight of the respondents which represent twenty four percent of the
respondents indicated that they used ratio analysis, the most commonly used ratios were
rate of debtors turnover ratio and average collection period.
53
Value of Accounts Receivables on Total Current Assets
The respondents were required to indicate the percentage of current assets represented
by accounts receivables for each of the five years under study. The table below shows
average number of respondents for the different ranges of the percentage of current assets
represented by accounts receivables.
Table 7: Value of Accounts Receivables on Total Current Assets
% OF CURRENT ASSETS FREQUENCY PERCENTAGE OF
REPRESENTED BY ACCOUNTS RESPONDENTS (%)
RECEIVABLES
Below 25% 7 21
Between 25%- 50% 23 68
Between 50% - 75% 3 9
Above 75% 1 3
Total 34 100
On average, twenty-three of the respondents which represent sixty eight percent of the
respondents indicated to having between twenty-five and fifty percent of their current assets
in form of accounts receivable. Seven of the respondents which represent twenty one percent
of the respondents indicated to having below twenty five percent of their current assets in
form of accounts receivable.
54
Invoicing System
The respondents were required to indicate the invoicing system in use in their firms.
The responses are presented in the table below:
Table 8: Invoicing System
INVOICING SYSTEM FREQUENCY PERCENTAGE OF
RESPONDENTS (%)
Manual 12 35
Automated 22 65
Total 34 100
Invoicing system to a large extent influences the accuracy and speed of processing
invoices. Twenty-two of the respondents which represent sixty five percent of the respondents
indicated to have automated invoicing system whereas twelve of the respondents which
represent thirty five percent of the respondents indicated to be using the manual system of
invoicing. The study found that the firms with automated invoicing system had fewer cases of
disputed invoices.
55
Timing of Invoicing after a Sales Transaction
The respondents were asked to indicate the time when they present invoices to their
clients. The responses are presented in the figure below.
Figure 6: Timing of Invoicing After a Sales Transaction
60
50
50
40
29
30
20 17 18
10
10 6
3
1
0
Immediate After one day Within one week Within one month
The speed of invoicing is critical to maximizing accounts receivable turnover.

Seventeen of the respondents which represent fifty percent of the respondents indicated that
they invoice their clients immediately a sales transaction is made, that is, on delivery of the
goods. Ten of the respondents which represent twenty nine percent of the respondents indicated
that they invoice their clients one day after a sales transaction is made. Six of the respondents
which represent eighteen percent of the respondents indicated that they invoice their clients
within one week of a sales transaction. One of the respondents which represent three percent
of the respondents indicated that they invoice their clients within one month of a sales
transaction. The study found out that speedy presentation of invoices reduces the average
collection period.
56
Techniques of Dealing with Disputed Invoice
The respondents were required to indicate the technique they mostly used in dealing
with a disputed invoice. The responses are presented in the table below:
Table 9: Techniques of Dealing with Disputed Invoice
TECHNIQUE FREQUENCY PERCENTAGE OF
RESPONDENTS (%)
Making concession 12 35
Drawing a new invoice with 13 38
corrected amounts
Sending a debit note 9 27
Total 34 100
How a disputed invoice is dealt with will determine how much longer the firm will
have to wait before receiving payment from the clients. Thirteen of the respondents which
represent thirty eight percent of the respondents indicated that they draw new invoices
showing the correct amounts which they send to the clients. This means that the firm will
have to wait longer by the length of time the invoice was in dispute. The reason given for
this was accountability on the part of the book keepers. Twelve of the respondents which
represent thirty five percent of the respondents indicated that they make concession on the
disputed invoice and simply receive the lesser payment.
57
CHAPTER - 6
RESULTS/OBSERVATIONS,
FINDINGS& SUGGESTIONS
58
This chapter discusses the summary and conclusions of the research findings in relation
to the objectives as stated in chapter one.
5.1 Observations
The study aimed at investigating the principles and practices adopted by the firms in
PRIMUS for effective management of accounts receivables. The results from the study
revealed several factors that affect the management of accounts receivable. With regard to
credit extension policy, the study revealed factors such as lack of a formal credit policy, delayed
or non-review of the credit policy manual, inconsistency on credit risk analysis procedures,
lack of clear credit policy objectives and haphazard variation of credit terms which pose a real
challenge to the effective management of accounts receivables.
 On credit collection, the study revealed erratic fluctuation in the average

