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A Report on

ANALYSIS OF

FACTORING SERVICES & CREDIT CONTROL


FOR BHARTI TELETECH LTD

Submitted By Sumit G!r" I#S)De'r!dun Ro(( No$) #B+,+--

Submitted To #r$ S!n%ee& Se'"!( Gener!( #!n!"er) Fin!n*e & A** B'!rti Te(ete*' Ltd

CERTIFICATE

I have the pleasure in certifying that MsSUMIT.. is a bonafide student of IIIrd.. semester of Institute of management studies, Dehradun University Roll no She has completed her pro ect !or" entitled#actoring services and credit control in $harti Teletech %td. under my supervision. I certify that this is her original effort. It has not been copied from any other source. This pro ect has not been submitted in any other university for the purpose of a!ard of any degree. This pro ect fulfills the re&uirement of the curriculum prescribed by UT T'(). University, for the said course. I recommend this pro ect !or" for evaluation and consideration for the a!ard of degree to the student.

Signature

*ame of the guide Date

AC.NO/LEDGE#ENT

Indebted too many people !ho helped throughout the pro ect !or" and in the preparation of this report. #irst of all I !ould li"e to offer my sincere gratitude to Mr. San eev Sehgal, pro ect director and +eneral Manager , -ccounts . finance manager of $)-RTI T'%'T'() %IMIT'D, and IMS for giving me the opportunity to underta"e this pro ect. I !ould also !ish to special than" my pro ect guide Mr. -marender /ena, pro ect guide and (redit (ontrol manager of $)-RTI T'%'T'() %IMIT'D for his valuable guidance during the course of the pro ect. I o!e special debt to #ello! professionals at $''T'% for having shared the "no!ledge for providing me the consent support and valuable suggestions through the pro ect. My than"s are also to Mr. 0radeep Suri !ho has helped in organi1ing this pro ect. I am also than"ful to all my friends for providing me the much needed the moral support during the course of this pro ect.

IMS Dehradun

2Sumit +arg3 M$-4III Sem

0REFACE

The present study !as underta"en as a part of the organi1ational training 253 (omponent of the 0+DM$- course of masters in business studies in financial management. The ob ect of this training !as to develop information search s"ills into students. This enables them to gather information on a given sub ect in a systematic and consciously planned manner. The study !as done as the pro ect for $''T'% %td, *e! Delhi. $eetel is engaged in production of range of basic and cordless phones and is also *ational distributor of Motorola handsets in India. The study !as carried out during the months of /une4/uly678. Its ob ective !as to study the concept of #actoring in detail in conte9t of distribution of Motorola handsets by $''T'% in India and suggests about the study.

CONTENTS
Certi1i*!te A*2no3(ed"ement 0re1!*e 5. '9ecutive summary :. Introduction ;. <b ective of the study =. (ompany profile >. (oncept of #actoring 4 $)-RTI 4 $''T'% ?. #actoring benefits 8. @or"ing of #actoring A. #actoring strategies B. Methodology 57. $eetel and TD 55. $eetel and UTI $an" 5:. $eetel and *'@ I*DI- I*SUR-*(' +roup 5;. @or"ing and (redit (ontrol in $eetel 5=. Recommendations and suggestions 5>. (onclusion

E4EC5TIVE S5##ARY

E4EC5TIVE S5##ARY
Management of !or"ing capital is a matter of balance. - company must have sufficient cash on hand to meet its immediate needs !hile ensuring that idle cash is invested to the organi1ation6s best possible advantage. The most important component of the !or"ing capital is debtors because the entire operating cycle depends upon the turnover period of the debtors and here the #actoring concept has !itnesses a heralding revolution during the recent years. #actoring is proving a po!erful tool in the hands of management for having 577C control over the debtors of the company. In the analysis done for $''T'%, a $harti +roup (ompany, it !as found that the debtors has increased due to drastic increase in sales because of the distribution business of M<T<R<%- products and accessories. (ompany has managed efficiently to decrease its debtor6s turnover period through the factoring services of UTI ban". $''T'% has entered into an agreement !ith the UTI ban" for the receivables #actorings for conversion of M<T<R<%- sale invoices into instant cash. In this !ay company has managed to convert their receivables into instant cash to meet its day to day re&uirements. Thus, good management of receivables is a part good financial management of $''T'%. Its effective use is contributing to the operational efficiency of the company, resulting to increased turnover and ma9imum returns.

Ob%e*ti&e6 O1 T'e Study

OB7ECTIVES OF THE ST5DY

$efore entering the $eetel, #actoring !as an un"no!n concept to me, so it being the vast topic is !as really difficult to plan out the ob ectives. $ut ho!soever the ob ectives !hich !ere planned after entering the $eetel and understanding the concept of #actoring areD

Understanding the concept of #actoring Understanding the strategies related to #actoring (lient dealingETD dealing )o! to ma"e factors (onsiderations !hile ta"ing Insurance cover Managing credit !ith factoring

Comp!ny 0ro1i(e ) BHARTI

BHARTI ENTER0RISE

B'!rti Enterpri6e6 has successfully focused its strategy on telecom !hile straddling diverse fields of business. #rom the creation of F-irtelF, one of IndiaFs finest brands, to becoming the largest manufacturer and e9porter of !orld class telecom terminals under its F$eetelF brand, $harti has created a significant position for itself in the global telecommunications sector. $harti -irtel %imited is today ac"no!ledged as one of IndiaFs finest companies, and its flagship brand F-irtelF, has over =7 million customers across the length and breadth of India. @hile a oint venture !ith Teletech Inc., US- mar"ed $harti6s successful foray into the (ustomer Management Services business, $harti 'nterprises6 dynamic diversification has continued !ith the company venturing into telecom soft!are development. Recently, $harti has successfully launched an international venture !ith '% Rothschild +roup o!ned '%R< )oldings India %td., to e9port fresh -gri products e9clusively to mar"ets in 'urope and US-. $harti also has a oint venture 4 G$harti -H- %ife Insurance (ompany %td.6 4 !ith -H-, !orld leader in financial protection and !ealth management. $harti has recently forayed into retail business under a company called $harti Retail 0vt. %td. It also has a MoU !ith @al4Mart for the cash . carries business.

Hi"'(i"'t6

$harti 'nterprises announces ne! -pe9 level Strategic <rgani1ation Structure.

$harti -nnounces Strategic Roadmap for its Retail Ienture

$harti +roup has an arrangement to buy >.?C direct interest of Iodafone in $harti -irtel %imited for USJ5.? billion

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

$harti -irtel receives %etter of <ffer to provide :+ and ;+ mobile services in Sri %an"a

Group Stru*ture

STR5CT5RE OF THE CO#0ANY

Comp!ny pro1i(e ) BEETEL

BHARTI TELETECH

BHARTI TELETECH

PROFILE

In 5BA>, $harti Teletech entered into a technical collaboration !ith Siemens -+, the +erman technological giant and set up a plant in %udhiana to manufacture telephones. (ome :77>, and $eetel has ourneyed across

t!enty years of creating history. In 5BB5, $eetel manufactured phones for FSprintF, the -merican telecom mammoth. Shortly after, in 5BB;4B=, came IS< B7754:777 accreditations for the manufacturing units 4 by this time t!o in numbers, at +urgaon and %udhiana. -nd in a short span of time, $eetel !as already the mar"et leader. (ornering half of the Indian mar"et, $eetel became FIndiaFs #avorite 0honeF . Today $harti Teletech has t!o IS< B777 certified plants !ith an annual capacity of > million units p.a. $harti became the first company to manufacture cordless telephone and telephone ans!ering machines in India. It is also the first to launch SMS phones on fi9ed line in the country thereby heralding a revolution in fi9ed line SMS telephony. In line !ith customer needs, $harti !as also the first to launch bac"lit %'D and +SM Interference free phones. <ur product range includes the $-SI( 0hones, (-%%'R ID 0hones, (<RD%'SS 0hones, 5.A +)1 D'(T, :.= +)1 phones, I<I0 0hones, broadband 2-DS%3 e&uipments li"e Modems, routers and set top bo9es. $TT% is the first Indian company to manufacture :7 million phones. Today, one out of every three phones in India is a $eetel. @ith rapid gro!th over the years, $harti Teletech

today is the largest manufacturer of phones in the +lobe outside (hina. $harti Teletech commands a lionFs share of over B7C. In the e9tremely competitive $S*%E MT*% segment. $harti became the first company to e9port phones to Sprint Inc. US- 4 recognition of our !orld class &uality. Today, $TT% is present in ;7 countries across > continents '9ports are a huge thrust area for $harti. In 5BB5, $harti became the first company to e9port phones to Sprint Inc. US- , recognition of our !orld class &uality. The e9port operations have been highly successful over the years. In :77;47=, e9ports crossed the half million mar" 4 a &uantum ump since !e started. Today, !e are present in ;7 countries across > continents despite intense competition from the strongest brands in the !orld. $rand building initiatives have also ta"en fruit in the global arena. The $eetel brand is present in Iietnam, Iran, (hile, <man, $angladesh, Mauritius and Sri %an"a. This list continues to gro! !ith each passing month and it is a matter of time before $eetel becomes a truly global brand. $harti Teletech Team is upbeat to create )istory by crossing a Sales Turnover beyond :777 crores in #K :77?478 against the last yearFs >=; crores LThe story continues. The canvas has broadened immeasurably, so have the challenges. -nd it is not long before IndiaFs #avorite 0hone ma"es its presence felt across the globe.L

ACHIEVEMENTS

Trend has !on GOLDEN 0EACOC. A/ARD as the only phone !ith SI# card reader. The model Millennium (lip Ma9 2- high end (aller ID and T!o !ay spea"er phone3 recently launched in the mar"et /ON a GOLDEN 0EACOC. A/ARD for INNOVATIVE DESIGN .

