1

SUMMER TRAINING REPORT ON

Cash Management System

Undertaken at

“DABUR INDIA LTD.”

BACHELOR OF COMMERCE (Hons.)

BY ABHISHEK S. IYER

07017788813

Vivekananda School of Business Studies

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To Whom It May Concern

I A B H I S H E K S . I Y E R Enrolment No. 07017788813 from BCOM 5TH

SEM of the

Vivekananda Institute of Professional S t u d i e s , Delhi hereby declare that the

Summer Training Report (BCOM 309) entitled CASH MANAGEMENT SYSTEM at

DABUR INDIA LTD. is an original work and the same has not been submitted to any other

Institute for the award of any other degree.

Date: Signature of the Student

Certified that the Summer Training Report submitted in partial fulfillment of Bachelor of

Commerce (Hons) [BCOM (Hons.)] to be awarded by G.G.S.I.P.University, Delhi 2013-16,

and Enrolment No. 07017788813 has completed under my guidance and is satisfactory.

Date:

Signature of the Guide

Name of the Guide:

Designation:

3

PROJECT INDEX

TOPIC PAGE NO

Certificate 03

Summer Training Appraisal 04

Acknowledgement 05

Chapter I:Introduction 06

Chapter II: Cash Management System at Dabur India Ltd 20

Chapter III: Payment System in Dabur India Limited 22

Chapter IV: Application of SAP in Cash Management System 35

Chapter V: Dabur India Ltd. – Agreed Terms and Conditions with Bank 49

Chapter VI: Summary & Conclusion 53

List of Tables 56

References/Bibliography

57

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ON COMPANY’S LETTER HEAD

CERTIFICATE

This is to certify that Abhishek S. Iyer, a student of Bachelor of Commerce (Hons.) (B.com (h), a

class of 2013,Vivekananda Institute of Professional Studies, Affiliated to GGSIP University bearing

Enrolment No. 07017788813, has undertaken the Summer Internship Training at

DABUR INDIA LIMITED during 1st June 2015 to 31st July under my supervision & guidance. He has

conducted a study & completed the Project on Cash Management System (CMS).

Seal of Organization Signature of the Guide

Date: Name of the Guide:

Mr. Rakesh Arora

Designation: Zonal Financial

Manager (ZFM)

Address:

5

ACKNOWLEDGEMENT

I would like to take this opportunity to thank and extend my sincere gratitude towards

Mr. Rakesh Arora, Dabur India Ltd. & Mr. Randhir Singh Azad,

School of Business Studies (SBS),VIPS, G.G.S.I.P University whose valuable guidance and

knowledge helped me to work on this project. This project could not have been completed so

successfully without their valuable guidance and support.

Abhishek S. Iyer

(07017788813)

B.com (Hons.)

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Chapter-I: Introduction

1.1

Introduction:

(a) Cash Management comprises of a series of activities aimed at efficiently handling the inflow

and outflow of cash. This mainly involves diverting cash from where it is to where it is needed. In

other words, cash management is the optimization of cash flows, balances and investments.

Cash‟ in this context, may refer either to cash in the form of currency, or to other equivalents such

as cheques, drafts, deposits, among others. While organizations may hold other assets which can

potentially be converted to cash, cash management essentially deals with the management of liquid

cash and near-cash assets such as marketable securities and time deposits, which can be readily

converted to cash.

It is crucial to organizations for three main reasons:

a. Transaction: Ready cash balances are vital for routine transactions including

purchases, operating expenses, wages, and other payments such as dividends, taxes

and so on.

b. Precaution: There may be unanticipated cash requirements as a result of sudden

increase in inventory costs, delay in collection of receivables, among others. And

maintaining ready cash balances is essential to deal with such unforeseen expenses.

c. Speculation: Reserving cash balances is also crucial when firms anticipate decline in

prices of raw materials, reduction in interest rates for buying securities, availing

early payment discounts, among others.

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Components of Cash Management

1.1.1. Account Reconciliation: Managing cheques, monitoring their clearance, and

keeping track of the true cash balance can be an overwhelming task for businesses

because of the huge number of cheques that are processed on a daily basis. Hence

banks offer account reconcilement services wherein corporate customers can upload

details about the cheques issued on a daily basis. And at the end of the month, the bank

statement shows information on cheques which have been cleared and those which

have not. This system is also helpful in the process known as „positive pay‟, used by

banks to prevent cheques from being fraudulently cashed if they are not on the list.

1.1.2. Cash Concentration: This is a quick and cost-effective method of moving funds

from different accounts spread across the country to a single monitored and managed

account. This allows businesses to maximize the use of available cash, and to optimize

returns on consolidated balances.

1.1.3. Financial Risk Management: Risk management is the process of measuring risk,

and developing and implementing strategies to manage and mitigate risk. Financial

risk management plays an important role in cash management, because it focuses on

managing risks in relation to changes in interest rates, commodity prices, stock prices,

exchange rates, among others.

1.1.4. Liquidity Management:

Forecasting the cash needs of a

business is essential for

managing cash flows, short-term

borrowings, among others in an

efficient manner, in order to

ensure that such cash needs can

be met if and when they arise.

This requirement is addressed

through liquidity management services offered by banks. Liquidity management

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comprises of activities that release the investments locked in working capital, enabling

it to contribute to higher profits. It also refers to the specific services provided by

banks to enable their customers optimize their interest revenues and reduce interest

costs.

(b) Why Cash Management?

1. Complete Visibility: Corporate customers increasingly expect superior cash

forecasting ability, for which they need complete enterprise level visibility into cash

balances and movement of cash. This is provided by banks in the form of status

reports, direct enquiry, and through consolidated view of accounts held with

branches/banks across the globe.

2. Rich Reporting Modules: In order to make corporate customers understand the

need to adopt cash management services, banks are showing cost-benefit analysis

reports, and demonstrating the benefits offered by cash management using graphs

and illustrations.

3. Integrated Services: Corporate customers prefer a single platform for all their

financial needs in place of disparate systems. Hence the focus is on integrating cash

management systems with other activities involving the bank. For example, linking

of ERP solutions with banking systems facilitates cash management by enabling

effective trade finance process and investment management, among others.

