1

Receivable Management in Non-Banking Companies With special

reference to vehicle financing a study of Mahindra Finance Ltd.

A Assignment work Submitted to Department of Commerce, PGDAV College EVE

for the fulfill of B.Com (Hons) Semester V requirement

Session

2020-2023

Submitted by
Aniket Mallik

College Roll No: 20/5077

Section : B
Subject: Financial Management

Submitted to
Ramesh Kumar Department of Commerce PGDAV College Eve

Department of Commerce

PGDAV College EVE

(University of Delhi) Nehru Nagar, Ring Road, New Delhi-110065

Department of Commerce
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PGDAV College EVE

(University of Delhi)
Nehru Nagar, Ring Road, New Delhi-110065

Title of Project : Receivable Management in Non-Banking Companies

With Special Reference to Vehicle Finance a Study
Of Mahindra Finance Ltd.
Name of Student : Aniket Mallik

Subject Faculty Name : Ramesh Kumar

Date : 30/10/2022

Signature of Student
Aniket Malik

Name of Subject faculty: Ramesh Kumar

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Contents
Sr. No Content Name Page No.
1 Introduction And meaning of Receivable 5-6
management
2 Introduction to Mahindra financial 7-8
services

3 Importance of receivable management in 9-10

Mahindra finance Ltd.

4 Scope of the receivable management in

11
Mahindra finance Ltd.
5 Objectives of receivable management in 12-13
Mahindra finance Ltd.
6 Financing by Mahindra Finance ltd. 14-17
7 Research work 18-28
8 Analysis and Interpretation of Case 29
9 Limitation of the Study 30-31
10 Conclusion 32
11 Bibliography 33
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Department of Commerce

PGDAV College EVE

(University of Delhi) Nehru Nagar, Ring Road, New Delhi-110065

CERTIFICATE

This is certified that the Assignment Project work on fundamentals Investment

of the Entitled “…Aniket MAllik……” has not been done earlier by anybody in
anywhere.

(Student) (Subject Faculty Member)

Name : Aniket Mallik Name : Ramesh Kumar
Subject: B.com(H)
Date: 30/10/2022
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INTRODUCTION OF RECEIVABLE MANAGEMENT

Receivable management is a process of managing the account receivables within a business

organisation. Account receivables simply mean credit extended by the company to its
customers and are treated as liquid assets. It involves taking decisions regarding the investment
to be made in trade debtors by organisation. Deciding the proper amount be lent by the
company to its customers in the form of credit sales is quite important. It affects the overall
cash availability for undertaking various operations.

Receivable management business ensures that a sufficient amount of cash is always maintained
within the business so that operations can continue uninterrupted. It helps in deciding the
optimum proportion of credit sales. The overall process of receivable management involves
properly recording all credit sales invoices, sending notices on due date to collection
department, recording all collections, calculation of outstanding interest on late payments etc.

Receivable management aims at raising the sales volumes and profit of the business by
managing and providing credit facilities to customers. A proper receivable management
process aims at monitoring and avoidance of occurrence of any overdue payment and non-
payment. It is an effective way of improving the financial and liquidity position of the
company. Credit facilities are important for attracting and retaining customers and this makes
management of credit facilities by business crucial. Objectives of receivable management are
as follows

Account receivables refer to the outstanding invoices or money which is yet to be paid by your
customers. Until it is paid, such invoices or money is accounted as accounts receivables. Also
known as bills receivables. You need cash all the time to keep your business running smoothly
and ensuring the accounts receivables are paid on time is essential to manage cash flow
efficiently.

And as the term suggests, management of your accounts receivable is called receivable
management. Basically, the entire process of defining the credit policy, setting payment terms,
sending payment follow ups and timely collection of the due payments can be defined as
receivables management.