$eetel has a range of over ;> models across basic, feature and cordless segments and continues to add a ne! model every month. @ith a current mar"et share of over =7C, $eetel is the first choice of the Indian consumer. In the gro!ing private service provider segment, $harti Teletech commands a lion6s share of over B7C. In the e9tremely competitive $S*%E MT*% segment, !e have crossed a mar"et share of >7C. $TT% has successfully met the challenge of providing &uality products at competitive prices. #ollo!ing are the ne! products recently introduced in the open mar"et D4

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

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

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

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

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

DF <<++ 4(aller Id 0hone !ith large Screen Display

#ollo!ing are the ne! products recently introduced for the D<T mar"et as per ne! T'( specifications 2+T'%47:E7=3M all these models are +SM interference free.

IRIS :N; +-R*'T 0'RID<T 2- (%I 0)<*'3

$eside this company has maintained its leadership in all chosen mar"ets li"e 0S0, D<T, <0'* M-RN'T . 'H0<RT 2e9porting to ;7 countries across five continents !orld !ide

DO#ESTIC -fter years of careful and focused brand4building, $eetel is recogni1ed as a trusted brand in India and is poised to ta"e on global players in the most competitive international mar"ets. $eetel !as the first Indian brand to launch caller ID phones in India and the first to bring do!n the price of cordless phones to an affordable range at belo! Rs. :777. $eetel has also pioneered SMS phones, the first in India. @ith this landmar" development, India no! has the pride of oining the select set of countries that offer SMS on and from fi9ed4line telephony service platform !orld!ide. #or the consumer in India, $eetel is truly ringing in the future. Indian 0TT has accepted $eetel instruments !hole heartedly and the brand has a ?7C share in this mar"et. The private service providers have sho!n great faith in $eetelFs products and appreciate the companyFs ability to customi1e the phones to their specifications. $eetel has garnered over B>C of this mar"et. $eetel has remained the *o. 5 brand in the Indian retail mar"et, !ith a mar"et share of over >7C.

The companyFs mar"eting net!or" encompasses over >A7 distributors and over ;7,777 dealers, ta"ing $eetel phones to every corner of one of the biggest mar"ets in the !orld.

INTERNATIONAL

-fter years of careful and focused brand4building, $eetel is recogni1ed as a trusted brand in India and is poised to ta"e on global players in the most competitive international mar"ets. <verseas, the company has a richly diversified customer base in over ;7 countries across five continents. The mar"ets include the US-, South -merica, 'astern 'urope, the Middle 'ast, South 'ast -sia and -frica. Telephone instruments are supplied to Siemens, -"ai, (onnair and the Sprint +roup in the US- among many others. The 'lectronics and (omputer )ard!are '9port 0romotion (ouncil conferred upon $harti Teletech, the a!ard for the Top Telephone Instrument '9porter. The company e9emplifies a mar"eting success story that !rites ne! chapters of achievement !ith each passing year.

CO#0ANY=S VISION=S AND VAL5ES

VISION

To be a leader in Telecom and allied products in chosen global mar"et.

VAL5ES
(ustomer

@e !ill be responsive to the needs of our customer

0eople

@e !ill trust and respect our employees

%earning

@e !ill continuously improve our products and services4innovatively and e9peditiously

(ommunity . 0artners

@e !ill be transparent and sensitive in our dealing !ith all sta"eholders

>5ALITY 0OLICY

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

>5ALITY OB7ECTIVES

To meet customers' requirements in terms of functionality, safety, aesthetics, life expectancy and taking effective actions on their feedback's. To ensure planned results and continual improvements in all operations (processes and products).

To increase productivity by reducing rejections bringing automation.

non!value adding activities, and

To effect continuous improvements in "ustomer #atisfaction $ndex. To ensure training of employees as per defined targets studying needs and

requirements.

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

>5ALITY C5LT5RE

%roviding training on &uality education system right across the entire organi'ation to carry out continuous $mprovement activity in collaborative (ay. )eployment of &uality policy structured (ay &uality *bjectives through out the *rgani'ation in a

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

"ross!functional $mprovement teams to promote #ynergy through sharing. ,ll the employees al(ays carry out an $mprovement project, (hich leads to improvement in their individual efficiency. -e(arding. recogni'ing the good performers (individual as (ell as teams) in monthly . quarterly and yearly functions. +ncouraging innovation by (ay of giving token re(ard for each suggestion and running trophy to department giving maximum suggestion per person per month.

'ncouraging people to !or" as a team in Small +roup -ctivities 2T(-s3 and Ouality Improvement 0ro ects 2OI0s3

>5ALITY ACHIEVE#ENTS

/harti Teletech 0imited is a &uality "onscious organi'ation

continuously #trives

for &uality $mprovement through %rocess 1anagement. #ome of the achievements (hich have come out of company's unstinted faith in investing for quality are 2

A3!rd6

3olden %eacock $nnovative %roduct.#ervices ,(ard in the Telecommunication #ector for the year 4554, the 3olden %eacock for $nnovative 1anagement for the year 4556 and 1ost in 4557. $nnovative %roduct

-ecipient of the +#" ,(ard for +xcellence in +xports in Telecommunication +quipment in 4558!54 and 4554!59. :inner of the ;oice 4559!56. :on the "onsumer :orld ,(ard for 4556. ,(arded the <Top =ixed 0ine %hones "ompany!455>< by ;oice and )ata )ata ,(ard for <Top Telephone 1anufacturer< in 4554!59 and

BEETEL=S GRO/TH

$eetel has established itself as a leader in L#odem6L. $eetel has also entered the LSet
Top Bo@L mar"et and is on foray in this segment. $harti Teletech has oined hands !ith !orld leaders in their categories for manufacturing and Distribution of their products through itFs (hannel.

In addition to being manufactures and Distributors of L+' 0honesL in India and select S--R( countries, today $TT% are *ational Distributors for4 L#otoro(!A GS# mobi(e H!nd6et6 !nd A**e66orie6 A0o(y*omA Audio !nd Video Con1eren*in" Sy6tem6 A#i*ro6o1t 4 Bo@A "!min" de&i*e6$

DISTRIB5TION B5SINESS OF BEETEL

GE

0OLYCO#

4BO4

#OTOROLA

(<*('0T <# #-(T<RI*+ S'RII('S

INTROD5CTION TO THE CONCE0T OF FACTORING


F!*torin" is a 1in!n*i!( 6er&i*e designed to help firms to arrange their receivable better. Under a typical factoring arrangement a factor collects the accounts on due dates, effects payments to the firm on these dates and also assumes the credit ris"s associated !ith the collection of the accounts. Sometimes the factor provides an advance against the values of receivable ta"en over by it. In such cases factoring serves as a source of short4term finance for the firm. In order to provide a gamut of financial services under one roof, (orp. has also started factoring services. Under the scheme (orporation shall be at the time being only providing advances or prepayments against receivable and other services provided by the factor such as debt collection . administration of sales ledger etc. shall be ta"en later on. Under the scheme receivables only arising out of domestic trade shall be considered for factoring. SupplierE$orro!er shall dra! bills of e9change for goods supplied and the purchaser shall accept that. -fter acceptance of bills of e9change, (orporation shall ma"e prepayment of A7C of invoice value after deducting its discount charges P 58C to 5AC p.a. for period of bill of e9change to supplier. $alance payment of :7C of the invoice value shall be made after collecting the payment from purchaser. If purchaser fails to pay the due amount on due dates, the supplier shall ma"e the payment. $orro!erE Supplier shall submit $ill of '9change along !ith invoice %RERR receipts. Suppliers to be eligible for factoring must have minimum trac" record of 7; years !ith consistent profitability and minimum net !orth of Rs. :>.77 lacs.

Usually before providing advance payments to supplier an agreement is entered !ith supplier for arising debts of purchaser to (orporation and (orporation ma"e advances only against invoices dra!n to this particular purchaser. Sub4limit of each purchaser is fi9ed and sum of these sub limits is over all limit of supplier. Usually purchaser should have been dealing !ith supplier for minimum period of t!o years. Ma9imum limit of each purchaser should not e9ceed Rs. :>.77 %acs at a time. Usually limit for factoring is calculated on the basis of the pro ected receivables on credit sales of the company and deducting e9isting billsEboo"s debts limits en oyed by the company from ban". Ma9imum limit shall not e9ceed t!o months average turnover of the supplier as per last audited balance sheet or pro ected turnover of current year sub ect to ma9imum of Rs. 577.77 %acs.

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


The !ord LfactorL comes from the %atin LfactareL meaning Lto ma"e or to doL. This financing mechanism dates bac" to the time of )ammurabi. It has been part of the basic fabric of all trade. The concept of Lma"ing it happens no!L continues. 'ssentially it is the sale or assignment of a sale, trade, or accounts receivable account for immediate cash. $y definition, it provides any business from start4up to mature companies 2at any si1e3, access to immediate cash and improved cash flo! for e9pansion or gro!th but !ithout diluting e&uity or incurring debt. The reasons for using this financial tool are ust as numerous as they are variedD

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

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

Since the factoring firm effectively assumes the credit evaluation ris" of accounts receivable that may translate into decreased internal costs for accounts receivable administration, more efficient and effective customer accounts collection 2&uic"er pay3, and better information for management on the credit !orthiness of the firmFs clientsM

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

<ther financing options may not be available or timely for firm re&uirement2s3. .