4. Remote Deposit Capture and Straight- Through Processing - (STP): In order to

accelerate transactions businesses are looking for solutions that offer straight

through processing capability. For example, corporate customers are trying to

streamline their transactions and reduce downtime, for which banks offer STP

services which enable businesses to conduct entire trade processes and payments

electronically. And to better serve the needs of corporate customers, banks look to

technology vendors who offer optimal solutions that can enable more efficient cash

management.

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(c) The Role of Technology in Optimizing Cash Management: (Implementation strategy of

concept in your present study)

Cash management solutions are not new. The market is mature and many banks offer efficient cash

management solutions. But market forces, economic conditions, and changing corporate trends

have generated opportunities for further innovations in this space.

Although traditionally a large number of these solutions have been windows-based, with many

corporate customers embracing internet banking, several banks are now migrating to browser based

solutions. Technology has been the driving force in optimizing cash management solutions for

corporate customers:

Browser-based solutions facilitate centralization of cash management thereby

enabling better accessibility by users across the organization thereby having a better

control of cash flows.

Online banking and STP (Straight- Through Processing) help quicken payments,

thereby accelerating business and streamlining processes by eliminating redundant

manual processes.

360 degree view of accounts offers greater visibility on cash position thereby

improving the forecasting ability.

1.2 Objectives of Project:

(a) To study the Cash Management System of Dabur India Ltd.

(b) To study different aspects of Cash Management System

(c) To understand different Payment modes; Speed clearing and

(d) To study Central Banking Solutions - Cheque Truncation System (CTS),

Magnetic Ink Character Reader (MICR)

(e) The advantages in increasing the efficiency of the company

(f) To understand the Application of SAP in Cash Management System

(g) To understand Sales Order Management in SAP

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1.3 Scope of Project:

Cash management solutions are now widely being adopted, and hence there is likely to be an

increase in the number of vendors offering these solutions. Correspondingly, corporate customers

are also likely to become more demanding, thereby promoting more intense competition amongst

vendors. Here are some areas with scope for improvement which vendors can focus on, to provide

better services than their competitors:

Eliminating Disparate Systems: Different cash management solutions are being offered for

diverse segments. And as businesses grow, managing these disparate systems is increasingly

becoming a challenge. Hence vendors should come up with a single platform which can

support various cash management products and services as the business grows.

Customizable Solutions: Banks today offer similar solutions to all corporate customers

irrespective of their size and business. Hence vendors should try to come up with a

customizable platform which can cater to the specific needs of different businesses.

Unified System: Integration of corporate customer systems with banking systems can be very

helpful in reconciliation of internal systems with banking systems, and can support account

management between the bank and customer. And this offers great scope for vendors.

Today, banks are leveraging cash management systems as a tool to build long-term trust with

corporate customers, because these systems will empower bank‟s customers to be empowered

and manage their liquidity position at any given time, thus building a trust and strengthening

the relationship that goes beyond transaction banking

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1.4 Company Profile

1.4.1 Name of the firm/company:-

Dabur India Limited

Corporate Office:

Kaushambi

Ghaziabad - 201010

Uttar Pradesh, India

Tel: +91 (0120) 3982000 (30 Lines); +91 (0120) 3962100, 39412525, 4182100

Registered Office:

8/3, Asaf Ali Road,

New Delhi – 110 002

Tel: +91 (011) 23253488

1.4.2 Dabur India Ltd. - Corporate Profile

Dabur India Ltd is one of India‟s leading FMCG Companies with Revenues of over

` 7,806.4 Crore & Market Capitalization of US $5 Billion. Building on a legacy of quality and

experience of over 131 years, Dabur is today India’s most trusted name and the world’s

largest Ayurvedic and Natural Health Care Company.

Dabur India is also a world leader in Ayurveda with a portfolio of over 250 Herbal/Ayurvedic

products. Dabur's FMCG portfolio today includes five flagship brands with distinct brand

identities --Dabur as the master brand for natural healthcare products, Vatika for premium

personal care, Hajmola for digestives, Réal for fruit juices and beverages and Fem for fairness

bleaches and skin care products.

Dabur today operates in key consumer products categories like Hair Care, Oral Care, Health

Care, Skin Care, Home Care and Foods. The company has a wide distribution network,

covering over 5.8 million retail outlets with a high penetration in both urban and rural markets.

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Dabur's products also have a huge presence in the overseas markets and are today available in

over 60 countries across the globe. Its brands are highly popular in the Middle East, SAARC

countries, Africa, US, Europe and Russia. Dabur's overseas revenue today accounts for over

30% of the total turnover.

The 130-year-old company, promoted by the Burman family, had started operations in 1884 as

an Ayurvedic medicines company. From its humble beginnings in the bylanes of Calcutta,

Dabur India Ltd has come a long way today to become one of the biggest Indian-owned

consumer goods companies with the largest herbal and natural product portfolio in the world.

Overall, Dabur has successfully transformed itself from being a family-run business to

become a professionally managed enterprise. What sets Dabur apart from the crowd is its

ability to change ahead of others and to always set new standards in corporate governance &

innovation.

Figure 1 Manufacturing Facility in India

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1.4.3 Company’s vision & mission:

VISION

"Dedicated to the health and wellbeing of every household"

PRINCIPLES

OWNERSHIP

This is our company. We accept personal responsibility, and accountability to meet business needs.

PASSION FOR WINNING

We all are leaders in our area of responsibility, with a deep commitment to deliver results. We are

determined to be the best at doing what matters most.

PEOPLE DEVELOPMENT

People are our most important asset. We add value through result driven training, and we encourage

& reward excellence.

CONSUMER FOCUS

We have superior understanding of consumer needs and develop products to fulfill them better.

TEAM WORK

We work together on the principle of mutual trust & transparency in a boundary-less organization.

We are intellectually honest in advocating proposals, including recognizing risks.

INNOVATION

Continuous innovation in products & processes is the basis of our success.

INTEGRITY

We are committed to the achievement of business success with integrity. We are honest with

consumers, with business partners and with each other.

