A study on

“The Analysis of Credit Management techniques adopted by 3M and its

impact on Cash Movements”

At

Submitted to

BANGALORE UNIVERSITY

In Partial Fulfillment for the award of

The Master of Business Administration Degree

By:

TAYABA SHIREEN. A

Reg. No: 03ACCM6056

AL-AMEEN INSTITUTE OF MANAGEMENT STUDIES

(Affiliated to Bangalore University, Bangalore – 560027)

CONTENTS

CHAPTER- 1 INTRODUCTION

Accounts receivables policy formulation

Credit Policy

Credit Analysis

Credit Costs

CHAPTER- 2 RESEARCH DESIGN

Statement of problem

Title of the Project

Objectives of the Study

Research Methodology

Sources of Data

Tools for Data Collection

Scope of the study

Limitations

CHAPTER- 3 COMPANY PROFILE

History & Corporate Milestones

Strengths

The organization

Goals

Performance Initiative

Vision

CHAPTER- 4 ANALYSIS & INTERPRETATION

Techniques of Payment & Collection

Credit Terms

Credit Policy

Control of Accounts Receivables

CHAPTER- 5 FINDINGS

CHAPTER- 6 SUGGESTIONS

CHAPTER- 7 BIBLIOGRAPHY

ANNEXURES

INTRODUCTION TO RECEIVABLES MANAGEMENT

An accounts receivable is generated when an enterprise, having

granted credit, accepts, in lieu of cash, a written or implied promise to pay in

the future for delivery of its goods or services. In today’s business

environment, competitive pressures, customer preferences and promotional

selling leads the management of most enterprises to offer credit.

Accounts receivables often constitute a significant portion of assets.

Controlling the accounts receivables process demands the development of

policies that are compatible with an enterprises profits, liquidity and market

share. Since the accounts receivables policy has a broad impact, it must be

managed carefully and assessed frequently.

Accounts receivables policy development is subject to internal and

external business constraints and requires careful evaluation of the policies

potential impact on sales volume, cash management objectives and

procedures, direct and indirect cost of receivables management and customer

relations.

Once an account receivables policy is implemented, it should be

reassessed at least annually, since policy changes could be required to adjust

for changing internal and external conditions, such as changing business

objectives, varying competitive industry standards, fluctuating interest and

foreign exchange rates, inflation, rapidly increasing credit volume,

technological advances and globe trade pattern trends.

Receivable is a permanent investment and is an ever-rolling account.

The finance manager has to determine the level of this account suitable so

that there will be an easy flow of working capital. The management should

see that debtors turn fast. If the debtors’ turnover velocity is high then the

firm can minimize borrowings for working capital. Accounts receivable

management is a decision making process, which takes into account the

creation of debtors, and minimizing the cost of borrowings of working

capital due to locking of funds in account receivables.

Impact of receivables management on business

Financial Impact:

Improved return on receivables.

Increased cash flow.

Generates investment opportunities.

Increase collection of effectiveness.

Reduce receivable delinquencies.

Reduced operation costs.

Reduce administration costs.

Early intervention turns marginal accounts into profitable

accounts.

Customized receivables service based on invoice amount.

Productivity gain.

Strategic Impact (Long Term)

Focus on core business.

Better use of internal revenue.

Best in class capabilities utilized.

Tactical Impact (Short Term)

Reducing/controlling operating cost.

Reallocation of capital funds.

Tapping into new resources.

Receivables management flow chart

CSD

CustomerMaster

Receipting

Payments

Collections

Order processing

Order confirmation

Billing and dispatch

Consolidation of sales data

Provision for Credit Monthly scheduleBad debts Controller Of receivables System update

Required legal Follow up of outstanding Steps amounts

Proceed to Suspend SubsequentDispatches Payment Defaulted

End of the day

Documents

ACCOUNTS RECEIVABLES POLICY FORMULATION

The accounts receivable cycle begins with the enterprises decision to

extend credit and ends when settlement is received in payment for the goods

or services provided.

It is critical that accounts receivable credit, collection and financing

policies complement marketing, sales and production policies and, therefore,

be compatible with the enterprises overall objectives. To achieve this goal,

the chief executive officer should involve senior managers from all

appropriate departments in developing the accounts receivables policy, since

the various departments within an enterprise could have vested anterests and,

possibly, conflicting objectives; assign one senior manager to be responsible

for the groups’ policy determination; and review and approve the policies

that the group has formulated.

Specific level of accounts receivable responsibility and authority

should then be assigned throughout the enterprise. Designation by title is the

most efficient method of identifying levels of credit responsibility, with

senior managers usually assigned to approve higher credit risks. The policies

should be clearly communicated in writing to planning, production, credit

and sales staff (and any other staff affected by the policies) to ensure

effective accounts receivable management and credible, consistent customer

contacts.

CREDIT POLICY

An enterprises credit policy is a major, controllable element that has a

significant influence on sales demand and profits. The many factors that

comprise credit policy should be analyzed before the decision is made

whether or not to offer credit or to make changes to current policy. Foctors

that could constrain or influence credit policy include: ability to finance the

credit policy. Costs of financing receivables by means of internal or external

credit facilities should be estimated to determine which approach is feasible

for the enterprise.

The development of the enterprises credit policy requires that specific

decisions be made regarding several variables that establish the terms of sale

and the acceptable level of credit risk. The variables are:

Credit standards

Credit period

Credit terms

Cash discount and surcharges

Credit limits

Credit instruments

Payment methods

When implementing or varying the credit policy by changing

any one, or all, of the above variables, management must assess the

impact on net income, calculate the probability of achieving the

planned results, and determine the additional level of risk assumed. In

particular, any relaxation of credit policy should be considered only

after very careful evaluation of the impact of the change by top

management, because it is extremely difficult to revert to more

stringent policies without experiencing adverse effects on customer

relations and sales.

`Credit Standards

A firm has a wide range of choice in choosing the credit

standards. A firm has to decide what standard should be applied in accepting

or rejecting an account for credit granting. At one end of the spectrum it may

decide not to extend credit to any customer, however strong his credit rating

may be. At other end it may decide to grant credit to all customers

irrespective of their credit rating. Between these two extreme positions lie

several possibilities, often the more practical ones. This gives ample scope

for the Credit manager/ Finance manager to play a critical role.

In general liberal credit standards tend to push sales up by attracting

more customers. This is, however accompanied by a higher incidence of bad

debt loss, a large investment in receivables and a higher cost of collection.

