Cash Management Product

7/31/2019 Cash Management Product

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PREFACE

Cement is recognized as one of the major building block for the development ofnation and a key contributor for infrastructure development.

Cement production commenced in India as early as 1914. Right from thebeginning this industry faced severe competition from importers followed by

price and distribution controls till 1982. The easing of control and liberalization

process put the cement industry in vibrant growth path.

In this present cut-throat market competition in Indian economy, it is quite

pertinent to review the existing operating methodology in terms of financial

activities. In last few years Satna Cement Works kept the flag of BirlaCorporation Ltd. Quite high and were showing a good performance in terms of

sales and profit, but the large capacity addition to this industry forced the

management to rethink about the work culture and style of functioning, so thatthe company may face the competition and retain not only their market share but

also show a consistent growth over previous year.

To take a holistic view of inflow of funds, I conducted a study which was based

on actual monitoring of cash management product provided by State Bank of

India and HDFC bank and monitoring of deposits at depots located at different

places like Allahabad, Kanpur, Motihari and many others. I am happy to present

the report of the analysis which highlights the current status, problem, prosperityand puts forth suggestion to improve the performance of the company.

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Overview of Birla Corporation Limited

Birla Corporation Limited is the flagship Company of the M.P. Birla Group.

Incorporated as Birla Jute Manufacturing Company Limited in 1919, it was Late

Mr. Madhav Prasad Birla who gave shape to it. As Chairman of the Company,Mr. Madhav Prasad Birla transformed it from a manufacturer of jute goods to a

leading multi-product corporation with widespread activities. Under the

Chairmanship of Mrs. Priyamvada Birla, the Company crossed the Rs. 1300 -crore turnover mark and the name was changed to Birla Corporation Limited in

1998.

After the demise of Mrs. Priyamvada Birla, the Company continued toconsolidate in terms of profitability, competitiveness and growth under theleadership of Mr. Rajendra S. Lodha, late Chairman of the M.P. Birla Group.

Under his leadership, the Company posted its best ever results in the years ended

31.3.2006, 31.3.2007 and 31.3.2008.

The Company continued to record impressive growth in 2008-09 and 2009-10.Mr H V Lodha is now Chairman of the Company.

Birla Corporation Limited has products ranging from cement to jute goods, PVCfloor covering, as well as auto trims (jute felt-based car interiors).

6.46 Mill. Tons. 5.69 Mill. Tons.

38000 M T 27,300 MT

48.60 lakh sq. mtrs 1.09 lakh sq. mtrs.

7.80 lakh Pcs 0.64 lakh Pcs

3,750 tons 1,078 tons

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Overview of Birla Cement

The Cement Division of Birla Corporation Limited has seven plants, two each at Satna(M.P.) - Satna Cement Works & Birla Vikas Cement, Chanderia (Rajasthan) - Birla

Cement Works & Chanderia Cement Works, Durgapur (W.B.) - Durgapur Cement Works

& Durga Hitech Cement - and one at Raebareli (U.P.)-Raebareli Cement Works. Theymanufacture varieties of cement like Ordinary Portland Cement (OPC), 43 & 53 grades,

Portland Pozzolana Cement (PPC), Fly Ash - based PPC, Low Alkali Portland Cement,

Portland Slag Cement, Low Heat Cement and Sulphate Resistant Cement.

The cement is marketed under the brand names of Birla Cement SAMRAT, Birla Cement

KHAJURAHO, Birla Cement CHETAK, Birla Cement and Birla Premium Cement,

bringing the product under the common brand of Birla Cement while retaining the nicheidentity of SAMRAT for blended cement, i.e. PPC & PSC, for all the units, KHAJURAHO

(for the OPC product of Satna) and CHETAK (for the OPC product of Chanderia).

The Division exports large quantities of cement to Nepal, under the brand names of Birla

Cement Samrat, Birla Cement Khajuraho and Birla Cement. The special variety of Birla

Cement SAMRAT, being produced by the company, is ideal for mass concrete, RCC/pre-stressed/precast structure (for reduced thermal crack), increased water tightness of

concrete, increased resistance to sulphate soils and aggressive water and increasedresistance to alkali aggregate reaction besides corrosion resistant properties.

