About Dalda:

Introduction

History

Dalda’s story begins in early 1930’s when Hindustan Vanaspati Manufacturing Co (today’s Hindustan Lever Limited) wanted to start manufacturing Vanaspati locally. At that time hydrogenated vegetable oil was imported in India by a Dutch company, Dada & Co. Dada & Co, insisted that the branded product should reflect their name, hence in a bid to establish their ownership of the brand Hindustan Lever introduced the letter ‘L’ for Lever into the name; giving rise to the name DALDA.

Dalda Banaspati through its promise of superior quality & taste has won the hearts millions of consumers making it not only a household name in the sub-continent by synonymous with the genre vanaspati.

Dalda, in its quest to meet the changing needs of its consumers; entered the oils segment through the launch of Dalda Cooking oil.

In 1999 Unilever acquired International Technology to evolve Dalda Banaspati to Dalda VTF, making it the only Virtually Trans-fat Free Bansapati in Pakistan.In July 2004 Unilever Pakistan sold its "Dalda" brand to Westbury Group in collaboration with Unilever Employee Welfare Group, who formed a separate company

Under Dalda Foods (Private) Ltd.

Dalda Foods (pvt) ltd  took Dalda’s over 60 years of heritage combined with continuous innovation and  indepth consumer understanding and maintenance of high quality standards has made it the leading brand in the Cooking Oil and Fats industry.

Within a short span of 4 years Dalda Foods expanded its Brand Portfolio through the launch of Manpasand; to meet the needs of the vast middle-income segment. Manpasand Banasapti and Cooking oil was launched at end-2005 and has grown to become one of the most formidable players in the industry.

The Dalda portfolio was also expanded to seize the opportunity arising from changing consumer lifestyles and increased health awareness; the company entered the pure-oil segment in early

2007 through the launch of Dalda Canola & subsequently Dalda Olive oil.

In a bid to expand capacity and further strengthen position in the premium segment and enter the lower-income segment; Dalda Foods acquired the brand “Tullo” & “Pride” from Wazir Ali Industries in January 2007.

Market OfferingMarket offering is some combination of products, services, information, or experiences offered to market to satisfy a need or want.

The major offerings of Dalda foods are Vanaspati Ghee and Cooking Oil. Besides these the company also offers some beverages as well. The major offerings are available as a complete product line covering different price and quality ranges.

Products

Dalda VTF Banaspati

Dalda’s journey into the lives of its consumers started almost 60 years ago when Dalda’s food scientists pioneered a way of preserving the goodness of vegetable oils in a manner which not only preserved the taste of desi ghee but was a healthier alternative cooking medium- thus Dalda Banaspati was born.

Over time keeping in line with the changing consumer needs Dalda Banaspati evolved to become Dalda VTF Banaspati. Dalda VTF Banaspati is the only banaspati in Pakistan which is virtually Trans-fats Free (VTF).

Trans-fats cause significant and serious lowering of HDL (good) cholesterol and a significant and serious increase in LDL (bad) cholesterol; make the arteries more rigid; cause major clogging of arteries; cause insulin resistance; cause or contribute to type 2 diabetes; and cause or contribute to other serious health problems. This is why a worldwide campaign against Trans-

fats has led to a ban on its use in major developed countries. However such realization in countries like Pakistan will take a while but Dalda complies with worldwide quality standards and hence Dalda Banaspati is virtually Trans-fats Free since 1999.

Any ordinary banaspati brand contains up to 25% of these harmful Trans-fats; however Dalda using its International Technology and Expertise has reduced the amount of Trans-fats in its banaspati to less than 1%. This makes Dalda VTF Banaspati the healthiest banaspati available in Pakistan.

Dalda Cooking Oil

Not only was Dalda the pioneer in banaspati but also keeping in mind the changing lifestyle of its consumers Dalda introduced cooking oil to the market.

