A Study on Receivable Management at Colorlines Clothing India Pvt. Ltd. 1. EXECUTIVE SUMMARY :- The project deals in “Account Receivable Management with reference to the study of Colorlines Clothing India Pvt. Ltd”. Receivable management is one of the most important aspects of the organization, as it deals with the management of the outstanding. The profit of the company mainly depends on the accounts receivables. Therefore it needs a careful analysis and proper management. Debtors occupy an important position in the structure of current assets of a firm. They are the outcome of rapid growth of trade credit granted by the firms to their customers. Trade credit is the most prominent force of modern business. It is considered as a marketing tool acting as a bridge for the movement of goods through production and distribution stages to customers. Till few years back, Colorlines Clothing India Pvt. Ltd. had a very strict policy of selling against advance payments. That was an era of controlled economy. However, with an increasing domestic and international competition, company could no longer afford this policy, in order to maintain its premium position. Further in order to capture a greater amount of market share, it was compelled to go by the industry norms and thus it ushered into the new era of credit sales. This resulted in credit sales Karnataka State Open University, Mysore Page 1
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A Study on Receivable Management at Colorlines Clothing India Pvt. Ltd.
1. EXECUTIVE SUMMARY :-
The project deals in “Account Receivable Management with reference to the study of
Colorlines Clothing India Pvt. Ltd”. Receivable management is one of the most important
aspects of the organization, as it deals with the management of the outstanding. The profit of the
company mainly depends on the accounts receivables. Therefore it needs a careful analysis and
proper management.
Debtors occupy an important position in the structure of current assets of a firm. They are the
outcome of rapid growth of trade credit granted by the firms to their customers. Trade credit is
the most prominent force of modern business. It is considered as a marketing tool acting as a
bridge for the movement of goods through production and distribution stages to customers.
Till few years back, Colorlines Clothing India Pvt. Ltd. had a very strict policy of selling
against advance payments. That was an era of controlled economy. However, with an increasing
domestic and international competition, company could no longer afford this policy, in order to
maintain its premium position. Further in order to capture a greater amount of market share, it
was compelled to go by the industry norms and thus it ushered into the new era of credit sales.
This resulted in credit sales going up significantly. A credit limit was sanctioned to every
customer. The customers were required to pay the outstanding amount on the due date
This report discusses the importance of managing accounts receivable and provides proven
principles for achieving benefits such as increased cash flow, higher margins, and a reduction in
bad debt loss. The focus is primarily on commercial (business to business) receivables
management. protection against credit risks.
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2. INTRODUCTION:-
Meaning of Account receivables
Accounts receivable is an accounting transaction which deals with the billing of customer who owes
money to a person, company or organization for goods and services that has been provided to the
customers. In most business entities this is typically done by generating an invoice and mailing or
electronically delivering it to the customer, who in turn must pay it within an established timeframe
called credit or payment terms.
Definition of Account receivables
The term receivable management is defined as “debt owed to the firm by customer arising from
the sale of goods/ services in the ordinary course of business.” The receivable represents an
important component of the current assets of the firm. Receivables may be known as accounts
receivables, trade creditors or customer receivable. When a firm its products / services and does not
receive cash for it immediately, the firm has said to be granted trade credit to the customers. Trade
credit thus creates receivable / book debts, which the firm is expected to collect in near future.
Accounts receivable are thus amounts due from customers, which bear no interest in essence, a
company is providing no cost financing to the customer to encourage the purchase of the company’s
product/services.
Objective of receivable management
“To promote sales and profit until that point is reached where the return on
investment in further funding of receivable is less than the cost of funds raised to
finance that additional credit(i.e. cost of capital)”
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IMPORTANCE OF RECEIVABLES MANAGEMENT :-
It can be argued that revenue generation is the most critical function of a company. Dot-com
companies that created exciting new products but failed to generate significant revenue burned
through their cash and ceased operating. Every company expends substantial resources to
generate increasing levels of revenue.
However, that revenue must be converted into cash. Cash is the lifeblood of any company.
Every Rupee of a company’s revenue becomes a receivable that must be managed and collected.
Therefore the staff and processes that manage your receivables asset:
• Manage 100% of company’s revenue.
• Serve as a service touch point for virtually all the customers of Company
• Can incur or save millions of dollars of bad debt and interest expense.
• Can injure or enhance customer service and satisfaction, leading to increases or decreases in
revenue.
If increasing revenue, enhancing customer satisfaction, and reducing expenses are important to
you, read on.
The benefits of effectively managing the receivables asset are:
• Increased cash flow
• Higher credit sales and margins
• Reduced bad debt loss
• Lower administrative cost in the entire revenue cycle
• Decreased deductions and concessions losses
• Enhanced customer service
• Decreased administrative burden on sales force
These benefits can easily total millions in profit and tens of millions of cash flow in a year.