All our cement plants are ISO 9001:2000 Certificated, covering the entire range of

production and marketing.

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Product Profile

At Satna Cement Works and Birla Vikas Cement the dry process of Cement production is

followed which is termed as a modern technology. The entire manufacturing process iscontrolled through a microprocessor based programmable logic control system to maintain

a constantly uniform quality of Cement and high rate of production. The entire operation of

plant is controlled in a single control room. This modern plant has also taken measures toprevent pollution and dust nuisance to its surrounding areas. Cement mills here have

electrostatic precipitator (ESP) installed to check the dust emission and to ensure health

hazard free atmosphere.

Various varieties of cement produced at these plants are:

1) Ordinary Portland Cement (33, 43, 53 grade)

2) Portland Pozzolana Cement (PPC)

3) Low alkali Cement

4) Sulphate resistant Cement

5) Special Cement for Indian Railway Sleeper (IRS-T-40)

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Overview of Finance Department

As I was working in finance department in Birla Corporation Ltd. , so its important to givea brief overview of what are the functions and workings of this department. Mainly in

manufacturing industry all departments are closely integrated.

Functions and Responsibilities

Functions and responsibilities of the finance wing include the following:

1) Determine the financial resources required to meet the organizations operating and

capital expenditure program.

2) Forecast how much of fund requirement would be met by internal mobilization offunds and how much has to be borrowed from outside.

3) Establish and maintain the system of financial control governing the allocation and

use of funds on daily basis.

4) Analysis of financial results of all the operations and making recommendationconcerning future operations.

5) Carry out special studies with a view to reduce cost and improve efficiency andprofitability.

6) Carry internal audits and also maintain financial records of the company.

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Cash Management Product

Necessity of CMP

Previously, the cement was sold through our depot network at various locationssituated in MP, UP, Bihar, Jharkhand, Uttaranchal & West Bengal.

Against above sales, funds were collected in the form of Cheque/ Demand Draft

and the same were presented at various branches of SBI at depot locations by ourrepresentatives.

Funds deposited at depot banks were remitted to our Cash Credit bank account

with SBI, Satna.

Traditional Methods of Funds Transfer

Telegraphic Transfer

Electronic Transfer

AGENCIES INVOLVED

Funds Remitting Branch

Post Office (In case of TT)

Funds Receiving Branch

SHORTCOMINGS OF TRADITIONAL METHODS

Blockage of Funds at remitting branch/ in transit

Requirement of opening of account at collection centre

Comparatively higher cost

MIS support not available for Internal Control & Funds Planning

No value date credit is allowed in case of delay (In case of TT)

Introduction

Cash Management Product is the service provided by SBI for collection/paymentkeeping following targets:

Speedier movement of funds for reducing transit float to the minimum

Competitive Cost

MIS Support for Internal Control & Proper Fund Planning

Interest Cost reduction on borrowings

STATE BANK OF INDIA provides cash management services to Corporate Clientsunder the brand name SBI FAST ( Funds Available in Shortest Time). SBI FAST

eliminates the inherent delays of the traditional funds transfer

mechanism and enhances liquidity to ensure optimum planning andutilization of funds.

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MODULES

CMP services basically includes two modules. They are:

COLLECTION MODULE

Remittance of funds from collection centres to the pooling centre i.eSatna.

DEBIT TRANSFER MODULE

Payment of funds from various locations

Collection Module Procedure

SBI, Mumbai allots a specific code & communicates the same

to their branch for resuming CMP services under intimation tous

As the current account is not required to be opened at thecollection centre, procedure of remittance of funds is startedimmediately

After allotment of code our representative presents cheques/demand drafts quoting

our code number in the pay in slip with the dedicated CMP collection branches at

various locations.

Collection branch transmits summary of instruments presented to CMP Centre,

Mumbai for onward transmission to clients office for MIS purpose.

On completion of clearing, confirmation of credit and details of cheques returnedare sent to CMP Centre, Mumbai for crediting \ debiting clients account.

Details of credit/returned instruments report transmitted to clients through CMP

Centre, Mumbai.

