Essay About Costs Of This System And Demand Drafts

Toy World Calculation on Finance
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ASSIGNMENTStrike White DetergentsSubmitted to Prof. Amit SrivastavaIn partial Fulfilment of the Requirements of the CourseWorking Capital ManagementByGROUP 1Akshaj Singh (05)Chirayu Shah (08)Hardik ThakkarSmit Maniyar (45)Tejas ShahOn30/09/2016Adani Institute of Infrastructure Management, AhmedabadComment on SW’s current cash management? What are the costs of this system?Answer:5 to 10% of the dealers who have accounts in various banks at Ahmedabad pay through local cheques. Remaining people pay by Demand Drafts drawn on Ahmedabad.Daily 200 to 250 drafts have to be handledOnce the DDs are received at the office, they are collated and pay-in slips filled up for deposit to the bank.They are then passed on to the supplies section to update dealer outstanding. Updated accounts are then conveyed to the dispatch section for effecting/holding back any further supplies.The whole process take 4 to 8 days for the dealers to receive their required order. In particular4-5 days for draft to reach Ahmedabad office1 day for collate all DDs, fill bank slips and lodge with Bank2 days for clear usable funds in AhmedabadOn the supplier’s side:SW pay to them by DDs3 to 4 days opportunity cost but because of mirror image at collection system it is not crating any problem.What should be done to improve DW’s cash management?Answer:Heavy dependency on the DDs should be reduced as it has high opportunity cost as the same time it creates problems for the dealers if draft gets lost in transit.All payments are needed to be made at Ahmedabad location and company’s dealers are all across the country which increases unnecessary lead time. Company should accept payment through net banking or other online transactions like RTGS, NEFT, IMPS etc. it will reduce the opportunity cost by 2 to 3 days.It will reduce the stress of handling daily 200 to 250 DDs on daily basis and 0.2% DD charges can be avoided by the dealers.