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Determinants of accounts receivable/credit sales-
1. Credit sales volume
2. Credit policies
3. Business terms- time period, discounts
4. Competition
5. Cost of receivables/trade credits-
6. Carrying cost
7. Defaulting cost
8. Administration Cost
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3. INDUSTRY PROFILE
Industry Structure
The textile and apparel industry is one of the largest segments of India’s economy,
accounting for 20 percent of total industrial production and slightly more than 30 percent of
total export earnings. It is also the largest employer in the manufacturing sector with a
workforce of some 38 million people. In addition, millions of others rely on the textile and
apparel industry for their livelihoods, especially those involved in cotton production. This
chapter examines the structure of India’s textile and apparel industry, from fiber production to
textile and apparel manufacturing, and concludes with an overview of its textile machinery
industry, the major source of equipment for the country’s textile and apparel industry.
The textile and apparel industry is one of the leading segments of the Indian economy and the
largest source of foreign exchange earnings for India. This industry accounts for 4 percent of the
gross domestic product (GDP), 20 percent of industrial output, and slightly more than 30
percent of export earnings. The textile and apparel industry employs about 38 million people,
making it the largest source of industrial employment in India. The study identifies the
following structural characteristics of India’s textile and apparel industry:
India has the second-largest yarn-spinning capacity in the world (after China), accounting
for roughly 20 percent of the world’s spindle capacity. India’s spinning segment is fairly
modernized; approximately 35 to 40 percent of India’s spindles are less than 10 years old.
During 1989-98, India was the leading buyer of spinning machinery, accounting for 28
percent of world shipments. India’s production of spun yarn is accounted for almost entirely
by the “organized mill sector,” which includes 285 large vertically-integrated “composite
mills” and nearly 2,500 spinning mills.
India has the largest number of looms in place to weave fabrics, accounting for 64 percent
of the worlds installed looms. However, 98 percent of the looms are accounted for by
India’s power loom and handloom sectors, which use mostly outdated equipment and
produce mostly low-value unfinished fabrics. Composite mills account for 2 percent of
India’s installed looms and 4 percent of India’s fabric output.
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The hand loom and power loom sectors were established with government support, mainly
to provide rural employment. These sectors benefit from various tax exemptions and other
favorable government policies, which ensure that fabrics produced in these sectors are price
competitive against those of composite mills.
The fabric processing (dyeing and finishing) sector, the weakest link in India’s textile
supply chain, consists of a large number of small units located in and around the power
loom and handloom centers. The proliferation of small processing units is due to India’s
fiscal policies, which favor small independent hand- and power-processing units over
composite mills with modern processing facilities.
The production of apparel in India was until recently, reserved for the small-scale industry (SSI)
sector, which was defined as a unit having an investment in plant and machinery equivalent to
less than $230,000. Apparel units with larger investments were allowed to operate only as
export-oriented units (EOUs). As a result, India’s apparel sector is highly fragmented and is
characterized by low levels of technology use.
Competitive Position of India’s Textile and Apparel Industry
India’s share of global exports of textiles and apparel increased from 1.8 percent in 1980 to 3.3
percent in 1998. However, India’s export growth was lower than that of most Asian countries
during that period. The study identifies a number of competitive strengths of the Indian textile
and apparel industry:
India has a large fiber base, and ranks as the world’s third-leading producer of cotton,
accounting for 15 percent of the world’s cotton crop. India produces a wide variety of
cotton, providing operational flexibility for domestic textile producers. In the manmade
fiber sector, India is the world’s fifth-largest producer of polyester fibers and filament yarns
and the third-largest producer of cellulosic fibers and filament yarns.
India is the world’s second-largest textile producer (after China), and is diversified and
capable of producing a wide variety of textiles. The spinning segment is fairly modernized
and competitive, accounting for about 20 percent of world cotton yarn exports.
India’s textile and apparel industry benefits from a large pool of skilled workers and
competent technical and managerial personnel. India’s labor is inexpensive; hourly labor
costs in the textile and apparel industry average less than 5 percent of those in the U.S.
textile and apparel industry.
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The study also identifies the competitive weaknesses that have impeded the growth of India’s
textile and apparel industry:
Policies of the Government of India (GOI) favoring small firms have resulted in the
establishment of a large number of small independent units in the spinning, weaving, and
processing sectors. Sources in India claim that GOI policies have provided competitive
advantages for the small independent units over the generally larger composite mills,
discouraged investments in new manufacturing technologies, and limited large-scale
manufacturing and the attendant benefits of economies of scale.