Stiff credit standards have the opposite effect. They tend to depress sales,

reduce the incidence of bad debt losses, decrease the investment in

receivables and lower the collection cost.

Credit Period

The credit period is the length of time credit is granted (for example,

from invoice date to due date), and is normally established according to an

industry standard. The credit period has direct impact on the cost of

financing receivables and on collection risk. An enterprise may elect to

deviate from the industry standards for one or more reasons: to obtain a

competitive advantage, to reflect the enterprises classification of customer

quality, or to longer-term economic or business changes.

The date when payment is deemed to be received should be defined. It

may be based on the envelope postmark date, the remittance processing date,

or the date funds are received. Customers should be clearly advised of the

payment receipt date.

Credit Terms

Credit terms are normally specified on the contractual documents, or

on the customer invoice or statement. Frequently used payment terms

include the following: cash before delivery (CBD) or Cash on delivery

(COD) may be required when the buyer has been classified as a poor credit

risk. In case of an unknown or one-time buyer, credit cheque may be

required when the order is placed, or before the goods or services are

delivered.

Cash terms permit the buyer a payment period of about 5 to 10 days

and maybe used for high turnover or perishable goods.

Invoice terms often a net due date and a discount due date that maybe

calculated from various starting dates such as the invoice, delivery or client

acceptance dates. The term maybe quoted, for example, as 2/10, net 30

meaning a payment discount of 2% is given if the invoice is paid within 10

days. Full payment is required after 10 days but within 30 days.

Periodic statements are normally issued monthly. The statement terms

may be similar to invoice terms and include discounts and interest charges

for late payment. All invoice transactions are listed up to a cut-off date and

payment is due by a specified date in the following period.

Credit discounts and surcharges

Cash discount policies may be established for a number of reasons: to

conform to the industry norm, to stimulate sales, or to expedite receipt of

cash. To be an effective collection tool, the discount rate must be established

at a rate of interest higher than that at which the customer is able to borrow.

Consideration should be given to the implications of customers taking a

discount to which they are not entitled.

A surcharge, or late payment charge, can be used to encourage prompt

payment and to equalize treatment for customers who pay on time versus

those who delay payment.

Credit Limit

Credit limit categories should be established to codify the total credit

that may be granted to customers in each credit quality classification. To

ensure that credit limits remain appropriate, given business or other major

changes, they should be regularly reviewed. Periodic credit worthiness

reassessment can be simplified by automatically reassigning customers to a

higher credit limit level after a specified period of satisfactory payment

experience.

Credit factors, assigned by the credit grantor and weighted by relative

importance, can be used to calculate a single numerical value that could be

used to assign distinctive credit limits and payment periods to different

customers. The credit score must always be tempered by informed

management judgment because the accept-reject decision implicitly includes

economic trade-offs: to minimize rejection of an acceptable credit customer

(with loss of future business) versus to accept a poor credit risk (and

resulting debt losses).

Credit Instruments

Credit instruments are written payment contracts agreed to by the

enterprise and its customers. Instruments range from simple invoices to

formal credit arrangements that are selected to reduce credit risk. When

selecting an instrument to be used, the enterprise should consider industry

standards, market norms and buyer risks.

The enterprise may choose different instruments at different times

depending on the product or services sold, the customers geographical

location, or customer quality classification. The ability to use different

instruments provides flexibility when dealing with significant or sensitive

customers and orders. Compliance with relevant consumer protection

legislation may require detailed disclosure to the buyer of credit instrument

terms.

The following are the 4 major credit instrument:

1. Open Account

2. Promissory notes

3. Conditional sales contracts

4. documentary credits

Payment Methods

The management of the enterprise selling the goods or services should

advice its customers of acceptable payment methods, including advance

payments, cash, cheque, credit card or electronic fund transfer. The

implications associated with each method should be assessed carefully

before determining which payment vehicles to allow. For example,

electronic funds transfer (EFT) speeds cash flow and reduces collection risk

because funds are immediately withdrawn from the customers account and

credited to the seller account. However, there are initial development and

on-going operational costs, and some enterprises may not find this process

cost effective.

Factors to consider when determining possible payment methods are:

provisions of the Federal Currency Act concerning legal tender; standard

trade practices; cost of processing; cash flow implications and impact on

collection risk.

Currency hedging may be a major factor for industries involved in

foreign transactions, and the policy related to hedging should be in writing.

CREDIT ANALYSIS

Besides establishing credit standards, a firm should develop procedures

for valuating credit applicants. The second aspect of credit policies of the

firm is credit analysis and investigation. Two basic steps are involved in the

credit investigation process.

a) Obtaining credit information.

b) Analysis of credit information.

It is on the basis of credit analysis that the decisions to grant credit to a

customer as well as the quantum of credit would be taken

Obtaining credit information

The first step in credit analysis is obtaining credit information on

which to base the evolution of the customer the sources of information,

broadly speaking are:

Internal

External

Internal

Usually firms require their customer to fill various forms and

documents giving the details of the financial operations. They are also

required to furnish trade references with which firms can have contacts to

judge the suitability of the customer for credit. This type of information is

obtained from internal sources of credit information another internal sources

of credit information is derived from the records of the firm’s contemplating

an extension of credit facility . it is likely that a particular customer or

applicant may have enjoyed credit facility in the past in the case that firm

would have information on the behavior of the applicants in terms of the

historical payment pattern this type of information may not be adequate and

may therefore have to be supplemented by information from other sources.

External

The availability of the information from the external sources to assess

the credit worthiness of the customers depends on the development of the

institutional facilities and industry practices. in India, the external sources of

credit information have not as developed as in the industrially advanced

countries of the world. Depending upon the availability of the following

external sources may be employed to collect the information.

Financial Statements

The external sources of credit information is the published financial

statement that is the balance sheet and the profit and loss account. The

financial statement contains very useful information they throw light on an

applicants financial viability, liquidity profitability and debt capacity.

Although the financial statement do not directly reveal the past payment

period of the applicant they are very helpful in assessing the overall financial

position of a firm which is significantly determines its credit standings.

Bank References

Another useful source of credit information are the banks of the firm,

which is contemplating the extension of credit the modus operadi here, is

that the firm’s banker collects the necessary information from the applicant’s

bank. Alternatively, the applicant may be required to ask his banker to

provide necessary information either directly to the firm or to its bank.

Trade References

These refer to the collection of information from firms with whom the

applicant has dealings and who on their experience would vouch for the

applicant.

Credit Bureau Reports

Finally, specialists credit bureau from organizations specializing in

supplying credit information can also be utilized.