collection period through the five years under study.
 There were also significant amounts of bad debts written off in the same period,
which is an indication of either lack of, or inconsistent application of credit
collection policy procedures and weak follow up strategies on overdue
accounts.
 A surprisingly large number of firms did not have a credit control function at
all. Instead, the standard practice was to invoice all credit clients and hope that
they pay approximately on time.
 Its only when the company accumulated a few large bad debt losses did the
management take action to institute credit risk analysis for its clients.
 The firms with autonomous credit control departments reported shorter average
collection periods and fewer bad debt write offs.
 Credit monitoring was weak in those firms without autonomous credit control
departments as evidenced by their holding of large accounts receivable in their
current assets portfolio.
 A sizeable number of firms were still using manual invoicing system and others
took a considerable time to present invoices to their clients.
 This goes to explain the existence of delayed payments by clients as evidenced
by the long average collection period of these firms. Use of manual invoicing
system may also be attributed to the high frequency of disputed invoices in these
firms.
59
5.2 Conclusion
Accounts receivable management includes determining an appropriate credit policy as

well as investigating ways of speeding up collections and reducing bad debts.
We analyzed the structure of receivables, accounts receivable levels expressed in terms

of financial ratios along with a dependence between accounts receivable levels and profitability
and we also analyzed changes in credit policy as an important activity in management of
accounts receivable. A corporate model has been designed on the basis of the analysis results
of this activity. The development of the model essentially involves a definition of variables and
model specification.
Major findings include a new corporate model for calculating net savings from changes
in credit policy and demonstration of the correlation between accounts receivable levels and
profitability. The contribution of this paper is to model all the relationships between
independent variables which determine net savings from changes in credit policy as an
dependent variable. The corporate model can be used as a tool to consider changes in credit
policy and to make optimum use of accounts receivable in order to achieve a maximum return
at an acceptable level of risk.
The study concludes that although there exists some practices guiding extension of
credit to clients, their weak implementation as evidenced by lack of formal credit extension
policy, delayed or non-review of the policy manual, inconsistency on credit risk analysis pose
a challenge to effective management of accounts receivables. The study also concludes that
there is either lack of or inconsistent application of credit collection policy procedures and or
weak follow up strategies on overdue accounts which hampers effective accounts receivables
management. The study further concludes that due to weak or inadequate credit control and
monitoring procedures, manufacturing firms continue to face a challenge ineffectively
managing their accounts receivables. Finally, the study concludes that timely and accurate
invoicing procedures are an important component in the effective management of accounts
receivable that would ensure a reduction in bad debts and improved liquidity for manufacturing
firms.
60
5.3 Recommendations
From the findings of the study the researcher makes the following recommendations:
The firms should create a credit extension policy which should be adhered to always
and periodically reviewed to see when it should be changed to match with economic conditions.
The policy should be able to attract new clients as well as protect the firm from potential bad
clients.
Firms should create a credit collection policy setting out the procedures and practices
to be used by the company to collect overdue or delinquent accounts receivable. This policy
should allow for simultaneous use of a combination of several collection strategies that ensures
that the firm not only improves its cash flow by shortened average collection period but also
does not suffer bad debt losses.
It is of importance that management approves the formation of a well-run autonomous

credit department that will allow the imposition of a comprehensive set of operating policies
and procedures so as to achieve a reduction in bad debt losses and an improvement in liquidity
through shortened average collection periods. Credit monitoring should be enhanced to
evaluate the quality of accounts receivables to reduce over-investment in accounts receivable
as currently witnessed by a sizeable number of firms.
Firms should automate their invoicing system to cut down on the time taken to present
invoices to clients. This will reduce the average collection period. Automated invoicing will
also serve to reduce the errors in invoices thus reducing the number of those disputed.
61
5.4 Learning Experience
To conduct this research first I conducted a survey based on accounts receivables in

