A

Project Report
On

“A STUDY ON IDENTIFY THE PROBLEM AND

MAKE A REPORT ON IT WITH SUGGESTIVE SOLUTIONS”
At
“M.S. ENGINEERING WORKS, PUNE”
By
NEHA CHAVAN
Under the guidance of
PROF. (DR.) NIDHI AMIT MEDHEKAR
Submitted to
Savitribai Phule Pune University
In partial fulfilment of the requirement of the award of the degree
Of
M.B.A. Through

SHREE SHIVAJI MARATHA SOCIETY’S

INSTITUTE OF MANAGEMENT AND RESEARCH
ARANYESHWAR, PARVATI,
PUNE 411009
BATCH 2023-2025

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 DECLARATION OF STUDENT

(CERTIFICATE OF ORIGINALITY/DECLARATION)

This is to declare that I have carried out this project work myself in partial fulfilment of
the MBA Program of Savitribai Phule Pune University.
The work is original, has not been copied from anywhere else and not been submitted to
any other University/Institute for an award of any degree/diploma.

Date Signature

Place: Pune Name: Neha Chavan

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 DECLARATION OF GUIDE

This is to certify that the work incorporated in this Project Report on A STUDY ON
IDENTIFY THE PROBLEM AND MAKE A REPORT ON IT WITH SUGGESTIVE
SOLUTIONS submitted by Neha Chavan is his/her original work and completed under my
guidance. Material obtained from other sources have been duly acknowledged in the
Project Report.

Date: Signature of Guide

Place: Pune

ACKNOWLEDGEMENT

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 I would like to express my sincere thanks to the Savitribai Phule Pune University
and Shri Shivaji Maratha Institute of Management and Research for giving me the
opportunity to prepare and present this report.
“There is a good saying that the work is successfully completed if the guided properly
at the right time by the right person”, with that the good opportunities that we receive as
well as the efficient supervision and the most valuable the internal guidance.
Hereby I would like to express my deep gratitude to our project guide “Prof. (Dr.)
Nidhi Medhekar”, who in his/her busy schedule provided us with full support and
encouragement, his/her wholehearted cooperation throughout the progress and the
completion of the project.
Last but not the least; I would like to thank our Director Dr. Prajakta Warale for
her expertise guidance and making available all resources such as library computer lab etc.
I also extend my gratitude towards my friends and other faculty for their encouragement
and direct or indirect support i completion of my project.

Name of the Student

Neha Chavan

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 Table of Content

Chapter Number Name of Chapter Page Number

1 EXECUTIVE SUMMARY 6-7
2 INTRODUCTION 8-9
3 LITERATURE REVIEWS 10
4 COMPANY PROFILE / 13-14
ORGANIZATIONAL PROFILE
6 RESEARCH METHODOLOGY 15-16

7 DATA ANALYSIS & 17-27

INTERPRETATION
8 FINDINGS, SUGGESTIONS &
CONCLUSIONS

9 BIBLIOGRAPHY

10 ANNEXURE 28-32

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 EXECUTIVE SUMMARY

During my internship on A STUDY ON IDENTIFY THE PROBLEM AND MAKE A REPORT

ON IT WITH SUGGESTIVE SOLUTIONS” This project aims to conduct a thorough visit to
M.S. Engineering Works, identify key operational problems, and propose actionable solutions to
enhance overall performance and efficiency. Through comprehensive analysis and stakeholder
engagement, our goal is to provide strategic recommendations that drive sustainable
improvements.

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Project Overview: This project aimed to visit “M.S. ENGINEERING WORKS, PUNE” to
identify key issues within their operations and compile a detailed report with recommended
solutions. A combination of interviews, surveys, and data analysis was used to uncover the
underlying problems and offer actionable insights.

Methodology:

 Site Visits: Conduct on-site evaluations to observe operational processes and identify
inefficiencies.
 Interviews and Surveys: Engage with key stakeholders through structured interviews
and surveys to gather qualitative and quantitative data.
 Data Analysis: Analyze collected data to identify trends, root causes of problems, and
areas for improvement.
 Benchmarking: Compare the company's performance with industry standards to
highlight gaps and opportunities.

Key Findings:

1. Operational Inefficiencies: Identified bottlenecks in production processes leading to

delays and increased costs.
2. Employee Morale: Highlighted issues related to employee satisfaction and engagement,
impacting overall productivity.