Sources in India also claim that because of the GOI policies, small units have significantly
lower production costs than the composite mills, use low levels of technology, and produce
mostly low value-added goods of low quality that are less competitive globally.
India’s textile industry depends heavily on domestically produced cotton. Almost two-thirds
of domestic cotton production is rain fed, which results in wide weather-related fluctuations
in cotton production. Moreover, the contamination level of Indian cotton is among the
highest in the world. According to sources in India, the cotton ginning quality is poor,
contributing to defective textile products.
The GOI policy reserving apparel production for the SSI sector had restricted the entry of
large-scale units and discouraged investment in new apparel manufacturing technologies. As
a result, most Indian apparel producers do not benefit from economies of scale.
The competitiveness of India’s apparel sector is adversely impacted by an inadequate
domestic supply of quality fabrics. Fabric imports are subject to high duty rates and other
domestic taxes that increase the cost of imported fabrics. Another major weakness of the
Indian apparel sector is a lack of product specialization which, along with a limited fabric
base, has limited India’s apparel production and exports to low value-added goods.
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India has high energy and capital costs, multiple taxation, and low productivity, all of which
add to production costs. As a result, textile and apparel products from India are less
competitive than those of China and other developing countries in the international market.
Government Policies Affecting the Industry
As India steps into an increasingly liberalized global trade regime, the Government of India has
implemented several programs to help the textile and apparel industry adjust to the new trade
environment. On November 2, 2000, the GOI unveiled its National Textile Policy (NTP) 2000,
aimed at enhancing the competitiveness of the textile and apparel industry and expanding
India’s share of world textile and apparel exports to 10 percent by 2010 from the current 3-
percent level. The study identifies the following measures taken by the GOI to achieve these
objectives:
Under the NTP 2000, the GOI removed ready-made apparel articles from the list of products
reserved for the SSI sector. As a result, foreign firms may now invest up to 100 percent in
the apparel sector without any export obligation.
On April 1, 1999, the GOI implemented the Technology Up gradation Fund (TUF) to spur
investment in new textile and apparel technologies. Under the 5-year $6 billion program,
eligible firms can receive loans for upgrading their technology at interest rates that are 5
percentage points lower than the normal lending rates of specified financial institutions in
India. According to GOI officials, this interest rate incentive is intended to bring the cost of
capital in India closer to international costs.
To boost exports and encourage new industry investment, the GOI under the quota
entitlement policy increased the share of quotas earmarked for units investing in new
machinery and plants
To promote modernization of Indian industry, the GOI set up the Export Promotion Capital
Goods (EPCG) scheme, which permits a firm importing new or secondhand capital goods
for production of articles for export to enter the capital goods at preferential tariffs, provided
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that the firm exports at least six times the c.i.f. value of the imported capital goods within 6
years. Any textile firm planning to modernize its operations had to import at least
$4.6millionworth of equipment to qualify for duty-free treatment under the EPCG scheme.
In an effort to spur investment in the textile industry, on April 1, 1999, the GOI reduced the
amount to $230,000 and eliminated preferential treatment for imports of secondhand
equipment under the EPCG scheme.
Growth & Opportunities of Industry
India, with a population of 1 billion people, has a huge domestic market. India’s middle class,
currently estimated at 200 million, is projected to expand to include nearly half the country’s
total population by 2006. Based on purchasing power parity, India is the fourth-largest economy
in the world, has the third-largest GDP in the continent of Asia, and is the second-largest
economy among emerging nations. India is also one of the fastest growing economies of the
world. Although the disposable income of the majority of the Indian population is low, as the
Indian economy grows, more consumers will have greater discretionary income for clothing and
other purchases after meeting their basic needs.
India’s huge domestic market offers the prospect of significant growth opportunities in domestic
textiles and apparel consumption, which is expected to result in increased trade and foreign
investment, especially in certain product sectors. According to a 1999 study, the major growth
areas for trade and foreign investment in India will be technical textiles (e.g., fabrics used in
aerospace, marine, medical, civil engineering, and other industrial applications), home textiles,
and apparel. The S.R. Satyam Expert Committee (SEC), constituted by the GOI, also identified
these sectors as having the greatest growth potential and recommended various measures to
promote these sectors. The staff research study highlights the following areas where foreign
firms can potentially enter the Indian market:
Demand for nonwoven textiles has been growing with increasing domestic affluence,
growing health consciousness to use more disposable clothes, and the cost effective
production of synthetic fibers in India. The liberalization of the Indian economy has created
opportunities to import machinery and technology at preferential tariffs and enter into joint
venture arrangements with foreign firms.
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The technical textiles market in India has grown due to strong demand for automotive
fabrics. India’s goal is to achieve an output level of $6 billion (10 percent of world output)
in technical textiles by 2005. The GOI plans to provide incentives and tax concessions for
this sector to attract foreign investment.