Analysis of Credit Information

Once the information has been collected from different sources, it

should be analysed to determine the credit worthiness of the applicant.

Although there are no established procedures to analyse the information, the

firm should device one to suit its needs. The analysis should cover two

aspects:

a) Quantitative

b) Qualitative

Quantitative

The assessment of the quantitative aspect is based on the factual

information available from the financial statements, the past records of the

firm, and so on. The first step involved in this type of assessment is to

prepare an ageing schedule of the accounts payable of the applicant as well

as calculate the average age of the accounts payable. This exercise will give

an insight into the past payment pattern of the customer. Another step in

analyzing the credit information is through a ratio analysis of the liquidity,

profitability and debt capacity of the applicant. These ratios should be

compared with the industry average; moreover, rend analysis over a period

of time would reveal the financial strength of the customer.

Qualitative

The qualitative assessment should be supplemented by a

qualitative/subjective interpretation of the applicant credit worthiness. The

subjective judgment would cover aspects relating to the quality of

management. Here, the reference from other suppliers, bank references and

specialist bureau reports would form the basis for the conclusions to be

drawn. In the ultimate analysis, therefore, the decision whether to extend

credit to the applicant and what amount to extend will depend upon the

subjective interpretation of this credit standing.

COSTS

The major categories of costs associated with the extension of credit

on accounts receivable are:

1) Collection cost

2) Capital cost

3) Delinquency cost

4) Default cost

Collection Cost

Collection costs are administrative costs incurred in collecting the

receivables from the customers to whom credit sales have been made.

Included in the category of costs are (i) additional expenses on the creation

and maintenance of a credit department with staff, accounting records,

stationary, postage and other related items; (ii) expenses involved in

acquiring credit information either through outside specialist agencies or by

the staff of the firm itself. These expenses would not be incurred if they do

not sell on credit.

Capital Cost

The increased level of accounts receivable is an investment in assets,

they have to be financed thereby involving a cost. There is a time lag

between the sale of goods to, and payment by, the customers. Meanwhile,

the firm has to pay employees and suppliers of raw materials, thereby

implying that the firm should arrange for additional capital to support credit

sales, which alternatively could be profitability employed elsewhere, is,

therefore, a part of the cost of extending credit or receivables.

Delinquency cost

This cost arises out of the failure of the customers to meet their

obligations when payment on credit sales becomes due after the expiry of

the credit period. Such costs are called delinquency cost. The important

components of this cast are:

1) Blocking up of funds for an extended period.

2) Cost associated with steps that have to be initiated to collect the over

dues, such as, reminders and other collection efforts, legal charges,

where necessary, and so on.

Default Cost

Finally, the firm may not be able to recover the over dues because of

the inability of the customers. Such debts are treated as bad debts and have

to be written off as they can not be realized, such casts are known as default

casts associate with credit sales and accounts receivable.

RESEARCH METHODOLOGY

STATEMENT OF PROBLEM

To keep up with the competition prevailing in the industry, every

company is extending credit to its customers. This not only is being as a

marketing strategy but it also helps in improving sales.

The problem that arises is the assessment of the management of credit

granted to customers and keeping a track of over-dues and ensuring prompt

payment.

Management of receivables is one area, which attracts the immediate

attention when we speak about cost, efficiency, profitability and controlled

inflow and outflow of the cash and funds. It is here we can minimize the

costs, bad debts, interest on these receivables, managing creditors and

ultimately managing liquidity i.e., cash. It is evident from above, the need to

be strong in managing the receivables and thus the study of receivables

management arises and is of great importance to the organization dealing in

small or large business.

OBJECTIVES OF THE STUDY

To study the receivables and trend of managing the receivables.

To determine the effectiveness of management of receivables.

To determine the amount of receivables due.

To know the optimum credit period.

To study in detail the practical approach followed in granting various

types of advances.

To study the recovery pattern of receivables.

To know the cash and fund management.

RESEARCH DESIGN OF THE STUDY

The study is mainly based on the data provided in the Ageing files of the

company and its balance sheet for the year 2003-04. The other data required

for the study was directly collected from the concerned executives.

SOURCES OF DATA

Primary data:

Discussions held with the concerned financial personnel and other related

departments.

Secondary data:

The secondary data is collected from various academic books and journals

pertaining to financial aspect.

TOOLS FOR DATA COLLECTION

As the subject under study is mainly the financial aspect of the company, the

main sources of information are taken from internal sources of the company.

1. Balance Sheet/ Profit and Loss Statements.

2. Ageing files of the customers.

3. Cash flow Statements.

4. Formal and informal discussions with the concerned department

personnel’s.

SCOPE OF THE STUDY

The scope and significance of the study are as follows:

The study was carried out at 3M India Limited, Bangalore.

The study is confined to analyzing the components of Receivables

Management.

The findings and suggestions from this study will help the

organization to frame a suitable financial strategy for the better

operation of the organization.

LIMITATIONS

The study is limited up to 10 major customers to whom credit was

extended.

The study is based on the data collected for only 2 years.

The study included collection of data through interaction with

officials and the findings were based on the premise that the

respondents have given correct information.

CORPORATE PROFILE

In 1902, a group of professional businessmen found the company 3M

(Minnesota, Mining and Manufacturing) with the purpose to mine a natural

abrasive called corundum from a local mountain, aiming to manufacture

grindstones. The mineral turned out to be worthless and they started to

manufacture sandpaper. Thus, began a stage of growth, which was to

culminate to being one of the largest and most innovative company’s

history.

With the growth of the company, it produces more than 50 thousand

product in 62 different countries, having 160 manufacturing locations.3M

laboratories around the world employ over 8000 people. Having the net

income of $ 2 billion and 12.1% of sales.

But 3M recognize that it is the people and not the pound or dollar that

gets result in the research field. So every researcher is allowed 15% of his

working time to work along lines that interest him personally, indeed,

innovation is the buzzword at 3M with 500 new product introductions every

year.

3M company, head quartered in St. Paul USA is a multi-product,

multi-technology, multi-market, transnational company encompassing

amazing diversity. 3M is a highly diversified fortune 500 company with a

significant global presence. The strong 3M team of more than 70000

employees is spread over 60 countries with core values of innovation and

technology driven is what propels this huge global force forward.

3M is US $ 25 billion global giant which manufactures over 50000

innovative products, established itself as one of the most admired

companies.

The perfect match between India’s multifaceted customer profile and

3M’s diverse range of products offering proven customers benefits led to

BIRLA 3M being born in 1987.