the company and interacted with the employees to know the procedures carried on to
maintain them and also how the recover the debts.
After the process I prepared a questionnaire and took feedback from 50 employees
about their process and ways to recover the debts and also personal questions based on their
interest.
Lastly, I learnt to prepare the tables and graphs based on the questionnaire data from
the employees. I also learnt to give written analysis and interpretation for the tables and
graphs and also give findings, suggestions and conclusion for my topic.
62
REFERENCES
Andrew, B 2008.Accounts receivable, Strategies, Experiences and Intentions, Global

supply management Aberdeen Group Inc.
Arnold, G. (2005). 3rd Edition Corporate Finance Management; London Financial times
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Management; Concise Edition. South Western.
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Journal. vol 32. Elsevier Ltd.
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London.
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Damilola,D.A (2005).1st edition Corporate Finance Issues Investigations, Innovations and

Applications; Lagos.High Rise Publications.
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Quantitative Analysis No. 19, 271 – 285.
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Website:
http://www.iloveindia.com/economy-of-india/service-sector.html#x7sOc1lOyd7s4u1s.99
64
ANNEXURE
65
QUESTIONNAIRE
Respected Sir/Madam
I am NIKITHA N MBA student of Indian Academy Schools of
Management Studies. I would like to conduct a project study of PRIMUS Global
Technologies Pvt Ltd, Bangalore for my academic purpose. I solicit your
esteemed co-operation to fill up your answers of the following questions. Please
put a tick (√) in the appropriate columns.
Issues Related to Accounts Receivable Management
1. What percentage of your total current assets is represented by accounts

receivables?
Answer using a tick (√)
a) Below 25% ( )
b) Between 25% - 50% ( )
c) Between 50% - 75% ( )
d) Above 75% ( )
2. In your opinion, how would you generally rate your company’s

account receivable
Management policy. Answer by putting a tick ( √ ) as appropriate.
a) Excellent ( )
b) Good ( )
c) Average ( )
d) Below Average ( )
66
3. Does your company have a credit policy manual? Yes ( ) No ( )

If yes, then answer the following
i. Which of the following are the components of your company credit policy
manual?
a) The credit period ( )
b) The credit limits ( )
c) Discount rate and period ( )
d) Any other, (Please specify) __________________________________
ii. How often is the credit policy manual used by the management?
a) Always ( ) b) Sometimes ( ) c) Never ( )
iii. Who of the following personnel in your company is in charge of

implementing the credit policy?
a) Managing director ( )
b) Chief finance officer ( )
c) Credit controller ( )
d) Any other, (Please specify) __________________________________
iv. Rank the credit policy objectives in your company use (1) for very
important (2) for important (3) for necessary and (4) for not important.
a) Minimizing credit cost ( )

b) Elimination of bad clients ( )
c) Tool to gain competitive advantages ( )
d) Earn interest on an overdue account ( )
v. Do you review the company credit policy Yes ( ) No ( )
vi. If yes how often? Yearly, quarterly, never etc. Please state__________
67
vi. In order of importance, which of the following requirements does your