India’s home textiles market is dominated by the handloom and power loom sectors, which
cater primarily to the low end of the market. The handloom sector is highly price
competitive in terry towels and for home furnishings. The power loom sector is price
competitive in bed sheets. The composite mill sector dominates the branded market, which
is relatively small. Demand for branded and quality home textiles has increased recently
with increasing affluence among the Indian population. Opportunities exist for the
introduction of quality branded products into this growing market.
India supplies 8 percent of the global demand for denim fabric. Per-capita denim
consumption in India is estimated at 0.1 meter, about one-fifth of the global average.
Domestic demand is expected to increase with the accelerated growth in the Indian economy
and increased consumer spending on clothing. Capacity utilization of the Indian denim
sector currently averages 50 to 60 percent. The deregulation of apparel production from the
SSI sector under the NTP 2000 is expected to encourage large apparel firms to enter the
Indian market, thereby spurring domestic demand for denim.
Opportunities exist for U.S. apparel producers to enter the Indian market through licensing
and joint ventures with local firms. The recent GOI decision to deregulate apparel
production is expected to help foreign firms establishing a large production base in India
without any export obligation
Textile Market Profile
India is the world’s fourth-largest economy, the third-largest in Asia, and the second-largest
among emerging nations.88 The Indian market reflects considerable diversity in income levels
and lifestyles. Although India’s per-capita GDP is one of the lowest among the developing
countries, a significant segment of the population (an estimated 200 million people) has
significantly higher income. 1998 study by the National Council of Applied Economic Research
(NCAER) projects that India’s middle class will expand to include nearly half the country’s
total population by 2006. The same study projects that the rich and the middle income class
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together will increase from 29.6 million households in 1997-98 to 97.1 million households in
2006-07. According to a recent article in The Strategist, Indian consumer credit is growing by
35 to 40 percent annually; new cardholders are increasing by 25 to 30 percent annually.90
Buying has become a year-round phenomenon in India; seasonal demand has gradually
disappeared from the Indian market in just the past 5-10 years.
Nearly 70 percent of the Indian population lives in rural areas. While both rural and urban
markets are growing significantly, the rural market is estimated to be growing twice as fast as
the urban market. According to the NCAER study, the rural share of total consumer purchases
rose from 54.2 percent in FY 1989-90 to 57.9 percent in FY 1995-96. A number of factors have
fueled consumer spending growth, including rising prosperity and the emergence of a thriving
consumer finance business. According to another NCAER study, Indian Demographics Report
1998, consumer references have shifted from low-valued items toward the higher priced
products.
The size of the Indian market for consumer durables is estimated at 100 million people,
according to a recent survey by KSA-Techno park covering some 7,300 consumers in 12 major
cities in India.95 The Indian market for branded products such as jeans, trousers, shirts, and
other consumer goods is estimated at no larger than 40 million consumers. Indian consumers are
typically more loyal to their stores than to brands. About three-fourths of the survey respondents
reported that they would revisit the stores where they had previously purchased apparel. The
survey also revealed that brand is the second most important factor in purchase decisions. In
south India, consumers are generally more brand loyal than consumers from the north. Price,
however, is the most important factor for the consumers in east India.
Apparel Market
The Indian market for domestic readymade apparel is estimated at $5.5 billion (Rs200
billion) to $8 billion (Rs300 billion) annually.101 Trade sources estimate that menswear
accounts for 25 percent of the readymade apparel market (by quantity); women’s wear, 48
percent; and children’s wear, 17 percent.102 Approximately 20 percent of the apparel produced
in India consists of branded ready-to-wear garments.103 Brands are more prominent in
menswear, particularly shirts, trousers, and jackets.104 Most national and regional brands are
supplied by the large organized apparel firms.
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The Indian market for readymade woven garments expanded 38 percent by quantity and 94
percent by value during 1992-96, whereas the market for knit garments expanded 7 percent by
quantity and 68 percent by value, reflecting the improvement in quality and a change in product
mix. Cotton is the primary material in women’s blouses and petticoats, while polyester-cotton
blends are dominant for most other goods.
Leading Players in Textile & Garment Industry in India.
1. Reliance Textiles
2. Arvind Mills
3. Raymond Ltd.
4. Century Textiles
5. Morarji Mills.
6. Vardhman Group
7. Bombay Rayon Fashions Ltd.
8. Ginni Filaments
9. Mafatlal Textiles
10. Modern Group
11. Ashima Syntex
12. KG Denim
13. Alok Textiles
14. Gokaldas Exports
15. Shahi International
16. Gokaldas Images
17. UDG
18. Jockey
19. Birla Group
20. NSL Textiles
21. Bhaskar Denim
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4. COMPANY PROFILE
Business Summary
Color Lines Clothing India Pvt. Ltd. manufactures and exports high-quality children's
clothing. It Backed by 26 glorious years of experience in Kids garments making, Colorlines is
the 6rd largest kids garment making company with an existing annual output capacity of 50 lakh
pieces garments Per Annum. Established in 1988, Colorlines Clothing India has 12
manufacturing units in Bangalore.