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 3. Customer Feedback: Recognized concerns raised by customers about product quality
and service delivery.
4. Technology Gaps: Noted outdated systems and processes that hinder efficiency and
innovation.
5. Operational Bottlenecks:
1. Production delays due to outdated machinery and inefficient workflow.
2. Lack of standardized processes causing inconsistencies and errors.
6. Communication Breakdown:
1. Poor inter-departmental communication leading to misalignment and conflicts.
2. Absence of clear communication channels for feedback and updates.
7. Employee Discontent:
1. High turnover rates due to job dissatisfaction and lack of career growth
opportunities.
2. Limited training and development programs affecting employee morale and
performance.
8. Customer Service Challenges:
1. Inadequate handling of customer complaints resulting in decreased satisfaction.
2. Insufficient feedback mechanisms to address and resolve customer issues
promptly.

Suggested Solutions:

1. Process Optimization: Streamline production workflows to eliminate bottlenecks and

reduce lead times.
2. Employee Engagement Programs: Implement initiatives to boost employee morale,
including regular feedback sessions and professional development opportunities.
3. Quality Improvement Plans: Introduce quality control measures and customer feedback
loops to enhance product and service standards.

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 4. Technology Upgrades: Invest in modern technologies and systems to improve
operational efficiency and support innovation.
5. Enhancing Operational Efficiency:
1. Implementing modern technology and automation to streamline processes.
2. Establishing standardized operating procedures to minimize errors and delays.
6. Improving Communication:
1. Developing a structured communication strategy to ensure clarity and consistency.
2. Introducing regular team meetings and collaboration tools to enhance teamwork.
7. Boosting Employee Engagement:
1. Creating a comprehensive employee recognition program to increase job
satisfaction.
2. Offering continuous professional development and clear career advancement
pathways.
8. Elevating Customer Service:
1. Setting up a dedicated customer support team to handle complaints effectively.
2. Implementing a robust feedback system to proactively address customer concerns.

Conclusion:

The visit to M.S. Engineering Works has provided valuable insights into the challenges faced by
the organization. By addressing the identified issues and implementing the proposed solutions,
the company can achieve significant improvements in performance, employee satisfaction, and
customer experience. The execution of the recommended plan will require commitment and
collaboration from all stakeholders to ensure successful outcomes.

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 CHAPTER 1:
INTRODUCTION

INTRODUCTION

Meaning and Definition

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A trader very often buys and sells goods on credit. Credit is a very powerful instrument to
promote sales. In working capital management sundry Debtors are one of the significant and
major components. In a business concern next to inventories and cash, the Accounts Receivable
is an important aspect of financial planning and control the world ‘Accounts Receivables’
otherwise termed as ‘Sundry Debtors’ or ‘Trade Debtors’ or ‘Book Debts’. Sundry Debtors may
be defining as “Money due from a customer for sale of good or services in the ordinary course of
business.”
The term Accounts Receivable is defined as “Debt owed to the firm by customers arising from
sale of goods or services.”
Accordingly, when a purchase is made on credit, he undertakes to make payment of the goods
purchased to the seller at a future date. In other words, when goods or services are sold on credit,
finished goods get converted into Accounts Receivable in the books of the seller. On the other
hand, a debt due to the seller or any goods or services purchased on credit is termed as Accounts
Payable or Sundry Creditors or Trade creditors.
A firm’s total volume of business is Account Receivable at any one time depends in its sell on
credit and collection policies. Significantly influence working management; it is essential to
consider the following aspects of the credit management.

Characteristics

1. Objective-Oriented:

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 The project is driven by clear objectives to identify specific problems within an organization and
provide actionable solutions. The goals are measurable and focused on delivering tangible
improvements.

2. Analytical Approach:

A systematic and analytical methodology is employed to gather and analyze data. This includes
using qualitative and quantitative research methods, such as interviews, surveys, and data analysis
tools.

3. Comprehensive Assessment:

The study involves a thorough assessment of the company's operations, processes, and
environment. It considers multiple perspectives, including those of employees, management, and
customers.

4. Data-Driven Insights:

The findings and recommendations are based on robust data analysis. This ensures that the
solutions proposed are grounded in empirical evidence and are likely to be effective.

5. Stakeholder Engagement:

The project actively involves various stakeholders to gather insights and ensure buy-in for the
proposed solutions. Engaging stakeholders helps in identifying the root causes of problems and in
developing feasible solutions.

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6. Problem Identification and Prioritization:

The project identifies a range of issues affecting the organization. These problems are then
prioritized based on their impact and urgency, allowing for a focused and strategic approach to
problem-solving.

7. Innovative Solutions:

The project emphasizes creativity and innovation in developing solutions. It looks for novel
approaches that can provide a competitive advantage and drive significant improvements.

8. Practical Implementation Plan:

Along with suggesting solutions, the project includes a detailed implementation plan. This plan
outlines the steps needed to execute the recommendations, including timelines, resources
required, and monitoring mechanisms.

9. Alignment with Organizational Goals:

The study ensures that the proposed solutions are aligned with the organization's strategic goals
and objectives. This alignment increases the likelihood of successful implementation and
sustainable improvements.