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MISSION

To maximize shareholders‟ value, by offering superior quality nature based products, that

contributes in improving consumers‟ life in personal care, health care and foods.

1.4.4 Product range of the company:

DABUR INDIA LTD. (PRODUCT LINE CATEGORY)

HEALTH CARE

SUPPLEMENTS

DIGESTIVES

OTC- HEALTH CARE

PERSONAL CARE

HAIR CARE

ORAL CARE

SKIN CARE

FOOD PRODUCTS

REAL

ACTIV

BURSST

HOMMADE

LEMONEEZ

CAPSICO

HOME CARE

ODOPIC

ODOMOS

ODOMOS NATURALS

ODONIL NATURE SPRAY

SANI FRESH (SHINE)

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1) Health Care

Supplements, Digestives, OTC- Health Care

2) Personal Care

3) Food Products

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4) Home Care

5) Ethical

6) Professional Range – Fem

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1.4.5 Organization structure of the company:

1.4.6 Market share & position of the company in the industry:

COMPANY NAME LAST PRICE %

CHANGE

52 WK

HIGH

52 WK

LOW MARKET CAP

HUL 896.20 -1.18 979.00 665.00 193,920.88

Dabur India 297.15 0.19 304.00 200.45 52,203.91

Godrej Consumer 1230.00 0.33 1261.85 872.65 41,885.55

Marico 435.25 0.18 466.30 243.40 28,077.34

Colgate 2046.00 -0.59 2198.50 1465.00 27,824.13

Table 1: Market share & position of the company in the industry

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Dabur India Ltd. (DABUR) - Net Sales

COMPANY LATEST(Rs) CHG CHG (%) Net Sales (Rs crore)

ITC 311.70 -2.60 -0.83 36507.40

Hind. Unilever 901.60 -5.30 -0.58 30805.62

Rajesh Exports 541.60 12.55 2.37 23537.49

Videocon Inds. 154.10 -2.30 -1.47 18967.60

Asian Paints 856.60 9.35 1.10 12263.77

Redington India 107.00 -1.55 -1.43 12021.38

Titan Company 331.65 -7.70 -2.27 11903.21

Shree Gan.Jew. 13.22 0.12 0.92 9830.88

United Spirits 3706.00 -82.15 -2.17 8516.59

Gitanjali Gems 41.40 -1.35 -3.16 7343.03

HCL Info systems 41.00 -1.40 -3.30 5725.41

Dabur India 298.85 2.25 0.76 5431.28

PC Jewelers 437.00 -4.85 -1.10 5324.83

Marico 431.50 -2.95 -0.68 4681.20

Godrej Consumer 1252.00 26.00 2.12 4429.80

Bajaj Electrical 276.65 0.05 0.02 4258.11

United Breweries 1028.00 17.70 1.75 4235.50

Colgate-Palm. 2058.70 0.55 0.03 3981.94

Whirlpool India 717.00 -13.45 -1.84 3887.25

Berger Paints 211.00 -5.65 -2.61 3806.51

Table 2: Dabur India Ltd. (DABUR) - Net Sales

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1.5 Industry Profile:

A. Established in 1884 - more than 125 Years of Trust & Excellence

B. Among top 4 FMCG companies in India

C. World‟s largest in Ayurveda and natural healthcare

D. Revenue of ` 41.1 billion and profits of ` 5.7 billion in FY2010-11

E. Strong brand equity

o Dabur is a household brand

o Vatika and Real are Superbrands

Hajmola , Real & Dabur ranked among India‟s Most Admired Brands

F. 11 Brands with sales of over ` 1 billion each

G. Wide distribution network covering 2.8 million retailers across the country

17 world class manufacturing plants catering to needs of diverse markets

H. Strong overseas presence with c. 30% contribution to consolidated sales

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Chapter 2:

Cash Management System at Dabur India Ltd

The company maintains bank accounts in all towns through Dabur owned Depots.

(Cheques/ drafts received from customers (now here customers are referred to as stockiest) in

nearby places are sent for local clearing to initially collect funds in these bank accounts.

This has reduced the average collection period (as compared to the time it would take if customer

cheques were first received at head office and then sent for out-station clearing) thereby increasing

the velocity of cash inflows. Funds thus collected at the depot towns are each day transferred to the

company‟s head office or corporate bank accounts.

The company has a “sweeping arrangement” with the bank at head-office by which any of the funds

transferred from the depot towns are automatically applied towards settling the company‟s cash

credit loan from the bank and reducing its debit balance. These steps have resulted in reducing and

controlling the cost of interest to the company. When the company has surplus funds, the company

invests the same in short- term investments or instruments like Mutual funds and Govt. securities.

2.1 Process of Cash Management through Banking Department

Stockiest

PSBC

Invoice Generates

Parking

Sorting

Filling Posting

Cheque Deposit in

Bank

Acknowledgment

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Company has “Pre-Signed Blank Cheques” (PSBC) from all the stockiest.

The company receives at least 3 cheques from them. (Security Feature)

2.2 Banks and Zones

Dabur has 4 banks in each of the 4 zones-

The company has different terms and conditions with every bank according to CMS terms

negotiated by various banks. Headquarters Dabur Tower, Kaushambi, Sahibabad, Ghaziabad -

201010 (UP), India

2.3 Terms and conditions set by Company

a. For speed clearing (local, outside)- no charges

b. For non- speed clearing (local, outside) - costlier, bank covers its expense in physically

collecting cheques and compensation costs.

•HDFC BankDelhiNorth zone

•Bank of AmericaKolkataEast zone

•RBSMumbaiWest zone

•Kotak Mahindra BankHyderabadSouth zone

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Chapter 3: Payment System in Dabur India Limited

These are the main 3 modes of Payment followed in DIL:

3.1 Cheque

3.2 RTGS

3.3 DD

3.1 Cheque- If there is bouncing of Cheque, and then stockiest would have to pay 3 times the

original amount to the company (Cheque bouncing amount). If the cheque is bounced more

than 3 times the company would block that account.

Two Types of bouncing –

Cheque Banked

Clearing next day

Bouncing Report

Reverse Document Number

Update Bouncing File

• This means error through duplication, wrong amount, missing Date or the Stockiest signature etc.