#actoring is not a collection system for bad debts or even slo! pay accounts. Use of factoring may ho!ever tend to speed the payment from an other!ise slo!4pay client once the disciplined payment techni&ues of a &ualified factor are introduced. -s !ith any Lfinancial toolL, there may be !ide variations in applicable terms, conditions, and cost rates for its utili1ation. #or e9ample, advance rates 2percentage of invoice paid in advance of collection3 may vary due to account ris", industry, and factoring firm. The discount rate 2fee charged by the factor for the financing3 may also vary by actual ris" in the account, industry, andEor factor firm. Transactions may either be Lrecourse or non4recourseL 2return liability or guarantee of collection from the firm3 !hich may ta"e the form of merely replacing a receivable if it reaches a previously agreed upon age. -ll of these variables then come together in a Lris" evaluationL cost rate or fee for the factoring service. -s !ith any type of financing, the greater the perceived ris", the greater the cost for the service. The range for the first ;7 days might be e9pected to be :C48C of the gross value of the account financed, !ith >C being typical. There may also be a !ide variety of other terms and conditions in the transaction such asD

Minimum invoice amounts 2i.e., J:77 4 J>773, minimum monthly volumes 2i.e., J57,777 4 J>77,7773, andEor time period commitments 2i.e., ?45: months3.

*otification and non4notification to the receivable account that a factoring transaction has occurred.

/ust li"e all financing options, the business firm must evaluate its o!n individual needs and re&uirements including a focused evaluation of all actual or potential advantages versus the costs in the transaction. In most circumstances and at every stage of development, factoring, if properly utili1ed, can be a very valuable financial tool to achieve e9panded sales and company gro!th. *ot all factoring companies are ali"e, often !ith !ide variations in terms, conditions, and rates depending on your firmFs needs and accounts receivable 2as !ell as si1e and geographic coverage6s 4local, regional, and national3. F!*torin" is often used synonymously !ith accounts receivable financing or debtor financing or invoice financing. #actoring is a form of commercial finance !hereby a business sells its accounts receivable 2in the form of invoices3 at a discount. 'ffectively, the business is no longer dependent on the conversion of accounts receivable to cash from the actual payment from their customers, !hich ta"es place on typical ;7 to B7 day terms. $usinesses benefit from the acceleration of cash flo! by obtaining cash from the factor e&ual to the face value of the sold accounts receivable, less a factorFs fee. #actoring is considered o11 b!(!n*e 6'eet financing in that it is not a form of debt or a form of e?uity$ This fact ma"es factoring more attainable than traditional ban" and e&uity financing. Debtor 1!*torin" has been established as a method of raising !or"ing capital for some :77 years. <ver that time, numerous product variations have emerged until today there are a diverse variety of services and optional e9tras available.

In essence, there are four basic services of !hich the factoring company !ill offer their client some combinationD

)E!r(y ) ) )

0!yment6 S!(e6 Non

2including

overpayments Credit Led"er

in

some

cases3 Contro(

Admini6tr!tion Credit 0rote*tion

Re*our6e

The first is an E!r(y 0!yment against the credit invoices that they raise. @hen a business first ta"es up a factoring facility there !ill normally be an outstanding sales ledger of unpaid invoices. The factoring company !ill ma"e available a prepayment against these invoices, often up to A>C of their value, and this can create a substantial cash in ection for the business. -s the business continues to raise invoices, they are passed to the factoring company !ho !ill provide further funds against those invoices. The factors early payments are then repaid as the invoices are paid by the customers. In this !ay the facility is of a rolling nature that !ill gro! in line !ith the sales that the business ma"es. This can be considerably more attractive than traditional overdraft lending !hich is often much less fle9ible. These funds can be put to good use !ithin the business e.g. settling supplier invoices early in order to receive further discounts. Credit Contro( is a collections service !hereby the factoring company !ill employ letter and telephone based chasing techni&ues to ensure that payments are received from customers on a timely basis. Indeed, a factoring company can often improve the overall debt turn 2the average number of days in !hich sales invoices are paid3 of its client !hich creates a further cash flo! benefit. The other advantage of outsourcing debtor credit control is that a factor can often offer this at a fraction of the cost of employing one or more members of staff. This can translate into another tangible saving for a client. 'ven !here the o!ners of small businesses handle the credit control themselves, it has to be carried out during office hours and this is time that the factor can free up for the o!ner, enabling them to spend that prime time see"ing ne! sales.

S!(e6 Led"er Admini6tr!tion is a service !hereby the factor !ill create and maintain a debtor sales ledger for the clientFs business. -s invoices and cash are received so the

factor !ill post them to the ledger and the factor !ill provide this information to the client either via electronic lin"s or paper print outs.

Non Re*our6e B!d Debt 0rote*tion is an optional additional service !hereby the factor !ill insure the client against non payment by customers that the factor has pre4approved. The client !ill normally advise the factor of the details of ne! customers that they !ish to trade !ith and the factor !ill investigate the credit standing of that business in order to grant a credit limit. The client can choose to e9ceed the level of the limit that is granted but if they trade !ithin the limit they !ill en oy the peace of mind that comes from "no!ing that they !ill get paid by the factor should the customer go bust or fail to pay by reason of protracted default.

The number of businesses that use debtor factoring has continued to gro! significantly year on year and on average a client6s stay !ith their providers for a number of years. This supports the case for factoring as a cost effective !ay of saving money and raising !or"ing capital for e9pansion.

C'!r!*teri6ti*6 o1 1!*torin"
Usually the period for factoring is ;7 to B7 days. Some factoring companies allo! even more than 5>7 days. #actoring is considered to be a costly source of finance compared to other sources of short term borro!ings. #actoring receivables is an ideal financial solution for ne! and emerging firms !ithout strong financials. This is because credit !orthiness is evaluated based on the financial strength of the customer 2debtor3. )ence these companies can leverage on the financial strength of their customers. (redit rating is not mandatory. $ut the factoring companies usually carry out credit ris" analysis before entering into the agreement.

(ost of factoringQfinance cost R operating cost. #actoring cost vary according to the transaction si1e, financial strength of the customer etc. The cost of factoring depending upon the financial strength of the clientFs customer. Indian firms offer factoring for invoices as lo! as Rs5777. #or delayed payments beyond the approved credit period, penal charge of around 54:C per month over and above the normal cost is charged 2it varies li"e 5C for the first month and :C after!ards3

TY0ES OF FACTORING

BAC Noti1iedD or 1u(( 6er&i*e 1!*torin" @ith notified factoring, the debtors are a!are of the finance facility as the factoring company normally does the credit control, that is, collects the outstanding debts. BBC Con1identi!(D or in&oi*e 1in!n*e @ith invoice finance 2sometimes called confidential or non4notification factoring3, the factoring facility is undisclosed, !ith the seller usually retaining the credit control function. BCC Re*our6e 1!*torin" Recourse factoring is no! the most common type of factoring transaction. This factoring transaction allo!s the factor to go bac" to the seller if payment is not received 2normally after a B7 day period3. The credit ris" does not transfer to the factor during the recourse factoring process.

*ormally, in the event of non4payment by the customer, the seller must buy bac" the invoice !ith another invoice 2credit !orthy3. Recourse factoring is typically the lo!est cost for the seller because the ris" for the factor on the funding transaction is lo!er. BDC Non re*our6e 1!*torin" *on recourse factoring is the traditional method of factoring and puts the ris" of non4 payment, in the event the debtor becomes insolvent, fully on the factor. If the debtor cannot pay the invoice due to insolvency, it is the factorFs problem to deal !ith and the factor cannot see" payment from the seller. The factor !ill only purchase solid credit !orthy invoices and often turns a!ay average credit &uality customers. The cost is typically higher !ith this factoring process as the factor assumes a greater ris".

BENEFITS OF FACTORING

*o collateral security re&uired.

-s a result of factoring services, the enterprise can concentrate on manufacturing and selling. The ris" of bad debts is eliminated. The factoring institution also provides advice on business trends Increase (ash #lo! @ithout Increasing or -dding Debt #ast and 'asy 0rocess (ash Received for Kour Invoices in := )ours or %ess 'liminate %ong $illing (ycles -dd (apital to Kour $usiness That is *ot a %oan 0ay <ff 0ast Due <perating '9penses Increase Mar"eting 'fforts 0rovide (onsistent @ee"ly (ash #lo! to -llo! for $etter 0lanning and +ro!th Reduce Stress Involved @ith *ot )aving (ash to Meet $usiness <bligations Reduce $ad Debts by Using the #actor6s (redit Department Ma"e 0rofessional Ouic" (redit Decisions for *e! (ustomers Improve Decision4ma"ing on *e! $usiness Reduce -dministration (osts -ssociated @ith (ollection -ctivity Receive 0rofessional -ccounts Receivable Management <ffer $etter Terms to (ustomers -llo!ing Kou to +ain More $usiness #unding is $ased on the #inancial Strength of Kour (ustomers +ain *eeded (apital @ithout +iving Up '&uity (oncentrate on Important 0arts of Kour $usiness Instead of (ollecting Invoices Use Kour (ustomerFs +ood (redit as %everage for $etter (ash #lo!