10. Ethical Considerations:

Ethical standards are maintained throughout the project. This includes ensuring data privacy,
transparency in reporting findings, and fairness in stakeholder engagement.

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 11. Documentation and Reporting:

The project is meticulously documented, providing a comprehensive report that includes the
methodology, findings, and recommendations. The report is clear, concise, and well-organized,
making it easy for stakeholders to understand and act upon the insights.

12. Continuous Improvement:

The project promotes a culture of continuous improvement by not only addressing current
problems but also setting up mechanisms for ongoing monitoring and refinement of processes.

Benefits

1. Enhanced Analytical Skills:

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 Conducting a detailed study to identify problems sharpens analytical and critical thinking
abilities. MBA students learn to assess complex business issues, interpret data, and derive
meaningful insights.

2. Practical Application of Theoretical Knowledge:

This project bridges the gap between theory and practice. Students apply classroom knowledge to
real-world scenarios, reinforcing their understanding of business concepts and methodologies.

3. Problem-Solving Expertise:

Engaging in problem identification and solution development fosters strong problem-solving

skills. Students learn to tackle challenges methodically, considering various factors and potential
impacts.

4. Improved Research Capabilities:

The project involves extensive research, including data collection, analysis, and interpretation.
Students gain proficiency in research techniques, enhancing their ability to conduct future studies.

5. Enhanced Communication Skills:

Reporting findings and proposing solutions require clear and effective communication. Students
improve their ability to convey complex ideas concisely and persuasively, both in writing and
verbally.

6. Stakeholder Engagement Experience:

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 Interacting with various stakeholders—employees, management, and customers—enhances
interpersonal and negotiation skills. Students learn to gather diverse perspectives and build
consensus.

7. Strategic Thinking Development:

Identifying problems and crafting strategic solutions requires a holistic view of the business.
Students develop strategic thinking abilities, understanding the broader implications of their
recommendations.

8. Ethical and Professional Growth:

Addressing ethical considerations and ensuring integrity in research practices promote

professional growth. Students learn to navigate ethical dilemmas and uphold high standards in
their work.

9. Career Advancement Opportunities:

Successfully completing an MBA project showcases a student’s ability to manage complex

projects, making them attractive candidates for leadership roles. It demonstrates their capability
to contribute effectively to organizational improvement.

10. Networking Opportunities:

Engaging with industry professionals, mentors, and peers during the project creates valuable
networking opportunities. These connections can be beneficial for future career prospects and
professional development.

11. Increased Organizational Value:

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 For companies involved in such projects, the insights and recommendations provided can lead to
significant improvements in efficiency, productivity, and overall performance.

12. Personal Satisfaction and Achievement:

Completing a challenging project provides a sense of accomplishment. Students gain confidence

in their abilities and take pride in their contributions to solving real business problems.

Advantages of Receivable Management

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1. Improved Cash Flow:

Effective receivable management ensures timely collection of payments, enhancing the

company’s cash flow and liquidity.

2. Reduced Bad Debts:

Regular monitoring and follow-ups reduce the risk of bad debts, ensuring that customers settle
their accounts on time.

3. Customer Relationship Management:

Systematic receivable management helps maintain good relationships with customers through
clear communication and efficient handling of invoices and payments.

4. Increased Profitability:

By minimizing the amount of outstanding receivables, companies can optimize their working
capital and invest in growth opportunities, thus enhancing profitability.

5. Better Financial Planning:

Accurate tracking of receivables allows for more precise financial forecasting and budgeting,
aiding in strategic decision-making.

6. Credit Control:

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 Effective management includes assessing customer creditworthiness, which helps in extending
credit only to reliable customers, reducing the risk of defaults.

Disadvantages of Receivable Management

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1. Administrative Costs:

Managing receivables involves administrative expenses for monitoring, follow-ups, and

maintaining records, which can add to operational costs.

2. Time-Consuming:

It requires continuous attention and effort to ensure timely collections, which can be time-
consuming for the finance team.

3. Potential Customer Conflict:

Aggressive collection tactics may strain customer relationships and could lead to conflicts,
affecting future business dealings.

4. Resource Allocation:

Significant resources (both human and technological) are required to manage receivables
effectively, which could otherwise be utilized in core business activities.

5. Risk of Overextension:

There is a risk of extending too much credit to customers in an attempt to boost sales, which can
lead to liquidity issues if not managed properly.

6. Impact on Sales:

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Stricter credit policies might deter potential customers, possibly leading to a reduction in sales.