The Idea and Origin of Colorlines Clothing India Pvt Ltd
When Ms.Bela Katrak (Founder & Managing Director of company) moved to Bangalore in
1988 with two young children, she could not find ready-to-wear clothes that were affordable,
durable and comfortable. "All I saw in the market was fussy, over-adorned, highly embroidered
stiff clothes," she recalls. "I figured that if I was in the situation so were a whole lot of other
moms." After investing over 40 lakh opening a retail store selling high-quality cotton kids
clothes, Bela was forced to concede: she was wrong.
"I realized that India was at that time not ready for an 'all cotton' children's store because
cotton was difficult to maintain vis-a-vis polyester," explained Ms. Bela Katrak.
Ms.Bela Katrak, a consummate entrepreneur, knew that she wanted to make high-quality
kids clothes, and if India wasn't ready, then manufacture to export was her only alternative.
With that thought, her business was reborn.
The Opportunity / Growth & Development of the Organization
However, while the international markets were ready to purchase, in the beginning Bela was
not quite equipped to deliver. "I had to learn to set up systems. So I took job work from existing
garment manufacturers and learned from them what the systems were."
Once she got the systems right, Bela traveled to Australia to cold call buyers. "Every call I
made was put down," she recalls. Finally Bela decided to simply walk into a customer's office,
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instead of calling ahead. "And that is how I broke through with one group," she says. "This was
Target chain of stores, which was one of the leading exporters of Australia."
The firm's customer base includes clothing retailers and buying houses that stress quality over
quantity. "Our customers usually have over 100 stores spread over as many countries," says
Ms.Bela.
Their customers' need for smaller runs provides a good niche for Bela, and keeps her
competitive in an increasingly mass-manufacture world. "We prefer to coordinate numerous
orders with smaller runs rather than a small number of orders with larger runs. This gives us
experience with a wide variety of products and styles," explains Bela.
Color Lines is also unique in India in that the company "provides high fashion for little
ones, keeping safety and quality in mind as their skin is more sensitive to the dyes and textures
of fabrics and trims," says Bela.
Color Lines has its own in-house design team and studio working closely with buyers to
provide garments that are both high-quality and economically viable. "We are often presented
with high fashion adult wear from international designers and asked to convert the concept into
a children’s wear to be sold on High Street." Color Lines remain the only export house in India
that deals almost exclusively in children's wear.
The Capital
Bela, like many entrepreneurs, turned to friends and family for capital, after having been turned
down by banks. "I had a business idea and they had the faith that I could carry it through. Their
faith in me was the most important factor in raising my initial money," she says. The amount
she borrowed was Rs 50,000.
The Team and Organizational Structure
Early experience crystallized Ms.Bela's entrepreneurial streak. While in school, she noticed that
everyone wanted the wildly colored glittery pencils that aunties and uncles brought from
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abroad. So she went home bought some Indian pencils, scrapped the paint off them, redecorated
them with glitter, colors and stickers and peddled her wares at school. "That first fifty that I
made was the most important of my life. It showed me what I was capable of and cemented my
entrepreneurial attitude for life."
Building on that spirit, Bela began Color Lines along with a business partner and a core team of
five people. While she and her partner have parted ways, the remaining founding team members
have grown with the company. "Our head of retail started with me ten years ago at Rs. 12 a day
and now he heads an entire sector of the company," Bela smiles.
Present & Future status of the Company
"Initially the Company started as a 40 machine small scale factory that in a few short years grew
into multiple factories with top of the line technology and thousands of employees. The firm
today employs over 4000 people.
Color Lines has established itself with top international buyers. The company is still dealing
with C&A one of their earliest customer providing them clothes for their baby, toddler and
Disney teams.
"Making ten or even five year plans can be kind of risky in our business as the playing field
changes regularly," says Bela about Color Lines' future.
The company has a 3rd largest garment laundry (washing) unit in the South India, The Company
also has proposed three new units at Integrated Textile apparel park at Bangalore with
additional capacity of 25 lakh pieces production. Colorlines through its joint venture with
Baboosh Brand it has also entered the Retail outlet market in Bangalore.