F!*torin" in*(ude6 not on(y 1in!n*in"


#actoring, contains aside from financing, an additional service as !ell. This means that by concluding an -greement on the #uture -ssignment of Receivables in addition to financing it incliudes administration and monitoring, and to ensuring its collection and

the transfer of the additional payment to client account. In case of delay by the debtor factor send reminder notices, contact the debtor by phone and in !riting, monitor the status of the receivable and ta"e steps aimed at collection of the outstanding amount. This !ay, factor !ill help client to save time and costs connected to handling and administrating the receivables, and to be able to concentrate fully on your core business or sales activity. #actor regularly provide clients !ith chec"lists of important data, so that client have a complete overvie! of the purchased receivables, repayments of debtors, and other information important for client. -dministration is e9actly the feature of factoring that differentiates factoring from other forms of receivable financing 2forfaiting, the discount purchase of receivables or specific4 purpose financing3

COSTS INVOVLED IN FACTORING


The cost of a factoring transaction is determined by three criteria. #irst, the credit !orthiness of your customers. Second, the length of time that your invoices ta"e to get paid. %astly, the monthly factored volume.

Kour cost, actually called a discount, can be as lo! as 5.>C or as high as 5:C per transaction depending on ho! you fit the previous criteria

#actoring

feeD

- factoring fee is a fee for the e9penses related to the administration of the processing of assigned receivables. The fee is stipulated by a percentage rate, as a

one4off fee from the amount of the assigned receivables, depending, in particular, on the demands for processing and the scope of the services. Interest interest rates are at the level of rates on short4term ban" loans. #ee for the e9ecution and processing of contractual documentation. rateD Interest is applied to the advance payments paid for the assigned receivablesM the

0ARTIES INVOVLED IN FACTORING


Se((er of the product or service !ho originates the invoice. Debtor is the customer of the seller 2i.e. the recipient of the invoice for services rendered !ho promises to pay the balance !ithin the agreed payment terms3. F!*tor 2the factoring company3.

HO/ DOES INVOICE FACTORING /OR.SE


$nvoice 5. you factoring generate invoices is for your very products simpleD or services.

:. Kou submit the invoices to your clients and to the factoring company. ;. The factoring company advances you up to A>C of the gross value of your invoices 2the remaining is "ept as a reserve to offset disputes3. =. <nce the invoice is paid by your client, the factoring company releases the 5>C reserve and charges their fee. #actoring is best described !ith an e9ampleD 5. let6s say that you sell services to (ompany - and (ompany $. -s soon as you provide the services, you invoice them. :. -t the same time, you send copies of the invoices to the factoring company, !ho buys

them funds

and

provides are

you

!ith

an to

advance your

payment

for company.

them.

;. The factoring company !aits to get paid by your customers. <nce paid, any remaining remitted The invoice factoring process can be repeated every time you invoice, providing you !ith a fle9ible line of financing that gro!s !ith your business.

The agreement bet!een the (lient and the factor specifies the factoring procedure. Usually the client sends the customer6s order to the factor for evaluating the customer6s credit!orthiness and approval. <nce the factor is satisfied about the customer6s credit!orthiness and agrees to buy receivables, the firm dispatches goods to the customer. The customer !ill be informed that his account has been sold to the factor, and he is instructed to ma"e payment directly to the factor. To perform his functions of credit evaluation and collection for a large number of clients, a factor may maintain a credit department !ith speciali1ed staff. <nce the factor has purchased a firm6s receivables and agrees to o!n them.

The follo!ing is an e9ample of ho! factoring !or"s. -ctual rates !ill vary based upon the nature of the advance si1e and the customers. 5. #actor !ill complete its due diligence on the client and the customers :. #actor and the client !ill enter into a #actoring and Security -greement, as !ell as some additional documentation. ;. #actor !ill notify the customers of the change of address for remittance of payments. =. The client !ill submit an advance re&uest for J57,777 to M0 Star along !ith the invoices, the supporting documentation and assignment. >. The factor !ill verify the advance to ensure that the invoices are complete and that the accounts receivable are due and payable. ?. #actor !ill multiply the advance re&uest of J57,777 times the advance rate of A7C or JA,777 and subtract the initial fee of ;.>C or J;>7 for a total funding to the client of J8,?>7. 8. The invoices are then mailed to the customers. A. @hen the customer sends payment to the loc"bo9 in ;7 days. B. The factor !ill ta"e from the payment the amount advanced and the initial fee. The factor !ould then remit to the client the balance left over !hen the reserve settlement is released. In this e9ample using an advance rate of A7C and an initial fee of ;.>C for an initial fee period of thirty days the factor !ill advance A7C of the J57,777 advance re&uest or JA,777 less the initial fee of ;.>C or J;>7 for a total advance of J8,?>7 to the client. In this case that !ould be J57,777 44 J8,?>7 44 J;>7 Q J:,777 To e9tent that some invoices are not paid in thirty days, then additional late fees are

charged on only the invoices unpaid for each late fee period that an invoice is outstanding.

FACTORING STRATEGIES
@hen more fle9ible terms factoring begins, the client can increase prices to its customers by 5C to >C to help cover the cost of factoring. In many industries, customers e9pect to pay a fe! percentage points higher to get fle9ible sales terms. - client can see" a cash discount from a supplier in return for prompt payment, much time from :C up to 57C 2depending on the industry standard3. @hen a client ma"es cash payment on the day of purchase from suppliers, the client can profit from a large cash discount. @ith benefits availing to both the supplier and the customer, the cost of factoring can be covered by using smart factoring strategies.

BAC /'en to u6e F!*torin"E


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

5. Comp!ny *!nnot !11ord to 3!it F+ to ,+ d!y6 to "et p!id by *u6tomer6$ If the company6s biggest problem is that company need money sooner than the usual ;7 to ?7 days it ta"es for the clients to pay, then factoring is the ideal product for the company. factoring company can eliminate the !ait and ma"e company6s cash flo! predictable. :. Comp!ny need6 money to p!y 6upp(ier6 or emp(oyee6$ (ompanies that need money to pay for ongoing e9penses, such as employees or suppliers, can really benefit from invoice financing. Invoice financing !ill streamline cash flo! and help to meet ongoing

obligations. )o!ever, companies that need the funds to purchase e&uipment or to buy real estate !ill usually not benefit much from factoring. There are other products in the mar"et that !ill be better. Invoice financing is a great tool that can help ma"e payments predictable. This allo!s the company to plan for gro!th and enables to capitali1e on ne! and e9citing gro!th opportunities. #actoring is mostly used by large, established corporations that solve , in a long4term perspective , the issue of the daily administration of their receivables and fle9ibility of financing through factoring. #actoring is also used by companies !ith a high gro!th potential !hich are going through a certain restructuring phase or companies !hich face substantial seasonal fluctuations of production. #urthermore, !e are addressed by small4 and medium4si1ed enterprises, as !ell as suppliers of multi4national retail chains !ho determine the payment and price conditions for their suppliers.

BBC I6 1!*torin" 1it 1or t'e bu6ine66E


0roducts are &uic"4turnover products 0roducts are delivered regularly to a large number of buyers $uyers have been re&uested to provide !ith deferred maturity There is no o!nership, economic or personal connection bet!een the business . the buyer The business is a manufacturing or trade company or a company delivering services The business is engaged in automotive, !ood products, the te9tile or food industries, manufacture machines and e&uipment, electrical appliances, furniture, etc.

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

They arise from a business contract based on the supplies of goods or delivery of services, Their maturity is bet!een ;7 and 5:7 days,

They are before maturity, They are free of any rights or claims of third parties, Their assignment is not limited 2e.g. pursuant to a business agreement3, 0repayment invoices are not concerned, They are payable and enforceable in the amount and currency specified on the invoice, They may not be set off against the buyer6s receivables, The annual volume of receivables suitable for assignment !ill be at least (SN ;7 million.

F!*torin"D ! better option t'!n bu6ine66 (o!n Many business o!ners !ho need financing start their financing search by loo"ing for a business loan or a business line of credit. -lthough business loans and lines of credit are !ell "no!n products, they are very hard to get. -nd in reality, fe! business o!ners actually manage to get them.

In certain instances, Invoice factoring may be a better and easier to obtain alternative. There are three conditions that can determine !hether factoring is a better alternative than a business loanD

5. -re the clients6 slo! payments hurting the gro!thT Do they ta"e up to ?7 days to payT :. Is company turning a!ay bigger sales because company lac"s !or"ing capitalT ;. @ith the right financing, does the business have significant gro!th potentialT If the ans!er is yes to these &uestions, then chances are that factoring the invoices !ill be better for than more traditional business financing products. Invoice factoring provides company !ith financing based on its invoices, eliminating slo! payment cycles and providing it !ith money to pay rent, meet payroll and e9pand its business. Since factorin is tied to the sales potential, it does not have the arbitrary use limits that

business loans have. The more the business gro!s, the more financing the company &ualify for. This ma"es it an ideal product for businesses that have significant gro!th potential. #actoring 2or recei!able factorin as it is also "no!n3 is easy to use. <nce company have invoiced the customers company send a copy of the invoice to the factoring company. The factoring company, in turn, advances the company up to B7C of their invoice and !aits to be paid by their client. <nce its clients pay for the invoice, the transaction is settled.