Management of Receivables is also known as:

• Payment Collection
• Collection Management
• Accounts Receivables
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MEANING OF RECEIVABLES MANAGEMENT

The term ‘receivables’ refers to debt owed to the firm by the customers resulting from sale of
goods or services in the ordinary course of business. These are the funds blocked due to credit
sales. Receivables are also called as trade receivables, accounts receivables, book debts, sundry
debtors and bills receivables etc. Management of receivables is also known as management of
trade credit.

Motives or Purposes of Maintaining Receivables:

(i) Sales Growth Motive

The main objective of credit sales is to increase the total sales of the business. On being given
the facility of credit, customers who have shortage of cash may also purchase the goods.
Therefore, the prime motive for investment in receivables is sales growth.

(ii) Increased Profits Motive

Due to credit sales, the total sales of business increase. This, in turn, results in increase in profits
of the business.

(iii) Sales-Retention or Meeting Competition Motive

\In business, goods are sold on credit to protect the current sales against emerging competition.
If goods are not sold on credit, the customers may shift to the competitors who allow credit
facility to them.
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INTRODUCTION TO MAHINDRA FINANCIAL SERVICES

The department is engaged in providing financial services to its customer. It is part of

Mahindra & Mahindra conglomerate one of the biggest group of India. It is an NBFC
providing facilities like Auto Finance, Mutual Funds, Fixed deposit, Hire Purchase etc.

Mahindra and Mahindra Financial Services Ltd.

ADMINISTRATIVE SETUP

Mahindra & Mahindra Financial Services Limited (MMFSL) is a rural NBFC

headquartered in Mumbai, India. It is amongst the top tractor financers in India and
offers a wide range of financial products to address varied customer requirements. The
NBFC has 1000+ offices spread over 1 in every 3 villages across India with a total of
more than 4.7 million customers to date.

PRODUCTS AND SERVICES

• Vehicle Financing
• SME Financing
• Housing Finance
• Insurance Broking
• Asset Management Company (Mutual Funds)
• Mutual Distribution
• Mutual and Distribution
• Fixed Deposits

MISSION AND STATEMENT

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Mahindra and Mahindra financial services are known for providing financial services
like loans on vehicles and refinancing the new loans on vehicles. The Mahindra and
Mahindra financial services provide variety of plans regarding the loans for the
vehicles. The main objective of the company is to provide loans of variety of vehicles
from personal to commercial or small vehicles to large machines and trucks.

KEY PEOPLE

• Ramesh Iyer (Vice Chiairman & MD)

• C.B Bhave (Director)
• Vivek Karve (Chief Finance Officer)
• Arnavaz M Pardiwala (Company Secretary & Compliance Officer)
• Anish Shah (Non-Executive Chairman)
• Milind Sarwate (Independent Director)
• Rebecca Nugent (Independent Director)
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IMPORTANCE OF RECEIVABLE MANAGEMENT IN

MAHINDRA FINANCE LTD.

EVALUATES CUSTOMER CREDIT RATINGS

Receivable management evaluates its customers borrowing capacity and repaying ability for
determining their credit ratings. It approves any credit facility to its customers after analyzing
their information both qualitatively and quantitatively. Proper investigation of client details
helps in reducing the credit risk.

MINIMIZES INVESTMENT IN RECEIVABLES

It reduces investment in receivable by ensuring optimum funds are available within

organization at all the times. Receivable management decides proper credit limit and credit
period for avoiding any bankruptcy situations. Attempts are made to collect account receivable
as soon as they become due for payment which reduces the overall investment in receivables.

OPTIMIZE SALES

Efficient receivable management assist business in raising their sales volume. Business are able
to attract more and more customers by providing them credit facilities. They are able to
properly decide and monitor credit facilities with the help of a receivable management.

REDUCE RISK OF BAD DEBTS

It takes all steps to avoid any instances of bad debts. Receivable management notify all
customers for the payment as soon as the amount gets due. It charges interest on delay payments
and aims at optimum collection of all payment timely. Implementation of proper schedule and
monitoring of collection process results in minimizing the risk of bad debts.

