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Cagayan Valley of Computer Information
and Technology College
Business CommunicationResearch Compilation
Submitted to;
MARLYN JANE MANSIBANGBusiness Communication Instructor
Submitted by:
EZEKIEL C. HERNANDEZ
BSAT-III
GENESIS DE LEON
BSECE - III
CHIZA VALLEJO
Computer Secretariat
1
UNIT - I
Introduction
The word “Communication” is derived from the Latin word ‘communication’
which means ‘to share’. It is the act of sharing or imparting a share of anything.
II. Meaning
The word communication has. been derived from the Latin word ‘communis’
which can be translated as common. Communication can be defined as the process through
which two or more. persons come to exchange ideas and understandings among
themselves.,
Communication is defined as “Exchange of facts, ideas, opinions or emotions or
two or more persons”.
Another definition of communication is “Interchange of ideas from one person to
another’
Various Situations That Communication Arises
1. Information
The purpose of all communication is to bring about a change for the. better. e
intention of the communication is to influence some action in order to promote common
welfare of a group or an organisation.
For e.g., A Indian farmer requires some information regarding the weather, prices,
seeds, irrigation etc.,
Thus communication plays ‘a vital role in giving information.
2. Advice
The word advice is a kind of information. Parents advice their children, elders
advice the young, teachers advice their pupils, politicians advice a large group. Advice
means opinion given or counsel Hence advice denotes some communication which is
aimed at bringing about a change.
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3. Order
One of the objectives of communication is to convey orders and get them operated
and receive a feed back. n order operates through communication. An order establishes the
authority of the communicator. Normally if there is no conflict the order will be accepted
automatically.
4. Suggestion
To suggest means to call up on an idea.. It also something for acceptance or
rejection
Communication is used to convey suggestions or ideas. This happens in any social
group like a family, office, factory, state, nation etc. Effective communication promotes
the acceptance and trial of good suggestions.
5. Persuasion
To persuade means to convince another or induce a person to do (or) go into action.
The teacher persuades his pupils to listen to him and study. The politician persuades the
voters to vote for him and his party. The managing director persuades, his subordinates to
do the work according to his way of thinking.
Hence persuasion is one of the importance objective of communication. Persuasion
takes place through some kind of communication.
6. Warning
To warn means to give notice to put on guard or to mentally register danger. We
frequently notice such warning as “Beware of Dogs”, “No Smoking”, “Danger?’ etc.
Warnings are given by a higher official to his subordinates in official and factories. Hence
warnings being a method of communication is essential to get the work done.
7. Motivation
Motivation mans impelling powers to induce a person to act. For example, desire
fear etc. Motivation is one of the important functions of management. We often say that
the manager motivates the worker in a factory ad gets the work done. For this the manager
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has to constantly communicate with the men he manages.. Hence motivation can be
successful only through proper communication.
COMMUNICATION PROCESS
Communication process may involve the various elements as shown in figure:
The above figure shows the following elements in this process.
Sender
The person who intends to make contact with the objective of passing information,
ideas1 to other persons is known as sender.
Ideas
This is the subject - matter of communication. This might be opini attitude,
feelings, views suggestions, orders etc.
Encoding
Since the subject – matter of communication is abstract and intangil its
transmission requires the use of certain symbols such as wor actions, pictures, etc.
Conversion of the subject matte symbols is the process of encoding.
Channel
These symbols are transmitted through certain channels, e.g. rad telephone, air etc.,
depending upon the situation of the two sender parties. v sender and receiver.
Receiver
Receiver is the person to whom message is meant for.
Decoding
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Sender – Idea – Encoding – Channel – Receiver – Decoding –
Feed back
Receiver converts the symbols received from the sender to give I the meaning of
the message.
Feedback
Feedback is necessary to ensure that the receiver has received message and
understands it in the same sense as sender. Further, it also acts as an energizing factor,
thereby changing of action in the communication.
III. PRINCIPLES OF COMMUNICATION
The communication to be effective must be based on certain important principles.
H. Koontz says that the following principles are useful guides for establisher a good
communication.
1. Clarity: A communication is said to have clarity when it is expressed and
transmitted to the receiver in an understandable manner. Unless the message is well
understood by the subordinates, efficiency in action shall not become reality.
2. Integrity: Managerial communications are only means but not ends. The purpose
of communication is to develop understanding and to bring cc-ordination to attain the
cherished goals of the firm.
3. Uses of Informal Organization: Managers must make use of the informal
organization to supplement the communication channels of formal organization.
BENEFITS OF COMMUNICATION
The importance of the concept of communicator cannot be over emphasized.
Barnard has called it as “the foundation of all ground activities”. As stated by H. Koontz,
“group activity is impossible without informal transfer, because without it, co-ordination
and I change cannot be effected”. Communication, thus s a concept, has assumed more
importance in the managerial process. Its importance can also be judged from the
following benefits it provides.
1. Good communication ensures a smooth and unrestricted running of the
enterprise.
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2. It helps the managers to arrive at vital conclusion.
3. It Is sine quo non for the quick and systematic implementation of the managerial
functions.
4. It helps a lot in planning properly and co-coordinating the various managerial
functions.
5. It avoids illusions, builds up the morale of the employees and eliminates
conflicts and chaos.
6. It helps in attaining maximum productivity with minimum costs.
Thus, as stated by Shobhana Kandalwala, communication has become a part of
education, propaganda leadership and guidance function of the management.
Need and Importance of Communication in Business and Management
In olden days, the scale of business operations generally used to be very small. The
sole proprietor or the partners of a partnership firms carried on their business in a small
area, knew their customers personally and dealt with them face to face. Hence, they did not
feel the necessity of commercial correspondence.
But conditions are different these days. The great developments in trade and
commerce which have taken place over these years have led to a corresponding increase in
communication by letters. The ever quickening pace of business life, and the expansion of
trade have compelled business concerns to make use of business letters on a very large
scale in order to maintain close and uninterrupted business relations with their customers.
Thus a business letter is a must in modern business. It serves as a lubricating oil to
the wheels of Business. It is the life blood of commerce. Without proper communication.
2. Importance
Commercial correspondence has been playing a significant part in commercial
progress. Correspondence is one of the main channels through which a business house
makes and maintains contact with the outside world.
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Business correspondence is so important to a business house that experts compare it
to the process of human respiration. They opine that the business correspondence is a vital
factor to run smoothly. The scope and importance of commercial correspondence is fast
increasing every day because of the following reasons:
1. A considerable portion of commercial or business writing is found to be in the
form of letters. Effective communication is the crux (basic of necessity) of human
civilization. Language is the most suitable and effective medium of communication to
establish essential links among individuals in different walks of life. Effective
communication can be established only through effective letter.
2. Commercial correspondence is expected to open up and maintain good business
relations in order to introduce promote and conclude business transactions. Thus, it is
regarded as a very valuable instruction.
3. Effective commercial correspondence has enabled businessmen from one.
Corner of the globe to capture and expand markets all over the world. Business
correspondence is therefore rightly called as “The life blood of modem commercial
world”.
4. Business agreements concluded orally or through telephone will not be upheld in
the courts of Law, unless they are made in writing. Unnecessary misunderstanding and
troubles can be eliminated it all agreements are confirmed by letters.
5. A business letter is always cheaper. It can handle accurately even the most
intricate (complicated) transactions.
6. On many crucial occasions, a letter can achieve certain appreciable results which
a personal interview may not. For a businessman, time is money, one cannot afford to
waste his precious time. The loss of time involved in long personal and business talks can
be done away by writing short letters. Even if the letters are long, they can be kept aside
during busy hours and read during leisure hours.
7. The tongue and the pen are the interpreters of mind, of these two; the pen is more
faithful than the tongue. This is because the tongue being seated in a most slippery place,
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may fail in her expressions. But the pen having the greater advantage is not so subject to
error.
8. The unpleasant task of refusing a request at an interview can be conveniently
accomplished through a letter.
Downward communication
Here communication flows from a superior to a subordinate.
Orders, individual instructions, policy statements, job sheets, circular etc., fall
under downward communication.
Downward communication is eminently suited to-an organization in which the line
of authority runs distinctly downwards, with each rank clearly below another, to which it is
directly related.
Main objectives of downward communication
1. To gain specific directives about the job being entrusted to a subordinate. The
decisions taken at the managerial level are transmitted to the subordinate staff in the form
of directives so that action may be initiated.
2. To explain policies and organizational procedures. A clear understanding of the
policies gives the lower staff a wider perspective so that they can grasp and play their role
more meaningfully.
3. To appraise the subordinates of their performance. If the performance of a
subordinate is objectively assessed and the assessment is communicated to him in a
considerate tone, it will definitely promote his efficiency.
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TYPES OF COMMUNICATION
Upward Downward Vertical Horizontal Grapevine
Consensus
4. To give information about the rationale of the job, i.e., to explain to a
subordinate the significance of the job assigned to him and why he has been entrusted with
it.
Limitations of downward, communication
Under-communication and over-communication
Downward communication is often married either by under communication or
over-communication, i.e., a superior. may either talk too little or too much about a job.
Delay
The lines of communication in downward communication being very long,
transmitting information to the lowest worker is a time-consuming process. By the time
information reaches him, it may have lost much of its significance, or it may have caused
damaging delay.
Loss of Information
Unless the communication is fully written, it is not likely to be transmitted
downwards fully. A part of it almost is certain to be lost. In fact, it has been experimentally
verified that only 20 percent of the communication sent downward through five levels of
management finally gets to the worker’s level.
Distortion
In long lines of communication, information is not only lost but even distorted.
Built in resistance.
Built in resistance
The subordinates do not get any opportunity of participating in the “decision-
making process. They are expected to receive the policy decisions and directives without
questioning their appropriateness, utility or validly which they resent.
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Upward communication
The communication channel which pushes the flow of information upwards is
known as the upward channel of communication. Managers have only recently come to
recognize the importance of upward communication.
Importance upward communication
Providing feedback
Upward communication provides the Management with necessary feedback.
Outlet for the pent-up emotion
Upward communication gives the employees an opportunity to vent their problems
and grievances.
Constructive suggestions
Often employees offer constructive suggestions to promote the welfare of the
organization. Some of these suggestions, when implemented definitely prove beneficial.
Easier introduction of new schemes
Since the employees feel themselves to be a party to the decision- making process,
it helps the organization to introduce new schemes without unduly antagonizing the
employees.
Greater harmony and cohesion
Upward communication acts as a kind of lubricant. It makes the atmosphere in the
company congenial and creates greater harmony and cohesion between the management
and the employees.
Methods of upward communication
Open door policy
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The employees are given a feeling that the manager’s doors are always open to
them. Whenever they like, they can walk into his room without any hesitation whatsoever,
and talk to him about their problems
Complaints and suggestion boxes
At some convenient places in the office or the factory, complaints and suggestion
boxes are installed.
Social gatherings
Social gatherings are frequently arranged in different departments. These
gatherings offer a very informal atmosphere in which the employees shed their inhibitions
and talk about their problems.
Direct correspondence
Sometimes the manager may directly write to an employee and ask him to
communicate with him.
Reports
Employees may be required to submit reports about the progress of their work at
regular intervals.
Counseling
In some organization, workers are encouraged to seek the counsel of their superiors
on their personal problems. V
Limitations of upward communication
1. Employees are usually reluctant to initiate upward communication. The managers
might keep their doors open. But they can force the employees to walk in to their
rooms.
2. Employees often feel that if they communicate their problems I their superiors, it
may adversely reflect on their own efficiency.
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3. Upward communication is more prone to distortion than downward
communication. In downward communication, distortion is often unconscious. But
upward communication is deliberately distorted. Some managers lose their temper
if they are confronted with unpleasant facts. So information is suitably ‘edited’
before it is passed on to them. While transmitting communication upwards, the
transmitter always conscious of how it will be received and he cannot resist the
temptation of sugar-coating the information.
4. Sometimes, in the process of upward communication, worker become too bold,
ignore their immediate superiors and suggestions or complaints. This proves
harmful in two ways. The officers have been by - passed feel hurt, white ‘the high-
ups get suspicious of the workers’ information. The relations between the worker
and their immediate superiors get strained and work suffers.
5. Any negligence shown towards upward communication makes the workers cynical.
They carry the impression that the opportunity to communicate upwards is only an
eye-wash. This acts as a barrier to upward communication in future.
Horizontal communication
Communication between departments of people on the same level in the managerial
hierarchy of an organization may be termed a Horizontal or lateral communication.
Horizontal communication is extremely important for promoting understanding and
co-ordination among various departments.
The purchase department might keep on purchasing material which is neither
immediately needed nor can be adequately stored. The stores may report shortage of
material when production is fully geared up. Scarcity of raw material may cause
production to slow down but the sales department may continue booking orders. Free flow
of horizontal communication among various departments can easily avert the incidence of
such situations.
Grapevine
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In every organization an. informal channel of communication called the grapevine
is in operation.
It is quite natural for a group of people working together to be interested in one
another and talk about appointments, promotions, retrenchments, or even domestic affairs.
Some people derive great pleasure from gathering such ‘secret’ information and
transmitting it to others. They are the leaders who control the grapevine. Soon this top
secret reaches everybody.
Keith Davis rightly points out that the grapevine is more a product of the situation
than it is of the person. Certain situations like insecurity of service, uncertainty over
promotions, special increments to a particular employee, certain innovations in the
organization that are likely to affect the job prospects of the employees, are sure to activate
the leaders of the grapevine so that very soon all kinds of rumors spread in the
organization.
The grapevine in basically a channel of horizontal communication, for it is only,
between people working at the same level of hierarchy who can informally communicate
with one another with perfect ease.
Importance of the grapevine
A safety valve
Apprehensions experienced by workers on matters like promotions and
retrenchments become an obsession with them. Talking about them may not alleviate their
fears, but it certainly provides them emotional relief.
Orqai1sational solidarity and cohesion
The existence of the grapevine proves that the workers are in the rested in their
associates. The very fact that they talk among themselves helps to promote organizational
solidarity and cohesion.
Supplement to other channel
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All information cannot be transmitted to the employees through the official
channels. If there is some useful information unsuitable for being transmitted through
official channels, it can be transmitted through grapevine.
Quick transmission: The speed with which information is transmitted through the
grapevine is just remarkable.
Feedback: The grapevine provides feedback to the management.
Demerits of the grapevine
Distortion: One of the major drawbacks of the grapevine is that it may spread
baseless or distorted news which may sometimes prove harmful even to the employees.
Incomplete Information: The grapevine information’ is usually incomplete.
Damaging swiftness
The swiftness with which the grapevine transmits information may even be
damaging. A rumor may have spread and caused serious damage before the management
becomes aware of it and can take any rectifying steps.
How to use grapevine effectively
1. The managers should try to spot the leaders. They should try to find out the
people who are more active than grapevine and keep them well informed so that harmful
rumors do not reach the employees.
2. The grapevine should be used to feel the pulse of the employees.
3. If there is any false rumor, the management should immediately use the official
channels to contradict and to dispel the fears of the employees.
4. If the workers are associated with decision-making, the rum our- mongers will be
automatically frustrated. If the workers are already aware’ that the plant is to be
modernized but that the modernization process is not going to involve any retrenchments,
the arrival of the new machinery and engineers will not cause any undue apprehensions
among them. Thus the harmful effects of the grapevine will be successfully counteracted.
Consensus
14
In the commercial field, it is felt desirable that when the board meeting is held,
decision should be arrived at through consensus. Unanimous decision help to project a
good image of the organization among the employees as well as share holders.
Consensus does not imply unanimity, for perfect unanimity is just impossible. It
simply means that the majority of people subscribe to a particular view, which all the
members are willing to accept in the larger interest of the organization. The dissent is
there, but the dissent is not pressed and it is minimum.
Barriers in Communication
There might be a number of such barriers impeding the flow of communication in
the organization. These may be classified as (i) Semantic (ii) Emotional or psychological
barriers (iii) Organizational and (iv) Personal factors.
1. Semantic barriers
Semantic barriers are obstructions caused in the process of receiving or
understanding of the message during the process of encoding and decoding ideas and
words. These barriers arise from the linguistic capacity of the parties involved. The
following are some semantic barriers.
Badly expressed message
Lack of clarity and precision in message makes it badly expressed. Poorly chosen
and empty words and phrases, careless omission, lack of coherence, bad organization of
ideas, awkward sentence structure, inadequate vocabulary, platitudes, numbing repetition,
jargon, failure to clarify implications are some common faults in this case.
Faulty translations
Every manager receives various types of communication from superiors, peers,
subordinates and he must translate information destined for subordinates, peers and
superiors into language suitable to each. Hence the message has to be put into words
appropriate to the frame work in which the receiver operates.
Unqualified assumptions
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There are certain excommunicated assumptions which underlie practically all
messages. Though a message appears to be specific its underlying assumptions may not be
clear to the receiver.
Specialist’s language
It is often found that technical personnel and special group develop a special,
peculiar, and technical language of their o increases their isolation from others and builds a
communication barrier.
2. Emotional or psychological barriers
The following are some emotional barriers:
Premature evaluation V
Rogers and Roethliberger in 1952 first pointed out this barrier. Premature
evaluation is the tendency of prematurely. Evaluating communications, .rather than to keep
an uncompromised position during the interchange. This barrier can be remedied by
“empathy” a evaluative listening.
Inattention
The preoccupied mind of a receiver and the resultant non-listening is one of the
major chronic psychological barriers, It is a c phenomenon that people simply fail. to react
to bulletins, notices, minutes and reports.
Loss by transmission and poor retention
When communication passes through various levels organization, successive
transmission of the same .message decreasingly accurate. It is said that in case of oral
communication about 30% of the information is lost in each transmission.
Distrust of communication
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It arises out of ill-considered judgments or illogical decision frequent
countermanding of the original communication by the communicator. Repeated experience
of this kind gradually con the receiver to delay action or act unenthusiastically and hence
making the communication unsuccessful, though apparently it is complete.
Failure to communicate
It is quite an accepted fact that managers often tail to transmit needed messages.
This might be because of laziness on the part communicator, or assuming that “everybody
knows”, or procrastination “hogging” information or deliberately to embarrass others.
3. Organizational barriers
Organizational policy
The general organizational policy regarding communication an overall guideline to
everyone in the organization regarding how normally expected to behave in this matter,
Organizational rules and regulations
Organizational rules and regulations affect the flow of communication by
prescribing the subject matter to be communicated and also the manner through which
those are to be communicated. The rules may restrict the flow of certain messages and may
leave many important ones. On the other hand, communication through proper channel in a
specified way prescribed by these rules delays it and works against the willingness of
persons to convey the message. This barrier is strongly operative in Indian Public Sector
enterprises where observance of rules and regulations are more rigid.
Status relationships
The placing of people in superior subordinate capacity in the formal organization
structure also blocks the flow of communication and more particularly in upward direction.
Greater the difference between hierarchical positions in terms of their status greater would
be the possibility of communication breakdown.
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Complexity in organization structure
In an organization where there are a number of managerial levels, communication
gets delayed. Chances of communication getting distorted are more in case of upward
communication, because people generally do not like to pass up the adverse criticism either
of themselves or of their superiors.
Organizational facilities
Organizational facilities provided for smooth, adequate, clear and timely flow of
communication may take a number of forms. Some of these have been mentioned earlier in
the communication media such as meetings, conferences, complaint box, suggestions box,
open door system, social and cultural gatherings etc -If these are not properly emphasized
generally people fail to make effective communication.
4. Personal barriers
A plethora of factors internal to the two parties sender and receiver- to this process
also exert important influences on its operation, as communication is basically an inter-
personal process.
a) Barriers In superiors
Attitude of superiors
The attitude of superiors towards communication in general or in at t, particular
direction affect the flow of message in different directions. For example, if this attitude is
unfavorable, there is greater possibility that messages would not flow adequately from and
or to superiors.
Fear of challenge to authority
A person in the organization always tries to get a higher position and prestige to
satisfy his needs. As such managers in general try to withhold the information coming
down the line or going up as frequent passing or information may disclose their weakness.
Insistence on proper channel
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One of the basic features of superior’s exercising of the authority is that they wish
to remain in communication links and they do not like an. type of by - passing in
communication.
Lack of confidence in subordinates
Superiors generally perceive that their subordinates are less competent and capable,
they are not able to advise superiors or they may not have some information coming
downwards.
Ignoring communication
Sometimes superiors consciously and deliberately ignore the communication from
their subordinates to maintain their importance.
Lack of time
Superiors feel, whether correct or otherwise, that they are overburdened with the
work and they have little time to talk to their subordinates.
Lack of awareness
Sometimes superiors may lack awareness about the significance and usefulness of
communication in different directions in general or of a particular subject-matter. In such a
case, communication flow is blocked.
b) Barriers in subordinates
Vertical communication in either direction can take place only when subordinates
also actively participate in this process. There are various factors in the subordinates that
adversely affect such active participation on their part. Some factors which have been
traced in the case of superiors are also applicable here, such as attitude, time availability,
awareness about the significance, etc.
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Lack of proper Incentive
Lack of motivations to communicate also prevents subordinates to communicate
upwards. The ward and punishment system of the organization is more responsible for this.
If a novel suggestion by a subordinate does not evoke any attention from the organizations,
he would not convey it.
How to Make Communication Effective
There are various guidelines for making effective communication. American
Management Association has suggested ten commandments of good communication.
Clarity in idea
The communicator should be quite clear about what he wants to communicate.
Communication is a process starting with ideation which includes generation of ideas
which are meant for communication. This is the subject-matter of communication and may
include opinions, attitudes, feelings, views, suggestions, orders etc.
Purpose of communication
Every communication has some purpose, the basic purpose, of any communication
being to get behavioral response from the receiver of the communication. However the
ultimate objective may be extended further, for example, getting an order accepted by the
subordinate. The communication should be directed towards this objective by the efforts of
communicator.
Empathy in communication
The way for effective communication is to be sensitive towards receiver’s needs,
feelings, and perceptions. This is what psychologists call empathy in communication,
implying putting laze in other’s shoes.
Two-way communication
20
Communication is a two-way traffic and this fact must be realized in
communication. Two-way communication brings two minds together which is the basic
core of any communication. It involves a continuous dialogue between sender and receiver
of the massage.
Appropriate language
The subject-matter of communication is transmitted by decoding it into some
symbols. Such symbols may be in the form of words, either spoken or written, and
gestures, if words are used, the languages used for communication should be such, which
is understandable by the receiver. Technical terminology and multi-syllable words may be
impressive looking, but they can also be troublesome to the listener. One way of making
the communication simple is to use repetitive language with which receiver is quite
familiar.
Supporting words with action
Often it is said that action speaks louder than words. While communicating, the V
sender may use the actions to emphasize a point. This will ensure seriousness in
communication.
Credibility In communication.
One criterion for effective management communication is that demonstrated
through his competence that he Is worthy for trust must also maintain his trust and
creditability. Thus any communication which is based on this trust and creditability will be
followed subordinates.