Colorlines Clothing India Private Limited, a well known name for manufacturing &
Exports of Kids garment, it also manufactures and sells fancy kids garments under
the brand name “Baboosh” at wholesales outlets. The firm now plans to venture into
Other capital cities of India.
However, Bela is planning to grow. Since many exporters are leaving the trade, Bela want to
take advantage of the dearth of Indian suppliers to expand. "We choose to remain exclusively an
export unit and are planning on opening up a few more factories in the next year that will have
more technological advancements systems that immediately improve productivity,"
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"I worry whether the appreciating rupee will make India too expensive as a supplier for
textiles in general. One can supply to foreign retail stores but if the buyers desert India and
move elsewhere to obtain the product at a cheaper rate, it can't be helped. However, export of
textiles and garments has been a long-standing tradition here and when one is open to working
with the buyers to reach mutually beneficial solutions there really is no need for worry," Ms.
Bela Katrak concludes.
The company exports 80% of the produced garments to different countries of the World, the
company’s annual turnover above Rs.100 crores.
Below are their customers and the volume of business in terms percentage
Sl
No.Name of Buyer/Customer
Business
Volume %
1. C&A 45%
2. Mother Care, 15%
3. Mexx, 10%
4. TU Sainsbury 8%
5. ESPRIT, 6%
6. Marks & Spencer 5%
7. Levi’s 4%
8. Debenhams 4%
9. Primark 2%
10. H&M 2%
Table 1: List of Customers of Company
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Clothing is one of the strongest human desires. A desire to be different, A desire to look
beautiful, A desire to be comfortable, A desire to make a statement. A desire that is fulfilled by
that perfect piece of fabric called “Colorlines” Woven with passion, our fabrics speak a story of
novelty. Colorlines has grown phenomenally and the reason has been our customers. Inspired
towards betterment, we now possess the entire know how and technology for yarn dyeing,
fabric weaving, processing and garment manufacturing
Company Mission
“Achieve profitable growth through Innovation, Quality, Consistency and Commitment”
Company Vision
“To be a globally reputed apparel manufacturer, evoking distinctive recognition for
Product, Performance, Processes and People”
Goals of the Company
The Company goal is to provide the shortest turn-around time in production and supply and
strive towards better employee work culture, 100% customer satisfaction and stronger supplier
and stakeholder relations.
Company Policy
“Team work, trust, communication, honoring commitments, challenging others and goal
orientation are the behaviors that we demonstrate in the company. In addition to these, to keep
pace with the fast changing environment, we foster a culture of embracing change on a
continuous basis”
Awards & Recognitions
Best exporters Award from AEPC
Best Vendor of the year rated by C&A & Mothercare
Now going ahead with the project the firm wants a Receivables Management analysis to be
conducted for its all customer for the smooth collection of funds. This report deals with the
Receivable management analysis for the firm.
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Mc Kinezys 7’s Framework
The Model starts on the premise that an organization is not just structure but consists of
seven elements.
Walterman have been consultants at MCV Kinezys and company at the time the seven’s
model is better known as Mc. Kinezys 7’s. This is because the two persons who developed this
model. Tom peters and Robert published their 7’s model in their article “Structure is not
organization”(1980) and in their books “The Art of Japanese management” (1981) and “In
search of Excellence” (1982)
Those seven elements are distinguished in so called hard S’s. The hard elements are feasible
and easy to identify. They can be found in strategy statements corporate plan’s organizational
charts and other documentations
The 4 steps S’s however are hardly feasible. They are difficulty to describe since
capabilities, values and elements of corporate culture are continuosly developing and changing.
They are highly determined by the people at work in organization. Therefore it is much more
difficult to plan or to influence. The characteristics of the soft elements although the soft factors
are below the surface they can have a great impact of the hard structures, strategies and system
of the organizations.
Description:
The 3 Hard S’s:
Strategy:
The Colorlines Clothing India Pvt. Ltd started in 1986 in Bangalore rural. The main aim of
the company will be producing good quality of garments to the new born babies and kids as
well as providing more number of employments and increase standard of living of the people.
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The Colorlines Clothing India Pvt Ltd. Company philosophy is based on three core values;
they are Operational excellence, Customers focus and product leadership.
The bsiness Strategy emphasizes the following.
1. Increase their market shares
2. Reduced cost of procudtion
3. Increase company performance
4. Produce always quality product
5. To meet social responsibilities
6. Provide employment opportunity to the people of the area
7. Meet the national and International demand of Clothes
8. Reduce the import of clothes from the foreign market.
Strucure:
Organization structure is the skeleton of whole organization. It refers to the relatively move
organizational arrangements and relationships. Arrangement about relationship, how an
organizational member communicate with other members.
Colorlines has a good organization structure when the order is passed towards top level
management to their subordinates in the organization.