Technical Bouncing

• means signature mismatch, insufficient funds etc

Non-Technical Bouncing

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Processing of Cheque in Dabur India

New format of cheque system followed at Dabur India Limited:

3.1.1 Cheque Truncation System (CTS)

Truncation is the process of stopping the flow of physical cheque issued by a drawer at some point

with the presenting bank en-route to the drawee bank branch. In its place an e-image of the cheque

is transmitted to the drawee branch by the clearing house along with the relevant info like data on

MICR band, date of presentation, presenting bank.

Cheque comes in

Cheque Inventory

Invoice Generation

PIS (Pay in Slip)

System allocates cheque against invoice

On due date, Credit expiry report is generated

Cheque is placed according to PIS

Next Day Posting is done

Then sent to bank

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This effectively eliminates -

a. the associated cost of movement of the physical cheques,

b. reduces the time required for the collection and brings elegance to the entire activity of

cheque processing

Non CTS cheques were later on was not entertained in DIL and letter was issued regarding

clearing the Non CTS cheques on regular basis (every week).

Cheque Truncation in India

It speeds up the process of collection of cheques resulting in reduction of scope of clearing-

related frauds or loss of instruments in transit, removes the reconciliation- related and

logistics- related problem. Accordingly, RBI focus on improving the efficiency of cheque

clearing cycle as CTS is considered to be a more secure system vis-à-vis the exchange of

physical instrument.

CTS offer benefits like Business Process Re- engineering and HR rationalization.

RBI has implemented CTS in NCR and Chennai with effect from Feb1, 2008

and Sep24, 2011 and Grid based CTS was started in Chennai including few banks from

Coimbatore and Bangalore with effect from Mar, 2012.

Process Flow in CTS

a. In CTS, the presenting bank captures the data (on MICR band) and the images of

cheque using their Capture system and has to meet the specifications and standards

prescribed for data and images.

b. To ensure security, safety and non-repudiation of data/ images, end-to-end Public key

Infrastructure (PKI) has been implemented in CTS.

c. The collecting bank sends the data and captured images duly signed and encrypted to

clearing house for onward transmission to paying bank

d. For this purpose, presenting and drawing banks are provided with an interface/

gateway called Clearing House Interface (CHI)

e. The clearing house processes the data, arrives at the settlement figure and routes the

images and requisite data to the drawee bank, this is termed as „Presentation Clearing‟

f. The drawee CHIs generate the return file for unpaid instruments

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g. The return file /data sent by the drawee banks are processed by Clearing house in the

return clearing session in the same as presentation clearing

h. The „clearing cycle‟ is treated as complete once both the above sessions are

successfully processed.

CTS 2010 Standard

Standardization of cheque forms(leaves) in terms of size, „MICR‟ band, quality of paper,

pattern, design of cheque, watermark, bank‟s logo in invisible ink, „VOID‟ photograph

and standardization of field placements on cheques are key factors that enables the secure

mechanism of cheque processing. This all reduces the incidence of cheque misuse,

tampering and alterations.

Growing use of „multicity‟ and „payable-at-par‟ cheques, „CTS‟ introduction and „Speed

clearing‟ uniformly led across the banking industry.

The set of minimum security features would not only ensure uniformity across all cheque

forms issued by banks in the country but also help presenting banks while scrutinizing/

recognizing cheques of drawee banks in an image- based processing scenario. „Indian

Bank Association (IBA)‟ and „National Payment Corporation of India (NPCI)‟ are

coordinating with the banks on implementation of the new standard.

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Picture 3.1: Depicting the new CTS cheques which are under the process.

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3.1.2 Magnetic Ink Character Recognition (MICR)

MICR encoding or say MICR line is at the bottom of the cheque and other vouchers and typically

include the document type indicator, bank code, bank account number, cheque number, cheque

amount and a control indicator. The technology allows MICR readers to scan and read the info

directly into a data- collection device.

The MICR „E-13B‟ font has been adopted as the international standard in ISO 1004:1995, but the

„CMC-7‟ font is widely used in Europe.

A) MICR code line structure:

1. Cheque serial number of 6 numeric digits preceded and followed by a delimiter. The

alpha-numeric prefix to the serial number should be printed outside the code line in close

proximity, just above the read-band in normal ink.

2. Sort field or the city/ bank/ branch code number consisting of 9digits followed by a

delimiter. The first 3digits (numeric) represents city, the next 3digits (abbreviation-alpha

code) indicate the bank and last 3 indicates the unique branch code. It is unique.

Allotment of branch codes is by the President of the Clearing house of which the bank is a

member

3. Account number field, consisting of 6 digits followed by a delimiter, is an optional field.

In case of Govt. Cheques issued by RBI alone, the account number is of 7digits. The Govt.

account number is of 10digits i.e. 7digits occurring in Account number field and 3 in

transaction code field.

4. Transaction code field comprises of 2 digits in all instruments except Govt. cheques drawn

on RBI which have 3digits. Control documents, batch and block tickets have 3digit

representation in the transaction code field.

5. Amount field, it is the last field and consists of 13 digits bounded on both sides by a

delimiter. The amount is encoded in paisa without the decimal point.

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3.1.3 Endorsement of cheques

Special crossing stamp

All cheques received for collection over the banks counters are required to be

banded with the banks special crossing stamp.

Dimension of special crossing stamp

Two parallel lines of length up to 2 inches at a distance of ¼ inch in between them.

The name of the bank and branch to be incorporated in the enclosed space.

Position of Special crossing stamp- Preferably at the top left corner with a slanting

of 60 degrees to the base

Suggested specimen-

Additional Safeguard- The crossing stamp should be affixed in such a manner that

to the extent possible it does not deface „A/C Payee‟ crossing made by the

customer.

Clearing Stamp

The clearing stamp indicates particulars regarding the name of the presenting bank/

branch (alpha codes), date of presentation and type of clearing. Encoding machines

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are programmed to affix the clearing stamp on the reverse of the cheque

simultaneously while encoding the amount.