TYPES OF INSTRUMENTS PRESENTED

Drawn on the Branch Credited on the same day

High Value Clearing Credited on the same day

General Clearing - As per norms of clearing

Other Local SBI Branches As per norms of clearing

Outstation Cheques/ Demand Drafts are not accepted

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Debit Transfer Module

Debit Transfer Module envisages the transfer of outstanding balance in the specified

expenditure account to the pooling centre.

FEATURES

Clients are required to open current accounts at the CMP linked branches. This

facility is available only at CMP Branches.

There is a limit fixed upto which the drawee can be permitted withdrawal

(Day Light Limit)

With in the limit, the payments are made and balances outstanding at the end of

the day are swept to the main pooling account.

Types of Instruments Presented

Drawn on the branch credited on the same day

High value clearing credited on the same day

General clearing as per norms of clearing

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Adv antages

No account required at collection branches; funds transferred on the basis of the

code allotted

Instant transfer of clear funds from our various depot locations to the Pooling

Center at SBI Commercial branch, Satna. Customized MIS of Presentation/Credit Report on daily basis through E-mail

by evening

MIS report helps in fund planning and also to prepare Bank ReconciliationStatement

Comparative Cheaper Cost

No blockage of funds at the collection branch/transit.

Before using CMP around Rs.3.5 per Rs.1000 was paid as DD commission and

now this is reduced to approximately Rs.0.04 per Rs.1000

Types of reports produced by MIS

Location wise Instruments Presentation Report- This report indicates thenumber and type of instruments presented for being credited at a particular

location.

Location wise Credit Report-This report indicates the number of instruments

actually credited on a particular date with instrument details.

Client Wise Instrument Return Report-This report indicates the number and the

type of cheques being returned by bank and the reason for return.

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CMP Charges

There are three practices of CMP charge collection. They are:1. Standard where depots are divided into categories

.

2. Negotiated where fixed rate is charged for all the depots.

3. Customized where variable rates are charged for different depots. SCWfollowed the practice of Standard rates from 2001-2007 and there after itswitched to Customized charges.

Under Standard rate bank has divided collection centers into five categories.Categories are based on turnover and infrastructure available at concerned branches

of the bank.

Category A : 3 PaiseCategory B : 5 Paise

Category C : 10 PaiseCategory D : 15 Paise

Category E : 25 Paise

However from 2007 approximately 4 paise per Rs.1000 is charged.

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Average Monthly Turnover

Year Number of collection

centers

Average monthly

turnover(in crores)

2001-02 14 212002-03 14 24

2003-04 17 25

2004-05 25 33

2005-06 29 39

2006-07 29 50

2007-08 30 52

2008-09 32 55

2009-10 32 58

2010-11 34 62

Total funds collection Vs. collection through CMP

Year Collection through

CMP(in crores)

Total funds remittance to

Satna (in crores)

2001-02 253 314

2002-03 282 351

2003-04 305 374

2004-05 389 455

2005-06 467 5322006-07 603 697

2007-08 641 712

2008-09 684 756

2009-10 708 792

2010-11 752 825

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List of collection centres

Serial no. Location

1 Patna

2 Allahabad

3 Kanpur

4 Faizabad

5 Varanasi

6 Banda

7 Bareilly

8 Lucknow

9 Jhansi

10 Deoria

11 Rampur

12 Muzzaffarpur

13 Fathepur 14 Gorakhpur

15 Gonda

16 Sitapur

17 Baharich

18 Gwalior

19 Jabalpur

20 Azamgarh

21 Etawah

22 Gaya

23 Moradabad

24 Arrah25 Rewa

26 Motihari

27 Katni

28 Mirzapur

29 Tikamgarh

30 Bhind

31 Shahdol

32 Mahoba

33 Chhatarpur

34 Samastipur

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Unresolved Issues with SBI System

No remittance facility is available (other than traditional system like TT) at

locations where SBI does not have CMP facility. This results into delay in

collection of funds at Satna and company has to reimburse DD charges to the

parties which has been about Rs. 67 Lacs during 2006-07

Even SBI with CMP facility does not have trained & experienced man power

at some of the locations which results in delay

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CASH MANAGEMENT SERVICES (CMS) HDFC BANK

Cash management service is the process of optimizing receivables and payableswhile ensuring predictability in cash flows. The procedure followed by CMS is

same as SBIs CMP.

