SUMMER TRAINING REPORT ON

Cash Management System

Undertaken at

“S.A. Engineering”
Master of Business Administration

By Anchal Saini

M.B.A. 4th Sem

2206000001

Motherhood University Roorkee

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 To Whom It May Concern

I Anchal Saini Roll No. 2206000001 from M.B.A 4TH SEM of theMotherhood University
Roorkee hereby declare that Training Report entitled CASH MANAGEMENT SYSTEM
at S.A. ENGINEERING is an original work and the same has not been submitted to any
other Institute for the award of any other degree.

Date: Signature of the Student

Certified that the Summer Training Report submitted in partial fulfillment of Bachelor of
Commerce (Hons) [BCOM (Hons.)] to be awarded by Motherhood Universoty Roorkee
2023-24 and Enrolment No 2206000001 has completed under my guidance and is satisfactory.

Date:

Signature of the Guide

Name of the Guide:

Designation:

2
 PROJECT INDEX

TOPIC PAGE NO

Certificate 03

Summer Training Appraisal 04

Acknowledgement 05

Chapter I:Introduction 06

Chapter II: Cash Management System at S.K. Engineering 20

Chapter III: Payment System in S.K. Engineering 22

Chapter IV: Application of SAP in Cash Management System 35

Chapter V: S.K. Engineering. – Agreed Terms and Conditions with 49

Bank

Chapter VI: Summary & Conclusion 53

List of Tables 56

References/Bibliography 57

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4
 ACKNOWLEDGEMENT

I would like to take this opportunity to thank and extend my sincere gratitude Chairman

S.K. Engineering & Mr........................, (H.O.D.) Motherhood University Roorkee whose

valuable guidance and knowledge helped me to work on this project. This project could not have been
completed so successfully without their valuable guidance and support.

Anchal Saini

(2206000001)

M.B.A. 4TH SEM

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Chapter-I:

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1.1 Introduction:

(a) Cash Management comprises of a series of activities aimed at efficiently

handling the inflow and outflow of cash. This mainly involves diverting cash
from where it is to where it is needed. In other words, cash management is the
optimization of cash flows, balances and investments.

Cash‟ in this context, may refer either to cash in the form of currency, or to other
equivalents such as cheques, drafts, deposits, among others. While organizations
may hold other assets which can potentially be converted to cash, cash
management essentially deals with the management of liquid cash and near-cash
assets such as marketable securities and time deposits, which can be readily
converted to cash.

It is crucial to organizations for three main reasons:

a. Transaction: Ready cash balances are vital for routine transactions

including purchases, operating expenses, wages, and other
payments such as dividends, taxes and so on.
b. Precaution: There may be unanticipated cash requirements as a
result of sudden increase in inventory costs, delay in collection of
receivables, among others. And maintaining ready cash balances is
essential to deal with such unforeseen expenses.
c. Speculation: Reserving cash balances is also crucial when firms
anticipate decline in prices of raw materials, reduction in interest
rates for buying securities, availing early payment discounts,
among others.

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 Components of Cash Management

Account Reconciliation: Managing cheques, monitoring their clearance, and keeping track
of the true cash balance can be an overwhelming task for businesses because of the huge
number of cheques that are processed on a daily basis. Hence banks offer account
reconcilement services wherein corporate customers can upload details about the cheques
issued on a daily basis. And at the end of the month, the bank statement shows information
on cheques which have been cleared and those which have not. This system is also helpful
in the process known as „positive pay‟, used by banks to prevent cheques from being
fraudulently cashed if they are not on the list.

Cash Concentration: This is a quick and cost-effective method of moving funds from
different accounts spread across the country to a single monitored and managed account.
This allows businesses to maximize the use of available cash, and to optimize returns on
consolidated balances.

Financial Risk Management: Risk management is the process of measuring risk, and
developing and implementing strategies to manage and mitigate risk. Financial risk
management plays an important role in cash management, because it focuses on managing
risks in relation to changes in interest rates, commodity prices, stock prices, exchange rates,
among others.

Liquidity Management: Forecasting

the cash needs of a business is
essential for managing cash flows,
short-term borrowings, among others
in an efficient manner, in order to
ensure that such cash needs can be
met if and when they arise.
This requirement is addressed
through liquidity management services offered by banks. Liquidity management

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 comprises of activities that release the investments locked in working capital, enabling
it to contribute to higher profits. It also refers to the specific services provided by
banks to enable their customers optimize their interest revenues and reduce interest
costs.

Why Cash Management?

1. Complete Visibility: Corporate customers increasingly expect superior cash

forecasting ability, for which they need complete enterprise level visibility into cash
balances and movement of cash. This is provided by banks in the form of status
reports, direct enquiry, and through consolidated view of accounts held with
branches/banks across the globe.

2. Rich Reporting Modules: In order to make corporate customers understand the

need to adopt cash management services, banks are showing cost-benefit analysis
reports, and demonstrating the benefits offered by cash management using graphs
and illustrations.

3. Integrated Services: Corporate customers prefer a single platform for all their
financial needs in place of disparate systems. Hence the focus is on integrating cash
management systems with other activities involving the bank. For example, linking
of ERP solutions with banking systems facilitates cash management by enabling
effective trade finance process and investment management, among others.