Format of Local Clearing Stamp

3.1.4 Speed Clearing

1. What is Speed Clearing?

Speed clearing refers to collection of outstation cheques (a cheque drawn on non-local bank

branch) through the local clearing. It facilitates collection of cheques drawn on outstation core-

banking-enabled branches of banks, if they have a net-worked branch locally.

2. Why Speed Clearing?

The collection of outstation cheques, earlier required movement of cheques from the

Presentation center (city where the cheque is presented) to Drawee center (city where the

cheque is payable) which increases the realization time for cheques. Speed Clearing aims to

reduce the time taken for realization of outstation cheques.

Even though Speed clearing hastens the process of cheque collection as compared to outstation

cheque collection, it pre-supposes the presence of the drawee bank branch in the clearing house

location

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3. What was the process followed by banks for collection of outstation cheques before the

introduction of Speed Clearing?

A person who had an outstation cheque with him/her use to deposit it with his/her bank branch.

This bank branch is called the Presenting branch. The cheque, was sent for collection to the city

where it was payable / drawn called Destination center or Drawee center. The branch providing

the collection service is called the Collecting branch. On receipt of the cheque, the Collecting

branch use to present the physical instrument in local clearing at the drawee bank branch

location through its branch at the drawee bank branch location. Once the cheque was paid, the

Collecting branch use to remit the proceeds to the Presenting branch. On receipt of realization

advice of the cheque from the Collecting branch, the customer‟s account was credited. This, in

short, is the process of Collection before the introduction of Speed Clearing.

When a cheque was accepted on a collection basis by a bank, the customer‟s account was

credited only after realization of proceeds. In the absence of a clearing arrangement at the

Destination center, the Presenting branch was sending the cheque directly to the Destination

branch for payment. On receiving the proceeds from Destination branch, Presenting branch

follow the practice of crediting the customer‟s account.

4. How long does it take for getting credit of an outstation cheque sent on Collection basis?

Generally, it takes around a week to three weeks‟ time depending on the drawee center and

collection arrangements to get outstation cheques realized on a Collection basis.

5. How does the Local Cheque Clearing work?

In Local Cheque Clearing in major centers, cheques are processed by using Cheque Truncation

Systems (CTS) through movement of images. Grid based CTS are in place in New Delhi,

Chennai and Mumbai. In addition, Express Cheque Clearing Systems (ECCS) application

package is used in small clearing houses.

Local Clearing handles only those cheques that are drawn on branches within the jurisdiction of

the local Clearing House. Generally, the jurisdiction is determined taking into account the

logistics available to physically move to and from the Clearing House.

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6. How does the Speed Clearing work?

Banks have networked their branches by implementing Core Banking Solutions (CBS). In CBS

environment, cheques can be paid at any location obviating the need for their physical

movement to the Drawee branch. Cheques drawn on outstation CBS branches of a Drawee bank

can be processed in the Local Clearing under the Speed Clearing arrangement if the Drawee

bank has a branch presence at the local center.

7. When will the beneficiary get funds under Speed Clearing?

As on date, the local cheques are processed on T+1 working day basis and customers get the

benefit of withdrawal of funds on a T+1 or 2 basis. 'T' denotes transaction day viz. date of

presentation of cheque at the Clearing House. So, the outstation cheques under Speed Clearing

will also be paid on T+1 or 2 basis like any other local cheque.

8. What are the charges for cheques cleared through Speed Clearing?

With effect from April 1, 2011, no charges will be payable for cheques of value up to and

including Rs.1 lakh by Savings a/c customers. Banks would be free to fix charges for collection

of other types of accounts for all values and also from Savings a/c customers for cheque of

value above Rs.1 lakh. Charges fixed should be reasonable, computed on a cost-plus-basis and

not as an arbitrary percentage of the value of the instrument and to be levied in an upfront

manner with due dissemination to the customers of such charges.

9. How is Speed Clearing an improvement over collection basis?

Outstation cheque collection through collection basis takes around one to three weeks‟ time

depending on the drawee center. Under Speed Clearing, it would be realized on T+1 or 2 basis,

say, within 48 hours. Further Savings Bank customers need not incur any service charge for

collection of outstation cheques (value up to Rs.1 lakh) in Speed Clearing which they may have

to incur if such cheque is collected under collection basis.

32

3.1.5 Transaction Codes List

33

3.2 RTGS-

It stands for “Real Time Gross Settlement” which can be defined as the continuous settlement

of funds transfer individually on an order by order basis

(without netting).

RTGS system is meant for large valued transactions. The min. amount to be remitted is

` 2 lac and there is no upper ceiling for RTGS transaction

(I) Processing of RTGS

a. Email comes from Bank 4 times in a day – 2:00,4:00,6:00,8:30PM

b. Then YVIRTUAL t-code is used for Posting of RTGS

c. After posting in SAP, one of the following message is shown –

- 31 Bytes –means Successful

- 61 Bytes –means One or more errors in file

- 30 Bytes –means Whole file error

d. Then mail is send to related or associated team with attached file of RTGS received in

mail.

(II) Service charges for RTGS transaction

b. Inward transaction- Free, no charge to be levied.

c. Outward transaction-` 2 lac - ` 5 lac, ` 30.00 per transaction.

Above ` 5 lac `55.00/ transaction

(III) Information- remitting customers have to furnish for the remittance:

a. Amount to be remitted

b. Remitting customer‟s account number which is to be debited

c. Name of the beneficiary bank and branch

d. IFSC code of the receiving branch

e. Name of the beneficiary customer

f. Account number of the beneficiary customer

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3.3 Demand Draft:

A method used by individuals to make transfer payments from one bank account to another.

Demand drafts are marketed as a relatively secure method for cashing checks. The major

difference between demand drafts and normal checks is that demand drafts do not require a

signature in order to be cashed.

The company does not have a standard credit policy that could be applied to all customers.

Instead, distinct credit terms are offered to each group depending upon various factors such

as the product, place, price, demand and competition.

(A)Stockiest in Depots Town: 70% of the Company‟s stockiest are located in or

around the „depot towns‟. At these places, the company uses the cash management

system(CMS) offered by banks, stockiest cheques are collected till the end of a day are

deposited the next morning into the company‟s local bank account from where the funds are

transferred to the corporate bank account.