Objectives of Study

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 a) Identify Problems: Assess the company's current operations to pinpoint critical issues
impacting productivity, quality, and profitability.

b) Stakeholder Engagement: Gather insights from employees, management, and customers to

understand their perspectives and concerns.

c) Solution Development: Formulate practical and effective solutions to address identified

problems.

d) Implementation Plan: Provide a detailed roadmap for executing the recommended solutions.

Objective of Receivable Management

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 1. To promote international trade transactions.

2. To achieve the target, return on investments.

3. To achieve the objective or goals of the organization.

4. To minimize the cost and risk involved in trade credit planning and control.

5. To maintain adequate liquid capital of the firm.

Key Strategies

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1. Assessing Current Receivable Management Practices:

 Conduct a comprehensive review of the existing receivable management

processes.

 Identify inefficiencies and areas of improvement by analyzing historical data and

performance metrics.

2. Implementing Credit Policies:

 Develop clear and consistent credit policies to govern the extension of credit to
customers.

 Assess customer creditworthiness using credit scores, financial statements, and

payment history before granting credit.

3. Setting Credit Limits:

 Establish credit limits for customers based on their financial health and payment
behavior.

 Regularly review and adjust credit limits to align with changing customer
profiles and market conditions.

4. Invoicing Practices:

 Ensure timely and accurate invoicing to avoid payment delays.

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  Use electronic invoicing systems to streamline the billing process and reduce
manual errors.

e) Early Payment Incentives:

 Introduce early payment discounts to encourage customers to pay their invoices

ahead of the due date.

 Clearly communicate the terms and benefits of early payment incentives to

customers.

f) Automated Payment Reminders:

 Implement automated systems to send payment reminders to customers before

the due date.

 Use multiple communication channels (email, SMS, phone calls) to ensure

reminders are received and acknowledged.

g) Regular Account Reconciliation:

 Perform regular reconciliation of accounts receivable to identify and resolve

discrepancies promptly.

 Ensure that all payments are accurately recorded and matched against outstanding
invoices.

h) Customer Relationship Management (CRM):

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  Utilize CRM systems to maintain detailed records of customer interactions, credit
terms, and payment history.

 Use CRM data to identify patterns and address potential issues proactively.

i) Collections Strategy:

 Develop a structured collections process to manage overdue accounts effectively.

 Implement a tiered approach to collections, starting with gentle reminders and

escalating to more assertive actions if necessary.

j) Aging Analysis:

 Regularly perform aging analysis of receivables to monitor the status of outstanding

invoices.

 Focus on reducing the proportion of receivables that are significantly overdue.

k) Dispute Resolution Mechanism:

 Establish a clear and efficient process for resolving disputes related to invoices and
payments.

 Ensure prompt communication and resolution to minimize delays in collections.

l) Performance Metrics and Reporting:

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  Define key performance indicators (KPIs) to measure the effectiveness of receivable
management practices.

 Regularly review and report on these metrics to identify trends and areas for
improvement.

Conclusion

Implementing these strategies will enhance the effectiveness of receivable management within
the organization. By addressing the identified problems and adopting best practices, the company
can improve cash flow, reduce bad debts, and foster better relationships with customers. The
success of these strategies depends on continuous monitoring, regular updates, and effective
stakeholder engagement.

Diagram

a) Order fulfilment.

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b) Invoice Generation and Issuance.

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c) Payment Collection and Follow-up.

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d) Payment Recording and reconciliation.

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e) Dispute Resolution

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Page 35 of 72
LITERETURE REVIEW

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 Introduction:

Accounts receivable management is a critical aspect of financial management in any

organization. Efficient management of accounts receivable ensures steady cash flow,
minimizes credit risk, and improves the overall financial health of a company. This
literature review aims to provide an overview of existing research, theories, and
practices related to accounts receivable management.
Theoretical Framework:

1. Credit Management Theory:

o This theory emphasizes the importance of establishing credit policies and
procedures to manage credit risk and ensure timely collection of receivables.
o Key elements include credit evaluation, credit terms, and collection policies.
2. Cash Conversion Cycle (CCC):
o CCC is a key metric used to evaluate the efficiency of a company's accounts
receivable management.
o It measures the time taken to convert accounts receivable into cash and
highlights areas for improvement.
Empirical Studies:
1. Impact of Credit Policies on Financial Performance:
o Studies have shown that well-defined credit policies can significantly improve
a company's financial performance.

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 o Effective credit policies lead to reduced bad debts, improved cash flow, and
increased profitability.
2. Technological Advancements in Accounts Receivable Management:
o Research indicates that the adoption of automation and digital tools in
accounts receivable management enhances efficiency and accuracy.
o Technologies like AI-driven credit scoring, automated invoicing, and
electronic payments streamline the process and reduce human error.
3. Challenges in Accounts Receivable Management:
o Common challenges include delayed payments, customer disputes, and lack
of proper tracking mechanisms.
o Studies suggest that these challenges can be mitigated through improved
communication, regular follow-ups, and robust tracking systems.