Good listening
A communicator must be a good listener too. By this process, he is not only giving
chance to others to speck but he gathers usual information for further communication. By
concentrating on the speaker’s explicit and implicit meanings, the manager can obtain a
much better understanding of what is being said. Nicholas has identified managers suffer
from some common habits of bad listening. Davis suggested ten points which may be
observed in listening. These Stop talking, put the talker at ease, show the talker that you w
21
to listen to, remove distractions, empathies with the talker, patient, hold your temper, go
easy on arguments and criticism, questions, stop talking. He has emphasized stop talking
because without stopping talking, one cannot listen to.
Key concepts for review
Process of communication
- Encoding
- Grapevine
- Semantic Barriers
- Psychological Barriers
- Organizational Barriers
- Personal Barriers
- Art of listening
LISTENING
Listening an important aid to communication. Whenever a person communicates
anything orally, it will reach the communicate only when he listens to it. Listening is
different from learning. It involves much more than hearing. Hearing is simply perceiving
sound. When you perceive a sound, you are merely aware of it. You don’t necessarily
comprehend it. On the other hand, when you listen, you interpret and assign meaning to the
sounds.
Keys to Better Listening
Following are considered as the keys to better listening.
1. Undivided Attention: While listening to a lecture, one should give the speaker,
his/her undivided attention. In other words, he has to pay more attention to what the
speaker says than to how he says it. Listeners have to focus on the content of the talk and
do not overly concerned about how the talk is delivered. Speaker may have dressed
22
inappropriately, spoken very fast, appeared nervous. Do not bother. Always give
importance to what is said than how it is said.
Similarly, don’t miss a topic simply because it is presented in an uninteresting
manner. Some information that may be boring in fact may prove to be wry much useful.
2. Be Open-minded: While listening to a speech don’t look at whom you are
listening to or what the topic is etc. Keep your emotions under control; listen objectively.
You should be willing to accept new information, ideas, points etc., if they are really
useful.
Don’t look at the situation as a win/lose situation. Think it of as a win/win
situation. Because, the speaker wins by convincing audience of the merits of his position,
and the audience win by gaining new information and ideas, which will help them in
performing their duties effectively.
3. Actively Involve Yourself Mentally: While listening to a lecture, actively
involve yourself in it. Don’t get distracted. Repeat the important ideas, which the speaker
put before you to yourself. This will be of very much useful to understand the lecture
better. If you feel that noting down the points will be helpful, note down the main points in
a brief manner. Don’t become so busy writing down the facts that you miss the message.
4. Listen with a Positive Attitude: Mostly, listeners fail to listen because they are
not mentally prepared to listen. This is not correct. Li4eners should listen with a positive
attitude.
5. No Interruption: Interrupting a speaker creates a barrier to effective
communication. It may be due to impatience, time pressure, etc. Such interruptions have
many negative consequences. They are considered as rude. They tend to drag out the
exchange of information instead of speeding up.
6. Bodily Exhibitions: A listener must show himself that he is interested in
listening. Non-verbal signs can be used to exhibit affirmative head nods and appropriate
facial expressions, eye contact etc., convey certain things to the speaker.
23
7. Ask Questions: An effective listener always asks questions, clarifies doubts,
seeks explanations, and ensures dear understanding. This makes the speaker realise that he
is really listening.
8. Do not Overtake: Some people instead of listening to the speaker “till he
completes his version”, speak their own ideas or points. Listening is the price one has to
pay to get the people talk. An effective listener will never overtake the speaker. One cannot
talk and listen at the same time.
9. Put the Speaker at Ease: By your attitude, help the speaker become relaxed and
aware of a willing listener. Be not only seen to listen, but felt to listen. And use eye
contact.
10. Listen Patiently: The speaker is entitled to be heard, even if you feel his
approach is wrong.
11. Avoid Premature Arguments: Don’t interrupt to question or argue about
facts:
12. Remove Distractions: Don’t play with papers, pencils or anything else.
13. Indicate Acceptance: An occasional ‘yes’ or ‘I see’ or even a nod of the head
indicates attention. It can also acknowledge what is being said.
14. Observe Nan-verbal Cues: Search out the main points. Observe the non-
verbal areas such as tone, pitch, physical gesture etc., which too convey meaning to the
message. A listener may note them down as these will help in revealing if the speaker
appears to be sincere in his views.
15. Avoid Fake Attention: Many listeners mistake silence for listening. They
develop the habit of faking attention. They steadily fix their eyes on the speaker and try to
pretend as good listeners. They usually miss out many important points made by the
speaker.
16. No Personal Bias: It is always desirable to drop personal biases and attitudes
about a speaker arid his views. Listeners often prematurely dismiss lectures as
uninteresting. They assume so and let their mind wander somewhere else. .
24
VI. Channels of communication
Today’s dynamic business requires many mechanical devices for fast of quick
communication for manages to make effective decisions. A manager must communicate
both internally and externally.
I. Internal Communication
1. Oral communication
a. Face - to - face communication
Oral communication is the most popular means of transmitting - messages, whether
in business or social set up. It is used more often than any other type of communication. *
b. Mechanical devices
i) Staff on location
The superior appoints a staff for the delegation of authority. He communicates with
the concerned worker regarding his work at the time of working hours.
ii) Telephone
In today’s fast moving competitive business world, telephone is one of the most
commonly used means of oral communication. It is to make appointments, to establish
valuable business contacts and numerous other things.
Advantages
1. lt saves time
2. Effective if voice is modulated
3. It helps for immediate feedback.
4. The communicator can make sure that his communication has been well
understood and the communicator can have his doubts clarified.
25
Disadvantages
1. They cannot use facial expressions.
2. Since telephone service, especially in India is still far from satisfactory; a lot of
time is wasted.
3. A telephone message does not provide a permanent record for legal purposes. .
4. Nuisance of wrong numbers
5. Dependent entirely on voice modulation
6. Greater chances of missing or misinterpreting something.
iii) Intercom or. Inter-communications
The internal telephone extensions may be brought together on a private board and
control for inter-communication. Any person or department having an extension line can
get into conversation with an outside line or with another extension line of the same office
without going through the central telephone exchange. If such a private switch board is
operated and controlled by an operator employed by the office, it is known as PBX (private
branch exchange)
If there is no operator an automatic switch board is installed for the same purpose,
it is known as PABX (private automatic branch exchange).
iv) Dictating machine
Another mechanical device used in oral communication is dictating machine or
Dictaphone. It is just like a tape recorder and it records the message given by the superior.
It is a substitute for the short hander. If the superior is free he will dictate it on the machine
when the typist is free he will types that matter.
2. Written Communication
A. Through actual delivery
i) Messenger service
26
Written communication is as essential as oral communication. In this written
communication, messengers were used to transfer the matters both internally and
externally. In this type of communication, the superior will write the matter or type it and
he gives to the messenger, the messenger will hand over that particular file to the
concerned party as soon as possible without any delay.
ii) Mechanical devices
a. Pneumatic tubes
Pneumatic tubes are located throughout the office. The basic principle of a
pneumatic tube is a hollow tube in which acun-entofairis forced from one end to the other
end. It transports documents from one department to another. The initial cost is high, but
the maintenance cost is low.
b. Conveyor, systems
A conveyor system is used. in all offices. Documents are attached to the overhead
wire which moves along supported chains and carry the documents from one place to
another. Horizontal conveyor systems transport files in the same floor, while .a vertical
conveyor system transports documents from top to bottom.
c. Lifts
Lifts may be manually operated .or electrically operated. When documents have to
be passed continuously from the top floor to ground floor crossing 5 or 6 floors, this
system is used.
B. Without delivery
I) Tele Printers
Tele printer works with the help of the type writing machine to send the message
from one place to another distant place. In this method, we can type the message in one
27
place and it will be automatically typed at the other centre. This tele printer is based on the
law of electro - magnitude, and so it sends the message very quickly.
`i) Closed - circuit television
In very big organizations and factories this closed circuit televisions are used.
Because it is very difficult to supervise each and every one’s work, closed circuit
televisions are fitted in important junctions and are carefully watched by the top authority.
This helps to reduce the cost of production by decreasing the number of supervisors in the
company.
II. External Communication
1. Oral Communication
a. Telephone
The telephone is the most important tool of communication employed. in the
business world today. A telephone is a great tactility; its quickness is its greatest
advantage. It saves time and money and ultimately it is a cheap mode of communication.
The disadvantage of telephone communication is that one is not sure of getting the
number when it is wanted and lf one gets the number the person called may not be
available or may avoid talking.
b. Facsimile (Fax)
This modern machine facsimile or Fax is used to transmit visual materials such as
diagram, illustrations, photographs or artworks. This is connected with a telephone. One
can transmit the information through the fax to a distant place where an identical copy of
the document is reproduced by the receiving fax machine. The message is electronically
scanned and signals are transmitted to the receiving end.
We can send important documents like certificates, degrees testimonials,
agreements and contracts from one place to another place at the speed of a telephone call.
c. E-Mail
28
This is popularly known as Electronic Mail. This is also similar to fax but are
connected by two computers. The message is typed on the computer screen at one end and
is conveyed to the other computer through electronic impulses.
If the computers have fax, telephone or telex facilities attached to them, E-mail can
be used .to transmit telephonic messages or to send important documents.
Advantages
1. It can be easily stored for future reference.
2. It is quick and time saving.
3. lt both persons are simultaneously sitting at both ends, clarification can be easily
sought.
4. E-mail messages can be made highly confidential by using codes.
d. Tele conferencing
It is now possible to link one telephone number with many telephone numbers
simultaneously, leading to a mini-conference out meeting each other face-to-face. It saves
costly executive time money. We can even attach television (video facilities) to enable
people to see each other while talking.
2. Written Communication
a) Postal & Telegraphic Services
In many business organizations most of the business transact are held only by the
postal services. It is an effective communication least cost of production. Letters, parcels
are sent through the Offices: QMS (Quick mail service) Post bags. post boxes, insurance
V.PP. are the facilities given by the post offices to the commercial sectors. Likewise
telegrams were used for quick transmission.
b) Tele-fax
It is the latest system of machine used in highly, professional offices. In these
system drawings, photographs, documents, are sent through by means of electronic system.
29
The documents are fed at one end by pressing a button; a similar image is formed at the
other end.
VIII. Elements of communication
The basic elements of communication are:
1. Sender i.e., Communicator: Sender is a person who sends a message. He may be
a writer, speaker or actor.
2. Receiver i.e., Communicatee: Receiver is a person who receives a message.
The receiver may be a reader, listener or observer.
3. Message: Message is the subject matter of communication. It is in the form of a
verbal or non-verbal language. Verbal language means spoken or written words or
numbers. Non-verbal language can take the form of facial or body gestures or expressions.
4. Channels of Communication: Channel is the media by which the message is
flowed from the communicator to the communicatee. It acts as a connecting link between
them.
5. Feedback: The last stage in the communication process is feedback, the receiver
makes it known to the sender that he understood the message. The communication process
is said to be completed when the communicator receives the feedback. Feedback is the
response, reaction or reply made by the communicatee.
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Unit – II
COMMON ERRORS IN LETTER WRITING
Commercial English which was in vogue during the Victorian period has lost much
of its charm these days. They have become meaningless jargons, lacking sincerity. The
use of simple, natural English is preferred in commercial correspondence.
32
Some examples:
1. Commercial English Yours of the 18th instant to hand and the same shall receive
prompt attention.
Simple Usage: We thank you for your letter of the 18th January 1985. it shall receive
our prompt attention.
Instead of Say
2. We beg of acknowledge receipt of your
favor
We have received your letter.
3. We enclose herewith or Enclosed please
find
We enclose
4. I am to point out that the prices quoted are
subject to at trade discount of 25%
The prices quoted are subject to a trade discount of
25% (The ‘words’ I am to point out are redundant.
5. With a view to a discussion of the matter To discuss the matter.
6. it will be appreciated that owing to
fluctuation in prices it is impossible for us to
quote
Owing to frequent price changes we fare unable to
quote.
7. Adverting to your favor Referring to your letter
(or)
Thank your for your letter
8. We beg to thank you We thank your
9. The favor of your early reply will oblige I shall be glad to hear from you soon.
10. Assuring you’re of our best attention at all
times. / Thanking you in anticipation. We beg
Meaning fewer endings. Hence better to avoid
them. Altogether.
33
to remain / Awaiting the favor of you early
11. As per According to
12. At your earlier convenience As soon as possible
13. Only too pleased to Very glad to
14. please be good enough to advise us f Please tell us
15. Contents noted Unnecessary expression; hence can be omitted.
16. 2nd inst., Proximo, ultimo Better to mention the name of the month.
17. Our Mr. Antony Mr. Antony, our Sales Officer.
18. Commence Begin
19. In the course of his speech, he talked on
the question of security
During his speech, he talked about security
20. Rules have been made for the avoidance
and settlement of disputes
Rules have been made for avoiding and settling
disputes.
21. Achievement of this goal is not possible
without the co-operation of the staff
This goal cannot be achieved without the
cooperation of the staff.\
22. We shall advise you as soon as goods are
ready
Inform
23. We don anticipate any difficulty in
meeting your requirements
expect
Correct the following:
Questions Corrected Answers
34
1. 9 persons …………….. (Nine persons)
2. Twelve days……………..
(Rule: Figures must be used for numbers 10
and above; they must be spelt out if below ten.)
(12 days)
3. Thirty five members attended………..
(Rule: A hyphen must be used to join the
compound numbers from 21 to 99)
(Thirty-five)
4. 0.45 = …………….
(Rule: Two zeroes must be put before the
decimal point in case there is no integer in a
figure )
(00.45)
5. Twenty-fifth December 1989………..
(Rule: Date must be written in figures)
(25 December 1989)
6. 9’0 clock………
(Rule: if 0’clock is used to indicate time, the
numeral must be spelt out
(nine 0’clock)
7. Please acknowledge the receipt of this letter.
(Please acknowledge receipt of this letter)
8. The Sales Manager and not his assistants were responsible for this omission.
(The Sales Manager and not his
assistants, was responsible for this
35
omission.)
9. One of the directors has resigned. (One of the directors has resigned.)
10. The committee is unable to agree on the
proposal.
(The committee has unable to agree
on the proposal.)
11. The Committee have submitted their
report
(The committee has submitted its
report. Here the committee is
referred to a single unit.)
12. None have turned up for the meeting (None has tuned up for the
meeting.)
13. Everybody is entitled to vote at the
meeting.
(Everybody is entitled to vote at the
meeting.)
14. Neither the chairman nor the members has
tuned up.
(Neither the chairman nor the
members have turned up.)
15. Two-birds of this pole are rotten.
(Rule: The complete subject determines the
number of the verb.)
(Two-thirds of this pole is rotten.)
16. Some of the files have been stolen. (Some of the files have been
stolen.)
17. One thousand rupees are a lot of money
for the poor.
(One thousand rupees is a lot of
money for the poor.
18. The number of files missing are very
small.
(The number of files missing is very
small.)
19. Mr. K is more successful than me. (I)
36
20. We have received your order of 1st June
1980. and the same is receiving attention.
(it)
Kinds of Business Letters
Name the different kinds of, business letters.
With the widening of the area of business operations as well as with the stupendous
increase in the volume of business done by each. Business unit business letters take
different forms and are of diverse varieties
The various kinds of business letters are briefly enumerated below:
1. Letters of - Enquiry and Replies:
These are meant for knowing the availability of goods price lists, V terms of trade,
request for lowest quotations etc, and replies ‘from business units. V
2. Offers and Quotations: V
These are letters in the nature V of a circular announcing offer of goods cautioning
the danger V of poor supply in future and emphasizing the benefits of present buying.
Letters containing quotations sent in response to a request theref9r state the rates at which
goods will be offered for sale.
3. Orders and their Execution:
Letters placing orders with firms V for the supply Of V specified quantities of
goods, letters intimating execution of orders or requesting condonation of delays come
under this category.’
4. Status Enquiries:
37
Letters written to business hoses to ascertain the advisability of granting credit to
specified parties when fresh applicants for credit approach them are called letters of status
enquires. The persons addressed are the firms furnished as references by such credit-
applicants.
Replies furnishing opinion on the Credit standing of parties referred to also come
under this type.
5. Complaints, claims and adjustments
Letters of-complaints are many. They may be with regard to poor quality of goods
supplied, short supply, delay in the execution of orders etc. Replies assuaging the wounded
feelings, called adjustment letters require to be drafted with tact, ad courtesy.
6. Circular Letters:
These letters convey messages meant for a number Of parties —may be customers,
business friends, dealers etc.
Example: Removal of business to new premises, obtaining an agency, clearance
sales, retirement of a partner etc.
7. Letters Relating to Agency:
Applications requesting grant of agency, letters granting agency, letters seeking
reasons for poor sales performance etc. come under this type.
8. Collection Letters (Dunning Letters):
These are letters demanding settlement of dues, granting time extension for
payment threatening legal action against continued default etc.
9. Application for a situation:
These relate to applications put in for appointment to posts advertised or heard
about. Appointment letters and letters verifying reference will also come under this
category.
10. Letters of Recommendation.
38
They may be testimonials given or letters in traducing business friends to other
business houses for help.
11. Letters Relating to Export and Import:
These comprise letters seeking price quotation Placing orders with foreign
suppliers’ advice of shipment, letters of advice of sale etc.
12. Bank Correspondence.
Correspond, with the bankers by any business house is very frequent. Standing
instructions to bankers, letters – regarding dishonored checks, those requesting loan
facilities, correspondence by bankers to business houses (e.g asking— 1. for production of
more securities) letters from ‘banks to their Head offices and vice versa, letters from one
bank to another —alt these come’ under this type.
13. Insurance Correspondence:
Requests for cover against fire or marine risk, notice of damage by fire together
with claim, replies of insurance companies accepting liability or rejecting claims come
under insurance correspondence
14. Secretarial Correspondence:
The correspondence of the company secretary with the directors, shareholders,
office staff, Registrar of joint stock companies, correspondence with various government
bodies with banks, stock exchanges, etc. come under secretarial correspondence.
15. Correspondence with Government Departments:
No business unit can function these days without having something to do with
various government departments. Obtaining licenses, submission of various statical data,
seeking clarifications on various government orders-all come under this category.
39
These are the important kinds of business letters.
Note:
If a question on kinds of business letters is asked under section A or B, itls enough
to enumerate the various kinds of business letters given as paragraph headings in this
answer, In other words, n explanation is needed.
Structure of a Business Letter
A Business letter consists of eight parts
1. Heading
2. Date
3. Reference number
4. Inside address
5. Salutation
6. Body of the letter - consisting of:
a) Introductory paragraph b) the message c) closing paragraph
7. Complimentary close or subscription’
8. Writer’s signature and designation
Spacing the parts of the letter
The spacing which must be observed in a letter are indicated in the layout shown
below:
The Layout of a Business Letter
40
________________________________________________________________________________
_____________________________________________
_______________
_______________________________________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________________________________________________________________________________________________________
______________________________________________________
Ref.NoInside address
Salutations
Heading
Date
Message
Complementary close and signature
Heading
The name of the organization is printed at the top of the letter and the address at the
right hand side. It may also give particulars such as description of the business, telephone
number telegraphic addresses of its branches and the address of its head office. The
following letter-head is a typical one. The printed letter head thus constitutes the sender’s
address enabling the addressee to reply.
Date
The date is typed next to the address, at the right side of the letter there are three
ways of denoting the date:
(i) English Style - Englishmen generally write the date as, “30th October 1998”
(ii) American Style - October 30, 1998
(iii) Oxford University Press Style - 30 October,1 998.
41
VENGATESWARA LIMITED(Dealers in Textiles)
Phone: 654 561, Ashok nagar,Tele: MadrasGram: ‘Balaji’
Ref.No …………..
In the English style the date is written in the order of day, month and year. In the
American style ‘it is in the order of month, day and year. The Oxford style is similar to the
English except that the day is not followed by the suffixes-st, nd, rd and th. In all the three
types, a comma is placed before the year and a full stop after the year.
3. Reference Number
Reference numbers are often quoted at the left hand side of the letter but not on the
same line of the date. The reference may take a variety of forms. Let may serve to identify
either the department other section of a department from where the letter was written.
e.g.- Our, ref: Dep. B\o.
or it may refer o the file in which the correspondence is to be found:
e.g.- Our ref: R 468.78
It is also common that the reference consists of the initials of the person dictating
the letter and of the typist:
eg. - Our ref: RG\YR .
The reference enables the original writer to identify the particular member of the
staff who had dealt with the letter. Failure to quote a given reference causes much
inconvenience and surely it is discourteous.
4. Inside Address
This is the address of the person to whom letter is directed it is typed from the left
hand margin with three line spacing below the reference line. This inside address is useful
to the writer. Normally, copies of such letters are filed for future reference. Without the
inside address, we can not identify the addresses at that time. It may be either in the
indented form or in the block from as shown below.
Indented form Block form
Messers. Chellam & Co. Messers. Chellam & Co.
42
444. Main Road 444. Main Road
Kovilkpatti Kovilkpatti
In the indented form each line is indented five or more line spaces to the right of
the first letter of the preceding line. In the block form each line starts at the margin, and
punctuation is omitted wherever it is not necessary. The former4 form is commonly used
in England and the latter in the U.S.A. But there should be consistency in the use of any
one particular form. Students are advised to follow block form consistently in all letters.
The address should be correctly punctuated. Commas should be placed after the
firm’s name after the door number and after the name of the street. A full-stop should be
upt after the name of the city.
Inside address need not be written on a post card, since outside address appears just
on the other side.
Modes of addressing
Mr, Miss, Mrs and Messrs, are the ordinary titles used for addressing
correspondence. There are also other titles of rank such as Doctor, Professor, Sir, Colonel,
Captain, Reverned.
Mr. is the appropriate mode of addressing in general, it becomes a must when
forename or initial is not known.
(e.g.) Mr. R. Kaviarasu / Mr. Kaviarasu
Miss - The name of an unmarried woman should be preceded by Miss or Selvi.
(e.g.) Miss K. Sutha / Selvi N. Geetha
Mrs- The anme of a married woman should be preceded by Mrs. (Mistress) or Tmt.
(Thirumathi)
(e.g.) Mrs. Gandhi / Mrs. Indira Gandhi
In foreign countries, the practice is to write the husbands name ( or initials) and his
surname after ‘Mrs’
43
(e.g.) Mrs. Robert Kennedy or Mrs. R. Kenney
If the husband’ name or initial is not known, surname alone may us used after
“Mrs”. This is quite common.
(e.g.) Mrs. Kennedy / Mrs. Naidu
In western countries, normally the Chirstain name” of the woman is not written
except in legal documents.
But in India, the common practice is to insert personal name between “Mrs” and
the husband’s surname for easy identification.
(e.g.) Mrs. Indira Gandhi
- Personal name and husband’s surname
Mrs. Gandhi
- Husband’s surname alone.