Dalda Cooking Oil is a premium blend of canola, sunflower and soybean oil, which is then hygienically refined to perfection using Dalda’s state of the art plant and International Technology and Expertise. This process of refining is specially designed to preserve the natural goodness of each of the individual oils in the blend. Hence the optimum goodness of each canola, sunflower and soybean reaches the consumers.

Dalda Cooking Oil is 100% cholesterol free and contains Vitamin A and D together with Vitamin E which protects from skin and heart diseases. It also contains essential fatty acids, Omega 3 and 6 and natural antioxidants that boost the immune system of the body. Thus food cooked in Dalda Cooking Oil is not only delicious but also exceptionally nutritional.

Planta Cooking Oil

In its quest for innovation Dalda introduced Planta Cooking Oil for consumers who were reluctant to shift to cooking oil from desi ghee. Thus Planta Cooking Oil became the only cooking oil to contain the goodness of oil and the delectable taste of ghee. It is a blend of soybean, canola and sunflower oil and is 100% cholesterol free. It also contains Vitamins A and D. This makes food cooked in Planta Cooking Oil tasty as well as very healthy.

Dalda Canola Oil with Vitamin Power

Dalda also expanded its product range to include Dalda Canola Oil with Vitamin Power. Extracted from fresh canola seeds, Dalda Canola Oil with Vitamin Power not only provides the benefits of Canola oil but also additional nutrients to give consumers extra energy, superior health and great taste essential for a modern and demanding lifestyle.

It is these properties and the additional Vitamin Power in Dalda Canola Oil which make it a much superior product and an ideal choice for Canola oil consumers.

Dalda Olive Oil

Another novel product by Dalda is Dalda Olive Oil. Dalda Olive Oil is packaged and imported from Spain. Using its International Technology and Expertise, Dalda ensures that its olive oil is extracted from the purest and freshest hand picked olives from the fertile lands of Spain, which are then refined to perfection using the most advanced International Technology under stringent quality standards within Spain. Dalda Olive Oil is 100% cholesterol free and enriched with exceptional Shifa and health benefits of olives, and fortified with additional Vitamin A and E to provide its consumers’ life with the smile and sparkle that it deserves. Find out more about the benefits of Dalda Olive Oil.

Dalda Olive Oil is available in three variants Extra Virgin, Pure, and Pomace. The difference between the variants of Dalda Olive Oil is their acidity level, which affects mostly taste and not nutritional content.

Dalda Olive Oil Extra Virgin

Dalda Olive Oil Extra Virgin is from the first pressing of the olives and has a strong flavor and aroma with all natural vitamins. It is naturally enriched with vitamins and anti-oxidants which may help prevent against heart disease and cancer.

Dalda Olive Oil Pure

Dalda Olive Oil Pure is a blend of refined and virgin olive oil. It is refined using Dalda’s International Technology. It has a medium flavor and aroma and contains natural vitamins.

Dalda Olive Oil Pomace

Dalda Olive Oil Pomace is refined and filtered using Dalda’s International Technology. It has a light flavor and aroma. It has additional vitamin A as well as natural vitamins.

Manpasand

Manpasand Banaspati

Manpasand Banaspati is produced using the most advanced technology and fully automatic plant under stringent international quality and health standards. It is manufactured using similar plant/technology which is used to make Dalda.

Manpasand Banaspati with its granular texture; has a distinguished aroma and taste which enhances the flavor of the food to an unprecedented level.

Manpasand Banaspati is economical in use and enriched with Vitamins A & D to ensure healthy and great tasting food for your family.

Manpasand Cooking Oil

Manpasand Cooking Oil is produced using the world’s best vegetable oils on Pakistan’s most advanced plant under stringent international health and hygiene standards.

Manpasand Cooking Oil is a premium blend of Canola, Soybean and Cottonseed Oil. Manpasand Cooking Oil is best suited for all types of cooking, as it is economical in use and cholesterol free. It is enriched with Vitamins A and D, which provide your family the health and care they deserve.

PricingCompanies use different pricing strategies to position their brand effectively in the market. Dalda foods have set prices that are easily affordable by its target customers.