Best Practices:

1. Regular Monitoring and Reporting:

o Regularly monitoring accounts receivable and generating detailed reports
help in identifying overdue accounts and taking timely actions.
o This practice ensures that receivables are collected on time and reduces the
risk of bad debts.
2. Customer Relationship Management:
o Building strong relationships with customers can lead to better payment
terms and prompt collections.
o Studies highlight the importance of maintaining clear communication and
addressing customer concerns promptly.
3. Credit Risk Assessment:
o Assessing the creditworthiness of customers before extending credit helps in
minimizing the risk of default.
o Empirical research supports the use of credit scoring models and financial
analysis in evaluating credit risk.

Conclusion: The literature on accounts receivable management underscores the

importance of efficient credit policies, technological advancements, and proactive
monitoring. By adopting best practices and leveraging technological tools,
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companies can enhance their accounts receivable management, leading to improved
financial performance and stability.

COMPANY PROFILE

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M.S. ENGINEERING WORKS is a progressive & reputable medium-scale industry
manufacturing a range of sheet metal components and exhaust systems for the automotive sector
since 2002. We are original Equipment (OE) manufacturers and suppliers of Fuel tanks,
Hydraulic Tanks, Oil Sump, Vacuum Tanks, Radiator Frames & other assemblies for the entire
range of Trucks, MUV's, SUV's and Cars to Tata Motors, (India's largest automobile company
and the world's fourth largest Commercial Vehicle manufacturer) and Exhaust systems (mufflers)
to Mahindra 2 Wheelers Ltd. We are also supplying Hydraulic reservoirs to Hyva, Wipro
Infrastructure & Tata Automation. A Fully integrated modern facility is also situated at Rudrapur,
Uttarakhand with heavy Pressing, fabrication and Conveyorized Paint Shops. M.S.

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ENGINEERING WORKS is a leader in Fuel Tanks for Commercial Vehicles in India. D & S is
the sole supplier of 14 of latest models of fuel tanks for Tata Motors & a major source for the
balance.

MILSTONES

ACHIEVEMENTS

AWARDS AND CERTIFICATIONS:

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PRODUCTS

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Sr. No Part Description Pictures
1 Hydraulic Tanks

2 Fuel Tanks for Micro Trucks

3 Silencers for Tractors

4 Radiator Surge Tanks

5 Heavy Press Components.

6 Bonnet Inner.

CLIENTS

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WHAT IS ACCOUNTS RECEIVABLE

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When goods and services are sold under an agreement permitting the customer to pay for them
later, the amount due from the customer is recorded as accounts receivables; so, receivables are
assets accounts representing amounts owed to the firm because of the credit sale of goods and
services in the ordinary course of business. The value of these claims is carried on to the assets
side of the balance sheet under titles such as accounts receivable, trade receivable or customer
receivable. This term can be defined as "debt owed to the firm by customers arising from sale of
goods or services in ordinary course of business."
The customer who represents the firm's claim or assets, from whom receivables or book debts are
to be collected in the near future, are known as debtors or trade debtors. A receivable originally
comes into existence at the very instance when the sale is affected. But the funds generated
because of these ales can be of no use until the receivables are collected in the normal course of
the business.
Receivables may be represented by acceptance, bills or notes and the like due from others at an
assignable date in the due course of the business. As the sale of goods is a contract, receivables
too get affected in accordance with the law of contract e.g. Both the parties (buyer and seller)
must have the capacity to contract, proper consideration and mutual assent must be present to
pass the title of goods and above all the contract of sale to be enforceable must be in writing.
over, extensive care is needed to be exercised for differentiating true sales from what may appear
to be sales like bailment, sales contracts, consignments etc.

FLOW CHART

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MISELLANEOS

The usual practice companies may resort to credit granting for various other reasons like
industrial practice, dealers’ relationship, status of buyer, customer’s requirements, transits delay
etc. In nutshell, the overall objective of making such a commitment of funds in the name of

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accounts receivables aims at generating a large flow of operating revenue and earnings. than
what could be possible in the absence of such commitment. Figure 1.1 further provides an easy
explanation to the purpose for which they are maintained.

COST OF MAINTAINING ACCOUNTS RECEIVABLES

The following specific costs are identified while extension of credit and maintaining accounts receivable.
1. Capital cost.
2. Administration cost.
3. Collection cost.
4. Delinquency cost.
5. Default cost.
6. Production and selling cost.

1) Capital cost: -
The increased level of account receivable is an investment in current assets result in blocking of
the firm’s capital. There is a time lag between the sales of goods to the payment by them.
Meanwhile, the firm must arrange for additional funds either forms outside or out of retained
profits or share capital to pay employees and suppliers of raw material etc. while waiting for
payment from its customers. The firm incurs a cost on account of raising additional capital to
support credit sales, the capital, which alternatively, could be earned profitably, employed
elsewhere.