Anyway, a married women should not be addressed by her personal name below.
Wrong: Mrs. Sarojini / Mrs. Chandra
Messrs: it is the abbreviation of Messiers, it is the plural of Mr. Therefore, it is
appropriate to use it in the plural where Mr (or Esq’) woule be used in the singular. But
there are some difficulties in using this rule.
In addressing a firm
Partners constitute a firm, custom has prescribed the rule that firms are addressed as
Messrs, when the firm’s name includes a personal element, it should not be addressed as
“Messrs”. When its name is already preceded by a courtesy title or by the word the.
Dr. Nanjappa & Sons.
e.g. The Himalaya Trading Company
44
in addressing incorporated bodies
The use or non use of Messrs in addressing an incorporated body like a limited
company is much a matter of opinion. Although limited company is an artificial person in
the eyes of law, it cannot logically be addressed except through an agent. Besides, there is
a probable gain of efficiency if we address correspondence direct to the person concerned
like the managing director, the sales manager, the personnel manager and so on. When we
do not know which of the company’s officers will deal with our letter, we may address it
to, ‘The Secretary’ or The Manager’.
Recommended practice
a) For firms
Messrs. is used to address a firm that has a persona! name.
e.g. Méssrs, R.K. Sen & Co, (Personal name)
b) For incorporated bodies
It is better to address correspondence to the particular officer concerned.
e.g. The Manager,
c) Some don’ts
The title ‘Messrs should not be used in the following cases:
1. When an individual is addressed:
Mr. K.A. Raja, Managing Partner,
The chief Accountant Morarji Mills Ltd.
2. When a title is already included in the address:
Rajah Sir M.A. Muthiah Chettiar & Co., Sri Meenakshi Govt.College for Women.
3. When the title is impersonal
Rainbow Trading Stores
4. When the title beings with The’
45
The New deal Radio Co.,
5. The Salutation
The salutation is the complimentary greeting when the writer begins his letter. This
appears just three line spacing below the inside address, close to the left hand margin. The
form of salutation depends upon the writer’s relationship with his correspondent.
The salutation “SW’ is commonly used in all government correspondence, and in a
vary formal business letter.
For ordinary business purposes. Dear Sir or Dear Madam* (for both single and
married :woman) is used for addressing a single person. Dear Sirs, (or Mesdames*) for
addressing two or more (especially when a letter is addressed to a firm.) Salutations., are
not used for office memoranda. Like formal invitations, they are written in the”thi rd
person.
Dear Mr. Ravi’ and other similar forms may he used where the correspondents are
personally known to each other or where the writer wishes to foster a personal touch to the
letter as a matter of business policy.
‘Gentlemen’ is a formal mode of addressing like Sirs. Now its use is specially
adopted for letters and reports addressed to bodies such as boards, committees and
councils. This salutation is not widely used in ordinary business correspondence.
It should be noticed that the salutation is always followed by a comma.
6. Message
The message refers to the information to be conveyed to the addressee. Hence, this
is a most important part of the letter.
This should be written in clear and’ concise English with correct paragraphing and
punctuation. Commas and question marks should be used sparingly to have exactness of
46
meaning and to’ avoid ambiguity. Typing - of the message begins two clear line spacings
below the Salutation. Paragraphs are similarly spaced
The body of the business letter usually consists of the following three parts:
i) Opening Paragraph
ii) Main communication and
iii) Concluding paragraph
The various subjects dealt with should be treated in the order of their importance
and a separate paragraph should be devoted to each subject. . .
a) Opening paragraph sees as an introduction to the suhject matter dealt within the
letter. It should begin with such good natured and friendly, expressions as:
We are happy to - “I “We are glad that ‘‘ I “We thank you for your’
b) The body’ of the letter depends upon the circumstances. If the letter is short, and
deals with only one matter, one paragraph is sufficient. When there are several matters to
be mentioned, however, each should be dealt with in a separate paragraph. This will
facilitate easy reading.
C) The concluding paragraph consists of a few sentences to conclude the letter
smoothly. This paragraph should be as effective and convincing as possible because this
part of the letter is likely to stay in the memory of the reader.
A few examples:
“Assuring our best attention at all times’
“I should appreciate the opportunity of calling on you to demonstrate our new
noiseless typewriter”.
‘We accept the full blame for the unfortunate errors, and offer our sincere
apologies”. . . ‘
7. Complementary Close or Subscription
47
This consists of words expressing the regard of the writer towards his
correspondent, it is simply a polite way of concluding a letter. It should always be
consistent with the salutation: It should agree’ with the salutation not only in number and
wording. bu also in style. It is typed two line spacing below the last line of the body
Salutation Complimentary close
1. Sir, Gentlemen,
Dear Sir, Dear sirs,
Dear Madam, Dear Mesadames, Yours faithfully,
2. Dear Mr. Ravi
Dear Mrs. …
Dear Miss…….
Dear Yours sincerely
The most commonly used subscription is “Yours faithfully” “Yours sincerely” is
used in business letters only. whether writer is well acquainted with the person
addressed .In some case, depending upon the intimacy between the writer and his
correspondent, an expression
8. Writer’s Signature arid Designation
It is the last part of the letter and is placed after the complimentary close. It is the
signature of the writer or the name of the him or .company \ which is represented. Those
who cannot sign legibly hive their names typed below their signatures. Signatures on
commercial letter vary according to the authority of the person signing the letter.
“Per Pro Signatures”
In a large organization. It is impossible for the head of the organization :o de with
the entire correspondence. Hence, certain employees are authorized to sign for the firm.
They are said to sign per procurationment [per pro or p.p)
48
The authority may result from custom or from the execution of a
>roper ‘Power of Attorney’.
The existence of the proper authorization should always was be indicated y the
signature, thus:
per pro Muktha & Co..
P.C. Sekar .
An employee with no social authority tG bind the firm would sign
Kavitha & Co.. . or For Kavitha Co.,
per K. Dhasan . K. Dhasari’
The modem tendency is to omit the per instead the designation of the signatory
(e.g. Personnel Manager, Sales Manager or Secretary) is usually added. Then the recipient
wilt be in a better position to estimate the exact scope of powers and duties of his
correspondent.
Firm
A partner signing for his firm may write the name of the firm without the addition
of his name or initials:
SANKARGANESH&CO
Woman’s Signature
A woman, especially when Writing to a stranger. should indicate whether she is
married or single so as to ensure that she is properly addressed in any reply. \She may do
this in the (following way s when she writes her name€ below her signature:
married: (Signatue) •
(Mrs. UMA Arasu
49
Single (Signature)
(Ms. R. Sugannia)
Enclosures: When documents or papers are enclosed with the letter, it should be
indicated on the left hand bottom corner of the letter by writing the word ‘Enclosures, or
Ends’.
(e.g.) End : one cheque.
Postscript (P.S.)
If the writer wants to write something after the completion of the letter, he writes a
postscript. The postscript begins with its abbreviation P.S. As the P.s. is a part of the letter,
it acquires the signature of the writer or his initials. Postscript should be avoided as far as
possible and should be used only in unavoidable cases.
The initials of the person dictating the letter and of the person typing it are often
placed at the bottom of left hand corner of the letter. They are typed in capitals and
separated by an oblique line.
(e.g.) V.R.1K. C.
The first initials indicate the party who has written it arid the second initials
indicate the party who has typed it.
Use the correct Proposition
Arrive at the 15th June
Sold to a competitive price
Supply your at the date fixed
Your order from the 20th June
Arrive on the 15th June
Sold at a competitive price
Supply your on the date fixed
Supply you of the 20th June
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No demand in this design.
The terms to which we are prepared to well.
Replenish our stock with low prices.
No demand for this design.
The terms on which we are prepared to sell.
Replenish our stock at a low prices.
Essential of Good Business
Business letter-writing
Communication is the life-blood of any business. A good lot of business is done by
means of correspondence. Daily, thousands of letters, as silent and reliable salesmen,
move out and move in to accomplish their ends. Letters (a) establish contact between two
parties separated by long-distance (b provide w6tten evidences of what pass on between
persons resulting in contractual relationship and (c) serve as a cheap mode of
communication.
Being different from personal letters, business letters ‘are to be i written with
special attention and in a particular style. The following may be considered for this
purpose:
1 Choose the right word t” convey the proper meaning of that you want to express.
2. Choose the simple word to make your letter easily understandable. The tendency
to use, more complicated and round about methods. of expression of words or idiomatic
sense should be avoided.
eg. We shall be in a position to effect delivery - This may be written as:
We shall be able to deliver.., or We can deliver
3. Use adjectives and-adverbs sparingly - íe., they must be used only then they are
essential and contribute something to the meaning of the statements.
4. Avoid unnecessary prepositional phrases and simplify your language. Prof.
Gartside brings out this common failing in business letters (viz using cumbersome-
substitutes for a single word or a few ,simple ords). He gives the following as examples.
Instead of Say
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In the event of …………. If
So as to
With a view to
With the object of
Having regard to
to
On the question of
With the reference to
With regard to
Object to
On the object to
About/conceming
Avoid exaggerations : As in the commercial advertisement a common mistake in
business letter writing is to exaggerate things ir order to produce a striking effect. This is al
right in advertisement but not desirable in letters.
6. Avoid foreign phrases and idioms which are used common by in English. They
have no place in Business English.
Information technology and the future
Modern business depends on two vital areas, management and communication.
Ineffective management and communication will lead to fall in morale, low productivity,
poor turnover and ultimately to financial disaster. Effective communication takes place
only if a message or information gets transmitted from one individual (or group) to another
and obtains the correct and anticipated response from the receiver. Nowadays,
communication is dependent on high technology generally called Information Technology
(IT). Information Technology has growth immensely having great potential for speed and
efficiency. The revolution in IT has been accelerated by the invention of the silicon chip
followed by the modem digital systems. Together, they have transformed compunction by
52
replacing the traditional forms of communication including the analogue telephone.
Instantaneous communication of a large volume of signals around the world has become a
reality. Soon we will be seeing “cashless banks and paperless offices”. All that we have
studied in the foregoing chapters — Enquiries and offers, quotations and orders,
complaints and civisms may appear unnecessary in a situation where a business manager
sits before his lap-top equipped with a web-camera, negotiating a deal. It is true that
traditional business correspondence should give way to the telephone, telex, the fax, e-
mail, the internet and voice mailing systems wherever speed is the watch word.
However, business communication through letters will continue to have its
influence in business c :‘ls1he high-tech machines can just tell you how you can
communicate efficiently and quickly. But they can hardly tell you what you have to
communicate because they are neither programmed that way nor they can be programmed
to replace human brain. In fact, the development of language as a tool of communication
itself is a technological advancement. But it is with the invention of the telephone and
telegraph that the revolution began.
What does technology mean to business?
The offices will have less man-power and more machine-power. The tables
containing files, in-box trays will be replaced by ‘digital desks’ with sophisticated
electronic devices. Lengthy paper-based time-consuming communication will be
eliminated. Internet, e-mail and teleconferences will become the order of the day. Errors in
letters and documents can be corrected by taking advantage of special editing programmes
like the spell-check The dual advantage for business lies in the increase in speed
complemented by reduction in costs. Storage becomes easy demanding less space.
Benefits of’ technological advancement to business communication
1. Speed of transmission of messages will increase.
2. Accuracy of the transmitted message will be at a higher level than in the
traditional modes.
3. Man-power resource will be saved thus saving resources of energy and time.
53
4. Cost, particularly recurring costs like wage and wage increases will undergo
phenomenal reduction.
Obstacles that hinder technological advancement
1. Reluctance of managers to adapt to the new advancement.
2. Opposition on grounds of retrenchment from employees and their organizations.
3. Reluctance to make heavy investment in an area that keeps hanging at a rapid
pace making the earlier investment obsolete.
4. Poor planning and improper rate of implementation of high tech modes.
Need for Automation
In spite of the obstacles mentioned above, automation is taking place at a hectic
pace. Banks are urged by the Reserve Bank of India, Joint stock companies by the SEBI
and even retail traders by the Tax department to use computers for all operations like
storing, retrieving and communicating information. In this context it becomes necessary
for a student of business communication to get acquainted with some of the technological
advancements briefly explained below:
Fax: A facsimile machine (or fax) can transmit a document, as it is, over long
distances to another fax machine connected through telephone line. The document gets
scanned and converted into a signal and gets transmitted. A ‘fax machine, today can
transmit a page in less than half a minute. Newer machine to being developed to make
transmission even faster. Images, pictures in colour can now be transmitted by faxes. It is
still the best method for transmitting documents, charts, graphs, designs and contracts.
Visas issued by some country can be transmitted to the anxious traveler waiting at another
corner of the world. Faxes produce hard copies that can be filed for future references.
e-mail: E-mail combines characteristics of speaking and writing. One can directly
and immediately communicate with the receiver. One can send a message to another even
if he does not know his whereabouts by just sending it across with the ‘E-mail ID’.
Through E-mail one can reach individuals as well as groups. E-mail communication is
more informal. Formalities observed in a traditional business communication are dropped.
54
The informality can reduce an E-mail message into a rambling message unless one is
careful to put the most important message ‘upfront’. Otherwise these is the risk of
overlooking it or missing it. The following are the exercises involved in sending E-mail.
1. You should be having an E-mail account and a password for your identity. Then
you can log onto a computer.
2 You should know the email ID of your receiver. It is not a postal address.
3. You have to compose the message.
4. The message should be sent to the relevant ID through the computer.
5. To receive your e-mail correspondence, you have to log on and search for the
mail at your ID with your password. You can always delete, store, print or forward a
message through the computer. The commands used in sending and receiving messages
form the front-end and the process of storing messages before reading, the transport of the
mail from one mail-box to another are called the back-end. E-mail ID is not confidential
but the password is confidential..
Internet: A wide range of computer-networks connecting organizations and
individuals to services is called Internet. One can have access to internet through
commercial providers. You can book flight tickets or even railway tickets, hire services or
access the weather at any part of the world through the net.
Tele Conferencing
Aninter organizational meeting need not involve travel hereafter. Members can get
across to each other for a conference or a meeting through telecommunication services.
The advantage of having the person and seeing him at the screen while speaking and
responding to him through the same facility has immense job potential for the business of
tomorrow. High-level meetings can take place among executives using the facility. The
cost of video-conferencing is quite high now.
Voice Mail
55
Voicemail is used in many offices today. The message is recorded in a computer
and can be retrieved by the receiver later if he is not available then. The receiver can access
the message through telephone also with additional facilities.
We are not treating technology as a subject nor is it necessary at this stage. We
have only had a glimpse of the new devices that offices are trying to acquire. The speaking
tube, the telegram and the telex are all getting out moded.
The pager as a device of communication is disappearing as fast as it appeared. But
the telephone as a tool of communication will continue to hold its sway as ‘person to
person’ oral communication has great potential in business. Mobile Phones and satellites
together are revolutionizing communication. More sophisticated versions of the mobile
phone are on the anvil.
Managing technology in Communication
Communication using hi-tech instruments has its own problems. The user has to be
cautious in managing communication and technology. The users have to be wary of the
computer hackers and cyber-crimes. The user friendly high tech mechanisms cannot
distinguish between a genuine user and a hacker. In such a situation, confidentiality of the
communication and the files in the database are at risk of getting affected. One firm can
unethically eavesdrop into the policies, programmes and strategies of a competitor. Viruses
can be artificially created to damage programmes.
In the United States of America there are strict laws that prohibit the sale of
cigarettes to minors. A recent report says that minors below sixteen place orders for
cigarettes through the internet. The seller sometimes asks for their age. False information
enables them to get the cigarettes dropped at their door-steps. Sellers have even sent
compliments like ash-trays and lighters to minors. The law enforcing authorities lament
that they are unable to enforce the law because of net-shopping practices. Another incident
that happened in USA causes greater concern.
In February 2000 a computer hacker operating from Montreal, Canada intercepted
Yahoo.com a popular website and stopped thousands of subscribers from getting access to
the information they sought or the mails they wanted to send. They had to sit before the
56
blank screen of their PC’s. Several websites went out of the circuit. Wall Street trading in
stocks got crippled. The home page of several department stores were removed affecting
millions of dollars of trade. The US Government formed a high level committee from
different national security agencies to find the culprit. The administration was afraid of
national security’s vulnerability in the face of this threat. But finding a culprit sitting
behind a key board in the area of cyber -crime can be compared to the searching of a
needle in a hay stack. The police of two countries jointly investigated and were able tc find
the culprit in ten days. They found him to be just a boy of fifteen. He was arrested and fifty
eight charges were framed against him, all relating to cyber-crime.
They were able to arrest him because as an immature boy he bragged to some
people about what he was doing. The boy said that he merely wanted to test the security of
these webs It is considered safe by knocking then off line. He also, claimed that he wanted
to launch a high security internet company for websites. This incident not only exposes the
vulnerability of high technology but also underscores the need for international
cooperation in developing them as safe and sure means of communication.
Meaning of Business Correspondence
The term correspondence means communication by exchange of letters, telegrams,
written messages etc. that passes between persons. written communication between
individuals or groups on matters of common interest. Hence , oral or face-to-face is not
correspond ‘E” In other words, the term correspondence exclusively stands for written
communication.
The expression “Business Correspondence” or “Commercial Correspondence”
refers to the written communication between two businessman connected with their
business.
Importance of Business correspondence
In spite of the technological progress, which enables man to convey the spoken
word to any distance, the practical need for written word still continues. Every
businessman has to write letters at every stage of performance.. For the purchase of goods,
he has to make inquiries with the suppliers. Again, he has to write letters to offer his goods
57
for sale. Similarly, when complaints are received, he should attend them promptly.
Moreover, he has to retain the relationship with the old customers and establish
relationship with new ones. Every businessman has to write several letters for varied
purposes and without which he can not carry on the business. Thus, business letter is the
lifeblood of Theodore business.
The various advantages that will accrue by effective business letters J can
summarized as follows:
1. Means of connecting with the Outside World: The correspondence is the
principal and sometimes the only means by which business relations with the outside world
are established. It creates a good impression, and a well-drafted letter will pave way to
establish new business connections and invite new customers.
2. Record ‘for future Reference; It constitutes a written evidence of the
communications passed between the two parties and serves as an authenticated record for
the future reference.
Need For Business Letters
In the field of trade and commerce, business letters play a significant role. Every
business, whether small or. big in size, require business correspondence with many people
like suppliers, customers, prospects, Government departments and the like. A businessman,
as day to day activities, has to communicate with different people for different purposes.
For instance, soll enquiries, placing order for goods, executing orders, granting credit,
asking for credit, sending statement of accounts to his debtors, requesting for settling
accounts, canvassing goods. Further, he has to contact with certain Government authorities
say income tax authorities, sales tax authorities, municipalities, corporations etc. to fulfil
various statutory obligations, It is very difficult to maintain contact with all these persons
and institutions personally. The best method to meet all these persons and institutions is
letter correspondence.
Letters are the onycomnu.pic4tioz1.cbannels, which enable the firm to maintain
contacts constantly of the people in the business world because it acts as a messenger. Of
course, there are other means of communication, such as telex telephone, telegraph, E-
58
mail, Ecommerce etc. But they can make only. a temporary impression in the minds of the
receiver. Further they are quite expensive.
Functions of a Business Letter
As L Gartside pursuit there are four main reasons for writing business letters, They
are as follows: .
1.. To provide a convenient and inexpensive means of communication, without
personal contact.
2. To seek or give information.
3. To furnish evidence of transactions entered into, and
4. To provide a record for future -reference.
These reasons can also be termed as functions of a business letter. Besides, there
are other incidental functions like the building of goodwill etc. However, the principal
functions performed by a business letter can be classified into four categories. They are:
1. Reference function.
2. Legal function.
3. Sales function.
4. Goodwill function.
1. Reference Function: (Letters are valid records for ready reference in the routine
of administration) They are highly useful in all business transactions. ince business l’s a
continuous process, and administrative policies have to be shaped not only according to the
current trends but also on the basis of relevant past experience, reference to previous
correspondence becomes necessary) Oral transactions are of no use in those circumstances,
because it is difficult and even impossible for a businessman to remember persons. “Where
memory fails records come to rescue”.
59
2. Legal Function: Letters containing offers and undertakings should be legally
binding. The legal position of the parties with regard to any transaction cars be clearly
distinguished by pursuing the concerned correspondence. In case of any dispute, the
business letters concerned with that transaction could be produced as evidence.
3. Sales Function: Promotion of sales is considered as the primary function of
business correspondence. There are special types of sales letters often drafted to create a
demand for new goods or expand the sales of an existing product. Letters can play the role
of salesmen in creating, maintaining and expanding the market for goods and services. In
fact, every business letter is a sales letter.(,,The ultimate object of every business letter is
either to attract orders from the customers or to retain a customer or to expand a market) .
4. Goodwill Function: Goodwill is essentially a concept of friendliness -with the
community of customer. This friendly contact is established not necessarily by personal
visits but by the polite tone of the message put forth in the business letters. The contacts
are personalized through frequent dispatch of letters on appropriate occasions\Goçdwill
adds a moral and human touch to business routine. A badly written letter creates ill will
among the customers and down grades the reputation of the firm’. Goodwill can be built
up by observing the following technique.
Qualities of a Business Letter
Letter writing, no doubt, Anyone who can write a cogent I house. An effective
business letter should not leave. for further improvement, amendment or modification.
The correspondent must able to collect and classify facts and to present them in a form
that interest the reader, captures his attention, his approval and gets him to take the
desired a all these objectives, the business letter should havdi1ta’1T qualities. They are:
1. Correctness.
2. Completeness.
3. Conciseness.
4. Clearness.
5. Courtesy.
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6. Cheerfulness.
1. Correctness
A good business letter should always be written correctly and should always in the
correct form. The information given in a business letter should be absolutely correct. Facts,
figures, statements, quotations etc must be accurately mentioned. Every detail given in a
letter should, therefore, be carefully checked. Since the letters constitute a record for future
reference, any mistake committed shall land the business firm into trouble.
2. Completeness
The information furnished in a business letter should also be complete in all
respects. Inadequate information shall create a misunderstanding in the mind of the reader.
Therefore, the correspondent mist have complete knowledge of the transaction. lf has full
grasp of the subject and if he knows exactly what is to be communicated, he can easily
write a letter or draft a reply covering all the necessary information. Incomplete
information shall result in unnecessary exchange of letters leading to delay and frustration,
and may even create an adverse effect on the reader.
3. Conciseness
Though the letter to be effective must complete in all respects, it should be as
precise as possible. It is always undesirable to use more shall waste the time of the Writer
and also that of the reader. Besides, the reader shall also be placed in an embarrassing
situation. Lack of conciseness is caused mainly by:
1. Tautology.
2. Pleonasm.
3. Verbosity.
1. Tautology: Tautology means repetition of words I.e., the addition of
words that add nothing to the sense.