4. Remote Deposit Capture and Straight- Through Processing - (STP): In order to

accelerate transactions businesses are looking for solutions that offer straight
through processing capability. For example, corporate customers are trying to
streamline their transactions and reduce downtime, for which banks offer STP
services which enable businesses to conduct entire trade processes and payments
electronically. And to better serve the needs of corporate customers, banks look to
technology vendors who offer optimal solutions that can enable more efficient cash
management.

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 (b) The Role of Technology in Optimizing Cash Management:
(Implementation strategy ofconcept in your present study)

Cash management solutions are not new. The market is mature and many banks
offer efficient cash management solutions. But market forces, economic
conditions, and changing corporate trends have generated opportunities for further
innovations in this space.

Although traditionally a large number of these solutions have been windows-

based, with many corporate customers embracing internet banking, several banks
are now migrating to browser based solutions. Technology has been the driving
force in optimizing cash management solutions for corporate customers:

 Browser-based solutions facilitate centralization of cash

management thereby enabling better accessibility by users across
the organization thereby having a better control of cash flows.
 Online banking and STP (Straight- Through Processing) help
quicken payments, thereby accelerating business and streamlining
processes by eliminating redundant manual processes.
 360 degree view of accounts offers greater visibility on cash
position thereby improving the forecasting ability.

Objectives of Project:

(a) To study the Cash Management System of Dabur India Ltd.

(b) To study different aspects of Cash Management System
(c) To understand different Payment modes; Speed clearing and
(d) To study Central Banking Solutions - Cheque
Truncation System (CTS),Magnetic Ink Character
Reader (MICR)
(e) The advantages in increasing the efficiency of the company
(f) To understand the Application of SAP in Cash Management System
(g) To understand Sales Order Management in SAP

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Scope of Project:

Cash management solutions are now widely being adopted, and hence there
is likely to be an increase in the number of vendors offering these solutions.
Correspondingly, corporate customers are also likely to become more
demanding, thereby promoting more intense competition amongst vendors.
Here are some areas with scope for improvement which vendors can focus
on, to provide better services than their competitors:

 Eliminating Disparate Systems: Different cash management solutions

are being offered for diverse segments. And as businesses grow,
managing these disparate systems is increasingly becoming a challenge.
Hence vendors should come up with a single platform which can
support various cash management products and services as the business
grows.
 Customizable Solutions: Banks today offer similar solutions to all
corporate customers irrespective of their size and business. Hence
vendors should try to come up with a customizable platform which can
cater to the specific needs of different businesses.
 Unified System: Integration of corporate customer systems with banking
systems can be very helpful in reconciliation of internal systems with
banking systems, and can support account management between the
bank and customer. And this offers great scope for vendors.
Today, banks are leveraging cash management systems as a tool to build
long-term trust with corporate customers, because these systems will
empower bank‟s customers to be empoweredand manage their liquidity
position at any given time, thus building a trust and strengthening the
relationship that goes beyond transaction banking

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 Company Profile

Name of the firm/company:-

S.A. GROUP OF COMPANY

Corporate Office:
Plot No 5, Shade -2 Gali No 8 Kadipur Industrial Area Gurugram Haryana, India
Tel: + 09871026377,9355003611,9990399002,7503411243
project@saengineer.co.in, janaksingh@saengineer.co.in
a.k.yagyan09@gmail.com

S.A.GROUP is a diversified “ENGINEERING Solution” provider for Complete

tool room manufacturing and supply chain. Tapping into its proven capabilities, S.A
ENGINEERING is ready to live up to its commitment to fulfill the rising indigenous
demand and compete in the automotive sector. And S.A Engineering is complete Tool
Room units which provide the quality product to customer, And SPM, Fabrication,
Sheet Metal parts, and Machining parts Complete solution.

We would like to introduce over self as a Rising Team, with a rich experience in
automotive industry, having expertise in diff. kind of Mechanical Industries such as
Machining, Forging, Foundry & Sheet Metal. Assy, We havea state of art machinery &

.
Inspection Facility, to provide all kind of Engineering solutions

Our Mission

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Quality policy

We are committed to supply products as per customers requirements in order to

enhance their satisfaction through continual improvement in quality cost , delivery
management system.and work with first time right strategy

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OISHI MACHINE INDIA

Since its foundation in January of l952, Oishi Machine, as a trading company which
specializes in industrial machinery and machine tools, has been able together with its
customers thanks to their kind support and cooperation. In these times in which we are
experiencing for the first time revolutionary advances in information and other
technologies and a trend toward an increasingly aged society. Oishi Machine is looking
toward the future, promoting the increased implementation of leading-edge high
technologies as well as further strengthening its technical consulting activities. As a
trading company which is involved not only in the simple marketing ofproducts, but also
in the provision of equipment and production planning services, it is our hope to be able
to make the experience and knowledge which we have acquired over the years of use to
our customers. In the future, we plan to build upon our foundation as a trader of industrial
machinery and machine tools, to strengthen our sales departments which deal in
warehouse logistics and environmental protection equipment, to expand the import/export
activities of our trading department, and to endeavor toward broadened retail activities
through our do-it-yourself shopping centers "Make". We will further devote all of the
energies of our group companies to developing a variety of user needs, while creating a
company structure capable of effectively responding to those 5ame needs. More than ever
we look forward to your receiving your continued patronage and support.

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MAJOR CUSTOMER

15
COMPANY STRUCTURE

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Growth Graph

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 VISION
"Dedicated to the health and wellbeing of every household"

PRINCIPLES

OWNERSHIP
This is our company. We accept personal responsibility, and accountability to meet business needs.