Systems:
The management belives in the utilization of cutting edge technology to deliver world class
products and services. The company has made huge investment in technological resources to
ensure that products are superior and the service delivery in terms of theses products offering
standard. The system of the Colorlines Clothing India Pvt Ltd company clearly shows the
formal processes and procedures used to manage the organization, including the control
system, performance management measurement and reward system, planning budgeting and
information system, They follow the bottom to top approach in decision making.
The 4 Soft S’s
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Style
The management believes in an open organization in the company, they do not involve
employees for taking any decision. The management will be taking the decision itself it may be
in any area like production decision, merchandizing/marketing decision. Management itself
takes all finance decisions.
Example: In finance department, If any decision are to be taken only by the top management.
Staff:
The staff of the Colorlines is very good, they have been assigned with their responsibility
and the staff member knows the responsibility well and they are always working up their
potential to achieve the organizational objective.
In case of vacancies or in case of appointing from outside, Colorlines recruit people by
advertizing in the outdoor banners about the vacancies. In the interview final selection is done
if the person is found capable of doing the job and he will be appointed and trained under the
concerned department for the period of 3 months.
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Managing Director
Executive Director
Finance Manager
A Study on Receivable Management at Colorlines Clothing India Pvt. Ltd.
Skills:
The employees working here have got enough skill to achieve the organization
objective. If the top management feels that the skills of workers are not up to the potential
that is to achieve organization objective, that particular worker will be trained in such a way
that he/she will work effectively and efficiently. Here all the workers and staffs are working
in general shift only i.e., from 9.30 am to 6pm
Shared Values:
Shared values are the values shared by the members of an organization.
The values shared by the Colorlines members are;
1. Empowerment of working force
2. Continious innovation to improve the quality and design of product.
3. Installing a sense of responsibility in each employee.
4. Focus on and belief in employees.
5. Open culture
6. Additional benefits given by the company to its employees.
Dearness Allowances
HRA
Hospital and Medical benefits
Housing facility to staff
7. Spirit of accepting challenges.
8. Concern for performance.
9. Delivering quality service.
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Chart 1: Mc Kinezys 7’s Framework
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STRUCTURE
STRATERGY SYSTEMS
SHAREDVALUES
SKILLS STYLE
STAFF
A Study on Receivable Management at Colorlines Clothing India Pvt. Ltd.
Management:
The key technical members of the team are:
Ms. Bela Katrak – Managing Director (Founder of Company)
Ms. Ayesha Katrak – Executive Director
Mr. Adil Katrak – Executive Director
Ms. Rinti – General Manager Merchandizing
Mr. Amit – CEO Planning Production
Mr. Manoj – Sr. Manager Accounts Finance & Admin
Mr. Dinesh – Sr. Manager Sourcing and Purchase
Chart: 2 Organizational Structures
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MANAGING DIRECTOR
EXECUTIVE DIRECTOR 1
EXECUTIVE DIRECTOR 2
R&DHRD
DOMESTIC MKTG
MerchandizingPRODUCTIONQuality Control
EXPORTS
ACCOUNTS&
FINANCE
SOURCING PURCHASE
STORES
SUPERVISARY STAFF&
OPERATIONAL WORKERS
A Study on Receivable Management at Colorlines Clothing India Pvt. Ltd.
5. RESEARCH METHODOLOGY
Statement of the Problem
Objectives of the Study
Sources of data:
Primary data:
Primary data regarding the nature and method of working of the company was collection through
informal interviews and discussion with the employees and senior officials.
Secondary data:
Secondary data required for the analysis purposes were obtained through secondary sources
consisting of published annual reports, websites and various internal records of the company.
Techniques Used for Analysis
Tecnique used is Ratio analysis which is one of the powerful tools of financial analysis. In financial
analysis is a ratio is used as benchmark for evaluating the financial position and performance of
firm.
Limitations of the study
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A Study on Receivable Management at Colorlines Clothing India Pvt. Ltd.
6. FINANCIAL ANALYSIS
The financial or accounting figures sound in the financial statements is dump. Howevver they may
tell a vivid story of the financial adventures of an enterprise, if analyzed.
In the words of Garrison “Without financial statements analysis, the story that key
relationship and trends have to tell may remain buries in a sea of statement detail.