2. Pleonasm: Pleonasm means the use of more words than are necessary to
convey the matter proposed. As in the case of tautology, it consists of
61
adding words needlessly what is already implied. For example: “A sole
monopoly a false lie” etc. However, pleonasm is not always a fault. It
may sometimes be used to stress a particular point •:
3. Verbosity: Verbosity refers to the use of many words to express
what could be expressed in a fewer words. The writer can avoid tautology
and pleonasm by omitting superfluous words, but verbosity requires a
different treatment.
4. Clearness
Simple arid clear expression is an important virtue of effective writing. The reader
should not have any difficulty in understanding the matter conveyed by the writer. Clear
writing is possible only when the writer has a clear idea of what he wants to say.
If he has only a vague idea, the expression will also be vague.. It is therefore,
essential for the writer to think dearly before he beings writing.-
As observed by Lord Chesterfield ‘The first things necessary in writing letter of
business is extreme clearness and perspicuity. (lucid). Every paragraph should be so clear
and unambiguous that dullest fellow in the world may not be able to mistake it nor obliged
to real it twice in order to understand it” -
Reasons for Lack of Clearness
The main reasons for lack of clearness can be listed as follows:
1. Incorrect position of words, phrase and clauses.
2. Ambiguous use of pronouns.
3. Use of words, having two meanings.
4. Faulty punctuations.
5. Confused thinking.
5. Courtesy
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Courtesy means consideration for the feelings of others. Courtesy costs nothing.
But much is gained by it. It is like the oil, which removes friction, makes the life smooth
and wins friends. It so ftens the sting of an unpleasant piece of. information, creates
goodwill and produces a favorable response. The business letter, to be effective must be
courteous. A discourteous letter is often very costly. It shall result in loosing of friends and
business.
Courtesy may be shown or a variety of ways - in the general tone of the letter, in
spelling correctly the name of the person addressed, addressing him by his proper title,
making prompt answers, complying with the request when no obligation is involved and so
on.
There are many occasions in which businessmen have to deal with many unpleasant
matters like asking for the early settlement of an overdue account, making a complaint,
replying to a discourteous letter etc. Even in those circumstances, courtesy should not be
giver up.
6. Cheerfulness
The letter will inspire the reader only when its contents are presented with positive
and pleasing elements. Cheerfulness symbolizes optimism, goodwill, hope and confidence.
The writer should draft his letter in such a way as to create cheer among the readers, hold
out promises and hope instead of choosing words to cause gloom or disappointment.
Positive words always have the effect of creating hope and confidence. Negative words, on
the other hand, deflate the purpose of writing and acts as a drag on the goodwill of the
firm. Even inconvenient and unpleasant situations can be sugar coated with cheerful
expressions.
The You Attitude
The concept of keeping the reader’s interest, need and tastes in view is known as
you attitude in the business world. The first requisite of a successful letter is that it would
take the reader’s point of view.
63
The you attitude in a letter is not merely a matter of phraseology, but is one of
attitude. In other words, merely using the pronoun “you” will not refer to you attitude. The
writer while drafting the letter should always keep in mind the interests of the reader and
design his letter to appeal to him. It can be done by pointing out the qualities related to the
reader’s vintage. Concrete things like profit, pleasure, utility, appearance or enjoyment.
Therefore, the writer while drafting his letter should forget himself and should think about
the person to whom it is addressed.
All of us are generally tempted to write about what we ourselves are doing or
hoping to do.. No one, in fact, is interested in our problems, our products or our wishes.
Therefore, as observed by Robert L Shurter, “In letter writing, it is a good principle to
forget yourself. Think about the person to whom you are writing. He probably will not be
interested in your affairs unless you show him what he should be by appealing to his
interests”.
A glance through the advertising pages of any magazine will show that how
effectively the copy writers use this technique. Their appeal is always to the reader’s
interest and the same technique can be followed in business letters also.
This, however, does not mean that the writer should completely suppress his own
interest and unduly praise the reader’s interest. The writer should not artificially praise the
reader or make exaggerated claims. Therefore, great caution is needed in using you
attitude. Nothing in the letter should be further from the truth. Sincerity, truthfulness and
integrity should rank high on the list and unless the writer uses the you attitude sincerely
and in good faith, the very purpose of it will be defeated. Therefore, authorities feel that
the essence of good human relations in letter is the avoidance of superficial cordiality and
exaggerated claims. If properly used, the you attitude shall tell the reader in a honest,
tactful and truthful manner the benefits he obtains froM an action or attitude implicit in the
letter.
Physical aspects or appearance of a business letter
It is no exaggeration to say that the reputation of a business firm is often judged by
the general appearance of its letters. It should be capable of attracting the attention of the
64
reader. The purpose of the letter is to bring business and so the physical appearance of the
letter should enable the reader to form an opinion about the firm and its reputation.
If the physical appearance of the letter fails to create good impression in the mind
of the reader, it may even fail to evoke the is Ponse: Therefore, the businessman should
regard the physical appearance of his letter as a matter of great importance
The business man should note the following paints in his mind while writing a
letter.
1. Paper
Regarding the paper for the letterheads and envelopes, three points need to be
considered. They are: 1. Quality of the paper, 2. Colour of the paper, and 3. Size of the
paper.
1. Quality of the Paper: The paper must be of good quality. A letter written on a
cheap paper shall certainly destroy, the prestige and reputation of the firm using it. On the
other hand, letters written on a paper of superior quality shall definitely create a pleasant
feeling to the reader and thereby add prestige to the firm. Preferably bond papers are used.
2. Colour of the Paper: White is considered as the best colour for business letters
and so it is commonly used. However, if colored papers are used, they should be of light
shade.
3. Size of the Paper: The size of the letter paper maybe according to the suitability
of each business. Different firms use different sizes. In Great Britain, the following sizes
are commonly used.
1. 8” x 10” (Standard size)
2. 5”xS”
The former is generally known as quarto and the latter is used for sending short
communications.
In the United States, the standard size is 8 ½” x 11”. Besides , 5½” x 8½” and 7½”
x 8½” are also used. Foolscap paper is generally used in Government departments.
65
2. Typing
Typewriters are, commonly used by most of the business firms. Even small
businessmen prefer typed letters rather than hand written. This is because, a typed letter
has a majestic look. Besides, it saves time and copies can also be taken for future
reference. The typewriter should be in a good condition and the ribbons should also be of
superior quality. Above all, the typist should be efficient and capable of typing neatly.
The following points should be noted while typing a business letter.
3. Margins
Margins should be left on all sides of the letter paper and the subject matter should
be typed in the centre of the letterhead; The margins are just like the frame to a picture.
Hence, decent margin gives attractiveness and good look to the Letter.
Generally, one and a half-inch margin is used. In some cases, especially when the
matter is very long, one-inch margin is sufficient. However, there is no hard and fast rule
regarding the width of the margin. It generally depends on the size of the Letter paper. On
any account, it should not be less than one inch. Margins should also be Left on the top as
well as at the bottom of the letter paper.
4. Folding
The letters should have only a minimum number of folds so that the envelope does
not look bulky. if the letter is folded in an unsystematically wa9, it shall not evoke a
favorable reaction in the minds of the readers.
5. Envelope
The envelopes used should correspond to the size of the paper. The colour and
quality of the envelope should also be in agreement with the letterhead. The number of
folding of the letterhead depends on the size of the envelope. Letters of 8” x 10” are
generally enclosed in envelopes
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UNIT – III
TRADE ENQUIRIES AND REPLIES
I. Trade enquiries
For all trading concerns, purchasing is very important. A trader, especially under
the present competitive conditions should carefully watch the market trends of the goods in
69
which he is dealing. Then only he can obtain proper goods at proper times and on the most
advantageous terms. He should discover new sources of supply, so that he can get goods
without any interruption, in case the regular supplier is not in a position to supply.
Moreover, for even dealers who have permanent sources of supply and who can not switch
over to other suppliers due to the credit facilities offered, it is advisable for them to have a
bird’s eye view of the market trends. Newspapers, market reports and price lists, of course,
provide valuable information. But they are not sufficient and hence many enquiries have to
be sent out. Thus, enquiry letters are of paramount important to all business concerns.
Occasions in Which Letters of Enquiry Are Sent
Traders usually send letters of enquiry in the following circumstances.
1. When the goods required by them is of a kind, which they do not
regularly buy, and therefore they do not know the current prices.
2. When they want to ensure that the present suppliers are supplying at
competitive rates.
3. When they want to discover better sources of supply.
4. When they want to tap new lines of business.
Classification of Enquiry Letters
Enquiry letters may originate on the writer’s own initiative or as a response to
appeals and offers made by the sellers. They can be classified as follows.
70
Enquiry Latter
Enquiries asking for a favour Enquiries containing sales Possibilities
Solicited Enquiries Unsolicited Enquiries
1. Inquiries Asking for a favour
Such letters contain requests for the favour of information with no immediate
possibilities for placing an order. For instance, a promoter of a company may write to
suppliers to enquire about certain goods not with a view to buy them but to collect data for
preparing his plan. Likewise, a student may require the business details for reference in his
research work.
Such letters should be courteous, compact and at the same time should be confident
and definite. They should refer to the following points.
1. The purpose in view
2. Raising relevant questions, answers to which, will help n realising the purpose.
3. Indication as to have the material collected will be utilized.
4. Mentioning the advantages to the reader if the request is complied with.
2. Inquiries Containing Sales Possibilities
They are written by prospective buyers requesting for such particulars as may be
necessary to make up their mind to buy specific goods. The inquiries are motivated to
place orders on the basis of the information provided by the sellers.
The inquiries containing sales possibilities are of two types:
1. Solicited letter of enquiry.
2. Unsolicited letter of enquiry.
1. Solicited Letter of Enquiry: The solicited inquiries are written in response to
advertisements and general offers made by the sellers. Drafting of a solicited letter of
enquiry poses no serious difficulty to the writer. It should be very brief and usually not
71
longer than one or two sentences and should state definitely what is wanted. I t is also
appropriate to mention the medium in which the advertisement is made.
2. Unsolicited Letter of Enquiry: The unsolicited inquiries are those written by
prospective buyers on their own initiative to different firms to get more particulars about
the quality, price and other terms of sale. This type of letter is more complex and much
more detailed.
To give the reader sufficient information to enable him to answer intelligently and
easily, the unsolicited enquiry letter should contain the following.
1. A clear statement of the information desired or of the problem involved. This
should include:
1) What is wanted?
2) Who want it?
3) Why it is wanted?
2. A tabulation of questions or a reference to an enclosed questionnaire. This is
preferable when the enquiry is lengthy. The questions,.-in which case, should be of
objective type requiring ‘yes’ or ‘no’ answer.
3. An expression of appreciation
Some Dos and Don’ts
To make an unsolicited letter more effective, Robert L. Shurter suggests the
following points while writing the letter of inquiry.
1. Ask as few questions as possible.
2. Phrase them so that they are clear, direct and easy to answer.
3. Where confidential information is requested promise to keep it confidential.
4. Try to send the inquiry at the seasons when the pressure of business is least
heavy.
72
5. If possible, stress the way in which the recipient will benefit by answering the
questions.
Some Practical Hints on Writing Letters of Enquiry
Making an enquiry or sending an enquiry is not a matter of fact affair. It calls for
careful specifications, dear particulars etc. Further, the letter of Inquiry will naturally vary
with the product concerned. But it is possible to lay down more or less definite rules for
their construction. The following practical hints are highly useful to all students.
1. Exact Type of Goods: The inquirer should dearly state what he Intends to buy.
He should specify the size, style, quality, variety, shape, and brand or trade mark of the
goods he requires. Detailed description minimises the chance of receiving unsuitable goods
and avoids the need for further correspondence.
2. Probable Quantities that may be needed: The inquirer should give a rough
estimate about the quantity likely to be required. Discounts, concessions in packing and
forwarding expenses, timing of delivery etc. are all linked up with the quantity of goods
expected to be bought. However, don’t misrepresent or inflate your requirements first to
obtain better terms.
3. Purpose and Time of Requirement: If you require the goods for a specific
purpose or for sale during a particular-season, do not fail to say so. This is because, in that
case the seller will be in a better position to offer those goods, which are most likely to
serve the purpose.
4. Literature and Catalogue: The letter of inquiry may include a request, for
descriptive literature, catalogue or price list which should indicate the exact rates at which
the goods are offered for sale. In case of complicated machines, inquirer may request for
trial demonstration at places convenient to both.
5. Other Matters: The inquirer will also ask the seller to state the definite policy
of his firm regarding granting of credit, offer of discounts, mode and time of delivery and
terms of payment.
General Points That Should Be Remembered While Writing a Letter of Enquiry
73
1. Description of Goods: If the buyer is definite about his requirements, he should
describe in detail. By writing detailed description, the chance cf getting undesirable goods
can be avoided. If enquiry is made on the basis of catalogue, number assigned to each
goods may be given in lieu c the details. However, a clear description must be found in a
letter of enquiry, in order to avoid unnecessary further correspondence.
2. Price, Time and Place of Delivery: The buyer should know the prices. If it is
not found in the catalogue, he asks for it in his letter of enquiry, as well as the time taken
for delivery of goods, the place of delivery etc. The period of delivery time is an important
element. The goods may be supplied at F.O.R. or Ex-go down or C.l.F. value. To eliminate
doubts as to the quality of goods, sample may be asked for.
3. Terms of Payment: If a new purchaser aims at buying goods from a firm with
which he has had no previous transaction, he should ask whether goods will be supplied on
cash or credit. If it is on credit, the buyer should give references to enable the seller to
enquire the status of the buyer. It is also advisable to state the probable quantity that may
be purchased by him.
4. Other Charges: Generally insurance, commission, discount, rebate etc. are
found in terms of trade. It is seen that where a large quantify of goods is purchased, certain
facilities are given by a seller to the buyer viz., discount, commission.
Any suggestions, if needed, can be forwarded and of course the seller will comply
with it. Details regarding packing and forwarding of goods can be had from the seller. The
shortest route to the destination from the seller’s place may also be mentioned.
Opening and Closing Sentences
How to begin a letter of enquiry and how to end it will depend upon the nature of
the enquiry and circumstances in which it is made. Therefore, it is difficult to lay down
hard and fast rules n this regard. Further, the students should be encouraged to develop
their own style. However, for their guidance a few opening and dosing sentences are given
below.
74
1. Opening Sentences
1. We should be glad to receive details of your prices.
2. We should be obliged if you would inform us of the terms on which you are
prepared’
to supply.
3. We should be grateful for...
4. We should appreciate details of...
5. As we are now interested in purchasing...
6. We should welcome information...
2. Closing Sentences
1. We look forward to placing further orders with you and trust that you will make
every effort to satisfy our particular requirements.
2. We hope to give you further business and feel sure that you will make every
effort to satisfy us.
3. We await the favour of an early reply.
4. We request your prompt attention to our enquiry.
2. Replies to enquiry
Writing replies to enquiries also calls for greater care and skill on the part of the
writer. He should fully take note of each item in the enquiry. The letter should be as
precise and clear as the enquiry itself. Robert L. Shurter suggests two cardinal principles
for drafting replies to trade enquiries. They are :
1. Answer all inquiries promptly.
2. Take special care in addressing, posting and enclosing the material.
Importance of Replies to Enquiries
75
A few years ago, businessmen generally regarded the letters of enquiry they
received as a nuisance or as best as a matter requiring routine treatment. The replies, in
those days, lacked imagination and foresight. But today majority of the businessmen has
realized that these letters represent a real opportunity to turn the requests for information
into orders and goodwill. Therefore, most of the reputed businessmen are attending to it
promptly and in many cases the inquiries are answered within twenty-four hours.
Sometimes, the trader may not be in a position to send a reply either because the article
required is out of stock or has stopped in dealing with the articles required. Under such
situation, his immediate reply will greatly please the inquirer and make him think
favorably of the firm for his courtesy and promptness.
Model Instructions for Dealing with Enquiries
One progressive company of U.S.A. issued a few instructions to its correspondents,
which are worth mentioning here. They are:
1. Answer all enquiries the same day they are received. Strike while the iron is hot!
Give inquiries the right of way over all other correspondence.
2. Size up the needs of the prospect and answer his enquiry in terms of the
advantage of our product to him.
3. Don’t make him wait for information while you refer him to ‘Local
Representatives’ or ‘Branch Offices’. Answer him first and let your local agents follow it
up.
4. Allow a reasonable amount of time for an order or a reply to come in and then
follow it up with another letter. The percentage of returns from similar follow up makes it
profitable. So keep on writing at regular intervals.
Kinds of Replies
Replies to enquiries are of three kinds:
1. A letter answering the enquiry and referring to the catalogue of samples sent.
2. A letter containing a quotation within itself.
76
3. A letter enclosing a quotation on a separate sheet or a separate form.
Some Hints on Drafting Replies to Enquiries
1. Commence your reply by referring to the number if any, and the date of the letter
of enquiry and thank the writer for his letter. Then proceed to answer clearly and concisely.
2. Don’t forget to mention –
1) Mode and terms of payment.
2) Place and time of delivery. –
3) Method of transport.
4) Charges on account of sales tax, octroi, freight and insurance.
5) Packing and forwarding charges.
3. if you send a price list or catalogue in a separate cover, mention that fact in your
reply.
4. If you are not in a position to supply the article asked for but have a substitute,
which is similar in quality and price, you may offer substitute with tact and confidence.
5. Close the reply by assuring the enquiries that you have been glad to be of service
to him and are willing to supply him with any further information that he may need.
Specimen Letters of Enquiry and Reply
1. Solicited Letter of Enquiry
NAVEEN & SONS
(Dealers In Hardware and Paints)
108, Flower Bazaar Road,
Coimbatore - 641 001.
4th May 2000.
The Sales Manager,
Godrej Locks Ltd.,
77
50, Mahatma Gandhi Road, Fort,
Mumbai - 400 001.
Dear Sir,
We have read with interest your advertisement in ‘The Hindu’ dated 31st
April2000 regarding the introduction of new type of locks with Anchor Brand.
We shall appreciate further information about Nay - Tal locks since, we earnestly
desire to evoke good response for them in the local market.
Kindly, therefore, send us a copy of your latest catalogue and let us know your
terms for the bulk buyers. You can expect from us bulk orders provided your terms are
competitive.
Yours faithfully,
For Naveen and Sons,
S. Ranjith
Manager.
Note:
This is a solicited letter of enquiry because the writer sends the inquiry after seeing
the advertisement in the newspaper.
2. Reply to Letter No.1.
GODREJ LOCKS LIMITED
50, Mahatma Gandhi Road,
78
Fort, Mumbai – 400 001.
10th May 2000.
M/s. Naveen & Sons,
108, Flower Bazaar Road,
Coimbatore – 641 001.
Dear sir,
We thank you for your letter dated 4th May 2000 and have pleasure in sending you
under separate cover a copy of our latest catalogue and price list.
We need hardly add that behind every ‘Godrej’ lock is our reputation of over
seventy years as makers of quality locks specially designed for use in our country.
Out list prices are subject to a trade discount of 15% and an additional commission
of 2% in case your annual purchases from us exceed Rs. 1, 00, 000/-.
We are also allowing an extra discount of 5% if your annual purchase of the New
Anchor Brand lock exceeds Rs. 5, 00, 000/-. We trust that you will be able to take
advantage of these terms.
Yours faithfully,
For Godrej Locks Limited,
R. Gowtham
Sales Manager.
3. Unsolicited Letter of Inquiry
AJANTHA BOOK CENTRE
(Book Sellers and Publishers)
127, Cherry Road,
79
Salem – 636001.
4th May 2000.
M/s. Modern Book House,
No. 187, Thanappa Madli St.,
Chennai – 600 001.
Dear Sirs,
Please inform if you can supply us following books and their prices :
1. Business Organisation – by S. Kathiresan and Dr. V. Ratha.
2. Nuclear physics – by Prof. Murugesan.
3. Export Management – by S. Kathiresan & Dr. V. Radha. We look forward
to an early reply so that we may proceed to piace the order.
Yours faithfully,
Students Book Centre,
R. Aroind
Partner.
Note :
The letter is written on the own initiative of the trader and not in response to a
specific offer or advertisement.
4. Reply to Letter No.3.
MODERN BOOK HOUSE
(Educational Publishers and Book Sellers)
187, Thanappa Mudali St.,
80
Chennai – 600 001.
6th May 2000.
M/s. Ajantha Book Centre,
127, Cherry Road,
Salem – 636 001.
Dear Sirs,
We thank you for your letter dated 4th May 2000. We have the pleasure to inform
you that we can supply you the following books at prices noted against each.
1. Business Organisation - Rs. 80.00
2. Nuclear Physics - Rs. 150.00
3. Export Management - Rs. 70.00
We are sending under separate cover a copy of our latest trade catalogue, which can
furnish details of all our publications.
Documents through Bank only.
We allow a trade discount of 20% to all booksellers and allow cash discount of 5%
if the bill is retired from the bank within 7 days from the date of the intimation.
We hope that you will be able to take advantage of these terms.
Yours faithfully,
For Modern Book House,
N. Sama , Manager.
5. Letter Asking for Better Terms
JAYAGOPAL ELECTIUCALS
(Dealers In Electrical goods and Govt approved Contractors)
12, East Main Gate,
81
Thanjavur- 613001.
3rd May 2000.
The Sales Manager,
Bombay Electricals Ltd.,
21, Mahatma Gandhi Road,
Mumbai - 400 001.
Dear Sir,
We are in receipt of your letter dated 26th April2000, along with your recent
catalogue.
A few other firms from Mumbai have offered 10% trade discount and 2% cash
discount for 30 days.
We feel it would be competitive if you allow us as either an additional trade
discount of 5% or 3% for 0 days cash discount apart from the trade discount you have
already offered. We are also prepared to place an order for Rs. 1,00,000/- if the terms are
agreeable to you. We also assure to place further orders for Larger amounts on these terms.
We look forward a prompt reply from you.
Yours faithfully,
For Jayagopal Electricats,
J. Jayaraman.
Manager.
6. Reply to Letter No.5.
BOMBAY ELECT1UCALS LTD.
(Manufacturer and Suppliers of Electrical Goods)
21, Mahatma Gandhi Road,
82
Fort, Mumbai -400001.
7th May 2000.
MIs. Jayagopal Electricals,
12, East Main Gate,
Thanjavur- 613 001.
Dear Sir,
We thank you for your letter dated 3rd May 2000 and also appreciate your interest
our products.
May we point out to you that our quotations contained minimum prices taking into
account the variety and quality of benefit. The extra cost of packing and forwarding leave
us only a thin margin of profit.
However, we shall be pleased to allow you the requested additional of 5% discount
if you can raise your order to Rs.2,00,000/-.
We await your confirmation along with your order.
Yours faithfully,
For Bombay Electricats Ltd.,
S. M. Battiboi
Sales Manager.