Earlier these stockiest used to enjoy 5 days of credit period but now the company has

decreased the time frame to one day. For new stockiest, sales are normally made on

demand draft basis. If a Stockists cheque bounces, then the party has to make payment

only by demand-draft. If a party defaults on payment (or a party‟s cheques bounce) more

than once, then for all its transactions with Dabur India in the coming year the party would

be required to make payments only by demand draft.

(B)Stockiest in Remote Areas: The remaining 30% of the turnover with stockiest take

place at remote places away from the depot towns with no easy access to banks so that the

„anywhere cheque‟ system is logically not possible. Such stockiest may be allowed a credit

period of up to 10 days. On an average, the money is credited in company‟s bank account in

3-7 days.

35

Chapter 4: Application of SAP in Cash Management System

SAP stands for “System, Applications and Products”. In Dabur India Ltd, SAP is used to

manage Cash inflow and outflow in an efficient and effective way.

SAP Cash Management is used to monitor cash flows and to ensure that you have sufficient

liquidity to cover your payment obligations.

4.1 Integration

SAP Cash Management is a subcomponent of SAP Financial Supply Chain Management.

SAP Cash Management is integrated with a range of other SAP components. For example, the

liquidity forecast - in a medium to long term liquidity trend - integrates expected incoming and

outgoing payments in financial accounting, purchase and sales.

4.2 Features

The Incomings area covers the following topics:

Electronic and manual bank statements

Payments

Lockbox

Polling

Electronic and manual check deposits

Bill of exchange presentation

Memo record

Compare payment advices, Interest calculation and Returned vendor checks are dealt with the

Checks topic.

Cash concentration can be found in the Planning topic. Planning also deals with the payment

program, payment requests, bill of exchange presentation, memo record and telephone list.

The Tools topic covers the distribution to cash management systems.

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The Information System topic deals among other things with the Liquidity forecast. You can use

this to obtain relevant information in connection with customer and vendor cash flows. The

structure of the cash position and business transactions that affect the cash position are also

described here. SAP Cash Management uses the cash position to reflect movements in bank

accounts, while movements in the sub ledger accounts are represented using the liquidity forecast.

Further topics include: Payment advice journal (entered and changed planned items),

Compare and check and Reconciliation with cash management.

In the Environment area you will find functions for transferring market data to the SAP System.

Market data can be transferred using the file interface, real-time data feed or via the spreadsheet.

The areas Worklist and Change master record are also described here.

Prerequisites

In Data Setup you can find out what needs to be done before you can go live with SAP Cash and

Liquidity Management.

There are various types of SAP modules but it is according to use of different- different

departments like:

So Sap- FI is used for CMS in Dabur India Ltd. To have a control over its efficiency and

effectivity, certain SAP t-codes (transaction codes) are to be remembered such as

SAP-FI

• Finance

SAP- SD

• Sales

SAP- MM

• Marketing

And many more

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“T- CODES DETAILS

FBL5N Customer Line Item

FBL3N GL Line

ZCHEQINV Cheque Entry, Deletion and

Replacement

F-02 SAP Posting

F-29 SAP Posting for Overdue

YVIRTUAL RTGS Posting

ZFI_F29 Channel Finance Posting

F-32 Clearing

ZFB03 Voucher Printing

ZFBL3N Report generation after posting of

cheques

YCHLEAF Check availability of Cheques

YCBR After Parking check details of cheques

ZCCHQ Bank Details

YCUSTDET Customer Details

ZAPIS_NEW Printing of Overdue Vouchers

YPIS_NEW Parking

Table 3: Transaction Codes Used in SAP

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4.3 Displaying Cash Management & Forecast, Cash Management Position

Use

As already mentioned in the previous process on Cash Management, Cash Management &

Forecast/Cash Management Position are updated during the whole SD procedure - starting with the

order, then billing document, followed by cash receipt. The following sub-process will now present

the cash receipt in Cash Management Position and those changes in the planning totals connected to

the cash receipt, which are formed through open billings.

Procedure

Call up the transaction as follows:

Menu Path Accounting

® Treasury ® Cash Management ® Information System ® Reports on Cash

Management ® Liquidity Analyses ® Liquidity Forecast

Transaction

Code

FF7B

Enter the following data:

Field Europe North America

Company code 1000 3000

Cash management

position

Select Select

Liquidity forecast Select Select

Grouping Total (all types of receipts/expenditures

and bank data)

Total (all types of receipts/expenditures

and bank data)

Display as of Date of incoming payment Date of incoming payment

Display in EUR USD

39

Choose .

Enter the following data:

Field Europe North America

Delta display

with balances

Select (display changes per value date –

as opposed to cumulative display)

Select (display changes per value date –

as opposed to cumulative display)

Choose .

If the date you entered as the planning date falls on a public holiday, the incoming payment is

reproduced on the next working day dependent on the value date.

Double-click on Banks.

Double-click on B9 (Cash rec).

The system displays the bank accounts on which the cash receipts are recorded.

The cash receipt you posted has flowed into the value date dependent balance of the DBGEING

(Europe)/CBGEING (North America) group on the planning date you entered.

In DBGEING (for Europe) or CBGEING (for North America), select the amount in the column for the

planning date you entered and choose Display list.

You should be able to find the incoming payment you posted in the list of displayed documents on

the Line Items (Module Pool)

Screen.

Choose 3 times.

Finally, you still need to check whether the amount in short-term cash management (=presentation

of the expected cash receipt from the billing) has been reduced as a result of the incoming payment.

Choose New display.

In the dialog box, enter the following data:

Field Europe North America

Display as of Noted planning date from FI document Noted planning date from FI document

Choose Continue.

40

If the date you entered as the planning date falls on a Saturday or Sunday, the expected

incoming payment is reproduced on the next working day dependent on the value date. For

overview reasons select NEW ENTRY in this case and enter the previous working date as

value date (i.e. minus 1 or 2 days)!

Double click on Persons.

Double-click on the F1 (FI customers/vendors) level to display the group of customers

(already posted and thus billed values).

The sum displayed has once again been reduced exactly by your billing amount as this is henceforth

already displayed as an incoming payment on the bank account.