Price ranges in Premium A Segment:

Price for banaspati ghee ranges from 115-130/kg

Price for Cooking Oil ranges from 125-140/litre

Price ranges in Premium B Segment:

Price for banaspati ghee ranges from 100-115/kg

Price for Cooking Oil ranges from 110-125/litre

Price ranges in Mid Price A Segment:

Price for banaspati ghee ranges from 95-100/kg

Price for Cooking Oil ranges from 100-110/litre

Price ranges in Mid Price B Segment:

Price for banaspati ghee ranges from 85-95/kg

Price for Cooking Oil ranges from 90-100/litre

Customer Relationship Management

The customer relationship management is the overall process of building and maintaining profitable customer relationships by delivering superior customer value and satisfaction.

The two building blocks for profitable relations with customers are:

Customer Value Customer Satisfaction

A customer buys from the firm that offers the highest Customer Perceived Value. And most convenient form of payment, Customer Perceived Value is basically the difference between total customer value and total customer cost.

Dalda Foods maintain strong customer relations as they offer the best in quality and price and provide best value and satisfaction to their customers by providing the best cash and credit policies. They provide a product corresponding to each market segment and satisfy them according to their demands. Surveys are often conducted to identify what the actual needs and demands of customers are.

Using CRM to Enhance Accounts Receivable

Problem: Slow paying customers can jeopardize your cash flow, and you have no access to sales forecasting to plan cash flow accurately. CRM allows salespeople to review a customer’s credit status before they place new orders, so orders that can’t be fulfilled aren’t placed. Flags and alerts enable you to escalate late payment concerns more quickly, shorten AR collection time and track collection efforts with complete visibility to everyone in the business

Shorter AR time and more cash available for the business Easier access to order, invoice, payment, balance, and aging information

when contacting customers Hours saved on the phone with front-office staff and troubleshooting Fewer issues with late paying customers, since salespeople know a

customer’s account status before placing new orders Access to sales forecasting and reports from one system, so you know how

to plan cash flow.

Market EnvironmentThere are basically two factors that can affect an organization’s performance in the market it is operating. These are:

Micro Environmental Factors Macro Environmental Factors

Micro Environmental FactorsThe factors that are close to the company and that affect the ability of a company to serve its customers. There are six different factors that are generally treated as “Micro Environmental Factors”. These are

The Company Suppliers Intermediaries Competitors Consumer Markets Public

The Company

As it is mentioned in the history portion that Dalda Foods was basically a project of unilever but it but unilever decided to sale out this brand to Dalda Foods. At that time it was a project of 4 billion rupees. It were the devotion and the company policies that held this brand alive in the market and during 4 years span of time the company progressed and now it is a 31 billion project and also the second largest brand of Pakistan after Nestle.

Intermediaries

Company does its marketing itself. The product’s advertisement is done through an advertisement firm “Makan Ericson”. But this advertisement is just for promotional purpose because the company is well established and also it’s not in introductory stages.

For the product containment the company involves physical distribution firms or handling distributors. In Multan region Aaqib Bros. is working as handling distributors and provides transportation and warehouse to supply goods to resellers of Multan region.

This factor helps out the company to provide goods to final consumers in a more efficient and organized manner.

Suppliers

In micro environmental factors we take those suppliers into account that provide raw material for the product. In case of Dalda Banaspati ghee the raw material is “Palm Oil” that is being transported from Malaysia. Another raw material is the “tins” in which the final product is contained. It is also outsourced.

Palm Oil is imported through shipments and the premium brands of this industry like “Habeeb” and other brands are also involved in this import and other small brands purchase the raw material from them. The company policy is to revise the rates after every three months if it is needed. If the price of raw palm oil decreases in the international market and suppliers decrease the price but the company has the stock of the product that was purchased at high rates then it will create a problem. In this case company handles it by maintaining the prices for as long as they can and then gradually decrease them.

Supplies are always available in time and increase the availability of the product in the market.