In effect, by financing the invoices company eliminate the slo! payment problem. (ompany accelerates its cash flo!, enabling itself to pay for its obligations, ta"e ne! opportunities and gro! its company.

In terms of cost, factoring is a very competitive product. #actoring fees range from 5.>C to ;C per month, ma"ing it an affordable product.

BCC Se(e*tin" t'e Ri"'t In&oi*e F!*torin" Comp!ny )


Selecting the right 1!*torin" *omp!ny for the company can be a very comple9 tas". +iven the importance of the factoring relationship to the company6s ability to succeed and gro!, it is critical that company does the proper due diligence !hen selecting a factoring partner. )ere is a list of some of the criteria that are important !hen selecting a factoring financing companyD U F!*tor6= Com1ort Gone -lmost every factoring company !ill advertise that they can !or" !ith an account that re&uires as little as J57,777 per month and as high as a fe! million dollars per month. -lthough that may be true in principle, the reality is that managing a small volume account is very different from managing a multimillion dollar account. Most factors tend

to develop a comfort 1one or Vpreferred specialtyW !hen it comes to client si1e. @hen selecting a factor, al!ays as" about the si1e of their typical client. Ideally, the si1e of the business should not be significantly belo! or above that figure. U #ont'(y #inimum6 Most factors !ill only ta"e clients that commit to transact a minimum financing volume every month. The advantage of committing to monthly minimums is that the factor !ill offer the company better terms. The main disadvantage is that if the factored volume drops, your company could be liable for ma"ing up the difference in fees. @hen selecting a factor, be sure to select one !hose minimums are !ell belo! the e9pected minimums, or better yet, try and find a factor !ith no minimums. U Re*our6e &6$ Non Re*our6e Recourse is a term that defines the ability of a factor to resell the invoices bac" to a client if an invoice does not get paid !ithin a given period of time. Most factoring companies prefer to operate in recourse mode. )o!ever, there are a number of factors !ho offer non4recourse agreements. Under a non4recourse agreement, the factor !ill absorb the losses on an invoice if the account debtor becomes financially insolvent or ban"rupt. In effect, non4recourse factors offer some protection against bad debt. -lthough generally better !ith a non4recourse factor, most recourse agreements !or" !ell enough. U Contr!*t Dur!tion Typically, receivable factoring contracts re&uire a minimum term of one year or more. @hereas longer4term contracts enable a factor to offer you better pricing, they can also loc" your company into a factoring arrangement that outlives its usefulness. Kour best bet is to try and find a factor that !ill allo! you to easily terminate a contract 2giving reasonable notice3 once the service has outlived its usefulness. U Fee Stru*ture

-ccounts receivable factoring fees vary significantly across the industry and are usually dependent on a3 b3 c3 the The financial your duration strength monthly of your of your contract customers and

volumes

d3 the payment cycle of your receivables. The fee 2also "no!n as VdiscountW3 can be close to ;C per month for small tic"et deals 2less than J;7N per month3 to as lo! as a 5.>C for companies that !ish to factor several hundred thousand of dollars. -lso, be sure to understand your factors fee structure thoroughly before signing the agreement as some factors have comple9 fee structures. U Le&e( o1 Ser&i*e - very important criterion !hen selecting an invoice factoring company is choosing a company that !ill give you the appropriate level of service. The industry is very diverse, and there are many factors that charge very lo! fees and provide a very impersonal Vmass approachW to service. (onversely, there are factors that provide a Vhigh touchW level of service, for slightly higher rates. Most companies tend to choose the factor !ith the lo!est rates 2and usually lo!est level of service3 thin"ing that they !ill save money. In the long run, they end up regretting the decision. Kou are usually better off loo"ing for a factor that offers a better service, even if it comes at a slight premium. S'ou(d *omp!ny 3or2 3it' ! 1!*torin" bro2erH*on6u(t!ntE <ne !ay to simplify the process of selecting a factor is to !or" !ith a factoring bro"er. good bro"er !ill help the company determine if factoring is the best solution for the company and !ill help it find the factor that is best suited to serve it. The bro"er !ill also help the company position its company to a factor in the best possible !ay, ma9imi1ing the chances of getting the funds, the company needs, !ith the best possible terms. <ne of the most significant advantages of !or"ing !ith a factoring bro"er is that they !ill help

the company by saving time. The process of evaluating a factoring company can be both tedious and time consuming. - bro"er can help sidestep the issue since they !ill do all the !or" of finding the best factor for the company. %astly, most factoring bro"ers are compensated through a finder fee by the factoring company, so company !ill not have to pay them any fees for their service.

#ETHODOLOGY

#ETHODOLOGY
The study is based on personal decision, intervie! schedules, documentary observationM the data has been collected from the e9ecutives of the organi1ation and through the published sources.

RESEARCH
The research !or" is restricted only to the $''T'% DISTRI$UTI<* SKST'M !ith UTI $-*N and *'@ I*DI- I*SUR-*(' (<M0-*K. The study is based on the outcomes of personal intervie!s and documentary observation. $ut the e9treme care has been ta"en to involve the constructive suggestion from the e9ecutives. The success of research basically depends upon the method, !hich is adopted to solve the research problem i.e. a3 To collect desired information and data in a systematic manner. b3 -ppropriate selection of method is necessary. The first . foremost step in any research procedure isD4

STE0 9 0rob(em Formu(!tion


It is a very important step !hich has to be understood properly and clearly on !hich the study is based because it tells the scope of the study and it should not go beyond it nor should e9ecute some irrelevant aspect. In this case the study is based on #-(T<RI*+ system adopted by $''T'% for the distribution business of M<T<R<%- handsets.

STE0 8 Ob%e*ti&e6 o1 t'e Study

-fter the problem formulation the ob ectives should be clear through !hich specific type of information can be collected. The ob ective of this is to study about the concept of #actoring used in distribution business.

STE0F Determine 6our*e d!t!


The third step includes the collection of data, !hich is from the source i.e. primary secondary data. -fter the collection of data, it should be organi1ed and analy1ed to chec" !hether the ob ectives are fulfilled or not. -fter analy1ing the data investigation of research had !or"ed out !ith the help of follo!ing stepsD Research design Tools . techni&ues

RESEARCH DESIGN
- research is an arrangement of conditions for the collection . analysis of data in a manner that aims the research purpose and achievements of goal !ith economy in procedure depending on research problem. The study of #actoring is generally based on documentary evidences.

TOOLS AND TECHNI>5ES


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

9$ 0er6on!( Di6*u66ion They are certain information related to the sub ect !ho is
"no!n employees of the office so through connecting the employees and e9ecutives the information is gathered.

8$ Dire*t 0er6on!( Inter&ie36 The investigator personally approaches to the


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

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

F$ Do*ument!ry ob6er&!tion The investigator consulted the secondary sources


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

COLLECTION OF DATA
0rim!ry d!t! are those that are collected for the first time by the investigator and the
primary data used ad collected for this study areD4 Direct 0ersonal Intervie! Indirect <ral Investigation

Se*ond!ry d!t! are not collected but obtained from the published and unpublished
sources and the secondary data collected for this study areD4 0ublished data through ne!spapers, maga1ines, research institutes, ournals and boo"s. Unpublished data through scholars, libraries, area office.

FACTORING O0ERATIONS & CREDIT CONTROL IN BEETEL

0ARTIES INVOVLED IN THE FACTORING 0ROCESS 5SED BY IBEETEL= FOR THE DISTRIB5TION OF I#OTOROLA= HANDSETS
$harti Teletech %td. , (ompany 2Insured3. To!n Distributors 2TD3 , $uyer. UTI $an"4 #actor. The *e! India -ssurance (o. %td. . at radius 4 (redit Insurance company.

BEETEL AND THE TO/N DISTRIB5TORS JTD=SK

B'!rti Te(ete*' Ltd JBTTLK is an e9isting established (ompany engaged in the manufacture and trade, including e9port, of a large range of telecommunication e&uipmentsEproducts and spare parts and accessories thereof and is products. $TT% has therefore appoints various To3n Di6tributor6 JTDK for the sales and distribution of the Motorola products in India. The To3n Di6tributor has the necessary e9pertise and the e9perience in the sale and distribution of the 0roducts. The TD6s are appointed for some specific territory and as the volume of business gro!s $TT% appoints ne! TD6s to grab the gro!ing mar"et. appointed as a distributor by MEs. Motorola India 0vt. %td., 2M<T<R<%-3 to distribute in India its

Master -greement on $TT% letter head duly signed by Regional (redit (ontroller, copy shall be accepted and signed by the -uthorised signatory of TDM $TT% Regional <ffice !ill further pass on a copy to the UTI $an" and )<. The follo!ing documents are collected from TD before their registration4 Registration form duly filled by the distributor (opy of TI*. *<

(opy of the IT pan *umber (opy of the Memorandum and article of association in case of 0vt or %td company, copy of the partnership deed in case of partnership firm #our blan" che&ues in the name of $harti Teletech %td -greement copy duly signed by TD. %ast three months ban" statement. - letter containing the list of all the authori1ed signatories !ho sign the purchase order. (opy of last three year audited balance sheet and 0E% account including any provisional financial for the current year. (ertificate of net !orth or personal balance sheet of proprietorEall partner 2certified by a chartered accountant3.