PASSION FOR WINNING

We all are leaders in our area of responsibility, with a deep commitment to deliver results. We are
determined to be the best at doing what matters most.

PEOPLE DEVELOPMENT
People are our most important asset. We add value through result driven training, and we encourage
& reward excellence.

CONSUMER FOCUS
We have superior understanding of consumer needs and develop products to fulfill them better.

TEAM WORK
We work together on the principle of mutual trust & transparency in a boundary-less organization.
We are intellectually honest in advocating proposals, including recognizing risks.

INNOVATION
Continuous innovation in products & processes is the basis of our success.

INTEGRITY
We are committed to the achievement of business success with integrity. We are honest with
consumers, with business partners and with each other.

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Chapter 2

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 Cash Management System at S.A. Group of Company

The company maintains bank accounts in all towns through S.A. Group of
Company owned Depots.

(Cheques/ drafts received from customers (now here customers are referred to as
stockiest) in nearby places are sent for local clearing to initially collect funds in these
bank accounts.

This has reduced the average collection period (as compared to the time it would take if
customer cheques were first received at head office and then sent for out-station
clearing) thereby increasing the velocity of cash inflows. Funds thus collected at the
depot towns are each day transferred to the company‟s head office or corporate bank
accounts.

The company has a “sweeping arrangement” with the bank at head-office by which any
of the funds transferred from the depot towns are automatically applied towards settling
the company‟s cash credit loan from the bank and reducing its debit balance. These steps
have resulted in reducing and controlling the cost of interest to the company. When the
company has surplus funds, the company invests the same in short- term investments or
instruments like Mutual funds and Govt. securities.

Terms and conditions set by Company

a. For speed clearing (local, outside)- no charges

b. For non- speed clearing (local, outside) - costlier, bank covers its expense in
physicallycollecting cheques and compensation costs.

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 PAYMENT SYSTEM IN S.K.S. INDUSTRIES

These are the main 3 modes of Payment followed in DIL:

1- Cheque
2- RTGS
3- DD

Cheque- If there is bouncing of Cheque, and then stockiest would have to pay 3
times the original amount to the company (Cheque bouncing amount). If the
cheque is bounced morethan 3 times the company would block that account.

Cheque Banked

Clearing next day

Bouncing Report

Reverse Document
Number

Update Bouncing File

Two Types of bouncing –

Technical Bouncing

• This means error through duplication, wrong

amount, missing Date or the Stockiest signature
etc.

Non-Technical Bouncing

• means signature mismatch, insufficient funds etc

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 Processing of Cheque in S.K.S
Industries

Cheque
Inventory

Invoice Generation

PIS (Pay in Slip)

System allocates cheque against

invoice

On due date, Credit expiry report is

generated

Cheque is placed according to PIS

Next Day Posting is done

Then sent to bank

New format of cheque system followed at S.K.S. industries

Cheque Truncation System (CTS)

Truncation is the process of stopping the flow of physical cheque issued by a drawer at
some point with the presenting bank en-route to the drawee bank branch. In its place
an e-image of the cheque is transmitted to the drawee branch by the clearing house
along with the relevant info like data on MICR band, date of presentation, presenting
bank.

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This effectively eliminates -

a. the associated cost of movement of the physical cheques,

b. reduces the time required for the collection and brings elegance to the
entire activity ofcheque processing

Non CTS cheques were later on was not entertained in DIL and letter was
issued regardingclearing the Non CTS cheques on regular basis (every week).

 Cheque Truncation in India

It speeds up the process of collection of cheques resulting in reduction of
scope of clearing- related frauds or loss of instruments in transit, removes the
reconciliation- related and logistics- related problem. Accordingly, RBI focus
on improving the efficiency of cheque clearing cycle as CTS is considered to
be a more secure system vis-à-vis the exchange of physical instrument.
CTS offer benefits like Business Process Re- engineering and HR rationalization.
RBI has implemented CTS in NCR and Chennai with effect from
Feb1, 2008 and Sep24, 2011 and Grid based CTS was started in Chennai
including few banks from Coimbatore and Bangalore with effect from Mar,
2012.
 Process Flow in CTS
a. In CTS, the presenting bank captures the data (on MICR band) and the
images of cheque using their Capture system and has to meet the
specifications and standards prescribed for data and images.
b. To ensure security, safety and non-repudiation of data/ images, end-to-
end Public key Infrastructure (PKI) has been implemented in CTS.
c. The collecting bank sends the data and captured images duly signed
and encrypted to clearing house for onward transmission to paying
bank
d. For this purpose, presenting and drawing banks are provided with an
interface/ gateway called Clearing House Interface (CHI)
e. The clearing house processes the data, arrives at the settlement figure and
routes the
images and requisite data to the drawee bank, this is termed as „Presentation
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f. The return file /data sent by the drawee banks are processed by Clearing house in the
return clearing session in the same as presentation clearing
g. The „clearing cycle‟ is treated as complete once both the above sessions are
successfully processed.