Additional Precautions while Refusing an Enquiry
Answers to inquiries can be grouped into two general categories. 1. Those granting
or accepting the request. and 2.Those refuses the requests. Drafting a letter of the first type
is very easy due to the very nature of the situation; The letters, which merely grant the
83
request, are invariably written in a routine fashion. But the refusal of a request is one of the
most difficult types of letters. Great tact and courtesy must be used while drafting the letter
of this type. Of course, many of the requests or inquiries that are made by businessmen are
inconsiderable or unreasonable, but the answers to their requests should never be harsh,
even when the request is refused. A harsh refusal may antagonize a potential customer or
develops a source of ill will towards the firm. As observed by Robert L. Shurter,
‘regardless of how thoughtless the request may seem, the intelligent technique is to refuse
it tactfully’. By doing this good correspondents have lea’ it that they can say “No” and still
retain the reader’s goodwill.
The writer while refusing a request should follow the following pattern while
drafting the letter.
1. A statement of appreciation of the inquirer for his interest.
2. A refusal of his request without hedging and without apology.
3. If it is convenient, an explanation of why the request must be refused. Wherever
possible avoid vague terms life company policy or similar generalizations.
4. If possible make a constructive suggestion or offer in the closing paragraph to
be of service in the future.
Specimen Letter Refusing an Enquiry
Situation: Janatha Rubber Company is a manufacturer of cycle and Rickshaw
Tyres. Lion Rubber Industries is another manufacturer in the same line of business. Janatha
Rubber Company could not compete with Lions Rubber Industries due to the effective
performance of its Sales Representatives. Therefore, Mr. Janaki Raman, the Manager of
Janatha Rubber Company wrote a letter to the Lions Rubber Industries Ltd. asking for
information concerning the basis on which the company pays to its Sales Representatives.
A letter ref using to disclose the information shall be as follows.
LIONS RUEBER INDUSTRIES LTD.
23, Industrial Estate,
84
Guindy,
Chennai -600032.
20th May 2000.
Mr. Janaki Raman,
Manager,
Janatha Rubber Company,
114, Purasawalkam High Road,
Chennai - 600 007.
Dear Mr. Janaki Raman,
Thank you for your interest in your letter of 12th May 2000 concerning the way in
which we pay our Sales Representatives. We are really flattered that so successful
businessman like you should ask our advice.
We regret that we cannot divulge this information. Since each of our Sales
Representatives works under an individual contract, we would be violating the confidence
of our employees if the terms of these contracts were given out. Because our employees
themselves have requested this secrecy you will understand why we can not comply with
your request.
We hope that you may be familiar with the book “Setting up a Sales Organization”
by ‘E.J. Smith’. We have found it valuable in its practical suggestions for dealing with
specific problems. It might prove very useful to you at the present time.
If we may be of assistance to you in some other way, please feel free to write us.
We want to offer our best wishes for success in your venture along with the hope that our
pleasant relationship with you may continue.
Yours sincerely,
For Lions Rubber Industries Ltd.,
85
Sales Manager.
Note:
This letter is drafted according to the model guidelines laid down by Robert L. Shurter.
1. First paragraph contains a statement of appreciation.
2. Second paragraph contains a polite refusal to disclose information and also an
explanation for refusal in clear terms (In fact, it is a lie. But the tone is convincing).
3. Third consists of a constructive suggestion, and
4. The final paragraph contains an assurance to serve or assist in future (A customary
assurance).
II. Quotations
Quotation on the other hand is a specific offer for sale in response to an enquiry
from a particular person or business house. A quotation includes price for the specific
goods desired, terms of payment, conditions of delivery and other details.
Terms used in a quotation
The to towing are terms most frequently used in quotations
1. Loco
It refers to the price of goods at the seller’s factory or warehouse. The buyer has to
bear all the charges of carrying the goods to his place... It may or may not include the cost
of packing. If packing is extra, it is better to specify it in the quotation e.g. “Loco Madras
factory, packing extra”.
2. Ex-Warehouse
This indicates the price of goods at the warehouse of the seller.
3. At Station
At Station Price includes the cost of goods and the charges of transporting them to
the station named. Al! subsequent charges such as handling and loading them into rail
86
wagons and the freight must be paid by the purchaser When the seller gives such a
quotation he should mention the name of the station where the goods will be ready for
loading.
4. Carriage paid (Carr.Pd.)
This indicates that the seller is responsible for delivering the goods at his own cost
to the purchasers address or to the nearest station. In the latter case. it is conventional to
name the station as in the case of carriage paid to Madurai Junction”.
5. Carriage Forward (Carr. Fwd)
This means that the cost of transport is to be borne by the purchaser
6. Free on Roll (f.o.r.)
When prices are quoted on these terms the seller undertakes the responsibility of
taking the goods to the station named and loading them into wagons. All charges such as
carriage and lorry freight payable upto the station and charges of handling and loading into
the wagons are to. be borne by the seller. The purchaser should bear the railway freight,
carnage inwards, unloading charges etc.,.
7. Cash on Delivery (c.o.d) .
This means that payment must be made when the goods are delivered to the
purchaser.
8. Cash with order
This indicates that payment must accompany the orders. If it is not so, the orders
will not be executed.
9. Prompt. Cash
This means that payment should be made within two or three days from the arrival
of goods. This time-lag is allowed so that the purchaser is enabled to, examine and check
up the goods with the invoice.
10. 5 percent 7 days
87
This means that a discount of 5% will be allowed on prices quoted, if payment is
made with 6 days from the date of invoice.
11. Cost - Insurance - and Freight (c.o.i.f)
This quotation covers the price ex-warehouse and includes carriage up top the
dock, dock dues freight and insurance as for the port to which the goods are to be
consigned. Thereafter, the buyer has to meet the other expenses.
Sample letter for offer and Quotation Offer of tea:
Southern India Tea Company
14, Gandhiji Road, Salem
28th August 1998
To
M/s Robertson and Sons Limited
No:5, Bank Road,
Bangalore.
Dear Sir,
We have enclosed a price list of our tea and trust that the high quality of our
products will induce you to place a trial order with us.
Our terms are attractive and adopted to the needs of all types customers. Credit is
allowed for three months, if required against proper security. Cash payments within 14
days, however are subject to discount of 2%.
You will Observe that the prices quoted are exceptionally low, and they are likely
to rise very soon we would advice you in your own interest to place your order as early as
possible.
Thanking You.
Yours faithfully
88
Dr. Lakshmi
Sample letter for Quotation
A letter submitting quotation for the supp- of drawing boards.
Diwakar and Company
14, Nehru Street,
Mysore.
28th August
1998
To
M/s. Johnson and Company.
5, Beach Road
Mumbai.
Dear Sir,
I have your letter of 20th August 1998, informing me that you thinking of placing
your order for two dozen drawing boards with u:
I should be able to supply two dozen drawing boards as per following details.
1. Drawing board A - Rs. 275 each
2. Drawing board B - As. 250 each
3. Drawing board C - Rs. 235 each
If you place your order, it may be accepted against demand within two months of
acceptance. Delivery will be made within weeks of your order.
I have quoted you the lowest possible price and I hope you will be enough to send
your esteemed order. Since we require sometime keep the boards prepared according to
89
your specification, it will be highly appreciated if you can kindly send your reply
immediately.
Yours faithfully
C.S. Hemavidhya.
III. Status enquiry
Although goods may be sold for cash or on credit, the credit sales play a vital part
in the growth of any business. As business of credit invariably carry an element of risk of
non-payment, business man always makes enquiries regarding the financial standing,
reputation, credit worthiness and above all the character of the new customers before
entertaining credit deals with them. Such information relating to the status of credit
customers can be obtained from the following sources.
1. Business firms of the prospective credit customers.
2. Credit information agencies.
3. Banks.
1. Trade reference
Usually an order for goods or application for an appointment or an agency from an
unknown person will contain trade references (i.e) the names of firms or individuals to
whom enquiries about his standing may be addressed. . .
The business friends of a prospective customer who is in need of credit facility or
an agent who wants agency may supply the required information free of charge.
2. Credit enquiry agencies
Information agencies supply reliable information regarding the status of any person
or firm, professionally, according to a fixed scale of charges. Such Information can also be
had from chamber of commerce and trade associations.
90
3. Bank references
Bankers will answer status enquires only from another banker. The business house
making the enquiry must address it to its own banker and ask him to obtain the required
information from the banker whose reference to the prospective customer or agent has
given.
Hints on giving replies to status enquiries
1. Make it as brief as possible, hut let it be clear and adequate,
2. Say something, only on the basis of your personal knowledge and experience and
not on hear say.
3. Do not specify the amount up to which it would be sate to grant credit unless the
enquirer is very particular about it,
4. Express the unfavorable opinion with extreme care and tact. The best way is to
state that you are unable to express any opinion about the person about whose status is
enquired.
5. Always make it clear that
a. You are in no way responsible for the information you give.
b. The matter should be treated private and strictly confidential.
Sample letter
A letter concerning the financial status and business standing of a ‘new customer.
Raja Traders,
14, Nehru Street,
Mumbai.
1 4th October
‘98
To
M/s. Shankar & Bros,
91
4, Good Street,
Chennai.
Dear Sirs,
We have an order from 1he firms mentioned below.
M/s. Rani Traders,
5, Gandhiji Street,
Chennai.
They have given us your name as reference.
We shall be grateful if you will give information relating to their financial status
and business standing. Please let us know, in particular, whether you consider it would be
reasonable to grant them credit upto s. 5,000.
Whatever information you can provide us will be of immense help to Land we
assure you that such information will be treated strictly confidential.
Please make use of the enclosed stamped, self-addressed envelope.
Thanking you,
Yours
faithfully,
P. Mahesh.
A favourable reply from the reference
Shankar & Bros.
14, Good Street,
92
Chennai.
16th October
‘98
To
Raja Traders,
14, Nehru Street,
Mumbai.
Dear Sir,
Sub : Favourable reply to your status enquiry.
In reply to your enquiry, we are glad to inform you that proprietors of the firm in
question enjoy the fullest respect and unquestionable confidence in the local market. They
possess considerable amount of capital. They are very promising, and as far as we known
them, they have not sustained and losses.
Moreover, from our dealings, with them for the last fifteen years, we have always
found them prompt in all their dealings including settlement of their accounts. .
Personally, we feel no hesitation in allowing them credit for an amount for the sum
you have mentioned. However, please note that this opinion is given without obligation on
our part, although we fully believe you will find our information borne-out by facts.
Thanking you,
Yours faithfully,
P. Arumugam
(You have been asked about the financial standing of a business friend who was
once bankrupt but has since then paid his creditors in full write a letter to the enquirer
about the applicant for credit.)
Ram Traders
93
16, Guru Street,
Chennai.
15th October
‘98
To
M/s. Muruga Traders
15, Murugan Street,.
Palani.
Dear Sir,
This is in receipt to your enquiry dated 12th October. The owner of the firm in
question enjoys a good respect in the market at present. Now the possess a good bank
balance. But the honesty of the person cannot be thought of in favour.
The person in question was bankrupted once but sustained his losses now. But we
are not in a position to provide you exact information about the present financial position
of the person.
Since the amount quoted by you is a slightly heavy, we cannot give you the fullest
assurance about the credit-worthiness. The information’s provided by us are all factual and
not but of any hear -say.
Thanking you,
Yours
faithfully,
J. Krishnan.
Bank references
State Bank of Jaipur
14, Bank Street,
94
Jaipur.
15th October’98
To
The Agent
State Bank of lndore,
Indore
Dear Sir,
M/s. Hanuman Transport Company, Indore have approached us for an O/D
(overdraft) limit of Rs.. 50,000 and your name has been furnished as Bankers. We would
request you to advice us about the financial standing of the party.
Thanking you,
Yours faithfully,
(For Agent)
Reply for the bank enquiry
State Bank of Indore
14 Bank Street,
Indore.
21st October’98
To.
The Agent,
14, Babu Street,
S.B. of Jaipur.
95
Dear Sir,
Sub: Reply to the status enquiry
With reference to your letter dated 15th October ’97 we would mention that M/s.
Hanuman Transport Corporation, Indore had a current account with our branch for fine
years, but the same was closed about six month ago. We therefore, regret our inability to
advice you in the matter.
Thanking you,
Yours
faithfully,
(For Agent)
IV. Orders
Making enquires is the first stage for the buyer to get the necessary information to
enable him to place an order for the goods required. On the part of the seller, replies to
enquiries (ie) the quotations are the stage from where he expects orders from buyers.
The quotation is called an offer made by the seller and the orders by the buyer are
called the acceptance of the offer. This acceptance which is in the form of an order is the
thread which establishes a legal relation between the seller and the buyer.
The order must be brief but clear, complete and accurate so that it may be correctly
understood and promptly executed. Many multinational companies use printed order forms
to place orders. These are standardized order forms printed with columns for necessary
information. The advantage of this standardized form is that it contains all the instructions
necessary to be given to the seller and no important point gets omitted, while ordering.
These type of forms are very common for repeat orders particularly in the case of large
firms, as well as for regular routine orders.
Hints for drafting an order
1. Thank the seller for his quotation especially when special terms were offered.
2. Give the specification of the goods.
96
a. Exact trade name, size, colour, design and quality etc..
b. Price and discount
c. Quantity desired for each item in number or in weight.
d. Alternative goods if acceptable.
2. Give shipment or forwarding direction (IC) by air, ship, lorry, rail.
3. Give special instructions for packing, making insurance etc.
4. State the manner of payment.
5. Close with what you wish to emphasize (ie) quality, prompt execution, discount,
time factor etc.
Obligations of order
“A Careless order may lead to annoying experience”.
Whenever a trader plans to procure goods, he makes trade enquiries or asks for
quotations or tenders. On obtaining the-necessary information and particulars, he selects a
specific source of supply and places an’ order with that supplier on the agreed terms and
conditions. The orders bind both the parties legally. So, clarity, exactness and unambiquity
are necessary ingredients of such letters.
An order is a definite offer of the buyer to buy certain goads at the agreed price and
therefore when it is accepted by the seller, it becomes a legal contract binding both the
parties and creating certain legal obligations. The legal obligations are :
a) Buyers obligations
When the binding agreement comes into force, the buyer is required bylaw
1. to accept the goods supplied, when they correspond to the agreed specifications,
2. to pay for the goods, unless there is an agreement to the contrary,
3. to check the goods, at the earliest opportunity and report the defaults to the seller.
(Failure on the part of the buyer to give notice about the faults will be presumed as
acceptance of the goods)
97
b) Seller’s Obligations
1. To deliver the goods exactly of the kind ordered at the agreed time.
2. To guarantee the goods to be free from faults of which buyer could not be aware
at the time of purchase.
If faulty goods are supplied, the buyer may claim either reduction in the price or
replacement of the goods or cancellation of the order itself.
Contents of an Order Letter
Usually an order letter should contain the following matters:
a) Quantity
Be precise and clear in stating the quantity (e.g. please supply 20 steel cots of 18
cms x 90 cms”) When necessary, state your urgent requirements separately in the order
itself:
b) Quality
Full particulars with regard to the kind, colour, degree of fine-ness, makes, trade
name etc, must be stated. If their quality of the goods cannot be described, a sample may
be sent with the order. If the goods are selected from the trader’s catalogue the quality
should be indicated mentioning the number and trade name assigned to them in the
Catalogue.
c) Mode and terms of payment
The terms of payment need not be stated if the goods are ordered with a regular
supplier. But when the orders are placed with a new firm, the terms of payment must be
confirmed in the order - letter itself. Along with that, the specific mode of payment as such
as through money order, cheque, draft, accepting a Bill of exchange, etc., should be stated.
d) Price
98
Even when the price has been settled through the previous correspondence, do not
hesitate to give a detailed accurate statement of the price agreed upon. If the money is
enclosed with the order, the amount and the form in which it is sent should be clearly
stated e.g.. Please supply. the: “Boom” chappels of 8’ or 9” size at Rs. 75 or Rs. 90 per
dozen. This statement is ambiguous: because here either the quantity or the size is not
stated clearly.
e) Packing.
Generally the cost of packing is included’ in the price quoted by the seller. If the
buyer desires any special kind to packing, it should be clearly stated in the order. For this
the supplier may levy an extra charge, e.g., when the supplier is in the habit of sending
goods-in plywood boxes. The buyer may write please send the goods in hard wooden
boxes’. The seller in this case may charge a bit more for wooden packing.
f) Mode of transport
The buyer should give clear instructions as to the mode of transport (roadways,
railways, waterways, airways). Otherwise, the supplier will use the discretion in selecting
the mode of transport. Along with this the buyer should state whether he wants the goods
as carriage paid or carriage forwarded.
g) Time and place of delivery
The seller is expected to deliver the goods within the, required time and at the place
of delivery; otherwise, the order may be cancelled. The specific period (eg., Before August
16th) must be stated clearly. As far as possible the usage of the phrases ‘within reasonable
time, at the earliest, as early as possible’, “at your convenient date” etc., may be avoided. If
the goods are to be delivered at a place other than the one mentioned in the address of the
order letter, the specific address of the place of the delivery must be mentioned clearly.
h) Insurance
In inland trade; if .the buyer desires to get the goods insured, necessary instructions
should be give in the order itself. In the case of foreign trade, goods are invariably insured.
Precautions In writing order - letters
99
Great care is necessary in writing order letters. To be effective in writing order
letters, the following hints are suggested.
1. Place a clear and firm order. It is the only thing in which the supplier is
interested.
2. Eyen if it amounts to repeating do not hesitate to give a detailed, accurate, and
complete description of the items you wish to buy. The size, colour, quality, make,
reference to catalogue, Identification number etc., may be specified.
3. Make sure that there is no deviation from the description given in the original
letter inviting quotations.
4. If only a few things are ordered, you can specify the details in the body of the
letter itself. But when you order for large number of items, you better tabulate them or
attach a separate list of such items.
5. When the orders are placed through Telephone, Telegram or with the salesmen,
confirmation of such orders is necessary through a formal order letter.
6. It is better to use printed order forms in case of order for different and multiple
products or when your firm is big, and making frequent orders of those items.
7. If the order is repeat order the number and the date of the previous orders may be
mentioned to have a clear understanding of the terms and conditions. If the terms differ
from the previous order do not forget to state that precisely.
8. As the sales tax laws make it compulsory to enter the sales tax number on the.
receipt, indication of such number will reduce the burden to a greater extent.
Order forms
Many of the large business houses use printed order forms for all their purchases.
They are perforated, numbered and kept in a serial in the order book. The purchase officer
of the firm fill up the particulars or specifications in the space provided for them.
100
Usually such order forms are printed in duplicate or triplicate; the original will be
sent to the supplier arid one copy will be retained in the file and the third copy will be sent
to the stores or the receiving department for checking the goods received on their arrival.
Order forms have certain merits. They save time and labour of the purchase officer
and his typist. They, remind the purchase officer of all the points, about which the
information is needed. Usually they are uniform in size making it convenient to keep in
files and serve as ready reference.
Kinds of Order Letters
Order letters may be classified into the following heads for convenient grouping.
Trial (Or First) Order
Trial orders are placed usually when the quotations or samples received have been
found satisfactory. Sometimes they are sent when the travelling salesman have procured
the orders. They may also be sent when a new market Is to be tapped or a new product is to
be introduced or when a bargain has been just concluded.
When the trial orders are placed on the basis of samples, the buyer may reserve the
right of rejection, if they don’t tally with samples supplied. When an order letter is written
just after the conclusion of negotiations the supplier would express the hope that this order
would lead to mutually profitable business.
Routine Order
A routine order is placed at more or less regular interval with the regular suppliers.
All the details considered are lived long before. A routine order is often placed on an order
form and an accompanying letter goes with, it. Routine orders for standard .goods are short
and formal but they must include essential details. When the order is for two, or more
items, they should be tabulated as this lessons the chance of’ such items being over looked.
Orders based on the seller’s quotations
As the supplier has already supplied the quotations, there may not be any problem
in filling up an order form regarding instructions, specifications etc. To avoid
101
misunderstanding, price quoted along with the discounts permissible and special
instructions should be repeated. when the order is placed.
Orders based on inspection of samples
Sometimes, the quality of the goods is highly indescribable. In such cases, orders
are placed after examining the goods or samples. These letters should always convey
thanks for the samples and the results of the inspections carried out in the laboratory.
Repeat Orders
A repeat order is placed when (a) the trial order has proved good and the article is
still needed as the demand is continuous. This may happen with seasonal goods or fashion
goods; (b) The market has been successfully taped, as it seems possible to sell more.
These letters would make reference to the success of the trial order, and the reason
why a repeat order is required. As the time is important n such orders, the buyer usually
reserves the right of rejection when the goods are delivered late. Such letters will express a
hope that the way is perhaps open for a regular business.
Covering Letter With Order Form
When a covering letter is sent with an order form, essential details will be
contained in the form and additional explanations in the coveting letter. Usually these
letters are sent when the order is for an item involving technical details. Or when the order
is to the specific requirements of the buyers.
Orders With Conditions Attached
When the orders are very urgent or to the individual specifications or involving
heavy outlay and huge commitments based on the promise given to third parties, the buyer
will seek to protect himself by making his order subject to certain penalties, should the
terms of the contract not fulfilled.
Specimen Letters
1. First order letter
SHINE WEL FURNITURE
102
Netaji Road,
Madurai- 625 001.
12th July, 1998.
To
The Perfect Furniture’s,
134, Gandhiji Road,
Madurai.
Dear Sirs,
Thank you for your quotation of 2nd July, We are pleased to place the trial order
for the following items:
50 Numbers of “EXECUTIVE” chairs of Rs. 250/- each
25 Numbers of “ALL PURPOSIVE” Tables of Rs. 500/- each
The above quoted prices should include packing and forwarding charges, freight
shall be charged to our account. Sales tax will be charged @ 4% as our declaration form
‘C’ is attached herewith.
Please arrange to send the consignment by rail to Madurai Junction before 25th
July and forward the documents through Indian Overseas Bank, Bullion Branch, Madurai.
We hope that this order will be executed to our satisfaction and that it will help to
develop trade relations in our mutual benefit.
Yours faithfully,
For Shinewel Furniture,
P. MURUGAN
Manager.
2. Routine order letter
STUDY WELL BOOK SELLERS
103
(Dealers in Text Books)
49, Now Line Beach
Road,
Bombay,
30th June 1998.
M/s Palaniappa Book Sellers,
48, Anna Salai,
Madras.
Dear Sirs,
Confirming the order we placed with you by telephone this morning, we wish you
to supply the following books on the usual terms and at a special discount of 25% off the
published prices.
Copies Title Author Published Price
(Rs.)
10 Model Business letter Gartside 15
15 Commercial
Correspondence
U.R. Keli and
Urmila Raj
10
10 Business report
writing
Sharma and
krishnamohan
15
These books are required very urgently and we understand that you are arranging
for immediate delivery from stock.
Yours faithfully,
V. PARI
104
Manager.
1. Draft a letter ordering electrical motors and switch gears for the first time
without giving references from Suganya traders to Crompton India Pvt. Ltd., Bombay.