$TT% 0R<IID' I*T'R'ST $'-RI*+ (R'DIT #<R ;7 D-KS #R<M T)' D-T' <# I*I<I(' T<
-%% '%I+I$%'

$UK'RS #<R T)' M<T<R<%- 0R<DU(TS -*D S'RII('S.

To compensate the charges for interest for the period up to 5> days to the $UK'R, $TT% give cash discount of 7.>C on the total invoice value by !ay of incentive on the $ody of Invoice. Interest charged by the $an" for the credit period en oyed, $uyer !ill have to pay Interest as per the rates applicable from time to time. -ll this helps in smooth functioning for the accounts for the to!n distributor as every transaction can be reconciled !ith the ban" statements.

BEETEL AND THE NE/ INDIA INS5RANCE CO$

$TT% has ta"en credit insurance from T'e Ne3 Indi! A66ur!n*e Co$ Ltd$ The insurance policy is ta"en on a turnover for R69:++ *r at premium of +$99L on the insurable turnover. The percentage for !hich the claim is reimbursed is -+L sub ect to condition mentioned in the anne9ure attached. In most of the cases the sales 2invoice3 of BTTL are covered under the credit insurance policy. -ccording to Ne3 Indi! A66ur!n*e Co$ Ltd the To3n Di6tributor is a person or legal entity !ho is legally liable to pay the $TT% for the goods deliveredEservices provided andD $TT% collected information on the financials of To3n Di6tributor6, the various documents !hich are verified and assessed regarding its credit assessment form, financial of the last three years, and net !orth certificate. <n the basis of this BTTL credit control officers assess the credit limit for the TD and send the recommendation to Ne3 Indi! A66ur!n*e determine the credit limit of the TD on the basis of its assessment.

T'ere!1ter Ne3 Indi! A66ur!n*e Co$ Ltd 6'!(( re&ie3D 6et !nd endor6e t'e Credit Limit on b!6i6 o1 do*ument6 pro&ided by BTTL !(on" 3it' re*ommend!tion6 o1 BTTL=6 Credit Contro((er6$ The $TT% declare all In6ur!b(e Turno&er pertaining to the preceding month for all the TD=6. -ll this information has to reach the policy issuing office on or before the 5>th day of each calendar month. If no sale has been made during a month, a Gnil6 declaration shall nevertheless be submitted to the Insurance (ompany. BTTL also declare details of the /'o(e Turno&er every &uarter in the form prescribed by the Insurance (ompany, so as to reach the policy issuing office !ithin 5> days of the end of the &uarter. $TT% has to submit its sales conditions to Ne3 Indi! A66ur!n*e Co$ Ltd for approval. T'e Ne3 Indi! A66ur!n*e Co$ Ltd$ may re&uire changes andEor the insertion of any clause that the (ompany deems useful. -ny change in the BTTL general sales conditions must be submitted to The Ne3 Indi! A66ur!n*e Co$ Ltd$ for approval. BTTL has to furnish to T'e Ne3 Indi! A66ur!n*e Co$ Ltd$ promptly, any further information that the Insurance (ompany may from time to time re&uire, in respect of sales made during the policy period. Ma9imum period of credit of ;7 days !hich BTTL grant to any TD 2at or prior to the original due date of payment3 beyond the original due date !ith the prior !ritten approval of Ne3 Indi! A66ur!n*e Co$ Ltd$ If the payment is not given by the TD !ith in ;7 days then $TT% initiate for recovery !ith TD and if the recovery doesn6t ma"e in ne9t ?o days from the date of Due Date then $TT% go for file the provisional claim to *e! India -ssurance and in the mean time the further billing of that particular default TD is stopped by $TT%.

OBLIGATIONSHRES0ONSIBILITIES

OF

THE

IBEETEL= 5NDER THE AGREE#ENT )


BAC 0!yment o1 premium !nd *'!r"e6
The in6ured shall pay in full, on or before the commencement of the policy period, the pro&i6ion!( premium and other charges set out in the Schedule. The pro&i6ion!( premium is sub ect to ad ustment as mentioned herein belo!. The Insured shall be liable to pay any additional premium, on the actual turnover to !hich this policy applies 2i.e., the In6ur!b(e Turno&er3 and that may become due and payable after ad ustment of the pro&i6ion!( premium referred to herein above !hile submitting the relevant declaration of turnover as per clause ,B mentioned belo!. If at the e9piry of the policy, the In6ur!b(e turno&er falls short of the estimated turnover, refund of premium may be allo!ed for the difference sub ect to the (ompany retaining a minimum of >7C of the pro&i6ion!( premium$

The insured shall also pay all stamp duty or similar +overnment charges or ta9es, all ban" collection and transfer charges and debt recovery charges if applicable.

The Insured shall not offset any amount o!ed to the Insured by the (ompany against any amount o!ed by the Insured to the (ompany unless other!ise agreed by the (ompany in !riting.

If during the validity of the policy, the Insured agrees to grant longer payment terms than that mentioned in the proposal formEschedule to the policy, the (ompany reserves the right to revise the premium rate applicable to the relevant turnover.

BBC Turno&er De*(!r!tion


The Insured shall also declare all In6ur!b(e Turno&er pertaining to the preceding month, buyer4!ise, so as to reach the policy issuing office on or before the 5> th day of each calendar month, in the form agreed by the (ompany. If no sale has been made during a month, a Gnil6 declaration shall nevertheless be submitted to the (ompany. The Insured shall also declare details of the /'o(e Turno&er every &uarter in the form prescribed by the (ompany, so as to reach the policy issuing office !ithin 5> days of the end of the &uarter.

BCC De*(!r!tion o1 o&erdue p!yment6


BTTL has to declare to Ne3 Indi! A66ur!n*e Co$ Ltd, on or before the 9:t' o1 e&ery *!(end!r mont', all invoices !hich remain !holly or partially unpaid for more than ,+ days from the due date of payment, in respect of the sales made during the policy period and such declarations shall continue to be made to Ne3 Indi! A66ur!n*e Co$ Ltd even after the e9piry of the policy period, so long as any such payment remains unpaid.

BDC #!n!"ement o1 *redit (imit 1or t'e indi&idu!( TD=S


#ollo!ing heads are covered under this agreementD

B9C App(i*!tion

-pplication for Credit (imit6 in respect of each buyer has to be made to the (ompany in the prescribed format. The (ompany !ill inform the Insured in !riting about its decisionD i. To acceptErefuse the Credit (imit re&uested for any buyer. ii. -bout the amount of Credit (imit sanctioned for each buyer and the period of cover. The Insured must furnish details of buyers !ho have consistently paid late 2i.e. more than ;7 days after the due date3 in the last 5: months and any other information, !hich may affect the decision of the (ompany to grant cover. -pplication for e9tension of cover in respect of any Appro&ed Buyer should be made one month before the e9piry of the period of cover. In such cases, the cover for the buyer !ill be maintained until the NE/ INDIA INS5RANCE CO#0ANY refusesEreduces cover for the buyer, in !riting.

B8C Oper!tion
The (redit limit decision !ill ta"e effect from the date of commencement of the policy if the application for the limit is received !ithin one month of commencement of the policy. #or all other applications, the limit !ill be effective from the date mentioned in the credit limit decision. The Credit (imit is a revolving limit and !ill become automatically available to cover further sales as payments are received against outstanding invoices.
The revolving limit !ill ho!ever cease to operate under the follo!ing circumstancesD 2I3 @here there is already due from the Appro&ed buyer a debt older than ?7 days. 2ii3 @hen the credit limit for the Appro&ed buyer has been cancelled.

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

The NE/ INDIA INS5RANCE CO#0ANY may reduce, cancel or suspend limits for any TD at any time !ithout assigning any reason. Such decisions !ill be conveyed to the BTTL !riting. )o!ever, all In6ured Debt6 e9isting at the time of conveying the decision shall stand covered. The (redit limit shall stand automatically cancelled under the follo!ing circumstancesD @hen a provisional claim is filedE should have been filed under the policy. @hen the -pproved buyer becomes insolvent. @hen a credit limit has been refused. - total refusal is e&uivalent to a cancellation of credit limit. In such cases !here the credit limit has been cancelledErefused, including automatic cancellation, the BTTL must reapply for credit limits if at a later date he !ishes to continue selling to this TD.

BEC T'e TD 3i(( be*ome in6o(&ent in t'e 1o((o3in" mentioned 6itu!tion6) X5Y INSOLVENCY M
of the approved buyer , The buyer shall deemed to be insolvent for purpose of this policy !hen The buyer is declared ban"rupt from the competent court of urisdiction. <R - ReceiverE-dministratorE%i&uidator has been appointed by the (ourt to manage his estate. <R -n order by the (ompetent -uthority has been made for compulsory !inding up. <R

-n effective resolution has been passed for voluntary !inding up provided that this resolution is not merely for the purpose of reconstruction or amalgamation. <R

an arrangement binding on all creditors has been sanctioned by the appropriate (ourt <R Such and other relevant conditions e9ist as are in the opinion of the (ompany substantially e&uivalent in effect to any of the foregoing conditions.

The loss shall be confirmed by the relevant authority 2such as (ourt, %i&uidator, Receiver, -dministrator3 as being o!ed by the -pproved $uyer to the Insured at the date of insolvency.

