Revision in Cash Management System at Indian Oil Corporation Limited

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Case Details:

Case Code : FINC075
Case Length : 17 pages
Period : 2007-2011
Pub. Date : 2012
Teaching Note : Not Available
Organization : Indian Oil Corporation Limited
Industry : Petroleum and Petrochemicals
Countries : India

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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Excerpts Contd...

Banking Arrangements

There were two collection modes in IOCL: Non E-Collection Modes and E-Collection Modes. With Internet banking becoming a necessity in the business world, IOCL with the help of its bankers introduced the concept of E-collections within its working environment. Indian Oil Corporation, as stated earlier, had a centralized collection system whereas its payment mechanism was totally decentralized, i.e. Funds would flow through all the regional offices or state offices to the Head Office...

Cash Flow Forecasting

A key element of cash management involved projections of inflows and outflows of cash by the corporation. It also required constant updating on a day-to-day basis for ensuring effective fund management.

Finance | Case Study in Management, Operations, Strategies, Finance, Case Studies

Projections were done in two stages:

  • Monthly: by the 7th of every month
  • Rolling: by the 22nd of every month for the next month
  • For effective forecasting, managers at IOCL required credible information from multiple sources. The process of cash flow forecasting was on a daily/monthly basis, and employed forecasting by three months moving average, forecasting by OCC seasonal index, and forecasting by five years' trend analysis...

    Looking Ahead

    Though IOCL used a centralized collection system, it had a decentralized payment system. In early 2011, it started a centralized payment system but restricted it to employee payments. However, IOCL had plans to eventually centralize the whole payment system...


    Exhibit I: Indian Oil Corporation: Leader in Downstream Industry
    Exhibit II: Indian Oil Corporation: Organisational structure
    Exhibit III: Indian Oil Corporation: Cash forecasting (Three Months Moving Average)
    Exhibit IV: Indian Oil Corporation: Cash Forecasting (OCC's Seasonal Index)
    Exhibit V: Indian Oil Corporation: Cash Forecasting (Five Years Moving Average)
    Exhibit VI: Variance Analysis

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