One of the main plans of 3M’s business philosophy has been to grow

through improving and expanding its own technology base creating products

that fulfil specific customer needs. With a promise of delivering innovative

quality products and services that makes the customers life easier and better,

3M today has an array of useful products targeting each and every segment

of the market. 3M has made an unswerving commitment to innovation at

every function in the company and has believed in undertaking a strong

responsibility to the community at large and the environment in which it

operates.

3M HISTORY AND CORPORATE MILESTONES

1902 Founded in the town of two harbours, Minnesota as

Minnesota,

Mining and Manufacturing Company.

1910 Company moves to St. Paul.

1916 First dividend paid i.e. quarterly.

1920 World’s first waterproof sand paper was introduced.

1925 3M diversifies with invention of Masking Tape and first

Scotch® Adhesive Tapes.

1930’s Golden age of 3M’s Research programmes (Cellophane

tape /

Transparent tape)

1940’s Product for world war two – New products like Scotchlite

Reflective Sheeting for advertising, highway marking,

Magnetic Tape, Offset Printing Plates etc. Introduction of

Thermo fax copying process, Scotch guard fabrics

protection videotapes, Scotchbrite cleaning pads etc.

1960’s International Operation Commenced. Introduction to Dry Silver Microfilm, Photographic Products,

Decorative Laminates, Carbonless

1970’s Over Head Projectors, Medical and Dental products were

launched.

1980’s Growth of Pharma, Agrochemicals, Digital Sound

Recordings, Energy Control Films, Post-its and X-ray

Films were launched

1987 Jun 3M and Birlas become Partners

1988 Nov Foundation laid for Manufacturing Facility at Electronics

City, Bangalore

1990 Feb Inauguration of Customer Tech Centre, Bangalore, by

Allen F. Jacobson, CEO, 3M, St.Paul

Apr Production of UY connectors

Jun First Shipment of MS2 Connectors

Jul Commencement of Scotch-Brite Conversion

  Sep First Shipment of first Automotive Stripings

  Oct Installation of Tape Coater

1991 Jan Production of Box Sealing Tape Manufacturing of first

batch of Light Water

1992 Oct First Shareholder's Meeting

1993 Jul Self-Certification Approval for Telecom Connectors.

3M increases equity holding to 51%.

Warehousing Operation at Delhi.

  Nov Warehousing Operations at Mumbai

1994 Jan Opening of Chennai Customer Sales Centre

  Apr Opening of Calcutta Customer Sales Centre

  Dec Opening of Bangalore Customer Sales Centre

1995 Feb AS-400 Installed- E-mail and IFS2 Implemented 

  Apr ISO-9002 Certification

  Nov New Warehouse, Bangalore

1996 Feb  Inauguration of Graphics Production Centre. 

New Warehouse, Mumbai

  Mar Printed Post-it® Notes

  Dec Opening of Second Customer Sales Centre in Bangalore

1997 Jan  Industrial land acquisition at Ranjangoon, Pune

  May Mumbai Customer Sales Centre Expansion

  Jul  Chennai Warehouse

1998 Jan Expansion of Bangalore Customer Sales Center-1

  Apr 3M Increases equity holding to 76%

  Jul  Opening of new Delhi Customer Sales Centre with

expanded facilities

  Aug Inauguration of Innovation Center, Electronics City,

Bangalore

2000 Jun Acquisition of Auto Striping India Pvt. Ltd.

  Jul Inauguration of Centralized Corporate Office

2002 Dec Company name changed to 3M India Limited from Birla

3M Limited.

3M INDIA – STRENGTHS

     With the vision of being the most innovative enterprise and the

preferred supplier 3M India uses its core strengths of technology,

products, people and values to solve customer problem. 3M’s

immense strength lies in its 30 technology platforms some of which

are adhesives, specialty chemicals, micro replication and optics. These

platforms have launched several of 3M’s product lines. The resulting

products are often so unique, that they redefine the very parameters of

competition.

Since its inception in 1988, the company has listened to customer

needs in India and have customized and modified products to meet

special local needs.

That 3M is one of the world’s most innovative corporations worldwide

is reiterated by the fact that 30% of the annual sales come from products

that are less than four years old. But, innovation as 3M sees it, is in more

than just our products. It’s in the way we do business and provide

solutions – with simplicity and ingenuity.

       The products from the 3M portfolio are the result of combining

3M’s core strengths of innovation and customer satisfaction thereby

providing investors an attractive return through sustained quality

growth. Headquartered in Bangalore the company has a seven acre

manufacturing facility at Electronics city where around 40 products

are manufactured. These include connector and splicing systems for

telecommunication cables, automotive graphics, a range of pressure

sensitive adhesives (PSA) tapes and some consumer products.

        At 3M India, the philosophy is believing that everything begins

and ends with the customer. This has been one of the key drivers in

providing the best products and services in a timely and efficient

manner.

      To achieve its goal of global excellence, 3M has adopted a

continuous improvement process in the Supply Chain Excellence,

Pacing Plus Program and Earning Customer Loyalty initiatives. With

this approach 3M India goes beyond the current quality programmes

or awards and re-emphasizes the importance of customers in all it's

operations. At the same time, it empowers each and every 3M

employee so that every one is personally involved in ensuring

‘uncompromising commitment to customer satisfaction’

       3M India’s greatest asset has been the corps of highly trained and

qualified staff. The strong commitment to people has enabled 3M

India today to attract and retain some of the best talents in the country.

3M INDIA – THE ORGANIZATION

3M India is divided into 8 business groups that serve focused markets.

Markets Served by 3M India:

Industrial Markets

Automotive & Specialty Material Markets

Electro & Telecom Markets

Health Care Markets

Traffic & Safety Markets

Electronic Markets

Construction Markets

Consumer & Office Markets

Industrial Markets

Tapes, adhesives and abrasives form the key products of the Industrial

Markets Group serving the Indian automotive, aerospace, construction,

electronics and transportation markets. Some of the well-known brands

within this group are Scotch® Masking Tapes, Scotchbrite™ Surface

Conditioning Products and Wetordry™ Abrasive Papers. In addition, the

group also markets products for automotive repair and refinish, such as

3M™ Paint Finishing Products, 3M™ Abrasive Products and Accessories,

3M™ Adhesives, Coatings and Sealants. Cleaning and finishing materials

along with micro finishing abrasives also form part of the group's product

portfolio.