MAINTAIN EFFICIENT CASH

Maintaince of efficient cash is crucial for the survival of every organization. Receivables
management properly records all cash inflows and outflows of a business. All credit facilities
are extended after analyzing the capability of organization and due payments are collected
timely. This results in steady cash flow within the organization.
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LOWER COST OF CREDIT

Receivable management helps business in lowering its cost of credit by limiting the credit
amount and credit period for its customers. It performs all processes such as acquiring credit
information of clients and collecting all due payments in an efficient way which lower the
overall cost associated with credit facilities.
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SCOPE OF RECEIVABLE MANAGEMENT IN MAHINDRA

FINANCE LTD.

FORMULATION OF CREDIT POLICY

Receivable management is the one which formulates and implements an effective credit policy
in an organization. Credit policies are decided as per the capabilities of an organization. A
company may either follow a liberal policy or stringent credit policy for providing credit
facilities to its customers.

CREDIT EVALUATION

Credit evaluation involves examining the credit worthiness of customer before approving any
credit amount. Proper investigation of customer’s information lowers the risk of bad debts.
Receivable management acquire all credentials of client for determining their borrowing
capacity and repaying ability.

CREDIT CONTROL

Receivable management implement a proper structure for monitoring all credit functions of
business. It records credit sales with proper documents on a daily basis. Invoices are raised
immediately after goods get dispatch and amount are collected soon as they become due for
payment.

MAXIMIZE PROFIT

It plays an efficient role in maximizing the profit of organizations. Receivable management

helps in boosting the sales volume by providing credit facilities to customers. More and more
people are able to purchase goods on credit which maximizes the overall profit level.

BETTER COMPETITION

Efficient account receivable management helps business in facing the strong competition in
market. It enables in providing credit facilities to customers as per their needs and capabilities.
Receivable management analyses the credit strategies adopted by competitors and according
frame policy for an organization. It attracts more and more customers by offering them credit
facilities at convenient rates.
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OBJECTIVE OF RECEIVABLE MANAGEMENT IN MAHINDRA

FINANCE LTD.

MONITOR AND IMPROVE CASH FLOW

Receivable management monitors and control all cash movements

of organisations. It maintains a systematic record of all sales transactions.
Receivable management helps business in deciding appropriate investment in
trade debtors. It aims that a sufficient amount of cash needed for day-to-day
activities is maintained at business. Credit facilities are extended by doing proper
analysis and planning to ensure optimum cash flow in a business organisation.

MINIMISES BAD DEBT LOSSES

Bad debts are harmful to organisations and may lead to heavy losses. Receivable
management takes all necessary steps to avoid bad debts in business transactions.
It designs and implement schedules for collection of outstanding amount timely
and informs the collection department on due dates. Customers are notified for
amount standing against them and charges interest on delay in payments.

AVOIDS INVOICE DISPUTES

Receivable management has an efficient role in avoiding any disputes arising in

business. Disputes adversely affect the relationship between customers and
business organisations. Complete and fair record of all transactions with
customers are maintained on a daily basis. There is no chance of confusion and
dispute arising as all sales transactions are accurately maintained. Automated
receivable management systems present full evidence in a short time in case of
dispute arising for resolving them.
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BOOST UP SALES VOLUME

Receivable management increase the sales and the profitability of the

organisation. By extending the credit facilities to their customers business are
able to boost up their sales volume. More and more customers are able to do
transactions with the business by purchasing products on a credit basis.
Receivable management helps business in managing and deciding their
investment in credit sales. This leads to increase in the number of sales and profit
level.

IMPROVE CUSTOMER SATISFACTION

Customer satisfaction and retention are key goals of every business. By lending
credit, it supports financially weaken customers who can’t purchase business
products fully on a cash basis. This strengthens the relationship between customer
and organisation. Customers are happy with the services of their business
partners. Receivable management help in organising better credit facilities for
their customers.