company consider when appraising credit application by clients? Use: 1
for very
Important, 2 for important, 3 for necessary and 4 for not important
a) Character of the clients i.e. clients willingness to pay ( )
b) Capacity of the clients, i.e. clients’ ability to pay ( )
c) Capital i.e. financial strength of the clients ( )
d) Collateral i.e. the asset the clients has for securing the credit ( )
e) Condition of the clients i.e. the impact of general economic environment
( )
viii. What is the level of involvement of the following personnel in credit risk
assessment? Use 1 for most involved, 2 for averagely involved, 3 for
rarely and 4 for never involved.
Personnel
a) Chairman ( )
b) Managing Director / General Manager ( )
c) Departmental head ( )
d) Credit manager ( )
e) Finance manager ( )
Any other Please specify___________________________
68
4. i. What action (s) does your company take in dealing with overdue
accounts? Use 1 for mostly used, 2 for averagely used, 3 for rarely used
and 4 for never used.
a) Sending reminder notes ( )
b) Making telephone calls ( )
c) Use of collection agencies ( )
d) Institute legal proceedings ( )
e) Leave the clients alone to decide when to pay ( )
f) Put the Accounts on hold and stop further sales ( )
g) Write off the account as bad debt ( )
h) Charge interest on overdue amounts ( )
ii. Which of the following is the incentive mostly offered by your company to
encourage clients to pay promptly?
a) Cash discounts ( )
b) Trade (volume) discounts ( )
c) Giving promotional gifts ( )
d) None of the above ( )
e) Any other, please specify__________________________________
iii. Have your company ever written off debts as bad? YES ( ) NO ( )
If yes, please answer the following
iv. What percentage was the bad debts written off to the total debts for that
period?
a) Below 5% ( )
b) Between 5% - 10% ( )
c) Between 10% - 20% ( )
d) Above 20% ( )
69
v. Briefly state the factors that led to the situation above.

___________________________________________________________
___________________________________________________________
5. i. Does your company have an independent credit control department?

Yes ( ) No ( )
ii. If No, briefly explain why____________________________________

_________________________________________________________
iii. How frequent does the credit committee meet?
a) Monthly ( )
b) Weekly ( )
c) Any other, please specify_______________________________
iv. Briefly state the role played by the credit committee in managing
your company’s accounts receivable
______________________________________________________
______________________________________________________
v. What are the qualifications and experience of the head of the credit
control department?
______________________________________________________
______________________________________________________
70
vi. To whom is the head of the credit control department directly

answerable to?
b) Chief Finance Officer ( )
c) Marketing manager ( )
d) Sales Manager ( )
e) Any other, please specify_________________________
vii. Who of the following officers in your organization is in charge

of approving the customer credit application?
b) Finance control ( )
c) Credit controller ( )
d) Sales manager ( )
viii. How often does the company review its accounts receivable?
a) Weekly ( )
b) Monthly ( )
c) Quarterly ( )
d) Any other, please specify________________________
6. i. How does your company process invoices?
a) Manual system ( )
b) Automated system ( )
71
ii. How long after a sales transaction does your company take to invoice a
customer?
a) One day ( )
b) One week ( )
c) One month ( )
d) Any other please specify_____________________
iii. How do you deal with a disputed invoice? Briefly explain

a) Make concession to the disputed amount ( )
b) Draw another invoice correcting the errors ( )
c) Send the customer a debit note ( )
d) Any other, please specify_____________________
72
PROGRESS REPORT - 1
Sl. No. Particulars
1 Name of the Student NIKITHA N
2 Registration Number 1670CMD040
3 Name of College Guide Prof. KUPPU SWAMY
4 Name and contact no of the Co- Mr. NARAYANA

Guide/External Guide
(Corporate)
5 Title of the Project Issues in Receivable Management
6 Name and Address of the Primus Global Technologies Pvt Ltd.

Company/Organization where 28/2 Siddapura Whitefield Main Road
dissertation undertaken with Date Bangalore - 560 066
of starting Dissertation 1st August 2017
7 Progress report: A brief Number of meetings with guide: 7 times

note/Paragraph
(The work completed on project
work after the 1st progress report Place visited: Primus Global Technologies.
submission) (Whitefield)
Books referred: Brigham, F, Houston J. F,

Eugene F. (2009). 6th Edition Fundamentals of
Financial Management
Meeting with persons: Mr. Narayana (Asst.

Magner payroll)
Activities taken up for collecting data.

1. Completed 1 chapters of the project and now
completing 2rd
Date:
Signature of the Candidate Signature of the College Guide
73
PROGRESS REPORT - 2
Sl. No. Particulars
1 Name of the Student NIKITHA N
2 Registration Number 1670CMD040
3 Name of College Guide Prof. ROHINI SAJJAN
4 Name and contact no of the Co- Mr. NARAYANA

Guide/External Guide
(Corporate)
5 Title of the Project Issues in Receivable Management
6 Name and Address of the Primus Global Technologies Pvt Ltd.