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2) Administration cost: -
Another cost comes from an enlarged credit department. This cost involved in the form of clerical
working involved in checking additional accounts serving the added volume of receivables,
maintaining accounting record, costs of conducting investigating to assess the credit worthiness
of the customer.

3) Collection cost:
Some costs are to be incurred by a firm for collecting the amount from the customers on account
of the credit sale, sometimes, additional expenses involve sending frequent follow up letter, cost
of collection of exchange or cost of discounting bill and expenses of stringent action against
default customer etc.

4) Delinquency cost: -
These costs are those which are to be incurred by the firm when extending credit to the
defaulting customers. The delinquency costs include.
1. Committing funds to the investment additional receivables for extended credit.
2. Cost involved in putting extra efforts to recover the overdue from the customers.
3. Cost associated with frequent reminders.
4. Cost incurred on account of legal charges.

5) Default cost: -
Another cost comes from the probability of bad debts losses. The cost of bad debts that arises due
to the firm may not be able to recover from defaulting customers.

6) Production and selling cost: -

These costs are directly proportionate to the increase in sales volume. In other words, production
and selling cost increase with the very expansion in the quantum of sales. In this respect, a firm

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confronts two situations; firstly, when the sales expansion takes place within the range of existing
production capacity, in that case only variable costs relating to production and sale would
increase. Secondly, when the production capacity is added due to expansion of sales more than
existing production capacity. In such a case incremental production and selling costs would
increase both variable and fixed costs.

RISK CLASS CREDIT ANALYSIS: -

In credit analysis, the Risk-class approach is one of the important techniques established by
Hampton. According to him, customers can be classified into various risk categories ranging from
strongest to weakest these risk classes are classified based on gathering information and analysis
in the credit investigation process. To meet the firm’s needs, a separate credit policy is developed

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 in due course for each risk class of credit applicant. The given below table show the risk
classification scheme.

Risk Class Description Credit policy

Risk class I Customer’s financial position and past A line of credit is a

records indicate highly satisfied with maximum Limit.
no risk of default.

Risk class II Review of previous records A line of credit is a

indicates satisfactory with negligible. maximum limit with
risk exposure. approval.

Risk class Analysis of past payment records and Streamlines the credit line.
III liquidity position indicates less satisfied. up to specified Limit.
with little risk of exposure.

It is observed from the above table that a firm placed in risk class I indicates its financial position
and past payment records are highlighted highly satisfied with no risk of default. The credit
policy of risk class I am that of customer is to be allowed open credit without approval for
purchase more than maximum risk exposure or amount specified limits.

Credit Decision and Line of credit.

After analysis of customer’s credit worthiness, the financial manager must decide in initial sale
whether credit facilities extended to him. If repeat sales are likely, a line of credit procedure can
be established to avoid the need to investigate the extension of credit each time an investigate the
extension of credit each time an order is received. The term line of credit refers to a limit to the

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amount of credit extended to an accountant; purchaser can buy on credit up to that at a given
period. Suppose customer’s past payments records and liquidity position, indicates less satisfied
with little risk of exposure, the firm should streamline the credit line up to specified limits
customer not satisfied with maximum risk exposure, the firm must decide instead of outright
refusing to grand credit facilities, be offered cash on delivery terms. In practice, credit decisions
and line of credit can be fixed based on customer’s regular buying trend, past payment records,
liquidity position, streamline the operation and defining responsibilities of concerned executives.

The credit worthiness of a customer. It has decided whether credit should be granted. The firm
should use the NPV rule to make the decision, if the NPV is positive credit should be granted the
choice in a credit granting decision. If the firm chooses not to grant any credit, the firm avoids
the probability of any loss but loses the opportunity of increasing its probability. On the other
hand, if there is some probability that the customer will default, then the firm may lose its
investment. The expected net payoff of the firm is the difference between the present values of
the expected loss.

FACTORS INFLUENCING THE SIZE OF RECEIVABLES: -

The role which receivable plays in the total financial picture is directly or indirectly affected by
the following important factors.

1. Size of credit sales:

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 Size of credit sales is one of the important factors in determining the volume of
receivables. With an increase in the size of credit sales, it may decide to bring about a
proportionate increase in the magnitude of receivables. If a firm sells only on a cash basis there
will not be any increase or decrease in the size of receivables.