Choose until the overview tree appears.

Application of SAP with Screenshots:

(I) SAP T CODE: ZCHEQINV

*These SAP Screenshots were taken on Testing Servers of DIL

41

2)

3)

42

4)

(II) T Code – YPIS_new - Parking and Posting (CHEQUE PARKING AND POSTING

ACCORDING TO THE CREDIT EXPIRY)

43

44

(III)T- Code – FB50 - Virtual A/C Entry (Clear the GL)

(IV) T Code – YVIRTUAL – RTGS Posting

45

(V) T Code – ZFI_F29 - Channel Finance Posting

(VI) T Code – YCHLEAF – Cheques Availability

46

(VII) T Code – ZCHEQINV – Cheques Enter, Deletion and Replacement

47

4.4 Sales Order Management in SAP R/3

SAP R/3 (the "R" was for "Real-time data processing" and "3" was for "3-tier":

1) database, 2) application server, and 3) client (SAPgui)). This new architecture

is compatible with multiple platforms and operating systems, such as Microsoft

Windows or UNIX. This opened up SAP to a whole new customer base.

The order to cash process

SD: Sales and Distribution

Integrated with:

Materials Management (MM)

Production Planning and Execution (PP)

Financial Accounting (FI)

Configurable structures within the software that represent the legal and/or

organizational views of an enterprise

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Organizational elements form a framework supporting all business activities in

the manner desired and selected for a given instance of the software

4.4.1 Organizational Elements

Client

Company Code

Sales Organization

Distribution Channel

Sales Division

Sales Area

Plant

Storage Location

Shipping Point

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Chapter 5: Dabur India Ltd. – Agreed Terms and Conditions with Bank

These terms and conditions including terms under respective services section govern the CMS and

by signing the CMS designation form and / or by accepting the service proposal and/ or by using

the Banks CMS, one agree to be bound by these T&Cs at all times.

5.1 Transfers Limited to Available Funds- The bank is under no obligation to comply with

any payment instruction or to make any fund transfer that would exceed the available funds in

available limit on the Customer accounts designated for such payment instruction.

5.2 Confidentiality- The sharing, storage or transmission about Customer / his account details

within HSBC group or with any agent should be on confidential basis.

5.3 Indemnity- As long as bank is in good faith, the Customer shall indemnify the bank and

hold the bank harmless from time to time from any or all claims brought or incurred by bank.

5.4 Force Majeure- The bank will not be responsible for non-performance or delay in the

performance of one or more services caused by circumstances beyond its control such as fire,

communication/ system failure etc.

5.5 Change of Terms- The bank may modify, terminate and suspend the services including the

present T&Cs to the customer anytime with or without notice, due to change in rules, regulations

and laws set by tax authorities or Bank policies.

5.6 General Undertaking from Customer- He agrees and confirms that-

a. Fully understands and is satisfied with all features of services offered

b. He is solely responsible for the accuracy, completeness and timeliness of instructions

in line with that specified by the bank from time to time.

c. He authorizes the bank to debit his account and/ or exercise right of setoff for any

liability incurred by the bank for and due to the execution of payment instruction

issued by customer to bank.

d. The customer will ensure the security procedure established by the bank for the

purpose of verifying that the payment order or communication is that of the customer

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or for detecting error in the transmission of the content of the funds transfer request or

communication is adhered.

e. Customer hereby represents and warrants that these T&Cs have been duly executed

and delivered by duly authorized representative and constitutes a legal, valid and

binding obligation of the customer and shall be enforceable against customer.

f. The „Non- Residential External (NRE)‟ customer shall ensure that bank would mention

word „SOF NRE‟ in the „Tag70‟ or „Second Party Reference‟ field as appropriate

while initiating any RTGS, NEFT, IAT payments.

g. Also customer agrees to provide the Priority Payments File not later than the agreed

cut-off date and time, which is subject to change from time to time.

5.7 MIS/ Reports- Bank at its sole discretion provide info including data, instruments and

reports to Customer related to any concerned banking activity.

5.8 Waiver- If bank fails to exercise any right or privilege conferred in T&Cs shall not affect

the specified services and remain in full force.

Example of North Zone Bank Associated with Dabur India Limited:

51

What are the features and benefits of our Collection services?

With HDFC Bank's Collection Services, our aim is to make your banking more efficient,

manageable and speedy. Here are some of the major features and benefits of our Collection

Services:

Features

You can manage your funds' flow position most effectively from a central location.

Avail of a range of products under our collection services to make your cheque realization and

banking more efficient.

Benefits

Quick realization of your local and outstation cheques.

Avail this service with or without having a Current Account with HDFC Bank.

What are the products offered under Collection Services that you can use?

You can take advantage of the products we offer under Collection services:

Local Cheque Collections With this product, your local cheques deposited at the same location

will be realized quickly. You can make use of this product at all locations of HDFC Bank

("SPEED") and over 18 locations of our correspondent Bank ("RAPID")

Outstation Cheque Collections You can deposit outstation cheques drawn on any HDFC Bank

location at any HDFC Bank location ("SPRINT"). Also, cheques drawn on over 300 locations of

our correspondent banks ("EXPRESS") can be deposited at any HDFC Bank locations.

Transfer Cheque Collections Your local/outstation cheques drawn on any branch of HDFC Bank

Ltd. will be realized quickly though this product available at all HDFC Bank ("HBTRF") locations.

Clean Collections If your cheques are drawn on locations not covered by us or our correspondent

banks, they will be collected at any of our locations and the proceeds will be credited to your

account as soon as credit is received by HDFC Bank.

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Comprehensive MIS You will receive a detailed MIS that includes the following:

o Daily report of deposits made at various locations

o Location-wise report

o Credit Forecast report

o Monthly cumulative report - date wise / location wise

o Monthly charging statement

o Monthly cheque return statement

o Customized reports as per mutual agreement

Some Important Terminologies

1.2. Virtual Account- It is a non- transactional sub- account created under the Customer

Account at the request of the customer, as submitted to the bank from time to time, to

capture reference of payments made by the Payers for the purpose of preparing MIS/

Statements for the customer.