 CTS 2010 Standard

Standardization of cheque forms(leaves) in terms of size, „MICR‟ band, quality of paper,
pattern, design of cheque, watermark, bank‟s logo in invisible ink, „VOID‟ photograph
and standardization of field placements on cheques are key factors that enables the secure
mechanism of cheque processing. This all reduces the incidence of cheque misuse,
tampering and alterations.
Growing use of „multicity‟ and „payable-at-par‟ cheques, „CTS‟ introduction and „Speed
clearing‟ uniformly led across the banking industry.
The set of minimum security features would not only ensure uniformity across all cheque
forms issued by banks in the country but also help presenting banks while scrutinizing/
recognizing cheques of drawee banks in an image- based processing scenario. „Indian
Bank Association (IBA)‟ and „National Payment Corporation of India (NPCI)‟ are
coordinating with the banks on implementation of the new standard.

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Picture 3.1: Depicting the new CTS cheques which are under the process.

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 Magnetic Ink Character Recognition (MICR)

MICR encoding or say MICR line is at the bottom of the cheque and other vouchers and typically
include the document type indicator, bank code, bank account number, cheque number, cheque
amount and a control indicator. The technology allows MICR readers to scan and read the info
directly into a data- collection device.

The MICR „E-13B‟ font has been adopted as the international standard in ISO 1004:1995, but the
„CMC-7‟ font is widely used in Europe.

A) MICR code line structure:

1. Cheque serial number of 6 numeric digits preceded and followed by a delimiter. The
alpha-numeric prefix to the serial number should be printed outside the code line in close
proximity, just above the read-band in normal ink.
2. Sort field or the city/ bank/ branch code number consisting of 9digits followed by a
delimiter. The first 3digits (numeric) represents city, the next 3digits (abbreviation-alpha
code) indicate the bank and last 3 indicates the unique branch code. It is unique.
Allotment of branch codes is by the President of the Clearing house of which the bank is a
member
3. Account number field, consisting of 6 digits followed by a delimiter, is an optional field.
In case of Govt. Cheques issued by RBI alone, the account number is of 7digits. The Govt.
account number is of 10digits i.e. 7digits occurring in Account number field and 3 in
transaction code field.
4. Transaction code field comprises of 2 digits in all instruments except Govt. cheques drawn
on RBI which have 3digits. Control documents, batch and block tickets have 3digit
representation in the transaction code field.
5. Amount field, it is the last field and consists of 13 digits bounded on both sides by a
delimiter. The amount is encoded in paisa without the decimal point.

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 Endorsement of cheques

 Special crossing stamp

All cheques received for collection over the banks counters are required to be
banded with the banks special crossing stamp.
 Dimension of special crossing stamp
Two parallel lines of length up to 2 inches at a distance of ¼ inch in between them.
The name of the bank and branch to be incorporated in the enclosed space.

 Position of Special crossing stamp- Preferably at the top left corner with a slanting
of 60 degrees to the base

Suggested specimen-

 Additional Safeguard- The crossing stamp should be affixed in such a manner that
to the extent possible it does not deface „A/C Payee‟ crossing made by the
customer.
 Clearing Stamp
The clearing stamp indicates particulars regarding the name of the presenting bank/ branch
(alpha codes), date of presentation and type of clearing. Encoding machines are
programmed to affix the clearing stamp on the reverse of the chequesimultaneously
while encoding the amount.

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 Format of Local Clearing Stamp

Speed Clearing

1. What is Speed Clearing?

Speed clearing refers to collection of outstation cheques (a cheque drawn on
non-local bank branch) through the local clearing. It facilitates collection of
cheques drawn on outstation core- banking-enabled branches of banks, if they
have a net-worked branch locally.

2. Why Speed Clearing?

The collection of outstation cheques, earlier required movement of cheques
from the Presentation center (city where the cheque is presented) to Drawee
center (city where the cheque is payable) which increases the realization
time for cheques. Speed Clearing aims to reduce the time taken for
realization of outstation cheques.
Even though Speed clearing hastens the process of cheque collection as
compared to outstation cheque collection, it pre-supposes the presence of the
drawee bank branch in the clearing house location

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3. What was the process followed by banks for collection of outstation
cheques before theintroduction of Speed Clearing?
A person who had an outstation cheque with him/her use to deposit it with
his/her bank branch. This bank branch is called the Presenting branch. The
cheque, was sent for collection to the city where it was payable / drawn called
Destination center or Drawee center. The branch providing the collection service
is called the Collecting branch. On receipt of the cheque, the Collecting branch
use to present the physical instrument in local clearing at the drawee bank
branch location through its branch at the drawee bank branch location. Once the
cheque was paid, the Collecting branch use to remit the proceeds to the
Presenting branch. On receipt of realization advice of the cheque from the
Collecting branch, the customer‟s account was credited. This, in short, is the
process of Collection before the introduction of Speed Clearing.
When a cheque was accepted on a collection basis by a bank, the customer‟s
account was credited only after realization of proceeds. In the absence of a
clearing arrangement at the Destination center, the Presenting branch was
sending the cheque directly to the Destination branch for payment. On
receiving the proceeds from Destination branch, Presenting branch follow
the practice of crediting the customer‟s account.

4. How long does it take for getting credit of an outstation cheque sent on
Collection basis? Generally, it takes around a week to three weeks‟ time
depending on the drawee center and collection arrangements to get outstation
cheques realized on a Collection basis.