2. Credit policies:

A firm may be adopting a liberal credit policy or restrictive credit policy. The concern
with a liberal credit policy will have higher-level receivables while a firm with strict credit
policies; the size of receivables will be high. over, credit worthiness of the customer, extension of
credit facilities incidence bad debts loss, collection charge and terms of credit etc. the important
aspects of credit policies to affects the size of receivables. Different customers have been
provided with different credit terms.

a) 30 day’s b) 60 days’

c) 45 day’s d) 90 days’

As the investment in accounts receivable increased two things happen, first: marginal expected
rate falls. Second risk increases, so the required rate of return increases. This is the optimum
investment lies at a level of investment below that which maximizes operating profit. In this
graph operating profits are maximum at the point at which the incremental rate of return is zero.
Were marginal rate of return being equal to marginal capital.

3. Term of Trade:

The size of the receivable is closely associated with a firm’s trade credit. The length of
credit period and the rate of discount given also depend upon the size of credit terms which are at
least as generous as those offered competitors the terms of credit thus become almost customary.
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4. Profiles:

A firm’s added expected profitability on the additional sales is one of the important
aspects of determining the size of receivables. As the level of receivable increases the cost of
investment in receivable also goes up. However, the profitability of additional sales generated
exceeds the added cost of the receivables.

5. Credit Collection policy:

The size of the receivable depends upon the appropriate collection policy of the firm.
Prompt collection of accounts tends to reduce investment required to carry receivables and the
cost associated with it.

6. Expansion of credit plan:

Expansion of credit plans usually stimulates the volume of credit sales and attracting
customers. Expansion of credit facilities is likely to increase the working capital investment in
receivables.

7. Habits of customer:

The pay habits of customers are one of the factors that also influence the size of the
receivables. There are certain types of customers who consistently pay their debts promptly.
Some other customers may be delaying payments though they are financially sound. Thus, it
ensures the earliest possible payment on receivables without customer losses through ill will.

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8. Operation Efficiency:

Establishment of credit department and its function efficiency in billing record keeping,
inspecting the credit worthy of customer, reminder or follow up letter etc. are the important
aspects of determination of the receivables.

Size of market:

Size of receivables is closely associated with a firm exploring a new market for its
product or services. liberal extension of credit, a firm can easily enter a new market by attracting
new customers. This factor will make the firm arrange additional sizes of receivables.

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Page 55 of 72
 RESERCH METHODOLOGY

RESEARCH METHODOLOGY

3. To study the Sales Pattern in the company.

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 4. To study the Classification of Debtors and understand the provision for bad &
doubtful debtors.

5. To analyze Account Receivables Management of the Company.

4. To evaluate the Debtors Turnover ratio and Average Collection Period of the
company.

5. Evaluation of company’s performance.

6. To study the impact of effective debtors’ management on the liquidity position of

the company.

SCOPE OF THE PROJECT STUDY

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The scope of the study is limited to analyzing the accounts receivable policies at
M.S.ENGINEERING WORKS Company. Accounts Receivable Management is one of
the elements of working capital management. While doing the analysis the period
covered is 4 years. The study is based on secondary data provided by the managerial staff
of an organization. However certain restrictions were put on data availability, as financial
data is confidential.

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 DATA ANALYSIS

PRIMARY DATA ANALYSIS

I interacted with the company’s Manager Mr. M.A.Joshi Collected data from him about the.

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 ● How are they working?

● What are the manufactured Products?

● What is the scope of the industry?

M.S. ENGINEERING WORKS is a small-scale industry. I visited the Accounts Department to

collect data about the sales and debtors. Major customer of the company.

I visited the production Department to interact with the production manager. Collect data from
the production department so I know the cost of production as well as the cost of goods sold.

Primary data related to the project was collected from discussion and interaction with senior
employees and executives of the organization.

SECONDARY DATA ANALYSIS

The secondary data has been collected from

1. The company Brochure.

2. The company’s MIS Accounts and over last four years Annual Financial Reports

SALES AND DEBTORS.

YEAR SALES (RS) DEBTORS (RS)

2019-2020 92,03,915 17,14,126

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 2020-2021 1,61,70,614 25,23,001

2021-2022 2,15,49,973 44,67,358

2022-2023 1,87,38,386 57,88,995

2019-20 2020-21 2021-22 2022-23

SALES(RS) DEBTORS(RS)

INTERPRETATION

The above graphical representation shows us the number of sales and the number of debtors for
the first subsequent three years. There is relation between the sales and the debtors, when the
sales have been increased the debtors have also increased and year 2022-2023 sales is decrease
but debtors also increase.

DEBTORS TURNOVER RATIO (DTO)

DTO is calculated by dividing the net credit sales by average debtors outstanding during the year.
It measures the liquidity of a firm’s debts. This ratio shows how rapidly debts are collected. The
higher the DTO, the better it is for the organization.