Suganya Traders
15, Bank Road,
Delhi
30th August
1998
To
Crompton India Pvt Ltd.,
238, Andheri Road,
Bombay.
Dear Sirs,
I have pleasure in placing the following urgent order with you for the first time.
1. Electrical motors 150 HP Nos. 60
2. Electrical motors 250 HP Nos. 40
3. Switch gears Nos. 20
4. Fancy switch boards Nos. 20
5. Switch boards with rolling buttons Nos. 30
Packing : in new wooden boxes securely sealed.
Delivery : in any case not later than 30 the September 1998.
Payment: Twenty percent advance on confirmation of the order by you and balance
against delivery by cheque or D/D through State Bank of India.
105
A prompt delivery by you will be our highest pleasure. Quality and prompt delivery
will help us to continue our trade relationships.
Thanking you,
Your’s faithfully
(P.G. Sekar)
2. Write are order letter from Shakthi Agencies to M/s. VIP Luggage company
placing order for the various models for VIP suitcases, briefcases, Also state the mode of
transport, insurance requirements, packing requirement, mode of payment, discounts,
quality specifications, quantity required, size, colour and design.
Shakthi Agencies
15, Nehru Street
Delhi.
10th September’98
To
M/s. VIP luggage company 18,
Andheri Road,
Mumbai.
Dear Sir,
We are extremely happy to place the following order with you. In accordance with
your quotation letter dated 5th September ‘98.
S. No Descriptions Qty. (pieces) Unit Price Rs. Amount Rs.
1. ‘VIP’ Alfa Suitcase 10 x
20 cms
35 100 3,500
106
2. VIP suitcase 40 x 60
cms.
25 150 3, 750
3. VIP Briefcases (assorted
colours)
15 75 1, 125
8375
Since, the above articles are required by us immediately to supplement our stocks,
we request you to sent these items by lorry service (L/S) to Delhi.
Since, the items required are. subject to damage, we request you to insure them
before sending. The packing should necessarily be done in wooden boxes duly sealed.
The lorry receipt and the bills at 15% discount will be sent through Canara Bank,
Delhi.
Yours faithfully,
(C.S. yoga)
Execution of orders
Hints for drafting an acknowledgement
1. Receipt of every order must be promptly acknowledged.
2. Thank the party for his order.
3. Specify the goods you have dispatched or time by which you will despatch
them.
4. Refer to the need of prompt payment, but do not stress this point.
5. Mention the mode of delivery whether by passenger or goods train, lorry, ship
or air. –
6. Reference. must be made to the quality and popularity of goods and also the
expression of hope that the goods will satisfy the customers, requirement.
107
7. Mention a personal tone and show your eagerness to serve the customer in all
possible ways.
8. Impress your customer that his order has been given prompt attention.
9. End the letter by soliciting further orders.
Execution of the orders - Sample letter.
National Paints Ltd.
15,BahaclurNagar
Ahmedabad
18th september’98
To
Hiremath Brothers
16 North Street
Madurai.
Dear Sir,
Sub: Despatch of paints for your order dated 11th September ‘98.
We are happy to count you among our good friends in our business and as in our
every day life. We received your first order on 12th September and a beginning has been
made. We will endeavour to retain and strengthen our mutual business friendship through
our quality products and friendly service, for which our firm has earned great reputation.
As specified by you the following orders have been despatched (refer to the
previous order letter dated 11th September) V
As your are in great need of the above items we made a special care to despatch it
as quickly as possible.
The goods have been sent by passenger train carriage forward to Madurai. As
mentioned by YOU the railway receipt(R/R) and the invoices at 7% discount have been
sent through State Bank of Madurai. We solicit your future orders ‘to build our friendship.
108
Thanking you,
Yours faithfully,
(P. Mahesh)
Defective orders
How to answer replies to parties who are sending defective orders? Sometimes
sellers receives orders with incomplete information, such orders if executed may not fully
meet the customers requirement. Hence it is always a good policy to write back to the
customer asking for exact specifications regarding colour, design, price, size etc., before
executing the order.
To enable the customer to furnish exact specification, seller’s should send
separately the catalogue and price list.
It must be remembered that telling the customers that, “since his order is defective
it cannot be executed, will loose our sales opportunity”.
Tact suggestion and the tone of being helpful are the most important qualities of
these type of letters.
Delay in execution
In some cases, the seller may find it difficult to execute the order promptly or
within the periods specified by the buyer. Delay in shipping the goods may be caused by
many factors like goods being out of stock, production being held up on account of
scarcity of raw materials, machinery breakdown, strike, lockout, heavy orders on hand,
shifting the premises, asking for credit or more special terms etc.
In all these above cases it is desirable to write to the buyers informing them of the
circumstances, in which the delay in the execution of their order has become inevitable.
They should be informed about their probable time within which the goods can be
despatched. He should apologies to him to co-operate by allowing an extension of time for
the execution of the order.
Hints for drafting letter intimating delay in the execution of orders
109
1. Thank the party for his orders.
2. Explain in clear tone the reasons for delay.
3. Make the customers understand that the circumstances are beyond your control.
State if possible the date, when you can’t V execute the order.
4. Assure the party that his order will receive prompt attention on the date being
mentioned.
5. End your letter with reference to the inconvenience.
Sample letter
Mayur Quick Food Co.,
15, Bank Road,
Bangalore.
20th September’98
To
The National Food Products,
14, Nehru Street,
Mysore.
Dear Sir,
Sub: Delay in execution of order.
We thank you for your order dated 1 3thV August ‘98. We regret to inform you that
there will be a delay for a fortnight for the supply of bulk packings of Appalam. Sambar
Powders, Pickles. The rest of the goods are ready and they will be delivered to you next
week. We trust that this will not give inconvenience to you.
110
The delay is due to non availability of the raw materials Our suppliers have assured
us that these would be made available within a short period. We hope you will appreciate
our difficulty and bear with us for the delay.
Thanking you,
Yours faithfully,
(S: Lakshmi)
Refusal of an order
“He is less disappointed who is promptly refused”.
There maybe certain occasions when the supplier is not in a position to execute an
order on the agreed terms. Letters written by the suppliers in such cases are called refusal
letters. These letters are negative in their character because they usually carry unpleasence
with care and tact. As such, all the refusal letters should have the motive of winning back
the customers to our trading list. Otherwise, unpleasant refusal letters is to politely express
our inability to execute the order of the customer.
Reasons for Refusal
Refusing of orders leads to loss of business to the seller and further trouble to the
buyer. In order not to lose the customer the letter should carry convincing reasons for the
refusal. These refusal letters should be made into goodwill letter so that we may not lose
the customers who are the life blooed of the business. Reasons for refusal may be classified
into sales value messages and other reasons; they are:
Messages having sales value
1. The demand is greater than supply or production.
2. Government restrictions or pre-occupation of capacity due to vital defense needs
e.g.,
khaki for military purposes or steel or cement controls during war time.
3. Scarcity of raw materials.
4. When the order is received after the offer has expired.
111
Other reasons
1. Breakdown of machinery..
2. Stoppage of work due to accidents like fire, storm, cyclone, flood etc.
3. Labour strikes.
4. Other internal disturbances which cause suspension of work or production.
5. Unacceptable term of buyer.
6. Buyers credit- standing is suspected or sudden bankruptcy of the buyer.
7. Lack, of correct information.
8. When the orders are not received through proper channel.
9. Technical difficulties e.g., Transfer of executives.
Precautions to be taken while writing refusal - letters
Whereas he the reasons for refuring the orders refusal letters must be written with
an eye on the goodwill and future business of the firm.
1. First refusal letters should contain expression. of thanks and a note of
acknowledgement of the order received.
2. Express your regret for not accepting the order. The regret should build up
goodwill e.g. When a non-credit worthy customer asks for credit, rather than denying it we
shall ask him to order on cash basis.
3: Politely express the reason for the refusal in convincing manner.
4. Explain your position clearly and the steps that are being taken to control date of
despatch.
5. If the time schedule doesn’t suit you. express the approximate date of despatch.
6. Express the hope that the customer will be sympathetic and bear the
inconvenience.
7. Propose an alternative product or proposal as a substitute.
8. ‘If the buyer’s terms are different, make a counter-offer in the refusal letter itself.
112
9. When the terms are altered, supplier may send the goods on altered terms; but
such an execution of an order equals to goods being sent on sale on approval basis...
10. When the refusal is especially due to any bad condition, do not express the
same bluntly; instead, state the alternative proposals firmly e.g. when a customer asks for a
long credit-term, the refusal letter may quote the company’s policy regarding credit
periods.
11. Never give the impression to the customer that the order is too small to accept;
because every customer is important and every order is valuable.
12. When the order cannot be executed, it will be helpful, if you suggest the others
supplier’s address. Because the buyer will appreciated and remember such services.
13. If the buyer asks for any unfavourable obligations etc, such request can be
outwardly rejected. For example, if the purchasing officer of the buying company asks for
a commission, such things may be rejected openly.
14. By all possible means, express your interest in the interests of the customer.
Kinds of refusal - letter
1. Seller rejecting the order due to modification of the terms such as price
reduction, delivery terms and extending credit.
2. Seller’s refusal and suggestion to some other source of supply.
3. Supplier’s counter offer.
4. Seller sending a substitute on an approval basis.
5. Refusing a request asking for undue favour or better terms.
6. Seller’s refusal due to unforeseen circumstances, government directions or
official regulations.
Sample letter
Jupiter Watch Company
15, V.V. Road,
113
Mumbai.
22nd September ‘98
To
The Olympic Watch Company
24, Bank Road,
Bangalore.
Dear Sir,
Sub : Refusal of your order.
We thank you very much for your order for 200 click-well wall clocks.
We greatly appreciate your interest in clocks and we regret to inform you that we
are unable to accept your order as we have already in hand several large orders, which will
keep our factory busy for a long time. It will not be possible for us to book your order,
even if you were good enough to extend the date of delivery by several weeks.
To cope with the increasing demand for Jupiter Clocks we have ordered a new
platform Japan and it is likely to be installed next month.
We are very sorry for our inability to serve you at present, but look forward to the
time when we shall be able to attend to your order.
Thanking you . .
Yours faithfully,
Sample Cancellation letter
A letter cancelling order for undue delay
Laxmi Cloth Stores.
56, Bank Road,
Bangalore.
114
22nd September ‘98
To
M/s. Shyam & Sons,
14, Nehru Street,
Mysore.
Dear Sir,
Sub : Order cancellation.
We place an order with you on 1st August for 10 dozens of Royal to be delivered
on or before 10th September. But till now we have not received either the goods or any
letter from you.
As the time of delivery expired long above we are compelled to cancel the order
and if the goods arrive they will be refused.
Thanking you
Yours faithfully,
V. Claims, complaints and adjustments
Errors very frequently occur even in. the best managed business houses, because
‘To Err is human”. The moment any discrepancy or mistake is discovered by any trader, he
must immediately bring it to the notice of a supplier by writing a letter of complaint or
claim. Instead of unnecessarily entering in to a dispute the supplier should honourably try
his best to settle the matter peacefully, if the defects are proved.
Occasions, giving charges for a claim or complaints are many. Moreover, following
are the important causes that give chances for claims and complaints.
1. Inordinate delay in the execution of order.
2. Variance in the quality and quantity of the goods supplied as against those
ordered.
115
3. Supply of wrong goods or goods of inferior quality.
4. Delivery of damaged goods due to defective packing.
5. Variance in the terms and conditions relating to the payment and delivery.
Replies to Complaint Letter
Much tact and restraint must be practised, such letters should start with an apology
or at least with an expression of regret, when an apology is considered to be in appropriate.
The writer should explain the circumstances which led to the trouble and should never try
to justify his failure. He should state what he process to set things right to most cases. He
may offer to take the goods or allow a special discount. He should also assure that every
effort will be made to prevent its recurrence. A complaint letter should contain the
following points.
1. Am explanation of what is wrong
2. The explanation should give exact dates, model number sizes,. colours, or any
other
material data.
3. A statement of the inconvenience caused.
4. A statement of the loss suffered..
5. An attempt to motivate action by appealing to dealer’s sense of fair play, his
honesty or
his Goodwill..
6. A statement . of what adjustment is considered fair.
The art of drafting letters of claims and complaints
A trader must be extra ordinarily careful while drafting a letter of claim or
complaint in a satisfactory manner because such letters are generally drafted in a moods of
dissatisfaction or anger. Successful drafting of claim and complaint letters call for great
tact, courteousness, sympathy and patience, in order to avoid unnecessary bitterness, long
and tedious disputes and legal proceedings over petty issues.
116
Hints for drafting claims and complaints The letter should be
1. Fair and temperate but not apologetic.
2. Based only on facts without assumptions.
3. Friendly and courteous letters prove more effective than a letter breathing fury
and threats in gaining the co-operation of the reader.
4. Complete, supplying all the details is considered very necessary to adjust what
is wrong.
5. Definite and reasonable in its request for readers.
6. Brief in the statements relating to the inconvenience suffered by
the customer because of the error.
Sample Complaint letter
Maruti Book House
4, Station Road,
Mangalore.
27th September’98.
To
Raja Book House,
No.5, Bank Street,
Mysore.
Dear Sir,
Thank you, very ‘much for the despatch of six books on “Effective Business
English” sent to us by you in accordance with our order dated on 20th September. On
going through these books, we found out that one of the copies sent by you was is
incomplete as pages 45 - 64 (20 pages) are missing, while another copy is badly damaged.
We presume that this must be due to a mistake by one of your packers.
117
Will you please, let us know whether we can return these two copies to you may
replace them by the two good and complete copies
Thanking you,
Yours faithfully,
S. Hemavidhya.
II. Write a compliant letter from Subash stores to perfect pressure cooker company
that six out of the 50 cookers received from them we re in a damaged condition and ask
them to replace the damaged goods immediately.
Subash Stores
5, Bank Road,
Coimbatore.
27th September 98
To
Perfect Pressure Cooker Co.
6, Eldams Road.
Chennai,
Dear Sir,
We thank you for the despatch of fifty Cookers, sent by you in accordance with out
order dated 20th September. We regret to inform your that out of the fifty cookers sent by
you, three were found to have a broken handle and three with broken whistles. We
presume it to be due to your carelessness.
Kindly, let u known whether the six damaged cookers may be replaced by six good
ones by you.
Thanking you,
Yours faithfully,
118
Replies to letters of complaints and claims
It is wrong to think that compliant are a nuisance. The business man should
welcome any reasonable expression of dissatisfaction with his goods or his service.
Replies to complaints are called adjustment letters. They require the most delicate
and skillful handling, as they have not only to satisfy the customer hut also safeguard the
business interest and reputation of the writer. Hence while drafting such letters, the
business man should,
1. Be very careful and tactful.
2. Fully investigate the matter complained and appreciate the feelings before giving
any reply either admitting or refuting the complaint.
3. Plan the letter in such a way as to retain his goodwill.
Hints for writing the adjustment letters.
1. Deal with the complaint and reply as promptly as possible.
2. Do not show any discourtesy even though their complaint is unjustifiable.
3. Think that “The buyer is always night”.
4. Give due importance to the customers feeling in order to retain his goodwill.
5. Never treat any complaints indifferently.
6. Begin your reply to complainant by thanking him for his letter and apologizing
for the trouble caused to him.
7. Do not suggest that the customer was careless.
8. Do not think of paying back your customer.
Sample Adjustment letter I
Raja Book House
No.5, Bank Street,
Mysore.
119
29th September ‘98
To
Maruthi Book House,
4, Station Road,
Mangalore.
Dear Sir,
Sub : Reply to the complaint letter.
We thank you for your letter dated on 27th September1998. We are very sorry to
know that you have received one damaged and another incomplete copy of “Effective
Business English”.
We shall be highly grateful to you if you will kindly return those two copies, so that
we can, with great pleasure, replace them immediately.
We are very sorry for the inconvenience that must have been caused to you.
However, we assure you that such mistakes will not be repeated in future. We shall of
course, bear the postage both ways.
Thanking you,
Yours faithfully,
Raja
Govindasamy
Adjustment Letter ‘2’
Perfect Pressure Looker Co.
6, Eldams Road,
Madras.
29th September 1998,
To,
Subash Stores,
120
5, Bank Road,
Coimbatore
Dear Sir,
Sub : Reply to the complaint regarding pressure cookers.
We thank you for your letter dated 27th-September 98. We are very sorry to note
that you have received six damaged cookers (Three with broken handle and the other three
with broken whistle)
We shall be highly obliged if you would be kind enough to return back those six
damaged pieces. It will be helpful for us to replace them immediately.
We are very sorry for the inconvenience caused and assure you that such mistakes
will not be repeated. We shall of course bear the lorry receipt (L/R) both ways.
Thanking you,
Your’s faithfully.
P. Yogananda
Strong Sample Claim Letter
Draft a letter of complaint to M/s Roja Grinders, Trichy that 22 out of 150 dry
grinding machines supplied by them were making heavy noise and get struck up after 5
minutes of running which disturbs your production In the letter mention that you have
made atleast 15 S.T.D. calls and received no response from them. Strongly word the letter
and ask them to replace the faultly machines immediately.
Roja Traders
15, Gandhi Road,
Coimbatore,
30th September 98.
To,
121
M/s. Roja Grinders,
25, Nehru Road,
Trichy.
Dear Sir,
Thank you very much for your prompt delivery of 150 dry grinding machines in
receipt of our order dated 20th September 98.
We regret to inform you that out of the 150 machines, 22 are making a heavy noise
while running. They are a great source of disturbance in our locality. Moreover they get
struck up after5 minutes of running which disturbs our production to a great extent.
Before writing this letter have made more than 15 S.T.D. calls to your place and
received no response. This carelessness showed by yours highly rag regrettable.
We feel sorry to inform you that further negligence showed by you will force us to
take legal actions against you. Therefore, make it a point to replace the machines as early
as possible. That will help us to maintain cordial relationships.
Thanking you
Yours faithfully,
Settlement of accounts or remittance letters. (Payment of bill)
After receiving the goods ordered, the buyer should not only acknowledge their
receipt, but also arrange, to make payment of the amount due to the seller. The made of
payment depends upon the arrangement between the buyer and the seller.
Most of the accounts are settled by cheque, bank draft etc. The greatest volume of
business is generally done on credit.
Remittances against periodical statements of accounts received by the debtor from
the creditor are generally arranged when there are regular dealings between them.
The letters of remittance should be written with special care and accuracy as they
involve matters relating to payment of money.
122
Sample Payment letter
Letter acknowledging receipt of goods and informing remittance by cheque
RAJA STORES
5, Nehru Street,
My sore,
30th September ‘98
To
Camel Hair dye,
6, Sank Road,
Bangalore,
Dear Sir,
The camel hair dyes invoiced (bill) by you have arrived and are satisfactory. We
enclose a cheque tar Rs.2000 (Two thousand rupees only) in full settlement of the amount
of your bill.
Please acknowledge this receipt and credit us with the amount.
Thanking you,
Yours faithfully,
Roja
Application Letter
Application for a Job or application for a situation
Letters of applications for a situation or employment are undoubtedly very
important from stand point of unemployed persons seeking some jobs.
An application for a situation is a type of sales letter by which the applicant tries to
sell his services and it may affect his whole life as he will evaluated first by his application.
123
The experienced mind and eye of the business man wilt assess the character of the
applicant from his letter. Hence one should devote both time and thought over its drafting.
The following diagram shows the process of selection.
Process of selection
The structure of the application is similar to that of any other business letter with
which we are already familiar. The only special difficulty that may arise in the case of any
application for a situation is that the applicant may not have proper letter head. But this is
not problem. It is enough if the name and the address of the applicant should be placed on
the left hand top corner and the date should be placed on the right hand corner.
Hints for drafting application
1. Do not apply for a situation for which you feel that you are neither qualified
or quite fit.
2. Write the application with great care, courtesy and precision.
124
Application form
Test
Interview
Physical exam
References
REJECTION
Training
3. See that it is clear, legible and neat, free from blots, erasers. Rewrite it if
you find that your first draft is not satisfactory.
4. Ensure that there are no spelling and grammatical mistakes. If you are not
sure of yourself, get it revised by a better man in this line.
5. Introductory paragraph
a. If the application is replied to an advertisement
(i) State when and where that advertisement appeared. For
eg, the name and date of the newspaper.
(ii) Give the box number and address in its inside address, if
the name of advertiser is not known.
b. If it is sent unsoliated, explain your interest in the kind of work for
which you apply and commence the introductory paragraph by
writing “Being given to understand that a vacancy exists for the post
of”
c. State the nature of the position for which the application is made.
6. Body of the letter
State in the next paragraph, frankly, modestly and briefly your
(i) educational qualification, the name of the college or university from
which you have passed
(ii) Experience in that particular line, the period of service, name of the
employee, the reasons for your leaving etc.
(iii) General ability.
(iv) Age, hobbies and any special qualification that may useful to the
employer.
(v) Fitness for the position for which you are applying.
(vi) Divide the body of the letter into paragraphs, each dealing with a
separate idea.
125
6. State the terms and conditions under which you are willing to serve, if you
get appointed.
7. Give the names of persons or firms to whom reference may be made in
respect of you character and suitability for the post.
8. Concluding paragraph; End the letter with an assurance that you would
endavour to give satisfaction to the employer, if you are selected. It would
be better to conclude with a request for an interview.
But never promise anything more than what you can reasonably hope to keep. End
this para in such a way as to leave a favourable and pleasing impression on the mind of the
reader.
Sample letter of application for the post of a sales executive
From
P. Mahesh,
16, Big Kammala St.,
Trichy – 8.
29th December ‘98
To
The advertiser,
Box No : 140,
C/o Indian Express
Madurai.
Sir,
With reference to your advertisement dated on 25th December 1998 in issue of the
Indian Express, Trichy edition for the post of sales executives, I wish to offer myself as a
candidate for the post.
126
I have passed the MKU, B.B.A. Examination in first calss (72%) and I am happy to
inform you that have secured university 3rd rank. I have scored good marks in marketing
management and sales management in my B.B.A. examination from DDE, MKU.
I have completed my post graduate diploma in Marketing management from the
J.M.M. I am also well-built with better communication skills.
I have been working as an assistant sales executive in the firm Arumugam & Co.,
Madurai since last six months and I am now seeking better opportunities which my present
employer, with their limited range of business cannot supply.
I am at present 22 years of age and of active nature. I am prepared to serve on any
reasonable salary that you may be pleased to offer. I sincerely hope that you will give me a
trial before deciding about the salary, which if your opinion would be appropriate for the
work I shall do.
Copies of testimonials from the heads of the institutions mentioned above are
enclosed. One of them is in my own handwriting (to acquaint you with my hand) and this
application is a sample of my typing. You may also refer to my present employers who
have readily consented to write to you about my attitude, ability and character.
Please give me an appointment at a time most convenient to you when I may call at
your office from an interview.
I assure you that I shall try my best to give you complete satisfaction, if I am
selected for the post.