5. How does the Local Cheque Clearing work?

In Local Cheque Clearing in major centers, cheques are processed by using
Cheque Truncation Systems (CTS) through movement of images. Grid based
CTS are in place in New Delhi, Chennai and Mumbai. In addition, Express
Cheque Clearing Systems (ECCS) application package is used in small clearing
houses.
Local Clearing handles only those cheques that are drawn on branches within the

34
jurisdiction ofthe local Clearing House. Generally, the jurisdiction is determined
taking into account the logistics available to physically move to and from the
Clearing House.

6. How does the Speed Clearing work?

Banks have networked their branches by implementing Core Banking Solutions
(CBS). In CBS environment, cheques can be paid at any location obviating the
need for their physical movement to the Drawee branch. Cheques drawn on
outstation CBS branches of a Drawee bank can be processed in the Local
Clearing under the Speed Clearing arrangement if the Drawee bank has a branch
presence at the local center.

7. When will the beneficiary get funds under Speed Clearing?

As on date, the local cheques are processed on T+1 working day basis and
customers get the benefit of withdrawal of funds on a T+1 or 2 basis. 'T'
denotes transaction day viz. date of presentation of cheque at the Clearing
House. So, the outstation cheques under Speed Clearing will also be paid on
T+1 or 2 basis like any other local cheque.

8. What are the charges for cheques cleared through Speed Clearing?
With effect from April 1, 2011, no charges will be payable for cheques of value
up to and including Rs.1 lakh by Savings a/c customers. Banks would be free to
fix charges for collection of other types of accounts for all values and also from
Savings a/c customers for cheque of value above Rs.1 lakh. Charges fixed
should be reasonable, computed on a cost-plus-basis and not as an arbitrary
percentage of the value of the instrument and to be levied in an upfront manner
with due dissemination to the customers of such charges.
9. How is Speed Clearing an improvement over collection basis?
Outstation cheque collection through collection basis takes around one to three
weeks‟ time depending on the drawee center. Under Speed Clearing, it would be
realized on T+1 or 2 basis, say, within 48 hours. Further Savings Bank customers
need not incur any service charge for collection of outstation cheques (value up
to Rs.1 lakh) in Speed Clearing which they may haveto incur if such cheque is
collected under collection basis.

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Transaction Codes List

36
 RTGS-

It stands for “Real Time Gross Settlement” which can be defined as the continuous
settlement of funds transfer individually on an order by order
basis(without netting).

RTGS system is meant for large valued transactions. The min. amount to be remitted is 2
lac and there is no upper ceiling for RTGS transaction

Processing of RTGS
a. Email comes from Bank 4 times in a day – 2:00,4:00,6:00,8:30PM
b. Then YVIRTUAL t-code is used for Posting of RTGS
c. After posting in SAP, one of the following message is shown –
- 31 Bytes –means Successful
- 61 Bytes –means One or more errors in file
- 30 Bytes –means Whole file error
d. Then mail is send to related or associated team with attached file of RTGS
received in mail.

Service charges for RTGS transaction

b. Inward transaction- Free, no charge to be levied.

c. Outward transaction-` 2 lac - ` 5 lac, ` 30.00 per transaction.
Above ` 5 lac `55.00/ transaction

Information- remitting customers have to furnish for the remittance:

a. Amount to be remitted
b. Remitting customer‟s account number which is to be debited
c. Name of the beneficiary bank and branch
d. IFSC code of the receiving branch

e. Name of the beneficiary customer

f. Account number of the beneficiary customer

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Demand Draft:

A method used by individuals to make transfer payments from one bank

account to another. Demand drafts are marketed as a relatively secure method
for cashing checks. The major difference between demand drafts and normal
checks is that demand drafts do not require a signature in order to be cashed.

The company does not have a standard credit policy that could be applied to
all customers. Instead, distinct credit terms are offered to each group
depending upon various factors such as the product, place, price, demand and
competition.

(A) Stockiest in Depots Town: 70% of the Company‟s stockiest are

located in or around the „depot towns‟. At these places, the company uses the
cash management system(CMS) offered by banks, stockiest cheques are
collected till the end of a day are deposited the next morning into the
company‟s local bank account from where the funds are transferred to the
corporate bank account.

Earlier these stockiest used to enjoy 5 days of credit period but now the
company has decreased the time frame to one day. For new stockiest, sales are
normally made ondemand draft basis. If a Stockists cheque bounces, then
the party has to make payment only by demand-draft. If a party defaults on
payment (or a party‟s cheques bounce) more than once, then for all its
transactions with Dabur India in the coming year the party would be required
to make payments only by demand draft.

(B) Stockiest in Remote Areas: The remaining 30% of the turnover with
stockiest take place at remote places away from the depot towns with no
easy access to banks so that the

„anywhere cheque‟ system is logically not possible. Such stockiest may be

allowed a credit period of up to 10 days. On an average, the money is credited
in company‟s bank account in3-7 days.

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Chapter-3

39
Application of SAP in Cash Management System

SAP stands for “System, Applications and Products”. In Dabur India Ltd, SAP is used to
manage Cash inflow and outflow in an efficient and effective way.

SAP Cash Management is used to monitor cash flows and to ensure that you have
sufficient liquidity to cover your payment obligations.

Integration

SAP Cash Management is a subcomponent of SAP Financial Supply Chain Management.

SAP Cash Management is integrated with a range of other SAP components. For
example, the liquidity forecast - in a medium to long term liquidity trend -
integrates expected incoming and outgoing payments in financial accounting,
purchase and sales.