CMS Collection Products :

SPEED Under this product, local cheque /DD presented at HDFC locations islocally cleared and credit is passed to our Central Account

RAPID - This product is similar to SPEED but through Correspondent banks/

Coordinator of HDFC .

Offers by HDFC

Guaranteed transfer of collection proceeds on the same day the funds arecleared at CMS collection center located all over the country to the central

account of corporate at a designated pooling center. No accounts need to bemaintained at the collection centers.

Day end balance sweep of balance in operative account maintained at CMS

centers to facilitate local disbursement.

Transfer of day end balance in collection accounts maintained at various

CMS centers to main account.

Customize credit to clients account at Mid-day and end of the day.

Customize MIS on collection across the country, including forecast of

expected credit through e-mail on the same day.

Centralized Reconciliation Statement.

Benefits to Birla Corporation

Centralized control of cash

Cost reduction

Enhanced liquidity

Interchange of information between treasury and operating units

Reduced excess cash balance

Cash forecasting and scheduling

Effective control over disbursements

Efficient Financial Management

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CMS Remittance Charges

Remittance from SPEED locations : Nil

Remittance from RAPID locations : 55 Paise Per Thousand

Existing Centres of Satna Cement Works can be covered as under :

Number of centres Remittance charges Funds remitted in 2010-11

14 centres with HDFC

branches

Nil Rs.609 crores

Remaining Centres 55 paise per thousand Rs. 215 crores

System of collection of funds through HDFC Coordinator

Instead of taking DDs from the nearby locations, cheques are presented with the

coordinator of nearby locations and are sent to HDFC bank

HDFC bank then cleatrs the cheque and fund is pooled at Satna HDFC branch

Remittance charges of funds collection through coordinator is 0.55 paise per

Thousand

Unresolved issue with SBI can be addressed by following System of HDFC

RAPID Co-ordinators:

Collection of Funds from any of Non-HDFC bank locations through their

designated coordinators is possible, resulting into saving in reimbursement of DDcharges and saving in float.

As per information, HDFC has well trained staff who are acquaint with the new

technology

CMS Advantages

Faster access to funds

Provides Customized MIS in MS-Excel Format which is helpful in making

Analytical Reports

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Results in Cost Saving

Flow chart showing the clearance of cheque through CMS

Distributor

presents the

cheque to depot

Cheque is recordedin bank voucher slip

at depot and

collected

Cheque is attached

with pay in slip ofCMS and sent to bank

for clearance

Clearance at

HDFC

If yes amount istransferred to main

branch Mumbai for

further processing

If no unpaid

cheques arereturned back

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CMS Limitations

Probability of dishonour of cheques may increase in case we use coordinator/

representative bank of HDFC where we do not have offices.

As the number of collection centres will increase substantially, administrative

control of such collection centres needs to be reviewed.

HDFC Vs. SBI

Sr HDFC SBI

1 CMS charges are nil where HDFCbranches are available.

CMP charges are applicable even whereSBI branches are available.

2 HDFC provides the service bycorrespondent bank where HDFC

branches are not available

SBI does not provide the service whereSBI branches are not available.

3 HDFC service time is more. SBI service time is less than HDFC.

4 CMS reports are available onmonthly basis.

CMP report is available on both dailyand monthly basis.

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Preparation of Bank Reconciliation Statement

After understanding what is CMP and CMS now lets see actual pay in slip, bank statementand checklist for preparing reconciliation.

BIRLA CORPORATION LIMITED, SATNA

Name of the Depot: Allahabad

Name of the Bank: State Bank of India

Month of : April-11Ledger

Account: 24580D

BANK RECONCILIATION STATEMENT of CMP Account

Particulars Amount

Balance as per Bank Statement NIL

Add:Pay in slip deposited but not creditedby bank

Cleared on Pay in Slip No. Date Amount - Rs

3229.04.11 940000.00

3330.04.11 2314400.00

325440

Add: Credit by Bank but not Adjusted

Deposit Date Instrument No Bank Date Amount - Rs

0.00

Add: Return unpaid by bank but not adjusted by usDeposit Date Instrument No Bank Date Amount - Rs

0.00

Less:Returned unpaid adjusted by us but not debited bybank

Deposit Date Instrument No Date Amount - Rs

0.00

Less: Wrong Adjusted by us


0.00

Less: Wrong Entry by bank (Excess Credit)


Balance as per our Books 325440

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For preparing May reconciliation statement we need Aprils reconciliation statement, pay in

slip and checklist for the month of May.