Competitors

There are basically two types of competitors good and bad. Good competitors are those that don’t spoil the market. They make work in collaboration of others. For example if they have to increase the rates they take decision with the other premium brands so they don’t spoil the market of other brand. Dalda is one of those competitors.

When we talk about the bad competitors these are the ones that spoil the market. For example the major competitor of Dalda Banaspati ghee in Multan region is “Sultan Banaspati” they take such decisions independently and the retailers take their product more because this earns them more profit also they don’t have sense that Dalda is a premium brand while Sultan is not. Also when they decrease their rates they take an independent decisions hence spoiling the market of our product.

Definition of a Receivable Receivables are assets that represent claims against other entities for goods or services provided, but for which cash has not been received.

Accounts Receivable is considered valid after:

The buyer of the goods/services has entered into a legally binding agreement The receivable can be accurately measured The seller has provided goods or services to the buyer The payment is due to the seller from the buyer The payment has not been received from the buyer The revenue from the transaction has been recorded on the seller’s books There is a reasonable expectation of collection

Account receivables management Companies must balance speeding up the collection of accounts receivable with the possibility of

gaining customers by issuing credit and implementing easy payment terms. Small businesses

often have restricted access to credit themselves and may have to depend on rapid payment of

outstanding amounts. Company policies define the goals and the framework of the accounts

receivable functions from the point of view of such limitations. Quality issues often lead to late

payments, and the company must consider customer satisfaction in collection procedures.

Managing Invoicing

The first step in implementing an accounts receivable system is developing policies and procedures for invoicing. A business can speed up collection by issuing invoices as soon as the sale is complete. Internal policies must detail when the sales department should report sales and when the accounting department should issue the invoice. Procedures detail what the sales report must include, how to prepare it and where to send it. Accounting procedures give the details of invoice preparation, verification, data entry into the accounting software and invoice mailing.

Credit period of customers start from the date of invoices submitted and stocks received by the customers. These customers are managed by modern trade, PMG and Key Account managers. MT and KA payment details along with the bank voucher and pay in slips are sent to head office to reconcile these accounts. If any deduction is made against payment invoice, regions are supposed to give complete details against deductions. It could be against CR notes, claims, short supply etc.

Ageing and outstanding status is checked and disseminated to all concerned regions and sales staff on daily basis to recover the pending amount.

Managing Credit

Unless customers always pay in advance, they typically receive credit, at least until they pay their bills. Customers that receive credit must have accounts for which the company has performed a credit check and which it monitors for prompt payment. Company policies specify which customers can open accounts, what kind of credit approval process to apply and the required credit standards. Procedures detail the account information required from customers, who carries out the credit check and how. Account maintenance procedures give details on tracking payment performance and how to suspend credit when required.

Collecting Receivables

The final step in the operation of an accounts receivable system is collecting the amounts due as rapidly as possible. If a company operates in an industry where payment in 30 days is the standard, it can offer discounts or incentives for earlier payment. Regular reminders to customers with overdue accounts are an effective tool. Policies specify the standard payment terms, any discounts and a schedule for reminders as well as consequences for late payment. Collection procedures detail tracking payments, entering receipts into the accounting system, sending reminders for late payments and initiating additional collection actions.

Process of Accounts Receivable at :

There are mainly 4 steps performed at Dalda for the processing of Accounts receivable, it is done both electronically and manually.

1. Set up an account for each customer they have using normal bookkeeping system.Dalda use a Microsoft Excel spreadsheet for small bookkeeping needs. For every new customer the following steps are being taken:

o Capture their business name and that of their bookkeeping contact person, address, telephone and fax numbers.

o Add them to computerized system, giving the new account a name or number identification.

o Every time there is another sale to this customer, add it to his or her record.o Maintain a manual filing system with paper-copied information

2. Run a report from accounting software of people who have outstanding accounts over the past 30 days for monthly billing purposes.

o In this they Use only those accounts receivable who owe something to Dalda. Send these customers a bill listing the transaction, including the date of purchase, amount still owed, service and shipping charges and any applicable taxes.

o Each invoice must show penalties applicable for not paying in full by the listed due date. This is where we discuss late charges.

o Past due accounts also need to be included in this report. List the original date of purchase or services rendered and how many days the account is past due (such as 30, 60, 90 and 120 or more days).