HELPS IN FACING COMPETITION

Receivable management helps in facing stiff competition in the market. Several

competitors existing in market offers different credit options to attract more and
more customers. Receivable management process analysis all information about
market and helps the business in farming its credit lending policies. Customers
are provided better services by extending credit at convenient rates. Appropriate
amount and rates of credit transactions can be easily decided through receivable
management process. All credit and payment terms are decided for every
customer as per their needs.
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FINANCING BY MAHINDRA FINANCE LTD.

The Mahindra and Mahindra Finance is engaged in providing loans for commercial
vehicles, commercial equipment, personal vehicles, personal loans, mutual funds and fixed
deposits. The Mahindra and Mahindra and Financial Services main purpose is to finance
the vehicles and equipment’s. The goal of our project is to finance the loan for the vehicle
of the customer.

There are several steps in the finance of the vehicles like:

1. KYC (Know Your Customer)

2. Document Verification

3. Loan Agreement

4. CIBIL Score (Credit Information Bureau India Limited)

5. Application Form

6. Delivery Order
7. Welcome Letter

THE CIBIL SCORE-

TransUnion CIBIL Limited is a credit information company operating in India. It maintains the
credit files on over 600 million individuals and 32 million businesses. TransUnion is one of
four credit bureaus operating in India and is part of TransUnion, an American multinational
group. CIBIL Score is assessment of the trustworthiness based on information on their credit
history. The higher the score the better. It is a 3-digit number ranging between 300 and 900.
Ideally, 720 and above score considered as good CIBIL Score.

1. Consumer Credit Reporting-

Trans Union CIBIL aggregates the consumer borrowing and payment information for the
purpose of assessing the loan risk and pricing credit (setting the interest rate). It has partnered
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with Chicago based Trans Union. Consumer credit scores are also used in unemployment
decisions, although there are no studies in India showing that impaired credit leads to employee
misconduct and unemployment.

2. Know Your Customer (KYC)-

KYC means Know Your Customer and sometimes Know Your Client. KYC or KYC check is
the mandatory process of identifying and verifying the client’s identity when opening an
account and periodically over time. In other words, banks must sure that their clients are
genuinely who claim to be.

KYC process includes ID card verification, face verification, document verification such as
utility bills as proof of address, and biometric verification. Banks must comply with KYC
regulations and anti-money laundering regulations to limit fraud. KYC compliance
responsibility rests with the banks. In case of failure to comply, heavy penalties can be applied.

VEHICLE FINANCING / AUTO FINANCING

AUTO FINANCING-

Auto Financing also known as Car Finance, refers to the range of financial products available
that allow people to acquire a car with any arrangement other than a full-cash single lump
payment, it simply means borrowing money to buy a car. There are 4 types of
Vehicle financing –

• Auto Financing / Personal Car Loan

• CV - Commercial Vehicle Loan

• CE – Construction Equipment Loan

• Pre-Owned Vehicle Loan

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OTHER SERVICES BY MAHINDRA FINANCE-

There are several other services that are provided by Mahindra and Mahindra Finance to the
customers. Some of them are listed as below-

• Personal Loan

• House Loan

• Refinance

• Top Up Loan

• Mutual Funds

• Fixed Deposits

• Insurance

• Hire Purchase
• SME Loans

MAHINDRA FINANCE LTD. AS A NON-BANKING FINANCIAL

INSTITUTE

Mahindra finance ltd. Is a non-banking financial institute which transactions take place
differently from banking institutions

There are few differences which shows how a financial company like Mahindra finance is
different from banking financial institution
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BASIS FOR NBFC BANK

COMPARISON

Meaning An NBFC is a company that Bank is a government authorized

provides banking services to financial intermediary that aims
people without holding a at providing banking services to
bank license. the general public.

Incorporated under Companies Act 1956 Banking Regulation Act, 1949

Demand Deposit Not Accepted Accepted

Foreign Investment Allowed up to 100% Allowed up to 74% for private

sector banks

Payment and Not a part of system. Integral part of the system.