Scotch® Packaging Tapes

Scotch® Masking Tapes

Speciality Tapes and Films

Labelling Systems

Speciality Adhesives

3M™ Wet or dry™ Sheets

3M™ Imperial™ Hand Glaze

3M™ "4 Way" Spray

Scotch-Brite™ Surface Conditioning       

Products-Pads, Wheels, Brushes,

Rolls 3M™ Roloc™ Discs

Automotive and Specialty Material Markets

As part of the Group’s Speciality Materials Division, the

fluorochemical products marketed are used as liquid heat transfer media and

dielectric electronic testing fluids. 

In addition the group also locally manufactures & markets automotive

graphics & decorative badging for two and four wheelers. Other products of

the group are protective films, attachment tapes for automotive application

and 3M™ Filtrete™ Filtration Products for particle and gas filtration in air-

conditioners, room air-cleaners and vacuum cleaners.

3M™Scotchcal™ Automotive Graphics

Double sided foam tape for automotive trim attachment.

Fluorinest & HFE Specialty Chemicals

Glass Bubbles & Ceramic Microspheres

Electro and Telecom Markets

This specific group has been creating products that meet the

specialized needs of the power and telecom industry in the country.

Connectors for joining of copper and optical fibre telecom cables, jointing

and termination kits for power cables and interconnect products for the

electrical industry are some of the specialised products in this group.

3M™ Scotchlok™ UY and MS2™ Modular Connectors for splicing

underground copper cables

3M™ Fibrlok™ and 3M™ Multifibre Fibrlok™ Mechanicals Splices

for Optical Fibre Cables

Customised Fiber Management Systems, Fiber Optic Closures.

Test and measurement products for optical fibres such as OTDRs,

fibre identifiers and power meters Vinyl tapes, Polyester, Mastic

Tapes

Polyester film tape

Power termination and splicing kits

Health Care Markets

The Health Care Group is one of the key focus areas of 3M India’s

plans. This group has products ranging from medical surgical supplies,

medical equipment, dental care products and devices and film for the food

and pharmaceutical industry. Some of the well recognised products are

3M™ Transpore™ Plastic Surgical Tape, 3M™ Littmann™ Stethoscope,

3M™ Tegaderm™ Transparent Dressing, 3M™ Ioban™ Antimicrobial

Film, 3M™ Specialty Drapes, 3M™ Sterivac™ Gas Sterilizer and 3M™

Refastenable Tapes for manufacturers of diapers. The 3M™ Micropore™

Surgical Tape, which is the market leader worldwide for general dressing, is

part of this group's product portfolio. The Dental Division offers

restoratives, finishing and polishing products, adhesives, crowns, impression

materials, infections control products, and preventive sealants. 

3M™ Micropore™ Surgical Tape

3M™ Transpore™ Surgical Tape

3M™ Tegaderm™ Transparent Dressing

3M™ Littmann™ Stethoscopes

3M™ Steri Drape™ Incise Drape

3M™ Ioban2™ Antimicrobial Film

Autoclaves steam indicator tape

3M™ Indox™ Ethylene Oxide Gas Indicator Tape

3M™ Attest™ Biological Indicators

Refastenable tapes for disposable diapers

5XL & 8XL ETO Gas Sterilizers

3M™ Z100™ Composite Dental Fillings

3M™ Single Bond™ Dental Adhesive

3M™ Express™ Impressioning System

3M™ Filtek Restorative System

Traffic and Safety Markets

This group concentrates on reflective sign materials, graphics,

respirators and many other products that enhance worker, public and product

safety around the world. Some of the products offered under this group are

Scotchlite™ Products, 3M™ Reflective Sheeting,  3M™ Dust/Mist

Respirators, chemical sorbents, environmental safety products, 3M™

Panaflex™ Flexible Substrates and 3M™ Scotchcal™ Translucent Graphic

Marking Film.

Recent innovations include diamond-like reflective materials, large-

format digital printing, new anti-counterfeiting films for products and

documents, and brightness enhancement films for products that save battery

power and make computer screens easier to read.

3M™ Scotchlite™ Reflective Sheeting

3M™ Stamark™ Pavement Marking Polymer Tape

3M™ Scotchlite™ SOLAS Grade Reflective Material for Marine

Applications

3M™ Respirators

Personal environment systems

3M™ Powersorb™ Oil Sorbents

Thinsulate™ Thermal Insulation

3M™ Filtrate™ Air Filter Media

3M™ Ear Plugs

3M™ Liquid Filter Bags & Cartridges

3M™ Panaflex™ Flexible Substrate

3M™ Scotchcal™ Transluscent/Opaque Vinyls

Electronic Markets

This group in 3M India provides electronic packaging and inter

connection products for virtually any electronic application. The group

also deals with static control and corrosion protective products for

pipeline coatings

. Electronic connectors

Static control products

Corrosion protection products

Construction Markets

This group deals with window films, passive fire protection products

and lighting products catering to commercial, residential and automobile

markets. The window film market being the most prominent with brands like

3M™ Scotchint™ sun control films and 3M™Scotchshield™ Safety &

Security Films. These are sold to homes, buildings and automobile owners.

3M is continuously engineering new developments for films of tomorrow.

3M™ Scotchtint™ Sun Control Film

3M™ Scotchtint™ Safety & Security Film

3M™ Passive Fire Protection Products

3M™ Clip-on Reflectors

Consumer & Office Markets

This group deals with 3M's power brands. These products are widely

recognised and used by a cross section of people.

The Post-it® Notes and Scotchbrite™ Scrub Pads are perhaps the most

visible and widely used amongst these brands. Scotch® Magic Tape, Post-

it® Memoboards, 3M™ Precise Mousing Surface, 3M™Nomad Floor

Matting are some of the products of this group. Products catering to the

presentations and meetings environment like the Multimedia and

Overhead projectors also complement the portfolio of the Consumer and

Office Markets Group.

Scotch-Brite™ Scrub Pads and Laminates

Scotch- Brite™ sponge mops and wipes

Scotchgard™ Fabric and Leather Protectors

3M™ Nomad™ Entry-way System

Safety-walk™ Slip Resistance Products

Post-it® Notes

Scotch® Magic Tape

3M™ Overhead Projectors

3M™ Transparency Film

3M™ Flip Frame™ Transparency Protectors

Post-it® Memoboards

3M™ Multimedia Projectors

3M™ Ergonomic Products

Products Manufactured/Converted in India

IN OUR FACILITY

UY Connectors

MS2 Connectors

Splicing Rigs

Fibre Optics Connectors Assembly

(Pigtails & Patchcords)

Box Sealing Tapes

Office Tapes

Printed Tapes

Pre-masking Tapes

Masking Tapes

Repacking of chemicals

Automotive Graphics

Conversion of disposable respirators (8710-I)

CONVERSION

Coated & Nonwoven abrasives conversion

Post-it® Pads Conversion

3M INDIA – GOALS

3M Performance Initiatives

Six Sigma

3M Acceleration

Sourcing effectiveness

e Productivity

3M VISION

TO BE THE MOST INNOVATIVE ENTERPRISE

AND THE PREFERRED SUPPLIER

3M’s Value

Satisfy customers with superior quality value and services.