Data Analysis and InterpretationProfit and Loss Account for the year ended 31st March 2011
Particulars Schedule As at 31st March 2011 As at 31st March 2010INCOME
Sales 538,119,664 654,897,757 Other Income 14 48,253,633 68,002,344 586,373,297 722,900,101
EXPENDITURE Consumption of Materials 15 193,111,811 258,069,090 Operating & other Expenses 16 359,128,271 395,802,542 Financial Charges 17 13,254,470 15,778,419 Depreciation 5 12,400,786 12,159,051 Priliminary Expensess written off 13 - 230,472 Total 577,895,338 682,039,574 Profit Before Taxation 8,477,959 40,860,527 Provision for Taxex
- Income Tax (Rs.10,83,277 relates to pre yr) 4,325,822 2619689 17,513,988 - Fringe Benefit Tax 672,390
- Deferred Tax (Credit) (22,945) (212,178)Prior Year Expenses 242,304 388,000 Profit After Taxation 3,932,778 22,498,327 Balance of Profit Brought Forward 26,431,105 22,498,327 Earning per Share [Equity shares, par value Rs.10 each] - Basic & Diluted 1.12 11.24 Weighted average number of shares used in computing earning per share - Basic & Diluted 3,500,000 2,001,616 Notes to Accounts 18
Table:2 Profit & Loss Account of Colorlines Clothing india Private Ltd.COLORLINES CLOTHING INDIA PRIVATE LIMITED
BALANCE SHEET AS ON 31st March 2011Particulars Schedule As at 31st March 2011 As at 31st March 2010
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SOURCES OF FUNDS Share holders Funds Share Capital 1 35,000,000 35,000,000Reserves & Surplus 2 26,656,106 22,723,326Loan Funds Secured Loans 3 123,899,475 128,132,414Unsecured Loans 4 9,508,748 3,153,112 Total 195,064,329 189,008,852
Inventories 7 60,313,730 39,520,400Sundry Debtors 8 68,772,419 98,638,254Cash & Bank Balance 9 23,253,579 45,917,081Loans & Advances 10 65,316,802 52,157,168Total Current Assets 217,656,530 236,232,903Less:- Current Liabilities 11 90,042,276 108,830,956Less:- Provisions 12 4,802,225 122,812,029 17,010,438 110,391,509Net Current Assets Miscellaneous Expenditure 13(To the extent not written off)
TOTAL 195,064,328 189,008,852Notes of Accounts 18The schedules reffered to above form an integral part of Balance Sheet
Table 3: Balance sheet of Colorlines Clothing India Pvt Ltd for the financial year 2009-10 & 2010-2011
COLORLINES CLOTHING INDIA PRIVATE LIMITEDSchedule to Balance Sheet
Particulars As at 31st March 2011 As at 31st March 20101. Share Capital i. Authorised Capital :- 40,00,000 Equity Shares of Rs.10 each 40,000,000 40,000,000 ii. Issued, Subscribed & Paidup Capital:-
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35,00,000 Equity shares of Rs.10 each Fully Paid up 35,000,000 35,000,000 Total 35,000,000 35,000,000
2. Reserves & Surplus a. Securities Premium Account 225,000 225,000 b. Profit & Loss Account Opening balance brought forward 22,498,326 - Add: Profit transferred during the year 3,932,779 22,498,326 26,431,105 22,498,326 Less: Withdrawn/Transferred - - Balance Carried Forward 26,431,105 22,498,326
Total (a+b) 26,656,105 22,723,326
3. Secured Loans Working Capital from Banks 121,398,040 120,923,165 Term loan from bank 2,501,435 7,209,249
Total 123,899,475 128,132,414
4. Unsecured Loans Interest free loan from directors 9,508,748 3,153,112
Total 9,508,748 3,153,112 Schedule - 5 : Fixed Assets
TOTAL 89,395,717 6,592,026 1,000,158 94,987,585 12,159,051 12,349,106
369,249 24,138,907 70,848,678 77,236,666
Particulars As at 31st March 2011 As at 31st March 20107. InventoriesRaw materials 32,795,287 24,709,658Work in progress 11,046,494 10,270,429Finished goods 16,471,949 3,203,984Goods in Transit - 1,336,329Total 60,313,730 39,520,4008. Sundry DebtorsConsidered Good 127,972 471,728Considered doubtful 41,992 -Sub total 169,964 471,728
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Less: Provision for doubtful debts 41,992 -Sub total 127,972 471,728Others - Considered Good 68,644,447 98,166,526Total 68,772,419 98,638,2549. Cash & Bank BalancesCash in hand 97,332 105,083Balances with Scheduled banks:
In current Account 6,730,169 31,300,464In Deposit Account 16,426,079 14,511,534
Total 23,253,580 45,917,08110. Loans & AdvancesAdvances to Vendors 6,662,349 4,091,796Duty Drawback Receivable 7,928,277 8,961,795Advance/Refund receivable from statutory bodies 4,134,496 4,002,399Advance Income Tax 3,239,105 -Other Advances & Receivables 43,352,575 35,101,178Total 65,316,802 52,157,16811. Current LiabilitiesSundry Creditors (due to small & medium enterprises)