Checklist for the month of May 2011 for Allahabad Depot

BIRLA CORPN. LIMITED (CEMENT DIVISION)SATNA CEMENT WORKS/BIRLA VIKAS CEMENT

17 SBI Current A/C Allahabad

Voucher no . Narration Debit Credit

954 11180A SBI-Cash

CMP CR DT.2.5.11

1115000

955 11180A SBI- Cash

R/V CMP D T.2.5.11

100000

991 11180A SBI- CashCMP CR DT.3.5.11

2407400

1022 11180A SBI- Cash

CMP CR DT.4.5.11

1977000

1107 11180A SBI- Cash

CMP CR 5.5.11

668000

1139 11180A SBI-Cash

CMP CR DT 7.5.11

770000

1166 11180A SBI- Cash

CMP CR 9.5.11

1504000


R/V CMP DT 9.5.11

184000

1210 11180A SBI-CashCMP CR DT 10.5.11

2223000


2104000


CMP CR DT 12.5.11

1381000


CMP CR DT 13.5.11

615000


CMP CR DT 14.5.11

692000


864000

1413 11180A SBI-CashR/V CMP DT16.5.11

165000


1063000

1510 11180A SBI-Cash 1192400

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CMP CR DT 19.5.11


R/V CMP DT 19.5.11

160000


R/V CMP DT 19.5.11

45400


935000


CMP CR DT 21.5.11

487000


393000


857400


1487000


CMP CR DT 26.5.11

1106000


R/V CMP DT 26.5.11

88000


R/V CMP DT 26.5.11

8000


CMP CR DT 27.5.11

648000


CMP CR DT 28.5.11

1169000


CMP CR DT 30.5.11

794000


1803000

1942 14200D Sales advance

Depot Allahabad

29839300

1957 Return unpaid for the

month of may

100000


month of may

184000

1957 Return unpaid for themonth of may

165000


month of may

160000


45400


88000


month of may

8000

Grand Total 28255200 30589700

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Pay in slip for the month of May for Allahabad Depot

BIRLA CORPORATION LIMITED

DEPOT DATA BOOK CODE WISE

P/Slip no. Date Amount

35 02-MAY-11 1977000.00

36 02-MAY-11 175000.0037 03-MAY-11 668000.00

38 03-MAY-11 93000.00

39 04-MAY-11 770000.00

40 05-MAY-11 1136000.00

41 07-MAY-11 1039000.00

42 09-MAY-11 1920000.00

43 09-MAY-11 368000.00

44 10-MAY-11 1291000.00

45 10-MAY-11 1184000.00

46 11-MAY-11 615000.00

47 11-MAY-11 184000.0048 12-MAY-11 692000.00

49 12-MAY-11 90000.00

50 13-MAY-11 788000.00

51 14-MAY-11 973000.00

52 16-MAY-11 1142400.00

53 16-MAY-11 76000.00

54 18-MAY-11 935000.00

55 18-MAY-11 90000.00

56 19-MAY-11 262000.00

57 19-MAY-11 50000.00

58 20-MAY-11 213000.00

59 21-MAY-11 857400.00

60 21-MAY-11 225000.00

61 23-MAY-11 1219000.00

62 23-MAY-11 180000.00

63 24-MAY-11 1021000.00

64 25-MAY-11 648000.00

65 25-MAY-11 268000.00

66 26-MAY-11 1084000.00

67 26-MAY-11 85000.00

68 27-MAY-11 612000.0069 28-MAY-11 1092000.00

70 28-MAY-11 85000.00

71 30-MAY-11 3516000.00

72 30-MAY-11 182000.00

73 31-MAY-11 1322500.00

74 31-MAY-11 711000.00

TOTAL 29839300

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Name Location Deposit Dt Liqui Dt No.of Inst Total Amt Inst No. Inst Amt