B8C 0RES5#ED INSOLVENCY OR 0ROTRACTED DEFA5LT 4 by the Appro&ed ) Buyer


is the failure of the Appro&ed Buyer to pay to the BTTL, at the end of the 3!itin" period, the !hole or part of the In6ured debt relating to the goodsE services delivered to and accepted by an Appro&ed Buyer$

BFC 0ro*edure 1or "r!nt o1 Di6*retion!ry Limit


-ccording to agreement bet!een the BTTL . THE NE/ INDIA INS5RANCE CO#0ANY @here the Credit Limit re&uired on a buyer is less than or e&ual to the Di6*retion!ry Limit mentioned in the Schedule, the NE/ INDIA INS5RANCE CO#0ANY LTD$ may set a Credit Limit !ithout reference to the BTTL, !hich shall be ustified by eitherD i. - !ritten report from an independent credit agency dated not more than 5: months before the date of the oldest outstanding invoice, !hich supports the amount of credit given. If the report spea"s for a lesser amount, then the NE/ INDIA INS5RANCE CO#0ANY shall be liable to pay only the In6ured 0er*ent!"e of that amount. ii. - !ritten report from the buyer6s $an"ers dated not more than 5: months before the oldest outstanding invoice !hich supports a figure at least t!ice the amount of credit

given. If the reference spea"s for a smaller figure, then the NE/ INDIA INS5RANCE CO#0ANY shall be liable for the In6ured 0er*ent!"e of half the amount spo"en for. iii. +ood trading e9perience obtained !ithin a 5:month period preceding the establishment of an In6ured Debt$ The Credit (imit given should not e9ceed 5:>C of the ma9imum outstanding debt recorded !ith the Insured and satisfactorily paid. +ood trading e9perience is !here each month the buyer pays no later than ;7 days after the due date for payment, sub ect to the payment of a minimum of three invoices !ithin the due date of payment.

BGC Credit Contro(


i. The Insured must strictly follo! the credit control procedures that are endorsed in !riting to the policy, or if none, those that are detailed in the proposal form. 0roof of this shall be submitted to the (ompany at the time of ma"ing of claim under the Di6*retion!ry Limit. ii. The Insured shall not ma"e any settlement, arrangement or compromise for an In6ured Debt unless a !ritten agreement to this effect is obtained from the (ompany. iii. The Insured hereby agrees to monitor the payment performance of all Appro&ed Buyer6 by "eeping an age4!ise receivables record of all amounts due and all buyer e9posures against individual Credit Limit6 sanctionedEestablished and ta"e all reasonable measures to recover the Insured Debt6. The Insured hereby agrees to prevent any loss arising and should any loss arise, minimi1e it. iv. The Insured shall act in good faith and promptly inform the (ompany about any changes that they may become a!are of in their or their buyer6s circumstances, includingD -ny idea or reason to believe that the buyer might not pay its debts.

@here other suppliers stop delivering to a buyer because their payment record is poor 2or they have concerns about the buyer6s solvency3 If a buyer as"s for e9tra time to settle a debt or to pay by installments. If the buyer as"s to e9tend the term of the bill of e9change @hen a buyer6s draft or bill of e9change or che&ue is not paid on the date it is due or presented 2regardless of late payment3. If the Insured desires to start proceedings or action against a buyer. @hen a debt is partially or !holly unpaid beyond ?7 days

BHC Stop Co&er


(over for ne! deliveries shall be stopped in circumstances !hereD - payment due from a buyer is unpaid for more than ?7 days 2!hether the payment is insured or not3. The BTTL has received notice from a responsible source that a default is li"ely to occur in respect of an e9isting or future outstanding payments. @hen the NE/ INDIA INS5RANCE CO#0ANY notifies the BTTL of stopping cover. @hen the credit limit for the buyer is cancelled as detailed in clause ,G of the 0olicy. @hen a che&ueEbill has not been honored at maturity or !here che&ues have been returned unpaid. @hen legal proceedings have been instituted against the buyer for insolvencyEdefault in payments.

BIC C(!im 0ro*edure in *!6e o1 de1!u(t m!de by t'e TDD


BTTL has to

+ive prompt notice to Ne3 Indi! A66ur!n*e Co$ Ltd in !riting upon the occurrence of a defaultEdelay in payment or the discovery of any event or circumstance li"ely to give rise to a claim under this policy. +ive prompt notice in !riting to Ne3 Indi! A66ur!n*e Co$ Ltd if any amount becomes overdue by a period e&ual to the #!@imum E@ten6ion 0eriod 2 egg4 8days
or 5> days or ;7days3 from the original due date. If @ith in ?7 days from the date

of its discovery $TT% does not inform Ne3 Indi! A66ur!n*e Co$ Ltd then the claim amount !ill not remain liability under this policy. 'nsure that all rights in respect of the contract of sale and the In6ured Debt are properly preserved and e9ercised.

If re&uired by the Ne3 Indi! A66ur!n*e Co$ Ltd , ta"e any measures that may be re&uired including the institution of legal proceedings. @ithin B7 days of the due date of the first unpaid invoice, BTTL has to submit a 0ro&i6ion!( *(!im as follo!sD Submit a filled in claim form as prescribed by Ne3 Indi! A66ur!n*e Co$ Ltd. BTTL shall also submit support documents such as proof of non4receipt of payment and &uantum of payment due, proof of de(i&ery such as invoiceE%R etc. and such other documents to establish proof of actual sale. -ll documents shall be duly certified by a competent (hartered -ccountant. In the case of an insolvency claim, the BTTL shall submit a duly filled in claim form !ithin > days of becoming a!are of the event. BTTL shall submit confirmation of debt from the li&uidator, trustee in case of ban"ruptcy, or other authori1ed agent, to receive payments.

B7C Re*o&ery 0ro*edure

Recoveries consist of any amount received by BTTL from TD or from any other source !hatsoever to!ards the payment of the In6ured Debt. -ll recoveries received by and on behalf of the Insured in respect of any debt of the buyer to the Insured shall be treated as recoveries hereunder regardless of any designation as to the application of funds or source from !hich such payments are received and shall be applied chronologically against the outstanding In6ured Debt in order of the due dates. 2<r e9tended due dates !here applicable3. $TT% ta"e all steps that are necessary and e9pedient !hich Ne3 Indi! A66ur!n*e Co$ Ltd, may at any time re&uire, to effect recoveries, !hether from TD or from any other person from !hom such recoveries have to be made.

B.C #i66t!tement
-ccording to the agreement this policy shall be void ab initio, and all the premiums paid hereon shall be forfeited to the BTTL, in the event of any misstatement or non4disclosure of any material factEinformation. @ithout pre udice to any rule of la!, it is declared that this 0olicy is given on the condition that the BTTL has at the date of issue of the 0olicy disclosed and !ill at all times during the operation of this 0olicy promptly disclose all facts in any !ay affecting the ris"s Insured.

BLC C!n*e((!tion o1 t'e !"reement


-ccording to the entered the NE/ INDIA INS5RANCE CO#0ANY !ny may at any time cancel this policy by sending the BTTL ;7 day6s notice by registered letter at the BTTL=S last "no!n address. The NE/ INDIA INS5RANCE CO#0ANY shall ho!ever remain liable for any lossE claim in respect of sales transactions made to Appro&ed Buyer6 prior to the date of cancellation.

If, at the time of cancellation of the policy, the In6ur!b(e Turno&er falls short of the annual estimated turnover, refund of premium shall be made for the difference, sub ect to a minimum retention of >7C of the 0ro&i6ion!( 0remium.

This 0olicy shall stand cancelled automatically on the insolvency of the BTTL. In this event, the NE/ INDIA INS5RANCE CO#0ANY shall be entitled to retain all premiums paid, and receive and retain all premiums due and payable up to and including the effective date of such insolvency.

BETEL AND THE 5TI BAN.

$TT%, engaged in the business of manufacturing and mar"eting of !ide range of Telephones and mar"eting . distribution of +SM 0hones, DS% Modems . other allied $roadband products and set top bo9es and supplies the same to the sales channel intermediaries, corporate, institutions etc., has approached the ban" and ban" has agreed to purchase receivables from its buyers, !ithout R'(<URS' to $TT%. (onsidering the business interest of both the parties it has been agreed to enter into an agreement to sell and purchase the receivables and to specify their respective roles in the scheme and <n <ctober B, :77? $TT% and the UTI $-*N entered into the factoring agreement. -ccording to this agreement, UTI ban" !ill purchase the receivables of the approved buyer of the $TT%, not more than :5 days old, and charge B.:>C interest p.a. at the and of every calendar month by $TT%E$UK'R for the credit period i.e. from the date of payment by the ban" till the due date of payment by the approved buyer.

0ROCED5RE THAT BOTH THE CO#0ANIES FOLLO/S FOR THE FACTORING B5SINESS )
$TT% !ill raise the invoice on its buyers and shall hold the accepted invoice, %R and other relevant documents, title and interest as the trustee of the ban" in trust in accordance !ith the terms of this agreement. $TT% !ill send all the relevant documents to the ban" !ithin > days from the date of demand by the ban". In case of non receipt of the above documents, ban" retains the right to claim the amount of the invoice from the $TT% provided that payment is not received from the debtor. $TT% shall mail all the details of the invoices raised on the buyer to the ban". -fter the verification of the details of the invoices, ban" !ill purchase the receivables of the $TT% and !ill issue a pay order in the favors of $)-RTI T'%'T'() %TD. on the same !or"ing day. The pay order !ill be issued net of interest. -ll payment against the invoices purchased by the ban" shall be made at agreed centers. $TT% shall re&uest the buyers accordingly. Responsibility of collecting the payment from the buyer and depositing the same in the ban" shall be on the ban" alone. 'ach party shall bear their respective e9penses in connection !ith the agreement. The agreement can be terminated by either party, upon completion of one year from the date above mentioned, after giving a three months 2; months3 notice in !riting to the other party. If any of the party to the agreement does not perform its duty under this agreement, other party may choose to terminate the agreement, if the same is not ratifiedE set right !ithin ;7 days of being intimated.