Settlement system

Maintenance of Reserve Not required Compulsory

Ratios

Deposit insurance facility Not available Available

Credit creation NBFC do not create credit. Banks create credit.

Transaction services Not provided by Provided by banks

NBFC.
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RESEARCH WORK

Now we are going to understand the receivable management for vehicle finance of Mahindra
Finance Ltd. With the reference of a Customer’s Case Study of Mahindra Finance Ltd.

CASE STUDY OF A CUSTOMER

We observed the procedure for the vehicle financing by Mahindra and Mahindra Financial
Services to their customer. Case Study: How can any customer apply for loan through
Mahindra and Mahindra Financial Services. Various steps for the application of the loan
are written as follows:

1. Company Agent
2. Application Form
3. KYC Documents
4. Income Proof
5. CIBIL Score
6. Delivery Order (DO)
7. Welcome Letter
8. Vehicle Details (Registration, Insurance, etc.)

These are the basic steps for the vehicle financing in the Mahindra and Mahindra Financial
Services Limited. The Company agent play the most vital role in this process as he is the
representative of the company and give all details about the loan, various plans of the
company, verify the documents of the customer.
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1. COMPANY AGENT

A company's agent can act for the company and in some cases legally bind it. “Agency” is a
legal term that describes the relationship between a principal (a person or business) who
engages an agent (other person or business) to act for the principal. Both the principal and the
agent must agree to the agency relationship. However, principals may communicate the
apparent authority of an agent in a certain area to a third party (called a manifestation of the
agent's authority) without communicating the scope of that authority to the agent himself.

2. APPLICATION FORM

Application form is the form provided by the company to the customer for filling. The main
purpose of the application form is to know the details of the customer. Application form
basically has columns for:

• Name of Customer
• Father’s name of Customer
• Mother’s name of Customer
• Permanent Address of Customer
• Temporary Address of customer
• Mobile Number
• Landline Number
• Email Address
• Aadhar Number
• PAN Number
• Bank Details (A/C No., IFSC Code, etc.)
• Photo ID
• Signature
• Vehicle Details
• Loan Details
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Application Form from Case Study

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3. KYC DOCUMENTS
• Aadhar Card
• Driving Licence
• PAN Card
• Voter’s Identity Card
• Passport
• NREGA Card

These are the KYC documents that are required by the customer to be provided to the
company.

Aadhar Card

4. INCOME PROOF

Income proof is the updated document of the customer which provide the totally annual income
of the customer.
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This is the income proof of the customer as an agriculture land.

5. CIBIL Score

CIBIL Score is a 3-digit numeric summary of credit history, rating and report ranges from 300
to 900. It is consumer’s credit score the closer the credit rating to 900 better credit rating is. It
is done by Credit Information Bureau India Limited (CIBIL). It is the most popular of the four
credit information companies licensed by Reserve Bank of India.
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Asset Type What it means

Standard Payment is made within 90 days
(STD)
Non- Payment is overdue beyond 90 days
Performing
Asset (NPA)
Sub An account which remained a NPA for more than 1 year
Standard
Account (SUB)

Special A special account is created for reporting a standard

Mention account deteriorating to a sub standard
Account
(SMA)
Doubtful An account which remains a SUB for more than 1 year
(DBT)
Loss (LSS) An account which has proven to be uncollectable and is
declared a loss.
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CIBIL Score of the Customer

Bank Details of Customer

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6. DELIVERY ORDER

A delivery order (abbreviated D/O) is a document from a consignee, or an owner or his agent
of freight carrier which orders the release of the transportation of cargo to another party.
Usually, the written order permits the direct delivery of goods to a warehouseman, carrier or
other person who in the course of their ordinary business issues warehouse receipts or bills of
lading.
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7. WELCOME LETTER
Welcome letter is the great way of making the customer making appreciated. Welcome letter
of the Mahindra and Mahindra Financial Services contains the regards to the customer for
choosing the Mahindra Finance. It also contains the details of loan of the customer total
interest, principal, loan premium details and total number of premiums to be paid.
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8. VEHICLE DETAILS