Features
The Incomings area covers the following topics:

 Electronic and manual bank statements

 Payments
 Lockbox
 Polling
 Electronic and manual check deposits
 Bill of exchange presentation
 Memo record

Compare payment advices, Interest calculation and Returned vendor checks are
dealt with the Checks topic.

Cash concentration can be found in the Planning topic. Planning also deals with the
payment program, payment requests, bill of exchange presentation, memo record
and telephone list.

The Tools topic covers the distribution to cash management systems.

40
 The Information System topic deals among other things with the Liquidity
forecast. You can use this to obtain relevant information in connection with
customer and vendor cash flows. The structure of the cash position and business
transactions that affect the cash position are also described here. SAP Cash
Management uses the cash position to reflect movements in bank accounts, while
movements in the sub ledger accounts are represented using the liquidity forecast.

Further topics include: Payment advice journal (entered and changed

planned items), Compare and check and Reconciliation with cash
management.

In the Environment area you will find functions for transferring market data to the
SAP System. Market data can be transferred using the file interface, real-time data
feed or via the spreadsheet. The areas Worklist and Change master record are also
described here.

Prerequisites

In Data Setup you can find out what needs to be done before you can go live with
SAP Cash and Liquidity Management.

There are various types of SAP modules but it is according to use of different-
different departments like:

SAP-FI
• Finance

SAP- SD
• Sales

SAP- MM
• Marketing

And many more

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“T- CODES
DETAILS
FBL5N
Customer Line Item
FBL3N
GL Line
ZCHEQINV
Cheque Entry, Deletion and
Replacement
F-02
SAP Posting
F-29
SAP Posting for Overdue
YVIRTUAL
RTGS Posting
ZFI_F29
Channel Finance Posting
F-32
Clearing
ZFB03
Voucher Printing
ZFBL3N
Report generation after posting of
cheques
YCHLEAF
Check availability of Cheques
YCBR
After Parking check details of cheques
ZCCHQ
Bank Details
YCUSTDET
Customer Details
ZAPIS_NEW
Printing of Overdue Vouchers
YPIS_NEW
Parking

Table 3: Transaction Codes Used in SAP

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 Displaying Cash Management & Forecast, Cash Management Positio
Use

As already mentioned in the previous process on Cash Management, Cash Management

& Forecast/Cash Management Position are updated during the whole SD procedure -
starting with the order, then billing document, followed by cash receipt. The following
sub-process will now present the cash receipt in Cash Management Position and those
changes in the planning totals connected tothe cash receipt, which are formed through
open billings.

Procedure

 Call up the transaction as follows:

Menu Path Accounting , treasury, Cash Management, Information System , Reports on

Cash Management, Liquidity Analyses Liquidity Forecast

Transactio FF7B
n Code

 Enter the following data:

Field Europe North America

Company code 1000 3000

Cash Select Select

management
position

Liquidity forecast Select Select

Grouping Total (all types of Total (all types of

receipts/expendituresand bank data) receipts/expendituresand bank data)

Display as of Date of incoming payment Date of incoming payment

Display in EUR USD

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Field Europe North America

Delta display Select (display changes per value date – Select (display changes per value date –
with balances as opposed to cumulative display) as opposed to cumulative display)

 Choose.

If the date you entered as the planning date falls on a public holiday, the incoming payment is
reproduced on the next working day dependent on the value date.
 Double-click on Banks
 Double-click on B9 Cash Rec

The system displays the bank accounts on which the cash receipts are recorded.
The cash receipt you posted has flowed into the value date dependent balance of the DBGEING
(Europe)/CBGEING (North America) group on the planning date you entered.
In DBGEING (for Europe) or CBGEING (for North America), select the amount in the
column for the planning date you entered and choose display list

You should be able to find the incoming payment you posted in the list of displayed documents on
the line items (module pool)
Screen.
 Choose 3 times.

Finally, you still need to check whether the amount in short-term cash management (=presentation
of the expected cash receipt from the billing) has been reduced as a result of the incoming payment.
 Choose new display
 In the dialog box, enter the following data:

Field Europe North America

Display as of Noted planning date from FI document Noted planning date from FI document

 Choose continue

44
 If the date you entered as the planning date falls on a Saturday or Sunday, the expected
incoming payment is reproduced on the next working day dependent on the value date. For
overview reasons select NEW ENTRY in this case and enter the previous working date as
value date (i.e. minus 1 or 2 days)!
 Double click on Persons
 Double-click on the F1 (FI customers/vendors) level to display the group of customers
(already posted and thus billed values). 

The sum displayed has once again been reduced exactly by your billing amount as this is henceforth
already displayed as an incoming payment on the bank account.

 Choose until the overview tree appears.