Company/Organization where 28/2 Siddapura Whitefield Main Road
dissertation undertaken with Date Bangalore - 560 066
of starting Dissertation 1st August 2017
7 Progress report : A brief Number of meetings with guide: 4 times

note/Paragraph
(The work completed on project Place visited: Primus Global Technologies.
work after the 1st progress report (Whitefield)
submission)
Books referred: Damilola,D.A (2005).1st edition
Corporate Finance Issues Investigations,
Innovations and Applications; Lagos
High Rise Publications.
Meeting with persons: Mr. Narayana (Asst.

manager payroll)
Activities taken up for collecting data.

1. Completed 3 chapters of the project and now
completing 4th
Date:
Signature of the Candidate Signature of the College Guide
74

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ISSUES RELATED TO ACCOUNTS RECEIVABLE MANAGEMENT

“ISSUES RELATED TO ACCOUNTS RECEIVABLES

Project Report submitted in partial fulfilment of the requirements for the

Hennur Cross, Kalyan Nagar, Bengaluru – 560 043

management” Is an original work of Ms NIKITHA bearing University Register Number

SIGNATURE OF GUIDE SIGNATURE OF DIRECTOR

CERTIFICATE FROM THE COMPANY

DECLARATION BY THE STUDENT

fulfilment for the award of Master’s Degree in Business Administration by Bangalore

Place: Bengaluru Name:

Date: Reg Number:

CHAPTER CHAPTER PAGE

1.1 Theoretical Background

INDUSTRY PROFILE OR COMPANY

2.1 Industry Profile

2.7 Profile Of Respondents

3.1 Statement of the Problem

3.4 Research Methodology

4 DATA ANALYSIS 31-47

RESULTS/OBSERVATIONS, FINDINGS &

5.1 Observations 48-52

1 Table showing the Credit Policy Objectives

4 Table showing Strategies of Dealing with Overdue Accounts

Graph showing the Incentives Used To Encourage Prompt

2 Graph showing the Level of Bad Debts Written Off

3 Graph showing the Average collection period.

Graph showing the Techniques for monitoring the quality of

Graph showing the Timing of Invoicing After a Sales

1.1 Theoretical Background

An offer of credit is an evitable(unavoidable) requirement in the business

As appeared by Robert N. Anthony, "Accounts receivables are amounts owed to the

The book obligations or receivable emerging out of credit has three

• It includes a component of hazard, which ought (should) to be carefully evaluated.

• It depends on financial matters esteem. The monetary incentive in products and

1.2 Instruments Indicating Receivables

 Open Book Account

 Debatable (Negotiable) Promissory Note

It is an unconditional composed guarantee marked by the creditor to pay a positive whole of

 Increment (Increase) in Profit

 Enlarge Client's Resources

Figure No. 1.1

1.3 Cost of Maintaining Receivables

(A) Credit Investigation and Supervision Cost

(B) Collection Cost

3. Creation and Selling Cost

4. Unfortunate behavior Cost

1.4 Components affecting the size of receivables:

 The Volume of Credit Sales

 Bills Discounting and Endorsement

1.5 Measures of receviable management:

So as to include productivity, soundness and adequacy to receivables administration, an

2. Choice of Proper Credit Terms

4. Sound Collection Policies and Procedures

1.6 Parts affecting the size of receivables:

3. The Volume of Credit Sales

9. Bills Discounting and Endorsement

2.1 Industry Profile

2.2 Company profile

Regardless of whether you require proficient, Healthcare or IT staffing, technique counselling,

PRIMUS is a minority – affirmed business and an equivalent open-door manager.

The mission of PRIMUS is to be a global leader of technology – enabled business solutions

2.4 Management Principles

• They focus on customer fulfilment as most imperative business objective.