The agreement can be terminated by one party if the other party is declared ban"rupt by the court of la!.

0ROCED5RE FOLLO/ED BY THE BEETEL FOR THE FACTORING B5SINESS


M<T<R<%- business is gro!ing at a very fast pace in India and $TT%, being the national distributor of M<T<R<%- products in India, is ma"ing ma or portion of their profits from the M<T<R<%- business.

$TT% is carrying its distribution business of M<T<R<%- products !ith the help of the To!n Distributors. To inline !ith the distribution business of $TT%, To!n Distributors have to maintain the huge stoc"s of the M<T<R<%- products. So in order to help their To!n Distributors and to solve their li&uidity problems, $TT% has arranged for the #-(T<RI*+ services !ith the UTI $-*N. Through this factoring service $TT% has arranged for providing ;7 days credit on the M<T<R<%- products for it6s To!n Distributors though $TT% is not getting even a single day credit on the products from the M<T<R<%(ompany. $TT% approaches to the TDs for carrying the M<T<R<%- business. $TT% ma"es TD6S after verifying the financial strength of the individual or the partnership firm or the company. - uni&ue registration number is allotted to every TD after their registration !ith the $TT% sub ect to reception of all the re&uired documents.

Regional sales manager of the M<T<R<%- !or"s in coordination !ith the To!n Distributors. @henever a TD as"s for the credit limit for doing the M<T<R<%- business, Regional sales manager collects all the prescribed documents and the form from the To!n Distributors and sends all these documents to the regional credit controller of the $TT%. Then the regional credit controller of the $TT% assesses the financial records of the TD thoroughly and decides a feasible credit limit for the TD according to the credit !orthiness as sho!n by his financial reports. $TT% sends all the documents collected from the TD, for the said credit limit, along !ith the suggested credit limit to the *'@ I*DI- I*SUR-*(' (<. %TD for its approval, as the company has got its TD6S insured !ith the same. -fter receiving all the documents and a through e9amination and assessment of the same, *'@ I*DI- I*SUR-*(' (<. %TD determines the credit limit of the TD. This credit can be same or over or belo! the credit limit as suggested by the $TT%6S credit control manager. The *'@ I*DI- I*SUR-*(' (< sends an endorsement letter to the UTI $-*N . $TT% regarding limit set by the company for the TD. -fter receiving the endorsement letter UTI $-*N ma"es its o!n assessment of the credit limit and sets its o!n credit limit for the TD. <nce the endorsement letter is received UTI $-*N opens an account for TD. TD6S are provided !ith the uni&ue ID code !ith the UTI $-*N. There can be difference bet!een the credit limit set by the t!o i.e. UTI $-*N and T)' *'@ I*DI- I*SUR-*(' (<M0-*K %IMIT'D but the limit set by the UTI $-*N is applicable on the all the transactions bet!een the UTI $-*N and $TT% related to purchase

of the invoices. If the $TT% follo!s the credit limit set by the *'@ I*DI- I*SUR-*(' (<M0-*K %IMIT'D then $TT% have to bear the 57C ris" over the invoices purchased by the UTI $-*N. *o! !henever a purchase order is received from a particular TD, it is verified against the credit limit sanctioned and the credit limit utili1ed by the TD. $TT% receives current applicable credit limit for every approved buyer from the UTI $-*N on the daily basis. The current limit !ill be determined by consideringD4 i. ii. -ll invoices raised during the previous day after 5?77 hours and invoices raised during the day before 5?77 hrs. -ll cleared (he&ue sE0ayments on same day before 5?77.

-fter verifying the current applicable credit limit of the TD, $TT% dispatches the re&uired material and issuer invoice for the calculated amount, for the goods dispatched, in the mane of the TD and get it signed form the authori1ed signatory of the TD. $TT% retains a copy of the invoice issued against the TD as per the agreement !ith the UTI $-*N. $TT% then sends all the details of the invoice to the UTI $-*N via mail. UTI $-*N, on the reception of the details, issues a pay order net of interest in favor of BTTL for the invoice amount in its ID$I $an" account on the same !or"ing day, of the invoice date. In this course UTI became the o!ner of the goods dispatched to the TD till data the TD ma"e payment for

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

TD6S have to ma"e payment to the UTI ban" at their agreed centers. -ll the TD6S operate through specific accounts !ith the UTI $-*N. UTI $-*NS sends a report on the payment pending against the TD6s to the $TT%, on the daily basis. The credit controller of the $TT% goes through these reports and follo!s up !ith the TD6s for the pending payments by them to UTI $an".

FINDINGS

FINDINGS AND OBSERVATIONS


#actoring services provide solution to the problem of li&uidity. It can be used effectively to produce fruitful results !ith the limited capital. It enables a company to carry out its operations rather than spending time for chasing debtors. #actoring is an effective tool in the hands of management for increasing their sales by providing credit to their customers. #actoring helps the $TT% in generating cash for meeting their re&uirements !ithout any other additional liability as factoring is not a loan. UTI ban" purchases the receivables of the $TT% that $TT% generates against credit sales to the TDs and ma"es payment to the $TT% for the same. In short factoring benefits the $TT% in the follo!ing !aysD4

BAC ACCELERATED CASH FLO/ )


UTI $-*N advances $TT% cash on &ualified accounts receivable immediately, so that $TT% can ta"e care of operating e9penses, ta9es and other financial obligations rather than bloc"ing its money in the debtors.

BBC NO NE/ DEBT INC5RRED )


$ecause factoring is not a loan, $TT% assume no ne! debt or interest to pay. It merely e9changes one asset 2accounts receivable3 for another asset 2cash3 !ith the UTI ban".

BCC5NLI#ITED /OR.ING CA0ITAL )


#actoring is the only source of business financing that gro!s as company6s sales increase. The more accounts receivable company generates, the more immediate cash company can access. In this !ay factoring helps the $TT% in increasing its sales.

BDC NO COLLETERAL SEC5RITY RE>5IRED )


*o (ollateral Security is needed to avail finance. (ompany pays interest only on the actual funds utili1ed. )ence $TT% is getting additional money !ithout any colleteral security.

BEC CONCENTRATE ON ITS O/N B5SINESS )


The more the company6s sales boo" gro!s, the more the UTI $-*N helps the $TT% to turn their invoices into cash. This !ill enable the $TT% to respond more &uic"ly to mar"et opportunities. (ollection of receivables is also managed by UTI $-*N enabling $TT% to concentrate on its o!n core business activities.

BFC HIGH ADVANCE )


UTI $-*N is offering the highest advance rates to the $TT%. (ompany is obtaining up to B7C of the face value of the invoices !ith the TDs.

Su""e6tion6 & Re*ommend!tion6

S5GGESTIONS
$efore entering the $TT%, #actoring !as an un"no!n concept to me, so it !as really difficult to plan out the suggestions. $ut ho!soever the suggestions !hich !ere planned after studying the #actoring operations in the $TT%, and understanding the concept of #actoring areD
(ompany should consider the scope of the receivables factoring on the basic and the cordless phones that it manufactures as the factoring on the M<T<R<%- handsets and the accessories is benefiting the company a lot in its operations. Since factorin is tied to the sales potential, it does not have the arbitrary use limits that business loans have. The more the business gro!s, the more financing the company &ualify for. -s $TT% is ma"ing a ma or a portion of their profits out of this distribution business using the factoring services of UTI ban" only, steps should be ta"en to increase the sales of the M<T<R<%- 0roducts and the -ccessories. %i"e, some "ind of incentive can be given to the TD6S sho!ing outstanding performance in the sales of the M<T<R<%- products. <ther these "inds of incentives should

be introduced and increased to increase the transactions. This !ill increase the profits of the
$TT%.

0rocedure and the documents re&uired for the registration, of the ne!ly established companiesEpartnership firms and the businesses, as the eligible buyer or the TD should be clarified. The list of the documents re&uired for the registration as a TD includes the last three year6s (- (ertified balance sheets !hich a ne!ly established business !ill not be having.

CONCL5SION

CONCL5SION
-fter the analysis of the factoring business of the $''T'% it can be concluded that the company is using the factoring services of the UTI ban" very efficiently to convert their receivables in instant cash. Under this #actoring agreement, UTI ban" purchases all the receivables of the approved buyers up to the prescribed credit limit from $TT%, !ithout any recourse, and credit their account !ith the net amount on the same day. In this !ay, $TT% is able to generate constant cash flo! !ithout any additional liability and having tension for chasing the debtors for the payment resulting in a clam situation to concentrate on its main business. $TT% has also entered into an agreement !ith the *'@ I*DI- I*SUR-*(' +R<U0 %TD. #or the insurance of the receivables and thus nullified its ris". $ecause of these factoring services of the UTI ban", $''T'%6s turnover has increased manifolds resulting into ma9imum returns. <n the basis of !hole analysis done in the $''T'% over the factoring it can be finally said that these factoring services are benefiting

the company a lot in its operations and it should also consider the factoring for the basic and the cordless phones that it manufactures.

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