Application of SAP with Screenshots:

(I) SAP T CODE: ZCHEQINV

*These SAP Screenshots were taken on Testing Servers of DIL

45
2)

3)

46
4)

(II) T Code – YPIS_new - Parking and Posting (CHEQUE PARKING AND POSTING
ACCORDING TO THE CREDIT EXPIRY)

47
48
(III) T- Code – FB50 - Virtual A/C Entry (Clear the GL)

(IV) T Code – YVIRTUAL – RTGS Posting

49
(V) T Code – ZFI_F29 - Channel Finance Posting

(VI) T Code – YCHLEAF – Cheques Availability

50
(VII) T Code – ZCHEQINV – Cheques Enter, Deletion and Replacement

51
Sales Order Management in SAP R/3
SAP R/3 (the "R" was for "Real-time data processing" and "3" was for "3-tier":
1) database, 2) application server, and 3) client (SAPgui)). This new architecture
is compatible with multiple platforms and operating systems, such as Microsoft
Windows or UNIX. This opened up SAP to a whole new customer base.
The order to cash process

SD: Sales and Distribution

 Integrated with:

 Materials Management (MM)

 Production Planning and Execution (PP)

 Financial Accounting (FI)

 Configurable structures within the software that represent the legal and/or
organizational views of an enterprise

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4.4.1 Organizational Elements

 Client

 Company Code

 Sales Organization

 Distribution Channel

 Sales Division

 Sales Area

 Plant

 Storage Location

 Shipping Point

53
Chapter 5: S.A. Engineering Ltd. – Agreed Terms and Conditions with
Bank

These terms and conditions including terms under respective services section
govern the CMS and by signing the CMS designation form and / or by accepting
the service proposal and/ or by using the Banks CMS, one agree to be bound by
these T&Cs at all times.

Transfers Limited to Available Funds- The bank is under no obligation

to comply with any payment instruction or to make any fund transfer that
would exceed the available funds in available limit on the Customer
accounts designated for such payment instruction.

Confidentiality- The sharing, storage or transmission about Customer / his

account details within HSBC group or with any agent should be on
confidential basis.

Indemnity- As long as bank is in good faith, the Customer shall indemnify

the bank and hold the bank harmless from time to time from any or all
claims brought or incurred by bank.

Force Majeure- The bank will not be responsible for non-performance or

delay in the performance of one or more services caused by circumstances
beyond its control such as fire, communication/ system failure etc.

Change of Terms- The bank may modify, terminate and suspend the
services including the present T&Cs to the customer anytime with or
without notice, due to change in rules, regulations and laws set by tax
authorities or Bank policies.

General Undertaking from Customer- He agrees and confirms that-

a. Fully understands and is satisfied with all features of services offered

b. He is solely responsible for the accuracy, completeness and timeliness
of instructions in line with that specified by the bank from time to
time.
54
c. He authorizes the bank to debit his account and/ or exercise right of
setoff for any liability incurred by the bank for and due to the
execution of payment instructionissued by customer to bank.
d. The customer will ensure the security procedure established by the
bank for the purpose of verifying that the payment order or
communication is that of the customer or for detecting error in the
transmission of the content of the funds transfer request or communication is
adhered.
e. Customer hereby represents and warrants that these T&Cs have been
duly executed and delivered by duly authorized representative and
constitutes a legal, valid and binding obligation of the customer and
shall be enforceable against customer.
f. The „Non- Residential External (NRE)‟ customer shall ensure that
bank would mention word „SOF NRE‟ in the „Tag70‟ or „Second
Party Reference‟ field as appropriate while initiating any RTGS,
NEFT, IAT payments.
g. Also customer agrees to provide the Priority Payments File not later
than the agreed cut-off date and time, which is subject to change from
time to time.

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MIS/ Reports- Bank at its sole discretion provide info including data, instruments and
reports to Customer related to any concerned banking activity.
Waiver- If bank fails to exercise any right or privilege conferred in T&Cs shall not affect
the specified services and remain in full force.

Example of North Zone Bank Associated with Dabur India Limited:

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 What are the features and benefits of our Collection services?

With HDFC Bank's Collection Services, our aim is to make your banking
more efficient, manageable and speedy. Here are some of the major
features and benefits of our CollectionServices:
Features

 You can manage your funds' flow position most effectively from a central location.
 Avail of a range of products under our collection services to make your
cheque realization and banking more efficient.
Benefits

 Quick realization of your local and outstation cheques.

 Avail this service with or without having a Current Account with HDFC Bank.

What are the products offered under Collection Services that you can use?
You can take advantage of the products we offer under Collection services:
 Local Cheque Collections With this product, your local cheques deposited at
the same locationwill be realized quickly. You can make use of this product at
all locations of HDFC Bank ("SPEED") and over 18 locations of our
correspondent Bank ("RAPID")
 Outstation Cheque Collections You can deposit outstation cheques drawn on
any HDFC Bank location at any HDFC Bank location ("SPRINT"). Also,
cheques drawn on over 300 locations of our correspondent banks
("EXPRESS") can be deposited at any HDFC Bank locations.

 Transfer Cheque Collections Your local/outstation cheques drawn on any

branch of HDFC Bank Ltd. will be realized quickly though this product available
at all HDFC Bank ("HBTRF") locations.
 Clean Collections If your cheques are drawn on locations not covered by us or
our correspondent banks, they will be collected at any of our locations and the
proceeds will be credited to your account as soon as credit is received by HDFC
Bank.

57
Some Important Terminologies

Virtual Account- It is a non- transactional sub- account created under the Customer
Account at the request of the customer, as submitted to the bank from time to time, to
capture reference of payments made by the Payers for the purpose of preparing MIS/
Statements for the customer.
Master Account- It is any Customer Account with the bank into which payments by
Payerusing a distinct Virtual Account number is to be credited.
Inward Payment Services (Channel Financing)- The service under which the bank
would provide info on the payments received and outstanding for the Customer based on
the info received from the customer and the actual payments received in its account.
P2E Migration Program- This service assists Corporate in shifting their payments and
receivables from paper mode to electronic mode thereby offering the process and cost
efficiency benefits.
P2A- Person to Account service is used for fund transfer by individual to a corporate
customer using Payee IFSC and Payee Account number and shall form part of the
Service as defined under T&Cs.
PSBC- Pre-signed Blank Cheques issued in favor of Company and submitted to bank as
per applicable terms on which amount payable and Cheque date is left blank.
PDC- Post Dated Cheque issued in favor of Company with future date and submitted to
thebank for collection as per applicable terms.