3. Post payments to the accounts as they come in, giving credit to the appropriate company within electronic and paper files

A payment entry ensures that the customer has been given credit for payments made.

4. Maintaining a policy as to if/when we will send extremely past-due accounts to a collection agency or call it bad debtDebts will fall off as uncollectible at some point and should be archived or removed in some way so there will be plenty of room in our accounting system for the ongoing accounts.

Balance Check of Receivables

Sales orders given to depots along with the detail of DD/online deposits for only advance

customers. Pay in slips are circulated in depots and Sales accounts by the region after depositing

in to the bank. After feeding all payments into Scala, customer’s balances are disseminated to all

depots and regions by sales accounts. Depots and regions consider the balances to dispatch the

orders accordingly.

Debit Balances may arise due to;

1. Delay in entering payments detail in Scala

2. Short payments

3. Dishonored cheques

4. Stocks supplied more than Advance payment

Bank send the details of dishonored cheques/SIDS on daily basis to sales account and is entered

into scala and customers accounts is debited and freezed for further supplies till the amount of

bounced cheque/SIDA is circulated to all concerned depots, regions and line directors on daily

basis, sale accounts ask regions to get the amount realized from customers against bounced

cheques/SIDA.

If cheque/SIDA of any customer is bounced, he will pay 0.5percent penalty charges to WIL his

cheque faculty is stopped and brought on advance payment system. In special cases customer

converted to advance system are brought back on cheque/SIDA system on request of DB and

region with permission of NSM.

Credit policyThis refers to guidelines that are followed in managing credit at DALDA. Credit policy includes

credit standards, credit terms and collection procedures. Credit sales are a function of total sales;

total sales depend on such factors as the economic conditions e.t.c credit sales are also influenced

by the nature of the business and industrial norms. All these factors are to a very large extent

uncontrolled by a financial manger. The only way credit sales can be controlled is by making

alterations in the firm’s credit policy. A firm therefore requires credit policy in its operations

since a proportionately large amount of sales are made on credit and credit policy variables are

the ones in the control of DALDA’s manger.

Lenient credit policy

This policy tends to give credit to customers on very liberal terms and standards. Credit is

granted for period of time even to those customers whose credit worthiness is not fully known or

whose financial position is doubtful. Credit is granted at high discount rates.

Default customers who were converted to advance system are brought back on cheque/SIDA

system on request of DB and region with permission of NSM.

Stringent credit policy

A stringent credit policy gives credit on highly selective basis only to customers whose credit

worthiness has been ascertained and is financially strong. Credit periods are shorter and

discounts are lower. It involves low costs but may be detrimental to sales returns. A firm needs

to formulate a credit policy which is optimum.

Default customers accounts are debited and freezed for further supplies till the amount of

bounced cheque/SIDA is circulated to all concerned depots, regions and line directors on daily

basis, sale accounts ask regions to get the amount realized from customers against bounced

cheques/SIDA.

If cheque/SIDA of any customer is bounced, he will pay 0.5percent penalty charges to WIL his

cheque faculty is stopped and brought on advance payment system

Credit standardsDALDAs credit standards focus on the person who wants credit and thus determines who

qualifies for the credit. Credit standards are the criteria, which the firm follows in selection of

customers for credit extension. In order to analyze customers and set credit standards, the firm

should consider the average collection period (ACP) and the default rate. Average collection

period is the period in which the debts remain outstanding. On the other hand, default rate is the

rate of uncollected receivables to total receivables. From the default ratio, the firm is able to

determine that the customer will not meet his credit obligation.

Credit termsThese are stipulations under which DALDA grants credit to customers. Credit terms are more

attractive to act as an incentive to clients without incurring high level of bad debt losses. Thus

the terms offered should confirm to the average industrial terms.