Provide investors an attractive return through sustained,

quality growth.

Respect our social and physical environment.

Be a company employees are provided to be part of.

MANAGEMENT OF RECEIVABLES AT 3M INDIA LIMITED

A typical manufacturing company has receivables to total asset ratio

in the region of 20% to 25%. This represents a considerable investment of

funds and so the management of this asset can have a significant effect on

the profit performance of the company.

Receivables balance as shown in the balance sheet of the company

relates to sales made on credit for which payment has not yet received. They

arise from the sale of goods and services on credit basis. Sales on credit

depend upon the nature of business. To increase the sales volume, generally

the credit facility will be offered to the customers which result in investment

in receivables to maximize return on capital employed. The balance in

receivables account is determined by the number of customers, length of

credit, amount of credit allowed to each customer etc.

To achieve growth in sales and to meet competition in the industry, a

firm may resort to credit sales. Firms offer credit to customer to attract more

business, and the increased turnover will result in increased profit to the

firm. The market in which the firm is doing business is the ultimate

determinant in credit sales and receivables balances.

This project involves a comprehensive study about the receivables management and the practices followed generally in 3M India Limited. The study of receivables is done by realizing: -

Techniques of payment & Collection

Credit Terms

Credit Policy

Control of Accounts Receivables

TECHNIQUES OF PAYMENTS & COLLECTION

3M India Limited adopts a variety of payment & collection techniques.

Customers can adopt any one of the method of payment as per their

convenience. The following are the modes of payments & collection:

Channel financing scheme:

This is a new concept of clubbing the collection mode applicable

for key distributors coupled with funding them. This is a mix of OD

facility and Internet banking. This is a unique arrangement with ICICI

Bank exclusively for the selected Distributor’s of 3M.

This scheme provides:

Additional liquidity for distributor.

Extended credit period.

But still can pay 3M on time.

Based on B2B model through Overdraft facility.

The information obtained from the customers is entered into the customer

master, which contains all the details relating to a particular customer. So

whenever any customer applies for credit, the same information can be

obtained from the customer master.

Lock boxes:

The use of lock boxes speeds the collecting, processing, depositing

and reporting of payments received through the mail. A lock box is a special

post office box to which company’s customers are instructed to mail

payments. The box is checked several times daily by the processing

operation, which is usually operated by bank. Upon receipt, cheques are

immediately entered into cheque clearing process to be converted into funds

for the company.

Electronic funds transfer:

A faster method of collecting funds is to require that payments be

made electronically rather than with a paper cheque. In this system payment

is made by transferring funds directly from payer’s bank account to receipt’s

account. This makes the funds immediately available and also eliminates the

cost of handling paper cheques.

Preauthorized cheques:

Preauthorized cheques are pre-printed, unsigned cheques. For

fixed repetitive payments, companies authorize their creditors to draw

cheques on their accounts. The creditor sends the preauthorized cheques to

the bank, which then deposits the funds into creditors account.

This practice of taking preauthorized cheques from the

customers is also followed by 3M India Ltd where in the customers have

to deposit blank have preauthorized cheques with the company in certain

transactions.

Deposit concentration:

Because it is difficult to control funds in many different banks, most

receipt management systems provide for transferring funds electronically

into one or more large accounts. Central accounts can be more closely

managed.

CREDIT POLICY

Like every firm, 3M India Limited also has established its own credit

policy for proper management of debtors, otherwise it will lead to more

outstanding balances in debtors account and the risk of bad debts will also

arise. The important dimensions of 3M’s credit policy are:

Credit Period

The credit period refers to the length of time customers are allowed to

pay for their purchases. It generally varies from 15 day to 60 days.

Lengthening of credit period pushes sales up by inducing

existing customers to purchase more and attracting additional

customers. This is, however, accompanied by larger investment in

debtors and a higher incidence of bad debt loss. Shortening of credit

period would have opposite influences: it tends to lower sales,

decreases investment in debtors and reduce the incidence of bad debt

loss.

The credit period allowed by 3M to each customer depends

upon:

The group to which the company belongs to.

Nature of business.

Volume of sale generated by the company.

Credit rating of the company.

Cash Discount

Firms generally offer cash discount to induce customers to make

prompt payments. The percentage discount and the period during

which it is available are reflected in the credit terms.

Liberalizing the cash discount policy may mean that the

discount percentage is increased and/or the discount period are

lengthened. Such an action tends to enhance sales (because the

discount is regarded as price reduction), reduce the average

collection period (as customers pay promptly), and increase the cost

of discount.

3M India Limited extends cash discounts only to customers

who generate large volume of sales and are prompt in payment. This

is also done only on their insistence. 3M has a reserve; therefore it

does not feel the need to extend cash discount for the purpose of

early payment.

Collection Efforts

The collection programme of the firm aimed at timely collection of

receivables may consist of the following:

Monitoring the state of receivables

Dispatch of letters to customers whose due date is approaching

Telegraphic and telephonic advice to customer around the due date

Threat of legal action to overdue accounts

Legal action against overdue accounts

The following precautions are taken by 3M for prompt collection of

debts and accurate maintenance of customer accounts.

Invoices are sent out immediately after delivery of goods.

Checks are carried out to ensure that invoices are accurate.

The investigation of queries and complaints and, if appropriate, the

issue of credit notes are carried out promptly.

CONTROL OF ACCOUNTS RECEIVABLES

There is a time lag between provision of goods and services and the

receipt of cash for them. This time lag can result in a firm’s working capital

requirements from banks. Any increase in time lag, will cause serious

liquidity problems and sometimes can cause insolvency of the firm.

Economic conditions of business can influence the type and amount of

credit to be offered to the customers. In boom periods, when the demand is

more for the product, risk can be minimized by enticing new customers into

business. In case of recession, the business has to sustain with existing

market and simultaneously minimizing the credit risk.

Role of Credit Control Department

In general, the functions of credit control department are as follows:

Keeping the sales ledger up-to-date.

Dealing with customer queries.

Reporting to sales staff about new enquiries.

Giving references about customers to third arties.