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Chapter-4

59
Summary & Conclusion

Interpretation and Conclusion (SWOT Analysis):

The company maintains bank account at all depot towns. Cheques/drafts received
from customers in nearby places are sent for local clearing to initially collect
funds in these bank accounts. This has reduced the average collection period (as
compared to the time it would take if customer cheques were first received at head
office and then sent for outstation clearing) thereby increasing the velocity of cash
inflows. Funds thus collected at the depot towns each day transferred to the
company‟s head office (or corporate) bank account. The company has a
„sweeping arrangement‟ with the bank at the head office by which any funds
transferred from the depot towns are automatically applied towards setting the
company‟s cash credit loan from the bank and reducing its debit balance. These
steps have resulted in reducing the cost of interest to the company.

When the company has surplus funds, it invests the same in short-term
investments or instruments like mutual funds and government securities.

With advent of CBS and CTS, Dabur has increased its operational efficiency
and decreased its overheads and costs. Here computer software such as SAP is
used to perform core operations of banking like
a. Recording transactions
b. Interest calculations
c. Customer Records
d. Balance of payments
e. Details of Withdrawal
The new platform has changed the way bank system in Dabur India Ltd.
Works. All the services in the Cash Management System have benefitted the
corporate office and banking facilities by-
a. Shorter Clearing cycle
b. Superior verification and reconciliation process
c. No geographical restrictions and customers alike
d. Reduction in operational risk and risks associated with paper clearing
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 Moreover, a Company‟s Cash Position is said to be a better indicator of the health of
its business, rather than its profit and loss statement. Hence knowing the cash position
is crucial for every business to:

a. forecast when, how, and where cash needs may arise

b. determine which would be the best source for additional cash needs, and
c. be prepared to meet cash needs when they arise

And for better visibility into the cash position across banks, across borders, cash
managements crucial. It empowers businesses with the ability to forecast cash flows,
plan future business strategies, and manage cash accordingly.

Limitations:

 No authorization to use some T-codes which were restricted to Managerial Level.

 Data access wasn‟t provided as the information was highly confidential.

Suggestions, Scope for further Study & Conclusion:

Lack of control over cash flows and inefficient cash management can be very harmful
to business. More often than not, it is the improper management of cash that has caused
businesses to fail. Effective cash management is therefore a necessity for businesses.
Companies heavily rely on knowing their cash position to manage working capital
requirements such as ordering inventory, raw material, or
Acquisitions/expansion program, for which they need a clear idea of how much cash is
required, and when. This is enabled by Efficient Cash Management System.

Here are some areas with scope for improvement:

a. Eliminating Disparate Systems: Different cash management solutions are being

offered for diverse segments. And as businesses grow, managing these disparate
systems is increasingly becoming a challenge. Hence company should come up with a
single platform which can support various cash management products and services as
the business grows.

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b. Customizable Solutions: Company should try to come up with a customizable
platform which can cater to the specific needs of different businesses.
c. Unified System: Integration of corporate customer systems with banking systems
can be very helpful in reconciliation of internal systems with banking systems, and
can support account management between the bank and customer. And this offers
great scope for vendors.
Today, company is leveraging Cash Management System as a tool to build long-
term trust with their customers, because these systems will empower them and
manage companies and their position at any given time, thus building a trust and
strengthening the relationship that goes beyond transaction banking.

Summary

With growing recognition of the need to adopt Cash Management Strategies,

company is achieving and moreover expecting more efficiency and effective
solutions around -
b. standardization,
c. reconciliation,
d. integrated banking systems with corporate systems, and
e. Real-time reporting for overall view of the existing cash position.

Role of the Finance Department:

The finance department is involved in all aspects of financial planning and control.
It maintainsa quarterly score card, which helps the company evaluate the
performance of employees in terms of Cost to Company (CTC). Managerial
remuneration consists of a fixed salary plus bonuses based on performance on a
variety of parameters, including maintenance of inventory levels and other
working capital items within agreed limits. The department also prepares MIS and
communicates the same to all the concerned departments. It also continuously
monitors the management of inventory, debtors and creditors to ensure that the net
working capital remains within the budgeted levels. If, for example, the investment
in inventory exceeds the planned limits due to some unavoidable circumstances, it
must be offset by either an increase in creditors or a reduction in debtors.
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 References/ Bibliography

BOOKS
1. B. Bhattacharyya, Theory and Practice of Case Method of Instruction,

WEBSITES
1. www.s.k.industries.com
2. www.wikipedia.com
3. www.googlescholars.co.in
4. www.moneycontrol.com
5. www.rbi.org.in
6. www.sap.com
7. www.go.sap.com
8. http://www.dabur.com/Investors%20Relation-Reports
9. http://www.sap.com/bin/sapcom/en_us/downloadasset.2013-10-oct-01-18.dabur-
creating-efficient-cost-saving-shared-services-with-sap-document-access-by-opentext-
pdf.html

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