Vehicle details usually contain the registration, insurance etc of the vehicle. Vehicle details
are required by the company to verify the vehicle existence and find in case of customer was
unable to pay the loan.
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ANALYSIS AND INTERPRETATION OF CASE

From the case study above, we can see that there are lots of formalities for the sanction of the
loan. The company agent plays important role in the process making the customer comfortable
to the company policy. The agent tells customer about the terms and conditions of the
company and all policies related to the loan. There are several plans provided by the company
to the customer according to the vehicle customer financing.

The main factor of the loan is the document verification of the customer because it helps
company to gain trust in the customer and also saves them for the potential fraud. Generally,
the document verification required the detail of the document and the attested copy of the
document and original document for the company official to see for themselves. This concludes
the main paper formality of the customer. Once the bank account of the customer gets verified
the loan is being sanctioned to the customer.

After the loan is being sanctioned the

premium details of the loan is given to the customer, as chosen by the customer during the
plan selection (like how many years of loan or how many premium in total). Customer is also
provided by the details of the total principal and interest he has to pay to the company.
Customer has also given choice to how he can pay premium every month. There are several
options that customer can choose like online methods from the application of Mahindra
Finance or auto debit from the bank or he can manually pay at the nearest branch of the
Mahindra and Mahindra Financial Services.
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LIMITATIONS

1. INADEQUATE DATA:

In Mahindra Finance Ltd., there are lots of cases exists but are not disclosed by them so
we have to conclude that all works is going to like this case.

2. RISK ELEMEMNTS

Financing a vehicle is a risk element for company. Many customers denied to pay the
premium of vehicle on time. The employees faces problems at the time of recovery of
premium.

3. HIGH BORROWINGS BY COMPANIES

As we know company is providing facility of finance but first of getting return from
customer, company have to give an amount from his side to vehicle company.it requires
a lot of funds, for which company borrows funds from outside or inter-departments.

4. HIGH BED DEBTS

Company provides a lot of debts to its customers, but they sometimes get failed in
recovery of their loan. This non-recoverable amount become bed debts for company.\

5. BAD CREDIT

Specifically, accounts receivable financing can be more expensive than funding done
through traditional lenders, especially for those companies that have Bad Credit.
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6. CHANCES OF BUSINESS END-UP

Businesses may end up losing money from the spread paid for AR in the sale of the
asset. With the structure of the loan, the interest expense could be high or much more
than the Default write-offs or discounts might amount to when clubbed together
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CONCLUSION

From the above case we can conclude that we came to know about the working culture of the
company. The basis of the loan and mutual funds. The process of sanction of the loans in the
company. The concept of refinance is also coming to light in the working environment of the
Mahindra and Mahindra Financial Services.

To conclude we can say that people prefer

more branded and variety of products with good rate of interest. Customers also feel that there
should be proper customer service. As customer satisfaction plays a vital role, it has to be
concentrated on seriously. The report reveals that there is huge scope for the growth of
organized retailing. The main factor that affects the business is location. They seek value for
money so also matter for customers to focus mainly on the service part.
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BIBLIOGRAPHY

ONLINE LINK:

https://commercemates.com/objectives-of-receivable-
management/#Objectives_or_Features_of_Receivable_Management

https://en.wikipedia.org/wiki/Mahindra_%26_Mahindra

https://www.slideshare.net/SMCTCR/commercereceivables-management

BOOKS:

FINANCIAL MANAGEMENT FOR DECISION MAKERS

FINANCIAL MANAGEMENT(TAXXMEN)

ACCOUNTS RECEIVABLE MANAGEMENT (JOHN G. SALEK)

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NAME AND SIGNATURE OF STUDENT

ANIKET MALIK

NAME AND SIGNATURE OF SUBJECT FACULTY

RAMESH KUMAR

DATE: 30/10/2022