Checking out the customer’s credit worthiness.

Advising on payment terms.

Credit Cycle

The credit control function’s jobs occupy a number of stages of the order

cycle (from customer order to invoice dispatch) and the collectioncycle

(from invoice dispatch to the receipt of cash), which together make up the

credit cycle.

Establish credit status: for new customers who request a credit

extension. Before credit is granted one should satisfy about the

following: does the customer deserve credit? Is it a suitable risk? What is

known about the customer? Can the customer pay? Will it be profitable

to extend credit?

Check credit limit: if the order is fairly routine, and there is no problem

with credit status, then credit control staff examine their records or at

least the sales ledger records to see if the new order will cause the

customer to exceed the credit limit. There are a number of possible

responses, as follows:

i. Authorization: If the credit demanded is within the credit

limit, and there are no reasons to suspect any problems,

then the request will be authorized.

ii. Referral: it is possible that the credit demanded will

exceed the limit offered in the agreement.

o The firm can simply refuse the request for credit,

at the risk of damaging the business relationship.

However, credit limits are therefore a reason – to

protect the business’s profitability and liquidity.

o The firm can offer a revised credit limit. For

example, the customer may be a solvent, a regular

payee, therefore a low risk. The company might be

able to offer a higher limit to this customer.

o The firm can contact the customer, the request that

some of the outstanding debt has to be paid off

before further credit is advanced.

Issuing the delivery note, invoicing and so on is not the job of the

credit control department, but the credit control department will need to

have access to information such as invoice details to do its job

effectively.

Settlement: The credit control department takes over the collection

cycle, although the final payment is ultimately received by the

accounts department. It involves receiving overdue debts and chasing

them.

Stages in Credit Cycle

Customer places order

Cash received

Telephone calls

Reminder letters

Statement sent

Establish credit status

Check credit limit

Issue delivery note

Goods delivered

Invoice raised

Customer receives invoice

The following are the statements prepared by the credit control

department in order to keep the check on the payments and the over dues:

Ageing files.

Classification of receivables into current and non current accounts.

Quarterly accounts receivables.

Collection files.

AGEING FILES

The ageing schedule classifies outstanding accounts receivables at a

given point of time into different age brackets.

The actual ageing schedule of the firm is compared with some

standard ageing schedule to determine whether accounts receivable are in

control. A problem is indicated if the actual ageing schedule shows a greater

proportion of receivables, compared with the standard ageing schedule, in

the higher age group. Most businesses prepare an accounts receivable aging

schedule at the end of each month. Analyzing your accounts receivable

aging schedule may help you identify potential cash flow problems.

The aging schedule can be used to identify the customers that are

extending the time it takes to collect your accounts receivable. If the bulk of

the overdue amount in receivables is attributable to one customer, then steps

can be taken to see that this customer’s account is collected promptly.

Overdue amounts attributable to a number of customers may signal that your

business needs to tighten its credit policy towards new and existing

customers.

The aging schedule also identifies any recent changes in the accounts

making up your total accounts receivable balance .Business. However, if the

makeup of your accounts receivable changes, when compared to the

previous month, you should be able to spot the change instantly. ? The

accounts receivable aging schedule can help you spot the problems in

accounts receivable, and provide the necessary answers early enough to

protect your business from cash flow problems. The older the accounts

receivable the less likely the money will ever be collected.

The typical accounts receivable aging schedule consists of the

following columns:

1. Column 1 lists the customer code that has been fixed by the company.

2. Column 2 lists the group numbers i.e. the market that the company

belongs to.

3. Column 3 lists the name of each customer with an accounts

receivable balance.

4. Column 4 lists the invoice number.

5. Column 5 lists the invoice date i.e. the date on which the invoice was

issued.

6. Column 6 lists the due date i.e. the date on which the credit is due.

7. Column 7 lists the total amount due from the customers listed in

Column 1.

8. Column 8 is the “current column.” Listed in this column are the

amounts due from customers for sales made during the current

month.

9. Column 9 shows the unpaid amount due from customers for sales

made in the previous month. These are the customers with accounts 1

to 30 days past due.

10.Column 10 lists the amounts due from customers for sales made two

months prior. These are customers with accounts 31 to 60 days past

due.

11.Column 11 lists the amount due from customers with accounts over

60 days past due.

12.Column 12 lists the total number of days over due.

CLASSIFICATION OF RECEIVABLES INTO CURRENT & NON

CURRENT ACCOUNTS

An aging schedule is first found. From these ageing schedules the

receivables are divided into current and non current accounts. Those who are

overdue <= 0 days they are termed as current, over due by <= 60 days they

are OD between 0-60and those greater than 60 days from the due date OD

>60. These are termed as non current accounts as they are major overdue.

Aging as on due date is classified as

1) Current –where the aging days are <=0

2) Non current –where the days are <=60 days (OD 0-60)

where the days are >= 60 days (>60 OD)

Non-current is both the OD 0-60 & OD >=60. These are the

receivables overdue

The current OD is those accounts that are currently enjoying the credit

as on the particular quarter.

% current is the =current / grand total

By using this we can find out how many accounts are with the credit

period and those who are contributing to the over dues for the particular

quarter.

Classification of receivables into current & non current a/c

CUSTOMERCURRENT A/C

NON CURRENT A/C TOTAL

A Ltd 3702694 90225.44 3792920B Ltd 1739858 775442.8 2515301C Ltd 2239346 562349.2 2801695D Ltd 925673.6 45112.72 970786.3E Ltd 434964.5 193860.7 628825.2F Ltd 2355416 3413614 5769030G Ltd 4285795 876240 5162035H Ltd 1394357 343716.3 1738074I Ltd 588854 853403.5 1442258J Ltd 276766.4 39375.5 316141.9GRAND TOTAL 17943725 7193340 25137065

Classification of receivables into current and non current a/c

0

1000000

2000000

3000000

4000000

5000000

ALtd

BLtd

CLtd

DLtd

ELtd

FLtd

GLtd

HLtd

I Ltd J Ltd

CURRENT A/C NON CURRENT A/C

Analysis

The table and the graph shows that, all the companies except F

Ltd, have a larger portion of their receivables in the current period, i.e., these

companies are still enjoying their credit period. The non current accounts of

these companies are comparatively lower than their current account. F Ltd

shows a higher non current balance. This shows that F Ltd is not prompt in

making their payments. It is taking more time to make their payments than

the time granted to them. A Ltd and D Ltd have negligible non current

accounts.