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 YEAR SALES DEBTORS RECEIVABLE TURNOVER
RATIO

2019-2020 92,03,915 1714126 5.36

2020-2021 1,61,70,614 2523001 6.40
2021-2022 2,15,49,973 4467358 4.82
2022-2023 1,87,38,386 5788995 3.23

Receivable Turnover Ratio %

INTERPRETATION: -

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The above graphical representation shows us the debts turnover ratio was high in the
year 2019-2020 and year 2020-2021, while decreased in year 2021-2022 and 2022-2023. The
debtor’s collection was in year 2019-2020 and 2020-2021 compared to 2021-2022 and
2022-2023 as the ratio indicates us about it.

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 BIBLOGRAPHY

1. Anderson, R., Blackwell, J., & Pierce, L. (2020). Operations Management:

Enhancing Productivity Through Better Practices. Wiley Publishing.

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  This book provides insights into effective operations management strategies to

enhance productivity and resolve common operational issues.

2. Brown, T., & Wyatt, J. (2010). "Design Thinking for Social Innovation," Stanford

Social Innovation Review, 8(1), 30-35.

 This article discusses how design thinking can be applied to identify problems

and develop innovative solutions in various contexts, including business

operations.

3. Cameron, K. S., & Quinn, R. E. (2011). Diagnosing and Changing Organizational

Culture: Based on the Competing Values Framework. Jossey-Bass.

 This book explores methodologies for assessing organizational culture and

suggests ways to implement positive changes to improve performance.

4. George, M. L., Rowlands, D., Price, M., & Maxey, J. (2004). The Lean Six Sigma

Pocket Toolbook: A Quick Reference Guide to 100 Tools for Improving Quality and

Speed. McGraw-Hill Education.

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  This reference guide offers practical tools and techniques for improving

quality and operational efficiency, which are valuable for the project.

5. Kotter, J. P. (1996). Leading Change. Harvard Business Review Press.

 Kotter's seminal work on change management provides essential principles

for effectively leading and implementing change within an organization.

6. Slack, N., & Brandon-Jones, A. (2018). Operations Management. Pearson.

 This textbook covers the core concepts and practices of operations

management, offering a comprehensive foundation for identifying and solving

operational issues.

7. Sun, J., & Peterson, R. (2013). "Using Data Analytics to Improve Operations and

Customer Service," Journal of Business Research, 66(11), 1994-2001.

 This journal article highlights the role of data analytics in identifying

operational inefficiencies and improving customer service.

8. Ulrich, D., & Brockbank, W. (2005). The HR Value Proposition. Harvard Business

Review Press.

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  This book emphasizes the importance of aligning human resources with

business strategy to enhance organizational performance and employee

engagement.

9. Womack, J. P., & Jones, D. T. (2003). Lean Thinking: Banish Waste and Create

Wealth in Your Corporation. Simon & Schuster.

 Womack and Jones discuss the principles of lean thinking and how they can

be applied to eliminate waste and improve efficiency in business operations.

10. Yin, R. K. (2017). Case Study Research and Applications: Design and Methods. Sage

Publications.

 Yin's book provides a comprehensive guide to conducting case study research,

which is applicable to the project’s methodology for identifying problems and

proposing solutions.

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 ANNEXURE

Data Collection Tools:

1. Observation Checklists:

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 Checklist to document operational workflows, identify inefficiencies, and note areas for
improvement.

2. Survey Forms:

Forms designed to gather quantitative and qualitative data from employees and
customers.

3. Performance Metrics:

Key performance indicators (KPIs) to measure efficiency, quality, and customer

satisfaction.

4. Benchmarking Tools:

Tools to compare company performance against industry standards and identify gaps.

Data Analysis Techniques:

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 1. Root Cause Analysis:

Techniques such as the 5 Whys and Fishbone Diagram to identify the underlying causes
of problems.

2. SWOT Analysis:

Assessment of strengths, weaknesses, opportunities, and threats facing the company.

3. Pareto Analysis:

Identifying the most significant issues that need addressing based on the 80/20 principle.

4. Trend Analysis:

Evaluating data trends over time to identify patterns and predict future performance.

Implementation Plan Template:

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 1. Project Overview:

Description of the identified problems and the proposed solutions.

2. Action Steps:

Detailed list of steps to implement each solution.

3. Timeline:

Gantt chart or timeline showing the schedule for implementation.

4. Resources Required:

List of resources needed, including personnel, equipment, and budget.

5. Monitoring and Evaluation:

Metrics and methods to monitor progress and evaluate the success of the implementation.

Stakeholder Communication Plan:

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1. Stakeholder Identification:

List of key stakeholders and their roles.

2. Communication Strategies:

Methods and frequency of communication with each stakeholder group.

3. Feedback Mechanisms:

Channels for stakeholders to provide feedback and suggestions.

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