BCL Allahabad 29-Apr-11 02-May-11 6 840000 500631 95000




BCL Allahabad 02-May-11 02-May-11 2 175000 555075 92000BCL Allahabad 29-Apr-11 02-May-11 6 840000 255823 460000


BCL Allahabad 02-May-11 02-May-11 2 175000 322131 83000








BCL Allahabad 30-Apr-11 03-May-11 14 2314400 451392 200000BCL Allahabad 03-May-11 03-May-11 1 93000 15312 93000




















BCL Allahabad 03-May-11 05-May-11 4 668000 255828 275000BCL Allahabad 03-May-11 05-May-11 4 668000 5923 70000







- - - -

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Name Location Deposit Dt Liqui DtNo.ofInst Total Amt Inst No. Inst Amt











































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Name LocationDeposit

Dt Liqui DtNo.ofInst

TotalAmt Inst No. Inst Amt

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Reconciliation for the month of May for Allahabad Depot

BIRLA CORPORATION LIMITED, Satna

Name of the Depot: Allahabad

Name of the Bank: State Bank of India

Month of : May-11 Ledger Account: 24580D

BANK RECONCILIATION STATEMENT of CMP Account

Particulars Amount - Rs

Balance as per Bank Statement NIL

Add:Pay in slip deposited but not creditedby bank

Cleared on Pay in Slip No. DateAmount -

Rs

71 30.05.113516000.0

0

73 31.05.111322500.0

0

4838500.0

Add: Credit by Bank but not Adjusted by Us

Deposit Date Instrument No Bank DateAmount -Rs

0.0

Add: Return unpaid by bank but not adjusted by us

Deposit Date Instrument No DateAmount -Rs

0.0

Less:Returned unpaid adjusted by us but not debited bybank

Deposit Date Instrument No DateAmount -

Rs

0.0

Less: Wrong Entry by bank (Excess Credit)

Deposit Date Instrument No Bank DateAmount -Rs

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0.0

Balance as per our Books 4838500.0

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Findings

By analyzing four months data of CMS and CMP i.e. March, April, May and June thefollowing outcomes has been drawn :

1) Many branches of HDFC like Banda, Bahraich and Muzzafarpur are not workingproperly. These branches have 1 day limit for clearance of cheques/ DDs whereas

actually they are taking 2 days for clearance.

2) Some branches of SBI like Rampur, Motihari and Chattarpur have pay in slip

deposited in bank for years but the instrument has not been credited till now. Satna

Cement Works has written several letters to the main CMP branch in Mumbai but

the issue is not resolved.

3) Clearance of cheques later than their limit results in the loss of interest to the

company.

4) Some of the CMP accounts have excess credit given by the Bank which is not

debited till date.

5) While vouching the vouchers few important parties were found as defaulters and a

report of the same has been sent to the respective depots.

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Conclusion

After going through several documents and statements of the company, few suggestiongiven by me in the report are:

1) All the depots must be integrated with an ERP system so as to minimize dataredundancy.

2) As the depots maintain their record on paper therefore it was difficult to analyze therecord. So all the depots should be computerized.

3) Many of the vouchers were missing when they were transferred from depots to

Satna Cement Works. Computerization can solve this problem as data can be sentelectronically through e-mails.

4) As the vouchers were hand written, there were many errors in the cheque numbers

in voucher slips. Again computerization can solve this problem.

5) Also computerization of depots will result in hiring of more qualified staff for thedepots which will reduce the number of mistakes.

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Bibliography

1) Internal data provided by the company2) Data collected from HDFC and SBI bank (Satna)

3) Websites:

www.satnacement.com

www.birlacorporation.com

4) Mr. Sumit AgrawalAsst. Manager (SCW)

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http://www.satnacement.com/http://www.birlacorporation.com/http://www.satnacement.com/http://www.birlacorporation.com/


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PROJECT REPORT

ON

CASH MANAGEMENT PRODUCT

FOR

BIRLA CORPORATION LIMITED

BY

RESHU AGARWAL

Submitted in partial fulfillment of requirements for award of

Post Graduate Diploma in Management

Documents

Cash Management Product