QUARTERLY ACCOUNTS RECEIVABLES

Once an ageing schedule is prepared every month for each

customer, a statement indicating quarterly receivables payable at every

quarter is prepared. This is used to find out the payment pattern of the

customers. This indicates the customers who are not prompt in their

payments and take more than the time allotted to them to make the

payments. They also show the customers who are prompt in their payments.

Therefore, this statement helps the company to decide on either tightening or

loosening the credit to each customer. This is a tool which is used by the

company to take immediate action, where needed.

Accounts Receivable payable at every quarter:

CUSTOMER1st QUARTER

2nd QUARTER

3rd QUARTER

4th QUARTER

A Ltd 3977260 3334033 3503100 4267060B Ltd 1391852 1851368 2965973 3852011C Ltd 852543 2336473 2696896 5320868D Ltd 1252638 1786594 1350264 730149E Ltd 5047051 6244237 5628593 5244642F Ltd 5070912 5620413 6467770 5917025G Ltd 5417952 6277750 5449168 3503269H Ltd 307251.7 335391 452837.7 5856814

I Ltd 4285492 5458311 5194417 6022600J Ltd 411062 706719.7 446119.7 110152.5TOTAL 28014013 33951290 34155140 40824589

Receivables Patable at every Quarter

02000000400000060000008000000

ALtd

BLtd

CLtd

DLtd

ELtd

FLtd

GLtd

HLtd

I Ltd J Ltd

1st QUARTER 2nd QUARTER 3rd QUARTER 4th QUARTER

Analysis

From the table and the graph one can see that, E Ltd, F Ltd, G Ltd and

I Ltd have larger amount payable at each quarter when compared to other

companies. J Ltd has the least amount due to 3M. H Ltd is showing a

worsening trend, that is, it has been making its payments promptly, except in

the 4th quarter where their amount due has risen drastically. B Ltd and D Ltd

indicate a moderate pattern of receivables payable at each quarter.

COLLECTION FILES

Collection files are prepared to find out the payment pattern of each

customer. By preparing these statements, the percentage payment each

month by every customer can be found. This file also helps in finding which

customer is delaying in making their payments. This again is a tool to take

corrective action against customers who are not prompt in their payments.

From the data base the collection pattern is found out

The yearly receipt analysis file will have the applied amount, the

invoice date and the remitted date with details of the customer,

the divisions are all given.

With this data base we can find the collections made by a

particular customer over the period

CREDIT TERMS

An important aspect of the credit control policy is to devise

suitable payment terms, covering when should payment be made and how

this should be achieved.

Credit terms have to take into account the expected profit on the

sales and 3M’s cash needs.

Credit terms also establish when payment is to be received, an

important matter from 3M’s point of view.

In addition to specifications relating to the nature of goods to be

supplied, the terms and conditions of sale normally cover the price,

delivery, date of payment, frequency of payment (if in installments),

and discounts.

Factors influencing Credit Terms

IMPACT OF RECEIVABLES ON CASH MOVEMENTS

Credit Terms offered

The credit terms the seller obtains from his own suppliers.

Profit required

Competitors’ credit terms

offered

Seasonal factors

Special factors

relating to the business

Risk: the seller’s total

exposure

The ease with which the buyer can

go elsewhere

Cash, the most liquid asset, is of vital importance to the daily

operations of business firms. While the proportion of corporate assets held in

the form of cash is very small, its efficient management is crucial to the

solvency of the business because in a very important sense cash is the focal

point of fund flows in a business. In view of its importance, it is generally

referred to as the “life blood of a business enterprise.”

Motives for holding cash

Transaction Motive

Precautionary Motive

Speculative Motive

While cash serves these functions, it is an idle resource which has an

opportunity cost. The liquidity provided by cash holding is at the expense of

profits sacrificed by foregoing alternative investment opportunities. Hence, a

financial manager should:

1. Establish reliable forecasting and reporting systems

2. Improve cash collections and disbursements

3. Achieve optimal conservation and utilization of funds.

Practice at 3M

After being in the industry for decades, 3M has created for itself a list

of prestigious customers and the list is still growing. 3M attracts customers

through its innovations and goodwill. Based on this, over a period of time

3M has achived an optimal reserve fund. This fund helps 3M when

receivables are not received on time.

Since the collection function is outsourced to ICICI Bank, 3M does

not depend on the receivables for its functioning. The reserve created serves

the purpose.

Thus, the receivables have very less impact on the cash movements of

3M India Limited.

FINDINGS

The finance department of 3M India Limited is further divided

according to their functions, namely; credit management, collection

control, cash management, etc.

As 3M serves five markets, the credit management of these markets is

allotted to different groups.

At 3M India ltd, as the company’s groups serves different markets,

each group has its own credit policies and terms on which they

conduct their business.

The ageing files are used as the database for the preparation of other

reports.

3M has a tie up with ICICI bank for the purpose of collecting the

payments from the customers. The ICICI bank does the collection

from the customers on behalf of 3M India. The ICICI bank matches

the invoices against collections and sends the files to the company.

For the purpose of making payments, 3M has an alliance with CITI

bank.

3M India has an online order processing system called olops (online order processing system). When any order is placed

with the company it is entered in the olops. When the order is

processed, an invoice is generated. As olops and accounts receivable module are inter-related, the information is transferred to

the accounts receivable i.e., the A/R module.

3M also provides its customers the facility of finance called the

channel financing scheme. This is a new concept of clubbing the

collection mode applicable for key distributors coupled with funding

them. This is a mix of OD facility and Internet banking. This is a

unique arrangement with ICICI Bank exclusively for the selected

Distributor’s of 3M.

After the credit granting decision is made, 3M sets different targets for

different customers based on their resources, the payment history,

billing pattern and references of business group

SUGGESTIONS

Regular checks should be conducted to keep a track of the amounts

that are outstanding beyond the due date.

Records of customers who have crossed the target limit should be

maintained.

The co-ordination between the sales personnel and the credit

management executives should improve in order to avoid disputes

between the customers and the company.

The collection files should be updated on time in order to avoid delay

in judgements.

Regular conciliation of customer’s account with the statement of

accounts in the company should be done to avoid disputes with the

customers.

The credit and collection policies should be clearly communicated to

all the customers to avoid misunderstandings.

Cash discounts should be offered to customers, who are consistently

delaying in payments, to ensure faster payments.

Customers who are identified as high-risk accounts should not be

approved without security, in the form of pre-authorized cheques.

Customers’ credit limit should be checked before finalizing any

further deals.

The company should follow a standard procedure to assess the credit

worthiness of new customers.