Yours respectfully,
P. Mahesh.
Write an application for the post of office manager in a house.
From
Mr. R. Anuradha,
127
No:62, Sonaiyar St,
J Mangalam,
Madurai dt.
To
The Advertiser,
Box No: 140,
C/o The Hindu,
Madurai.
Sir,
With reference to your advertisement in the Hindu for the post of a sales manager, I
wish to offer myself as a candidate for the post.
I am a B.B.A. graduate, having passed the B.B.A examination of the MKU with
distinction. My degree is crowned with an extra credit of securing the university I rank.
Moreover, my qualifications are credited with a diploma from I.M.M. I am also doing
M.B.A under the correspondence course offered by the MKU. I would be completing it in
the next academic year.
I am pleased to inform you that I also have better communication skills and co-
coordinating capacity. I was nick-named as work driller in the previous institutions where I
worked. I am always successful as a loader of the team and adapted/to quick-decision
making.
I have been working assistant manager in M/s Anu Priya for the past 5 years. Since
am seeking better opportunities, which m present employers have failed .to offer;
I headed my college volley ball team for the state level National level
championships in football & volleyball. I also hold a post graduate diploma in complete
128
applications from the NIIT. I am also a good orator and have a good fluency in three
languages (Hindi, English & Tamil). I have also learnt French.
I am at present 29 years old and I am to work for a my reasonable salary offered by
you. I would also not mind travelling abroad on business and also have a passport.
I have enclosed here with all my certificates from the heads of institutions
mentioned above. My previous employers have, also consented to provide you necessary
information regarding by ability attitude & character.
You may give me an appointment at-a-time most convenient to you.
I assure you that I will do my best if given an opportunity.
Yours Respectfully,
R. Anuradha.
Notes
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UNIT – IV
131
CIRCULAR LETTERS
A circular a communication meant to notify or convey all customers business
friends of a business house regarding certain fundamental changes or important
information Circular letters are sent to a large number of persons at the same time.
In business these are numerous occasions in which circular letters re sent. A
circular letter is one that carries a communication to a number of addresses. The basic
difference between a circular and a general letter is that whereas the former is addressed to
many persons and the latter is addressed to only one person.
Circular letters are to be read by a large number of people whereas general letters a
personal and private in nature. Therefore, circular letter must be specially well written in
clear and understandable language.
Various situations of circular letters
1. The establishment of a new business
2. A change in the constitution of the business like.
a. Transfer or taking over of a business.
b. Admission, death or retirement of a partner.
c. Conversion of a partnership into a limited company.
3. Removal of business to a new premises (or) opening a new branch.
4. Granting or withdrawing power of attorney.
5. Obtaining an agency.
6. Appointment, discharge or retirement of an important employee.
7. Instructions to agents, travelling salesmen. branch managers etc.
8. Report to share-holders regarding general progress of some special work.
9. Issue of bonus shares or debentures.
10. Change of address or title.
11. Clearance sales.
132
12. Offering new shares to existing share-holders.
Circulars have certain special characteristics. They are usually printed or
cyclostyled. As regards the salutation general form is Dear sir or dear madam. The
signature must appear in circulars.
Advantages of printed or cyclo-styled circular letters
1. Hundreds of them can be easily prepared and posted in one day.
2. They are comparably less expensive.
3. They penetrate where the salesman fails to find access because their initial
success of arousing interest lasts longer, but the salesman’s success of gaining
the ear of the buyer may be easily over-whelmed by interruption.
4. The receiver can place aside for further reading at a more convenient time.
5. They neither feel rebuffs nor bring about the dismal feeling of wasted effort.
Objectives of circular letters
1. To obtain publicity bra merchandise.
2. To impress the readers with the facts about the firm and the products.
3. To make the readers mor interested in their contents.
4. To attain the confidence of the readers.
5. To stimulate sales.
Precaution to be taken in preparing circular letters
As the information through circular letter reaches many people at a
time, special care and caution should be taken in drafting such a letter.
1. Circular - letter should be short, crisp and direct to the point; otherwise, these
letters may not be looked into.
2. The opening paragraph should catch the reader’s interest either by a neat
heading or telling an anecdote story etc.
3. To give the letter an attractive look;
133
a. When large number of letters are sent, letters can be printed
- in the imitation typewriter types, with the signature in original or in
facsimile or printed in a different colour etc.
b. Use good quality paper and seal your letter in its envelope. The mere fact
that the letter is sealed creates curiosity and interest. Never use cheap
looking stencil duplicated letters on semi absorbing paper for it.
c. Use attractive printed letterhead which will have a favourable
psychological effect and add only a little to the cost.
4. Create the impression of personal interest by preferring you’ to such general
expressions as ‘our reader, ‘our customer’ ‘our clients’ etc.
5. Circular-letters may be adopted for business promotion also by appreciation of
the customer’s confidence in the past and the hope that it will continue in the
future.
6. Eventhough circular letters are prepared for many, an attempt is to be made to
convey a personal message that seems to be directed towards the reader
himself. –
7. These letters should convey correct and comprehensive information and worded
in such a way as to inspire confidence among the receivers of such letters.
8. The circular-letter should not be arrogant in tone which will be detrimental to
the interests of the sender.
9. Circular-letters may be made so as to appeal to the egoism of the recipient e.g.)
you and a few others are chosen among the elite to try our magazine at
concessional rate.
10. In these letters never make any big promise which you can’t keep; because, an
unfilled promise will cause more damage than an undelivered one.
11. These letters should also carry convincing message to persuade the customers
and create the necessary action.
Different Circulars during different occasions
134
Given below are the important points to be included in the various types of circular
letters depending upon their nature.
A. Commencing a new business
1. Name and address of the firm and its telegraphic code telephone number etc.
2. The exact date of opening the new business and the time of business hours.
3. Capital employed and the financial standing.
4. The qualifications, special business experience, knowledge of the proprietor so
as to infuse confidence among the customers
5. Quality of the goods and fairness of prices.
6. Other special attractions and concessions available.
7. Specimen signature of the manager or the person incharge of the business to
guard against forgery.
8. An invitation to extend the patronage and support.
B. Introducing a new product
1. The brand-name and the uses of the new product.
2. How it is superior to other products of the same kind.
3. Special features like packing, saving in expenses, easy handling etc.
4. Any special discount and incentives offered to wholesalers and distributors.
5. End the letters with a hope of the trial order and suggest that the result would be
satisfactory.
C. Reduction sale or clearance sale
1. The period and time during which it is kept open.
2. 2. The kind and type of goods offered under the scheme.
3. A comparsion between the usual and reduced prices,
4. Soliciting the early visit of the customers to select among the varieties.
135
5. Assuring the customers of the genuiness of the sale and appealing to use of the
offer.
D. Shifting to new promises, opening of a new department or branch and Expansion
of premises
All these factors have great sales-value, therefore such circular letters must,
a. stress the development of the business.
b. Mention the additional facilities like the easy reach for the customers, more
variety department.
c. Extend cordial invitation to the customers to visit the new premises/branch
or department..
In case of expansion and shifting to new premises, inform your customer about the
delays in supplying goods, request them to bear with . inconvenience. Also convince them
that the changes are for the’ betterment. When opening a new department or branch
assurance may 1’e given that it will maintain the firm’s policy of selling sound products 11
t competitive prices.
Where new branches are being opened, the address, the opening date and the name
of the manager incharge should also be stated. Along with this, information may be given
about forwarding of the communications. If the new branch or department offers any
special or additional facilities that may also be stated separately,
E. Change in price
Usually any increase in the price will b resisted by the customers To overcome this
difficulty these i4tters should carry convincing argument for the increase in price
1. Express the reason for the change in the price in a convincing manner.
2. Say clearly what the. new price is.
3. Express your assurance again that the’ Same quality and standard will be
maintained.
4. Hope that the same patronage will be extended. despite the changes in the price.
136
F. Obtaining an Agency
If the product is offered to a new locality, steps should be taken to popularise it. As
such the circular letter should contains
1. The excellance of the product you sell.
2. Effort should be made to suggest delicately that the manufacturer must hold the
agent in high esteem to leave the marketing of the product to him.
3. Details as to the price quality and delivery schedule of the product. can be
given.
4. The area and the period of agency may e’ given.
5. The operating managers specimen signature may be given.
6. If any special or concessional terms are offered at the initial period of agency
that can also be stated clearly.
7. If the product is widely advertised a reference may be made about
it.
8. Finally a cordial invitation can be extended to make use of your service..
9. Generous quantity of samples and specimens may also be sent to the customers.
Granting and withdrawing of powers of attorney or procuration
1. At the first instance the reasons for granting or withdrawing the authority may
be given
2. If the authority is delegated, the full name of he person along with his specimen
signature must be given.
3. If the power. of attorney is for a specific period, this period should also be
stated more clearly.
4. If the authority is withdrawn a note of caution stating that any representation by
that person will not bind the firm subsequently, may be given clearly.
Appointment of an employee .
1. Express the need for the appointment ,
137
2. Introduce the newly appointed hi qualifications, abilities, previous
experience etc.
3. Attention should also be drawn towards his model signature.
4. The extent of power granted, to him and the department looked after by him
may be cited. .
5. Express your hope that under the guidance of the new officer the business
would prosper well.
Discharge of an employee
1. Express the reasons for discharge.
2. The date and the time of discharge may be mentioned.
3. A note of thanks for his earlier service to the business.
4. Mode of refilling his agency.
5. A word of caution stating that for all subsequent dealings he is not binding the
firm or business.
Admission of a new partner . V
1. The occasion which necessitates the admission.
2. The name, address and other details about the new partner.
3. The date of admission and the capital brought in by him.
4. An appreciation of his special capabilities, rich experience abilities, which may
help\in improving the business further
5. A speciman signature of the new partner for the attention of the customers and
bankers. –
6. State about y change in the name of the business, if .1ny effected by the
admission of a partner.
7. Thank the customer for the past patronage and request him to continue the same
in future.
138
Death of a partner
1. Express your deep regret over the sudden demise of the partner it possible, the
cause of the death may be given.
2. Acknowledge the services rendered to the business by the deceased partner.
3. Share the grief with the family numbers.
4. Write about the alternate arrangements made for the loss of service and capital.
5. State any change in the name of the business.
6. Thank the customer for the past patronage and request him to continue the
same.
Retirement of a partner
1. Regret the loss of service of the partner without shaking the confidence of the
customers.
2. Appreciate and acknowledge the service rendered by him so far
3. Explain the reason for retirement e.g. ill—health, old age etc.
4. If the retiring partner withdraws capital explain the alternate arrangements
made.
5. Specify any change in the nature and in the name of the firm
6. Thank the customer for his support so far and express your-hope that the same
with continue.
Conversion of a Partnership Firm into a Company
1. Explain the reason for conversion
2. State clearly the new name and address. If there is any change in the address of
the company specify them clearly.
3. Give an assurance that such a change is only for betterment and
the same personnel would be maintained.
139
4. Thank the customer for the past patronage and express your hope that it will
continue.
Specimen Letters
1. Letter intimating the inauguration of a new business
HEAR.WELLRADIOHOUSE
38, Townhall Road,
Madurai,
1st August, 1998.
To
The Manager,
The Electricals and Electronics Company,
Ram Nagar Bazar,
Dindigul -
Dear Sir/Madam,
We have pleasure to inform you of the opening on Friday 7th of August 1 998, of a
high class radio shop at the above given address under the firm name of:
“SACS AUDIO HOUSE”
We have appointed Mr. Victor as the manager incharge. His fifteen years
experience in the business with the Standard Electronics will help a great deal in running
the business on the most efficient lines with prompt after-sales service to the utmost
satisfaction of all.
Our adequate capital will enable us to have bulk purchase at attractive discounts
and sell them at moderate prices, which will probably be the lowest anywhere in Tamil
Nadu.
The stores will be kept open from 8 A.M. to 8 P.M. and a special discount of 10%
will be allowed on all the purchase made by the first day customers.
140
It is of course, impossible to prove our worth and fairness of the prices unless you
give a trial order to us. We hope you will be satisfied with the results. The fascimile
signature of Mr. Victor is given below for your kind attention. -This will be used in all the
agreements entered into by our firm. Specimen signature of Mr. Victor
Yours faithfully.
S. Kurnar
Victor
Proprietor.
2. Circular - letter about opening of a new branch
BUY ALL PO VISIONS
41 Big Bazar St.,
Madras.
18th June, 1998.
To
Mr Raja Thilakar,
38, K.K. .Nagar,
Madras.
Dear Sir,
Due to the recent increase in the volume of our trade in the Northern Region we
have decided to open a Branch at42 Big Street, K.K. Nagar with Mr. Sukumar as the
manager.
Although we had been all to provide you efficient-service in the past, the
establishment of a branch in your region will result in your orders and enquiries being dealt
with more promptly. The new branch will be opened on 1St Jul 1998 nd from that date as
the orders and enquiries from your region should be sent to Mr. Sukumarr, the Branch
Manager.
141
We thank you for your patronage in the past and assure you again of our prompt
attention
Yours faithfully,
P. Chandra Sekaran.
General Manager.
Sample Circular letter announcing the retirement of a Partner
Ram Shyam & Sam Co.
15. Nethaji Road,
Murnbäi.
17th December ‘98
We regard to inform you that Mr. Sam our valued partner and one of the founders
of this firm is retiring due to old age and continued ill-health He has however gladly
consented to continue his association with u by acting in advisory capacity.
Consequent on Mr Sarn’s retirement, we find it necessary to change the name of
our firm as
RAM SHYAM & Co.,
We however sincerely feel that we shall be able to continue to serve you to you
atmost satisfaction, as we did not receive any compliant for the last two years during which
Mr. Sam’s work in the firm had been completely taken over by our young and able partner
Mr. Shyam subject to Mr. Sam’s ill-health.
We assure you that the ,business will be carried on at the same premises and on
exactly the same principles as in the past. We are glad to state that the firm has been able to
replace the capital with drawn by Mr. Sam with contributions from the remaining partners
and continues to enjoy the original financial standing.
142
We thank you most sincerely for the confidence you have hitherto kept in us and
hope that it will in no way be diminished by the altered arrangement. Please give us
opportunities to prove that the same standards of service are being maintained.
Yours faithfully,
Shyam
Circular conveying conversion of a partnership into a company
Hints
1. Mention that the expansion of the firm’s business, the consequent necessity to
carry out schemes of general development, the consequent need for more
capital have rendered the conversion desirable.
2. Re-assure them that their needs will receive the same attention as in the, past
and that every effort will be made to maintain its personal touch.
1. Draft a circular letter for M/s. Balaji Rarnji, announcing the conversion of their
partnership into a ltd., company (Public) under the style of Balaji, Ramji& Co., Ltd.,
2. Draft a circular to be sent out by Raja & Co., stating that the manager of the firm
Mr. Ram has been taken as a partner. The shop will in future be known as Raja, Ram Co.,
State that a large and varied stock is on view and invite enquiries and orders. V
MIs. Balaji & Ramji
25, Goods Street,
Coimbatore
18th December ‘98
To
x xx x
xx x x
Dear Sirs,
143
We take great pleasure in informing you, that we have taken a decision to convert
our firm into a Limited Company. This decision has been taken on account of the
increasing demand for our goods and the necessity of additional capital. Our growing
business demands a large amount be in line with the growing demand, additional funds
have become inevitable.
The new name and style of the company which will be born on 14th April ‘98 will
be
BALAJI RAMJI & Co., Ltd.,
We also grant you assurance that the change in the style of our business, as far as
you are concerned will be only for name sake. Intact, it will be more beneficial to you as
the increase in the scale will enable us to favour you with concessions. We certainly
believe that the intimacy shared by us will only grow and not diminish
It is our foremost duty to thank you at this venture, or the interest you have shown
in our company and enabled us to expand and grow to this extent. We eagerly anticipate
your view and opinions which would serve as guidelines for our functioning.
Thanking you,
Yours faithfully,
Balaji
Raja & Co.
56, Nethaji Road,
Coimbatore.
18th December 98
To
xxxx
x x x x
Dear’ Sirs,
144
We inform you with extreme pleasure, the inclusion of a new partner Mr. Ram to
our firm. Mr,Ram, the manager is associated with our firm for the past 18 years. He is one
of our charter members. Our firm will now continue its services in the name.
RAJA RAM & Co.
Mr. Ram is highly qualified and is also fully conversant with the technical know-
how. Besides these he has supplied us with a capital of Rs,. 1 latch as his contribution.
We are sure that his past experience in the field both at home and abroad will help
us a lot.
Moreover, we inform you with joy, that due to his, addition’ to the capital we have
had a varied stock of a variety of goods. We eagerly anticipate your enquiries and orders.
We express hope that the addition of our partner will help us to serve you best.
Thanking you,
Yours faithfully,
Ganesan
Circular announcing the new agency obtained
Hints
1. Refer to the excellence of the product and the fairness of its price in relation. to
its quality, arrangements for delivery..
2. Suggest that the manufacturers of such goods must hold the agent in high
esteem to leave the problem of marketing of the product to him.
3. End with an expression of service and by soliciting a trial orders.
Sample letter
Ram Agencies
15, Nehru Street,
Chennai
20th December ‘98
145
To
xxxx
x x. x x
Dear Sir,
We are happy to inform you that we have been entrusted with the marketing of
wash-well soap throughout South India. You will agree with us that this soap needs very
little introduction to the trade. ‘as it is a product of the well-known firm of “Janata Oil&
Soap works Ltd.”, whose preparations are world famous.
Under arrangements with them we have agreed to keep a fairly large stock of their
products. We are now in a position to deliver all varieties of Janata goods. As we are,
appointed their sole distributors for South India all orders from dealers in the are will be
booked by them through us.
You will be notified from the price list enclosed that all prices are subject to a
discount of 15%.
It has always been our earnest endeavour to serve you to the best of our ability with
goods of proved quality, and we feel we may safely claim to offer you once again a high
grade commodity on the most convenient terms.
Thanking you,
Yours faithfully,
Ram
Hints for drafting circular letter for expansion of a business premises or shifting to a
new premises.
1. Inform your customers in advance the delays in the execution of orders that are
likely to be caused and request them to adjust or - to accommodate as far as
they can
2. Convince them, that the’ change is for their benefit..
146
3. Strees then the special attractions which is much easier to reach of the
customers.
4. Display very” clearly the address of the new premises. Sample letter
A circular issued in connection with shifting to a larger premises.
Ram & Bros.,
14, Nehru Street,
Chennai.
22nd December ‘98
To
xxxx
xxxx
Dear Sir,
You will be pleased to know that the steady growth of our business has necessitated
an early move to a new and larger premises. Our old factory (including the showrooms and
administrative offices) has rapidly become insufficient to cope efficiently with he
increased demands of both old and new customers actually complained of the in adequacy
of our floor space and the poor showroom facilities and poor ventilation in
the old building, we could not move to a more specious premises owing to the non-
availability of suitable premises. Fortunately we have now succeeded in acquiring a newly
built large building at
45, Gandhiji Street,
Chennai
This building is best suited for our purpose and enables us to ensure. satisfactory
service to our customers.
The site is in the heart of the large industrial estate within easy reach of the railway,
the road and the sea. Transport bottle necks are thus reduced to a minimum and quick
deliveries can now be guaranteed.
147
Another heartening fact is that the new factory, in this new premises offers great
scope for mechanisation which is sure to increase both the quantity and quality of our
output.
Such a transitional period, as you know, gives rise to considerable difficulty.
Although, we are trying our best ‘to hasten the shifting operations.
We have confidence that you will certainly allow us a certain amount of latitude in
the special circumstances explained. As the factory will be ready for production within the
next to days, we can assure you of prompt delivery of all goods ordered from 2nd January
‘1998.
Please send all your communications to our new address. We take this opportunity
of expressing our sincere thanks for your confidence, custom and patronage in the past,
without which we could not have moved on We trust that the improvements that are going
to be effected will lead to’ even more business.
Thanking you,
Yours faithfully,
P. Yogananda
Introduction
A great volume of world’s trade both external and internal is conducted on the
system of agency. Particularly, business abroad would be difficult if the agency system had
not been devised. Even big manufacturers, though want to dispose of their products in
fairly large quantities in far distant markets, do not prefer to open a branch there. This is
because, they are often luxurious and have a tendency to eat deeply into the revenues.
Therefore, in most of the countries the agency system is adopted. It should also be noted
that it is not only manufacturers who avail themselves of these facilities. For instance,
insurance companies have recognised the value of the agency system even years ago.
148
An agent is one who is appointed to act for another. The person who appoints the
agent is known as the principal. The agreement between them is known as the agency
agreement.
Kinds of agents
There are various types of mercantile agents. Most important of them are:
1. Commission Agents.
2. Del credre Agents.
3. Factors.
4. Brokers.
5. Auctioneers.
6. Clearing arid Forwarding agents.
7. Underwriters.
8. Warehouse Keepers.
1. Commission Agent: A commission agent is a person employed by a principal
either to buy or sell goods on his behalf. He receives a commission at a specified rate. The
principal meets all the expenses connected with the purchase or sale of the goods.
2. Del credre Agent: His function is similar to that of a commission agent, but in
addition, he undertakes an additional liability of guaranteeing payment to the principal
when he sells the goods on credit. The principal, therefore, need not worry about bad debts.
For this additional service, he is entitled to an additional commission known as “Del credre
Commission”.
3. Factor: He is a general mercantile agent who had possession of the goods and
sells them in his own name without disclosing the name of the principal to the third party.
He receives payment from the buyer and issue receipts in his own name. In case of default,
he can sue or be sued.
4. Broker: He is a special mercantile agent. His duty is to bring the intending
buyer and the intending seller together. Thus, he acts only as an intermediary between the
149
two. He is not given the actual physical possession of goods. He is not personally liable
and hence cannot be sued by third parties.
5. Auctioneer: He is a person employed by a principal to sell his goods or
property publicly i.e., by asking the public to bid for it. For his services, he gets a
commission.
6. Clearing and Forwarding Agent: A clearing, agent is one who clears the
goods for the importer. The clearing agent assists the importer for a commission. A
forwarding agent, on the other hand, forwards goods to foreign countries for the exporter.
These agents are also employed in internal trade.
7. Underwriter: An under writer is generally appointed for underwriting an issue
of shares and debentures. The underwriter undertakes that he would subscribe to the shares
or debentures to the extent under written by him, if the public do not subscribe for them.
His commission is called underwriting commission.
8. Warehouse Keeper: A warehouse keeper helps trade and commerce by storing
goods in his go down or warehouse. His function is to take care of the goods kept in his
warehouse. He issues receipt known as warehouse keeper’s receipt for the goods stored.
He may even undertake to sell the goods on behalf of his clients.
Stages of Agency Correspondence
In the selection of an agent care must be taken. Similarly, an agent shall only
want to represent a reputed and reliable principal. The person seeking the agency can apply
to the principal or the principal himself can offer agency other persons. We shall now
consider the correspondence between a principal &! and the agent.