Collection proceduresDALDAs efforts in order to accelerate collections from slow paying customers and to reduce bad

debt losses. Collection procedures include sending reminders, use of litigation, insuring debtors,

e.t.c.

credit period

Mode of Collections;

1. Cheques and SIDA slips prepared and deposited into banks by sales accounting

2. DDs/Pos deposited into banks by regions

3. Online deposits by DB’s at their own

4. Online funds transfer ‘OFT’ by DB’s from their desktop

All the cheques/DD’s/SIDA slips are checked and matched before depositing into banks to check

the discrepancies. All the remittances are sent by courier rider. Banks provide knowledge pay in

slips deposited by sales account and regions. Knowledge copy is kept in record of sales account.

Online payments are also deposited in banks directly by customers and cash payment voucher is

provided to concerned sales regions by the customers. Sales region also sends online payment

sheets to ales account to check that payment. have been credited in to company account, same

are entered into customer’s ledger.

After receiving all remittances, bank sends the following reports on daily

basis;

1. Realization Report

2. Returned Report

3. Outstanding – CIP report

4. Bank Charges Report

5. Bank Statement.

Bank Collection and Reconciliation;

Strong collection system and bank reconciliation is very important in DALDA as it provides

confirmation that the company funds deposited into banks are credited into company accounts

and cheques issued are correctly paid from company funds. Errors and mistakes are highlighted

only after reconciliation of bank accounts. Timely conducting the reconciliation is a must at

DALDA.

Receivable Questionnaire

Internal Control Questionnaire: For the purpose of internal control, there is a receivable questionnaire used at Dalda by the accounts receivable department.

Other remarks concerning the evaluation of internal control for the receivable cycle:

* Question was designed to help identify risk factors that could result in errors, fraud, irregularities and/or illegal acts. When the question is answered “NO”, the risk factor identified should be considered when analyzing the department’s operations, and the completed questionnaire should be forwarded to Financial Controls.

Recommendations for improving accounts receivable management at Dalda:

1. Optimize Cash Sales to Avoid RiskThere is no credit risk in cash. Dalda allows for both cash payments and invoices, so they shouldoptimize the amount of cash, as a percentage of total sales, to the highest level possible for theirindustry or commercial sector.

2. Get Deposits Wherever PossibleLarger sales orders, produce-to-order manufacturing and, in particular, custom orders shouldrequire a deposit of 10-50% of the final purchase price at order time. This will go a long way toalleviating cash flow shortages and to also assuring the customer’s commitment to the order.Deposits of this nature should be non-refundable.

3. Suggest Credit Cards to Secure PaymentDalda should have the capability to accept major credit cards (Visa, MasterCard, America Express and Discover). This is the next best thing to cash and reduces payment risk. In many instances, italso makes it easier for a customer to order. Customers who object to paying ahead of time maybe satisfied by placing a “hold” on their credit card for the amount of the sale and processing thepayment only after shipping the product or completing the service. This guarantees payment(for a period, usually 30 days) yet doesn’t appear as an early payment to the customer.

4. Require Progress Payments for Work-in-Progress Orders or Contract Salesinclude in their sales contract specific times when payments are due (for example: 10% at time oforder, 40% at 60 days, balance at completion). This will go a long way to avoid cash tightness and provide funds for continuing the project. In many contract sales situations, the amount of thedeposit is effectively the profit on the order and is obtained upfront; the balance or cost of theproduct is then transferred from customer to vendor at normal payment terms.

5. Develop and Use a Credit Application FormEvery business, large or small that engages in invoiced sales should have a credit application. This can be as simple as a one page, faxable form giving critical information such as name andtelephone number of the customer’s accounts payable contact, department head and chiefexecutive. The form should also require a minimum of two trade references and a bank reference. A key administrative person (in smaller businesses this is usually the Office Manager) is delegated responsibility for obtaining the information on the form, verifying the references and suggesting a credit limit based on the findings.