1.3. Master Account- It is any Customer Account with the bank into which payments by Payer

using a distinct Virtual Account number is to be credited.

1.4. Inward Payment Services (Channel Financing)- The service under which the bank

would provide info on the payments received and outstanding for the Customer based on

the info received from the customer and the actual payments received in its account.

1.5. P2E Migration Program- This service assists Corporate in shifting their payments and

receivables from paper mode to electronic mode thereby offering the process and cost

efficiency benefits.

1.6. P2A- Person to Account service is used for fund transfer by individual to a corporate

customer using Payee IFSC and Payee Account number and shall form part of the Service

as defined under T&Cs.

1.7. PSBC- Pre-signed Blank Cheques issued in favor of Company and submitted to bank as

per applicable terms on which amount payable and Cheque date is left blank.

1.8. PDC- Post Dated Cheque issued in favor of Company with future date and submitted to the

bank for collection as per applicable terms.

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Chapter 6: Summary & Conclusion

6.1 Interpretation and Conclusion (SWOT Analysis):

The company maintains bank account at all depot towns. Cheques/drafts received from customers

in nearby places are sent for local clearing to initially collect funds in these bank accounts. This

has reduced the average collection period (as compared to the time it would take if customer

cheques were first received at head office and then sent for outstation clearing) thereby increasing

the velocity of cash inflows. Funds thus collected at the depot towns each day transferred to the

company‟s head office (or corporate) bank account. The company has a „sweeping arrangement‟

with the bank at the head office by which any funds transferred from the depot towns are

automatically applied towards setting the company‟s cash credit loan from the bank and reducing

its debit balance. These steps have resulted in reducing the cost of interest to the company.

When the company has surplus funds, it invests the same in short-term investments or instruments

like mutual funds and government securities.

With advent of CBS and CTS, Dabur has increased its operational efficiency and decreased its

overheads and costs. Here computer software such as SAP is used to perform core operations

of banking like

a. Recording transactions

b. Interest calculations

c. Customer Records

d. Balance of payments

e. Details of Withdrawal

The new platform has changed the way bank system in Dabur India Ltd. Works. All the

services in the Cash Management System have benefitted the corporate office and banking

facilities by-

a. Shorter Clearing cycle

b. Superior verification and reconciliation process

c. No geographical restrictions and customers alike

d. Reduction in operational risk and risks associated with paper clearing

54

Moreover, a Company‟s Cash Position is said to be a better indicator of the health of its

business, rather than its profit and loss statement. Hence knowing the cash position is crucial

for every business to:

a. forecast when, how, and where cash needs may arise

b. determine which would be the best source for additional cash needs, and

c. be prepared to meet cash needs when they arise

And for better visibility into the cash position across banks, across borders, cash managements

crucial. It empowers businesses with the ability to forecast cash flows, plan future business

strategies, and manage cash accordingly.

6.2 Limitations:

No authorization to use some T-codes which were restricted to Managerial Level.

Data access wasn‟t provided as the information was highly confidential.

6.3 Suggestions, Scope for further Study & Conclusion:

Lack of control over cash flows and inefficient cash management can be very harmful to

business. More often than not, it is the improper management of cash that has caused businesses

to fail. Effective cash management is therefore a necessity for businesses. Companies heavily

rely on knowing their cash position to manage working capital requirements such as ordering

inventory, raw material, or

Acquisitions/expansion program, for which they need a clear idea of how much cash is

required, and when. This is enabled by Efficient Cash Management System.

Here are some areas with scope for improvement:

a. Eliminating Disparate Systems: Different cash management solutions are being offered for

diverse segments. And as businesses grow, managing these disparate systems is increasingly

becoming a challenge. Hence company should come up with a single platform which can

support various cash management products and services as the business grows.

55

b. Customizable Solutions: Company should try to come up with a customizable platform which

can cater to the specific needs of different businesses.

c. Unified System: Integration of corporate customer systems with banking systems can be very

helpful in reconciliation of internal systems with banking systems, and can support account

management between the bank and customer. And this offers great scope for vendors.

Today, company is leveraging Cash Management System as a tool to build long-term trust with

their customers, because these systems will empower them and manage companies and their

position at any given time, thus building a trust and strengthening the relationship that goes

beyond transaction banking.

Summary

With growing recognition of the need to adopt Cash Management Strategies, company is

achieving and moreover expecting more efficiency and effective solutions around -

b. standardization,

c. reconciliation,

d. integrated banking systems with corporate systems, and

e. Real-time reporting for overall view of the existing cash position.

Role of the Finance Department:

The finance department is involved in all aspects of financial planning and control. It maintains

a quarterly score card, which helps the company evaluate the performance of employees in

terms of Cost to Company (CTC). Managerial remuneration consists of a fixed salary plus

bonuses based on performance on a variety of parameters, including maintenance of inventory

levels and other working capital items within agreed limits. The department also prepares MIS

and communicates the same to all the concerned departments. It also continuously monitors the

management of inventory, debtors and creditors to ensure that the net working capital remains

within the budgeted levels. If, for example, the investment in inventory exceeds the planned

limits due to some unavoidable circumstances, it must be offset by either an increase in

creditors or a reduction in debtors.

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List of Tables

Table 1

Market share & position of the company in the industry

Table 2

Dabur India Ltd. (DABUR) - Net Sales

Table 3

Transaction Codes Used in SAP

57

References/ Bibliography

BOOKS

1. B. Bhattacharyya, Theory and Practice of Case Method of Instruction,

ARTICLES

1. Aashish Goyal, Cash management at bank of India

2. Dabur Annual Report 2014-15, Dabur India Ltd.

WEBSITES

1. www.dabur.com

2. www.daburinternational.com

3. www.wikipedia.com

4. www.googlescholars.co.in

5. www.moneycontrol.com

6. www.rbi.org.in

7. www.sap.com

8. www.go.sap.com

9. http://www.dabur.com/Investors%20Relation-Reports

10. http://www.sap.com/bin/sapcom/en_us/downloadasset.2013-10-oct-01-18.dabur-

creating-efficient-cost-saving-shared-services-with-sap-document-access-by-opentext-

pdf.html