iTelescope

I’ve spent quite a bit of time trying to understand how transactions affect accounts. One should remember that the effects of Debit (dr) & Credit (cr) depend on the accounting you are dealing with. For example, receiving money into a bank account, i.e. debiting it, will increase its balance. Whereas, sale of goods, or crediting the sales account, increases its balance. Hope this illustration helps!

Effects on accounts

Disruptive innovation describe innovations that tend to get competitors jump out of their seats. This is something - highly desirable - that the market has never seen before. Wikipedia gives the example of lowering price, but undercutting is a relatively common phenomenon. However, ‘designing for a different set of consumers’ is quite apt.

It is every product manager’s dream to conceptualize a product, or at least a feature that does creates such a wave in the market! And if you ever happen to be at the receiving end of a product demo - like the one that I usually deliver - this is the best compliment you would give. Cheers!

Sales Orders (SO) & Purchase Orders (PO) are 2 key trade documents in any business. They usually two important fields: Payment terms & Delivery terms. After a brief on these terms, we go on to explain Incoterms: internationally accepted trade-terms used in international contracts.

Payment terms most often represent the payment instrument (cheques/collaterals), credit period and discounts, if applicable. In the simplest form, P30 indicates that payment will be made 30 days after receiving the bill/invoice. P30/2%20 is a more complex term indicating that if the payment is done within 20 days (instead of the 30-day credit period), the buyer is entitled tot a 2% discount on invoice value. Payment terms could also be based on collaterals like L/C (Letter of Credit) or Irrevocable credits that help minimize the seller’s risk.

Delivery terms are indicative of the agreement on delivery cost, responsibility (=risk) and ownership of transported goods/services. Costs include freight charges, taxes & duties and commissions to clearing agents. As a seller, I may choose to transfer ownership at my premises {ExWorks}, at my port {Free Carrier}, after loading cargo on board air/sea/road/rail vessel {Free On Board}, customer’s port {Delivered Ex Quay/Ship} or right up to ship-to address (address where goods are required to be delivered).

Incoterms are delivery terms standardized by the International Chamber of Commerce (ICC) for use in international trade. The abbreviations along with description & associated buyer/seller liability are mentioned here.

Talking about commission, in reality commission is a sweeter word for greasing charges at ports; needed an example of organized crime, take this! How would it look if I had a ledger account called Bribes? Doesn’t Agent Commission really sound decent? One of my uncles lives of this profession, so I won’t say another word (continue reading…)

Days Sales Outstanding (DSO) is an important financial metric for evaluating the effectiveness of converting credit sales (money owed to you) to cash. Considering the time value of money, it indicates the age of an organization’s accounts receivables or AR (sum of all money owed by debtors) in days and the average time it takes to turn receivables into cash. Ideally, this should never exceed the standard payment terms. So for a 52 credit period offered by credit card to borrowers (which is us, debtors to the issuing company), best DSO for the company will be 52. A higher DSO would indicate inefficiency in their collection cycle (and in our payment which they will gladly oblige by slamming exorbitant interest or by delegating collection to recovering agents).

DSO (measured in days) is calculated for a period,

DSO = Accounts Receivables / Credit Sales for the period * 30 (days)

DSO can vary significantly over the course of a year on account of several reasons:
- Fluctuation in sales volume, due to seasonality, economy, etc
- Negotiated payment terms, promotional discounts
Since these situations are common in business, DSO is argued (continue reading…)

Electronic Invoice Presentment and Payment, or EIPP, is more general concept (as compared to ERS discussed earlier) that is based on electronic invoice submission. ERS uses Advance Shipping Notices (ASNs) instead of invoice. However, they share benefits: avoidance of data entry, errors and exceptions, lost invoices and vendor inquiries. Most solutions are capable of receiving invoices in CSV, XML and few other formats over EDI.

EIPP or e-Invoicing is part of the larger procure-to-pay (P2P) cycle (will be writing soon on this). A huge challenge lies in supplier on-boarding: getting suppliers to automate at their end. In the current era, supplier enablement can be hastened by hosting an internet facing portal – called Supplier Portal in sourcing jargon – that suppliers can log-on to and key-in their invoices. ‘Flipping-the-PO’ is a standard feature that saves data entry effort for the supplier, and minimizes error. On referencing the PO being invoiced, information about line items viz. description, ordered quantity & price are defaulted. This helps reduce the number of expections in automated invoice matching. Imagine this as handing over your groceries list to a baniya who converts it to a bill by stamping his name and adding prices & total (and discounts if the baniya is willing to spare)

References:
http://scm.ncsu.edu/public/facts/facs041014.html
http://www.agilent.com/oracle_supplier/downloads/ERS_supplier_guide.pdf
http://www.jpmorgan.com/tss/General/Invoice_Management/1159348844579

I sometimes spend a lot of my time and blog-space publicizing (often, through criticism) other products, websites, hotels, etc. But sometimes I just want to show respect for  great ideas. And nothing excites me more than green initiatives! While going through Gopal Shenoy’s blog on Product Management tips, I got to learn of this cool company called Gazelle he joined. Gazelle, based out of Boston, pays you for taking away used electronics which it recycles. So instead of going to landfills, you’re gadgets are erased and either re-used or sold in the secondary market. It takes a week after receiving the gadget to complete inspect it and issue the payment. What more could you be asking for with Money in one hand and carbon-credit in the other!

I got too excited and checked what I will get for my 4 year old Nokia 6600! Have a look at the disheartening result!

Gazelle will pay me $9 for Nokia 6600

PS: No links on this page have referral commissions

Evaluated Receipt Settlement (ERS) is an EDI (Electronic Data Interchange) procedure, part of Supply Chain Management.  It was pioneered by GM to address the issues associated with payments against invoices (bills) for goods received. ERS is valid in India. (continue reading…)

Gemba, in Japanese, means ‘the actual place’ or ‘the real place’. In business, gemba refers to the place where value is created; in manufacturing the gemba is the factory floor. Its use is extended in IT where the consultant is supposed to assist users at their place so as to make them comfortable with use of the system. It is also suggested that solutions to problems, improvements & ideas will come from going to the gemba. (continue reading…)