6. Set a Credit Limit for Every Customer, Large or SmallAfter credit references have been checked, a credit limit should be set for every customer. For small customers, the credit limit should be set based on their mid-level to maximum demonstrated payment performance. For large companies, a credit limit should be set based on the amount of risk company is willing to accept and is a direct reflection of the percentage of business. you are willing to devote to one customer. Typically, concentrating over 10% of your business in one customer begins to be a risk; 30-50% is very risky and over 50% is potential disaster for your company. Bad things can happen to large companies as well.

7. Monitor Receivables Aging by Total and By CustomerAt least weekly, calculate the average age of your outstanding invoices by customer and total.Assign responsibility (for example, the Office Manager) for generating and reporting on thisinformation. Develop an “Overdue” report that shows every invoice 5 days or more past terms. Set specific, reasonable goals based on their industry for “Average Days Receivables” andtie one component of your Office Manager’s compensation package to achieving the goal.

8. Develop Standardized Action Procedures for Overdue InvoicesDevelop a formal, written collection procedure including scripts or guidelines to be used whencontacting customers who have outstanding, overdue invoices. The approach taken is alwayscourteous but increasingly firm as the overdue time increases. Typically, the first call is a courtesy inquiry only. At 60 days they may be reminded of the company’s terms and at their credit is in danger, at 90 days that their account is will revert to C.O.D. and at 100 days that litigation may proceed unless payment is received immediately. If the last stage is reached, you should be prepared to follow through promptly.

9. Avoid Early Dunning Letters and Use the TelephoneDunning letters, overdue notices and account statements that indicate an overdue invoice usuallydo nothing but irritate a responsible customer who may have a reasonable explanation for a slowpayment. Instead, it is preferable to have your person responsible for accounts receivabletelephone the customer’s accounts payable designee (found on the credit application) to ask if theinvoice has been misplaced or there is any other problem. Typically, 80% of slow payments areresolved in this manner and a rapport is created between key personnel at both companies.

10. Use Discount Payment Terms Wisely, If At AllOffering an early payment discount does not always produce the desired result. If your customer’s problem is cash flow, they will be unable to take the discount. Often, customers who already pay on time will take advantage of the discount. You may properly rationalize this as an award to good customers but you’ve just reduced your overall profitability as a result. Discounts that are attractive to customers most often do not produce a favorable offset in the time-value of money to your company. Better to poll your slow pay customers first and individually, to determine what the potential value of discounting might be to your cash flow.

11. Use Your Accounting System to Help Manage Credit and Accounts ReceivableMany small businesses use simplified accounting systems such as QuickBooks® or Peachtree® and these systems are capable of reducing the amount of time required for accounts receivablemanagement. Credit limits can be set by customer and the system will provide a warning message on entry of a new order should that order cause the limit to be exceeded. Aging reports by customer can be generated in a variety of formats. Data can be exported directly to an Excel®spreadsheet and further analyzed if desired. Invoice data can also be directly exported to acustomer via fax or email saving considerable time. Current customer contacts and telephonenumbers are included in customer records and can be quickly extracted and used in screen reports to aid in collection calls. Be sure you are using all the features of your accounting system to help your effort in managing credit and accounts receivable.

12. Use a designed software for accounts receivable management The company can use software especially designed for accounts receivable management for instance “SAP” This scenario deals with posting accounting data for customers in Accounts Receivable. it save chances of error and saves time, by the help of “SAP” All postings in Accounts Receivable are also recorded directly in the General Ledger. The payment program can automatically carry out direct debiting and down payments. When you post data in Accounts Receivable, the system creates a document and passes the data entered to the general ledger. General ledger (Profit and Loss) accounts and customer accounts are then updated according to the transaction concerned (receivable, down payment, credit memo and so on) customer payment activities. All business transactions are posted to and managed by means of accounts and for this customer master records are created. One time Customers are used for avoiding building up of huge master data volume.

Process Flow Diagram of SAP