1. Letter offering the Agency
The principal himself may offer agency to some other persons. This situation shall
occur only when the product of the manufacturer is not popular in that area or the agent is
a reputed businessman. Generally, the terms of such agency shall be liberal and the rate of
commission is also more. The writer should note the following points.
1. A reference to the potential market.
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2. The merits of the article.
3. Special advantages offered such as regular advertisements, maintenance of
showroom etc.
4. Terms, conditions and period.
5. An expression of hope that the connection would prove mutually beneficial.
2. Letter Applying for an Agency
Usually, the agent will apply for agency to the principal. Particularly in case of
popular goods, obtaining an agency is a difficult task. The intending person who wants to
obtain the agency should apply to the manufacturer. In such letters, he should specify his
ability, .reputation, familiarity In the area etc. The following points are to be noted while
drafting an application for agency.
1. The Opening Paragraph: In the opening paragraph, the applicant should mention
the source from which he got the information. The application, therefore, may be based on
either –
1. An advertisement offering agency, or
2. Information received from others, or
3. On the own initiative of the applicant.
1. Application with reference to an Advertisement
1. Make a reference to the said advertisement of the producer.
2. Offer your services and express your willingness to work as an agent.’
2. Application based on the information from others
1) Specify the source from where you have received information about the desire of
the manufacturer to appoint an agent in your area.
2) Offer your services and express your willingness to work as an agent.
3. Application on the own Initiative
1) Firstly introduce yourself as agent.
151
2) Explain the potential market for the product of the manufacturer in your area.
3) Specify your desire to take up the promotion of the sale of his products as an
agent.
2. The Main Communication: In the main paragraph, the following points should be
highlighted.
1. How long you have been in the line of business and the reputation you have
built up.
2. The business contacts established by you.
3. Your ability, experience and knowledge about the business trends, market
conditions etc.
4. Your arrangement for storage, distribution, advertisement, display, showrooms
and window displaying etc.
5. The terms of agency applicable to you and means of settlement.
6. One or two references that you know better and furnish valuable information
about you.
3. The Concluding Paragraph: Conclude your letter with a hope of getting a
favourable reply from the producer. -
3. Letter of the Manufacturer in Reply to the Application.
A reply from the manufacturer may be either the grant of the agency or refusal of
the agency. In all the cases, the following points should be noted.
1. Acknowledge with thanks, the correspondent’s letter.
2. Appreciate his interest in your product and also his business standing.
3. Inform whether you are prepared to grant the agency applied. If not, inform
politely that you have already appointed or have no idea of appointing an agent at present.
Also express an assurance that his case will be considered if any agent is to be appointed in
future.
152
4. If the agency is granted, mention the terms of agency either in the form of
accepting the terms offered by the applicant or by giving your own terms.
4. Other Letters from the Principal
Besides, a few letters are also to be sent between the principal and the agent. The
letters written by the principal to the agent are the following.
1. Letter asking for the reasons of low sales if the agent fails to reach
the target sales.
2. A circular letter to his customers and other interested parties
expressing the termination of the agency with a request not to deal
with him in future.
5. Other Letters from the Agent
The letters written by the agent are the following:
1. Letters suggesting improvements in the product if a complaint is received
from the customer.
2. Letters explaining the reasons for the poor sales if an explanation is
sought for,
3. A circular letter to all ‘the customers and interested parties about your
appointment as an agent for the manufacturer.
Terms of Agency
The manufacturer and the proposed agent have, to decide upon several points
regarding the terms on which the agency is to operate The main points to be settled
regarding the terms of agency are the following:
1. Allowance or Commission: The rate of commission or allowance is fixed with
reference to the capacity of the agent to boost up the sales. In deciding the reasonable rate,
the facilities provided by the agent in the shape of his contacts, showrooms, travels etc.
should be taken into account. Some reputed manufacturers follow a rigid policy regarding
the rate of commission. In some cases, the rate of commission is negotiable.
153
2. Duration of the Agency: The period for which the agent should act as an agent
for the manufacturer should be settled If the product is new to the market, the duration
should be reasonably long, and if the product is already popular in the market, a shorter
period may be specified. For example, one year. It may be renewed if the agent’s
performance is satisfactory.
3. Area under the Agent The area allotted to the agent should be neither too small
nor too large If it is too small, the agent will not be able to earn adequate commission and
so he will show less interest in his work. If it is unduly large, he will not be able. to cover
the whole area properly.
4. Terms of Payment: Terms of payment refers to the mode of payment by the
agent to the principal and the period within which The amount is to be settled. If any
amount is to be deposite with the principal as security deposit, the amount of such deposit
should also be stated.
Travelling salesmen.
Travelling salesmen or commercial travellers, as they are called, are persons whose
business is to go from place to place and to do business on behalf of their principals They
are generally paid a salary plus a fixed. rate of commission for the orders booked by them.
Functions of the Travelling Salesmen
The traveling salesmen generally perform the following functions:
1. To take orders from old as well as new customers and pass on them to the
principals for execution.
2. To visit customers who have stopped placing orders and try to receive them.
3. To collect overdue accounts, if authorized to do so.
4. To collect information regarding the financial status of old as well as new
customers if necessary.
5. To attend to the complaints of the customers and settle claims if any.
6. To baring to the knowledge of their principals any new development, favourable
or unfavourable, to the business of the firm.
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7. To submit a report periodically about their performance.
In performing these functions, the traveling agent has to write several letters to the
principal.
Specimen Letters in Agency
1. Letter Offering Agency
PHILICO ELECTRICALS LTD.
Manufacturer of High Class Electric Bulbs & Fittings
12. Industrial Estate,
Hosur- 635 109
Dharmapuri District.
14th May 2000.
M/s. Saliesh & Co.,
46, Harrington Road,
Trichy- 620 002.
Dear sir,
We have every reason to believe that our electrical bulbs and fittings would sell
readily in your distinct, provided an energetic agent could be found to overcome the
difficulties of introducing them to the local buyers who naturally prefer the familiar makes.
The difficulties are lessened by the care which we have been taking to make these
bulbs and fittings more than usually suitable for tropical conditions and to place them
within the reach of most people at cheaper prices.
For the present, however, only the cheaper varieties would be consigned unless you
express a desire for the finer ones.
‘we appreciate the difficulties you are likely to meet, and are accordingly willing to
allow you as sales agent a commission of 20 per cent on the net sales.
155
It is our firm belief that this connection would prove mutually beneficial, and we
hope that you will be prepared to act for us.
Yours faithfully,
For Philico Electricals Ltd.,
v.m.s Renganathan
sales manager.
2. Reply to the above-Accepting Offer
SAILESH AND COMPANY
Dealers in Electrical Goods and Government Contractors
46, Harring Road,
Trichy- 620 002.
16th May 2000.
Philico Electricals Ltd.,
12, Industrial estate,
Hosur- 635 109
Dharmapuri District.
Dear sir,
We thank you for your letter of 14th may 2000 offering us the agency for your
electrical goods in Trichy District and appreciate the confidence you have placed on us.
We share your view as to the possibilities of the market and believe that though
sales for the first few months may be low, the final result will justify the establishment of
the agency.
The cheaper varieties are, in our opi9nion, excellent means of testing the market,
though it is likely that the more expensive models could be handled later.
We accept your offer on the terms stated and await your further instructions.
Yours faithfully,
156
For Sailesh and Company,
N. sathish
Managing Partner.
3. Application for an Agency
BABU CYCLE TRADERS
Dealers In Cycles and Cycle Spare Parts
23, North Car Street,
Tirunelveli -627001.
20th May 2000.
M/s. Bajaj Cycle Industries,
168, Miller Ganj,
Judhiana- 141 001.
Dear Sir,.
We think that you have overlooked the possibilities of Tirunelveli District as an
outlet for your excellent cycles. There is in fact every indication that a small advertising
campaign would be productive of most satis1ring results.
It is at this point that you would need an efficient distribution system to back your
advertising. We believe that our knowledge of local conditions, your reputation and our
connections would be of the highest service to you. Our show rooms situated in the heart
of the business. quarters, offer admirable facilities for display and our many branches in
the district enable us to reach most of the larger towns in our district.
You can veri1’ these statements by referring to:
1 M/s. Rain Cycle Mart, Town Hall Road, Madurai -625001
2. India Cycle Company, 204, Broadway, Chennai - 600 001.
157
As there will be considerable difficulties at first, we think you will agree that a
commission of 2O%isreasonable. We are prepared to pay by monthly drafts on Ludhiana
but would, of course, also ready, consider any other alternative method you might suggest.
We are already representing several reputed manufacturers, for many years. We
trust that we shall have the pleasure of giving you similar service.
Yours faithfully,
For Balm Cycle Traders,
Managing Partner.
4. Letter offering Agency to the Applicant
BAJAJ CYCLE INDUSTRIES
Manufacturers and Exporters of QualIty Cycles
161s, Miller Ganj,
Ludhiana- 141 001.
26th May 2000.
M/s. Babu Cycle Traders,
23, North Car Street,
Tirunelvelli -627001.
Dear Sir,
We thank you for your letter of 20th May 2000 and are favourably impressed by
the suggestions you have made. It is, however possible that the local conditions may make
large sales difficult and with this, possibility is ruined we cannot do more than to forward a
small consignment of 100 cycles to test the state of the market
We also know that you have to face considerable difficulty in the absence of
advertising, but we think you will agree that our campaign is quite out of the question at
this stage. However, if you can succeed in pushing up the sales, we can also offer an
additional commission of 5 per
158
We accept your conditions with regard to commission and settlement and hope that
you will be as successful with our products as with those of your other manufacturers.
Yoursfaithfiilly,
For Bajaj Cycle Industries,
Sales Manager.
5. Letter to the Agent asking Explanation for Low Sales
BAJAJ CYCLE INDIJSTRIES
168, Miller Ganj,
Ludhiana 141001.
26th May 2000.
Sri SaravanaEmporim,
14,North Street,
Villupuram -605602.
Dear Mr. Aravind,
I note with regret that your sales do not show any improvement as yet. Our
products sell quite readily elsewhere and we regularly receive a considerable amount of
business even from your neighbouring districts like Trichy and South Arcot.
It is possible that there is some special reason for your low business, but we think
that we are entitled to ask for some explanation of the situation. Thai will enable us to
assist you in tackling your local problems with success.
We trust that with our co-operative efforts your sales returns will improve.
Yours faithfully,
For Bajaj Cycle Industries,
Sales Manager.
159
Banking Correspondence
Bank plays a vital role in the business line. It has become part and parcel of our
life. Banks cater to the needs of agriculturist, Industrialist, traders and other sections of the
society. ft is an indispensable institution in a modern society and constitutes the back-bone
of money market,
Origin of Banking
The word Bank is said to have derived from the french word “Banco” or “Bongue”
which means a Bench. In fact the early Jews transacted their business by sitting on
benches. When their business fail the benches were broken and the word “Bankrupt” came
into practice.
Another view is that the word ‘Bank’ might have been originated from the German
word “Back” which means a joint stock fund.
For a businessman it is an absolute necessity for he has to handle large amount of
money from day-to-day and then safely depositing money and withdrawing it at will.
Sometimes a business man finds his money tied up when he needs it most for another cash
deal. At such a time he can approach his bankers for a loan.
Even a common man may want to keep his valuable belongings in safe custody and
he may approach a bank, Thus we find that a bank performs various functions for its
customers.
Functions of a Bank(er)
The following are some of the important functions of a bank.
1. Receiving deposits of money
It accepts deposits from the customers who can take back their money at will.
Types of accounts
A. Savings accounts: Customers deposit their money in savings bank accounts to
save’ a part of their current incomes to meet their future needs and also earn an income
from their savings in the form of interest. 1 he minimum amount should be maintained as a
reserve.
160
B. Current account: A current account on the other hand is a running account,
which may be operated up on any number of times during a working day. The bank does
not pay any interest.
C. Recurring deposit account: In recurring account, the depositor deposits a fixed
amount at regular intervals and the total amount can be claimed after the due. The interest
rate is higher than that of savings account, since there is no interrupted withdrawals during
the operation.
D. Fixed deposit account: In a FD account the deposit made for a fixed period and
a higher rate of interest is paid to the depositer.
2. Granting loans: A bank lends money to the needy people at a certain interest
rate. Banks give loans to agriculturist, industrialist arid business men who invest it in their
ventures to their own profit and to the own economic advancement of the country.
3. Discounting bills of exchange: One of the important function performed by the
Bank to its customers is discounting the bill of exchange by endorsement.
4. Acting as an agent fo1r its customers: Banks act as an agent to its customers in
various commercial transactions like payment of insurance premiums, payment of tax etc.
5. Supplying status enquiry information to another bank which is needed by the
customers.
6. Taking charge of valuables for safe custody.
7. Issuing letters of credit and traveller’s cheque.
Relationship between a Banker and a customer
1. Depository relationship
2. Banker as a bailee
3. Banker as a trustee
4. Banker as an agent-follows the instruction of a principal in buying and selling
shares, collects cheques, dividends, pays insurance premium, subseriptions etc.
161
5. Debtor - creditor relationships.
A Bank must communicate
a. with its customers
b. With other banks
c. with its head office
d. with government departments.
The essential characteristic of Bank correspondence
Following are the essential elements of a successful bank correspondence
1. It should be as brief as possible.
2. it should be dear, complete precise and absolutely free from ambiguity.
3. It should be accurate in contents in figures, dates, names of the parties
should be properly maintained. .
4. It should be so carefully. worded as to maintain secrecy about the accounts
of its customers.
5. It should be tactful and courteous particularly while drawing the attention of
his customers to their over-drawn accounts.
Classification of Banking Letters
A banker who hopes for a successful career in banking should be well versed in the
art of writing banking letters. Acquiring this knowledge is as important acquiring
knowledge of the fundamentals of banking, them an who can talk on paper to a customer in
a friendly and impressive way will be an asset to his bank.
Bank correspondence can be classified as under:
1) Letters between a bank and its customers
2) Letters between the head office and its branches
3) Letters from one bank to another.
162
Part - 1
Correspondence between a Bank and its customers
In view of the varied transactions that take place between a banker and his
customers, it is obvious that banking correspondence are bulk and large. However, a major
portion of this is done by just filling in printed forms since most of the transactions are
stereotyped in character. Thus, most of the letters between the banker and his customer
have become standardised and formal. In his correspondence with others, a banker must be
very courteous and diplomatic. A banker is expected to guard in the secrecy about the
financial affairs, transactions and the nature of accounts of the customers. Therefore, banks
normally do not disclose to an outside party information regarding their customer’s
account. They will, however, exchange opinions and during that process, they always
exercise great care and caution. To their customers banks must give correct and prompt
information and guidance. Following are a few specimen letters to be exchanged between a
banker and his customer.
Letter to a new customer to use the safe deposit service
CANARA BANK
Paridian Hotel Buildings.
Alakarkoil Road,
Madurai,
28th November, 1998.
Dear Sir/ Madam, .
An insurance policy may get you money to rebuild your house or to buy new
furniture and clothes after a catastrophe, but fire and theft remove so many things which
cannot be replaced. .
Have you ever visited Our Safe Deposit ‘fault? Have you seen the great 33 ton door
with the burglar alarm system that resorts to sound Waves, the unique time saving vault
arrangement and the countless other modem innovation that have been brought about?
163
A safe deposit vault at the bank provides complete protection against loss of
valuable jewelleries, securities and documents. Ourvault contains boxes of various sizes to
suit your needs. You can. take on rent one of them for your exclusive use.
If you have not yet seen the vault, kindly take this letter as a cordial. invitation to
see for yourself this equipment which is modem; safe and convenient. It will give me great
pleasure to show you around the. vault and explain its many interesting features and
advantages.
Yours faithfully,
P Chancdru.
Part - II.
Correspondence between the Head office and its Branches
Bank correspondence with Head Office is similar inform to any other
correspondence, but there are a few points which must be noted here. The Head Office of
any Bank has a number of specialised departments and to facilitate the receiving of letters
by proper officials, it is usual to mark all letters on the left hand top corner With the name
of the appropriate department such as ‘Staff Department”, “Loan Department”, “Accounts
Department” etc. –
Sometimes, letters meant for a particular official of a particular department will be
marked as follows:
“The Chief Accountant,
“Head Office,
‘The Staff Manager,
Head Office”.
Letters from the branches to the Head Office usually consist of
(i) Proposals for advances to customers of the branch
(2) Letters concerning staff-their promotions, transfers etc,
164
(3) Reports on the general administration of the branch local trade conditions, ways
and means of developing the business and general topics of interest to the Head Office.
Letter from the Head Office to a branch asking for statements
DIAMOND BANK LIMITED
Tele Grams : Diamond
Phone: 254096
280, Tamrind Lane,
Fort,
Bombay
10th March 1998.
The Branch Manager,
Majestic Circle Branch,
Bangalóre.
Sir,
Board Meeting- 25th November, 1998..
Please send us on or before 25th November 1998 statements of General and Petty
Cash and Deposit accounts made up as at the close of 30th September, 1998. Please also
send us a certificate, addressed to the chairman, of the balance at that date.
Yours faithfully,
R. SIDDHARTHA
Secretary.
Letter from a Branch Manager to the Head Office recommending loan to a customer
against the security of shares.
LAKSHMI VILAS BANK LTD.
(Rajapalayam Branch)
Railway Station Road,
165
Rajapalayam,
15th November, 1998.
The Managing Director,
Lakshmi Vilas Bank ltd.,
93, Jawahar Bazaar,
Karur.
Sir,
Narayana Raja who owns and operates two rice mills, has applied for a loan of
Rs.50,000/- against the following securities.
1000 shares of Lakshmi Mills - currently quoted at Rs.55 per share
5,000 equity shares of Tata Co.; currently quoted at Rs.25 per share
2,000 equity shares of Alembic Industries Ltd., currently quoted at Rs.25 per share.
All the shares are fully. paid up and they stand in the applicant’s own name.
The applicant will execute the usual documents and deposit the shares with the
signed blank transfer deeds as collateral security. He agrees to maintain a margin of 50
percent on the market value.
Thus, there will be an ample margin to safeguard our interests against abnormal
fluctuations in the stock exchange. He is a man of considerable means possessing valuable
properties in the town. He has recently purchased a large quantity of paddy for his mills
during the last harvest season and therefore is running short of ready cash for his mills. He
hopes to repay the loan within the next six months. The advance will carry interest at the
rate of 16 percent per annum.
I recommend that the proposal may favourably be considered and request that it is
sanctioned, the decisi9n may be communicated at the earliest. –
Yours faithfully,
H. KALAVANAM
166
Branch Manager.
Part-III
Letters from one Bank to another
A bank writes letters to other fellow banks under various, Circumstances. Some of
them are
(a) enquiring about the credit-worthiness of a person, firm or a limited company. .
(b) enquiring about cheques sent for collection 3
(c)for verifying the specimen signature
(d) introducing a customer to a distant blank.
Note:
When goods are to be sold on credit terms, the supplier takes steps to ascertain the
financial standing and credit-worthiness of the buyer, To obtain this information, he may
have to enquire from the customer’s baker. However, because of the highly confidential
relationship between the banker and his customer, the banker will not respond to such
private enquires directly. But he will be willing to give such information to his fellow
bankers. Therefore, the supplier must make his enquiry his banker.
1. Application for opening a bank account.
a. By an individual
b. By a partnership tirm
c. By a joint-stock company
2. Credit or debt advice by a bank to its customers.
3. Statement of account sent by a bank.
4. Intimation of non-collection, refusal or dishonour of cheques.
167
A letter requesting a banker to open an account
MARUTI & Co.
14, Gandhiji St,
Chenai.
5th Janyuary ‘98’
To
The Manager,
Indian Bank,
Chennai.
Dear sir,
I am desirous of opening a current account with you. I have sent your printed
application form duly filled in with specimens of my signature and the letter of
introduction form one of your customers Mr. N. Guru, Proprietor, “Vasanth & Coy.,
through my personal assistant Ms. Maya, who will pay in sum of rupees Rs. 1000 as initial
deposit.
Kindly send with her a cheque book containing 25 leaves a passbook and pay in
slip book for purpose of remittances.
Thanking you,
Yours faithfully,
Madhan.
Write a letter from a bank regarding dishonoured cheque due to insufficiency of
funds
CANARA BANK
No.4, Goods Street,
Madurai.
5th January ’98.
168
To
M/s Gupta Agencies,
56, Koli Street,
Madurai.
Dear sir,
We regret to inform you that we were forced to dishonour your cheque dated
02.01.98 due to insufficiency of funds. Your cheque was worth Rs 50,000 but the balance
in the SB account is only Rs. 40,000
Kindly avoid such mistakes in the future as they create a doubt about your truest
worthiness. Else you can avail an O/D facility to avoid such hinderences.
Thanking you,
Yours Faithfully,
P. Murugan.
Hint for drafting request to pay insurance Premium.
1. Request the banker to make payment on bank.
2. Instruct him to debit your account for these payments.
3. Assume him that you will keep sufficient balance on due dates enabling him to
make such payments
4. Give details of policy, amount and period
Sample letter which requests to pay insurance premium
RAJA & Co.
14, Nehruji Street,
Madurai.
16th January ’98.
To
The Manager,
169
State Bank of India,
Madurai.
Dear Sir, :
I was an account holder in your bank. Due to my industrial tour I was unable to pay
the insurance premium, so I request you to pay the insurance premium to life Insurance
Corporation of Indian on or before 15th January 1998.
My insurance premium number is 256 The amount to be paid is Rs.500. You can
debit the amount from my account. I assure your that I will keep sufficient balance on due
date enabling you to make such payments. –
My current account number is 110. I again assure that I will maintain regular flow
of money in my account. My policy value is Rs.50,000. Once again I remember you to pay
the insurance premium of Rs.500 on or before 15th January 198.
Thanking you,
Yours faithfully,
S. Kumar.
Write a letter requesting the banker to pay income tax.
JAYANTHI&Co.
15, Colony Road,
Coimbatore.
16th January ‘98.
To
The Manager,
StateBankOf India,
Coimbatore.
Dear Sir,
170
I hold a current account in your bank for the past two years. I have been at present
invited by an U.S. company to attend an important. conference. I will have to be these by
7th January’98 and so I am unable to pay my income tax. I request to pay my income tax
on or before 25th January 1998 as per the enclosure of necessary details.
My yearly income comes around 15 crores. The e4nclosed details will give you all
the information about the tax to be paid. You can debit it from my account.
My current account number is 99. I give you the fullest assurance that I will keep
sufficient balance and regular flow of money in my account. Kindly, debit my IT before
25th January 19.8 without fail.
Thanking you,
Yours faithfully.
Request for an over draft
Hints:
1. Tell the banker about the progress of. your company.
2. Tell him why you need the over-draft (OlD) and why you cannot get credit
supplies.
3. Mention the amount needed and the period.
4. Assure him that you will honour the term on which the over-draft facility is
granted and will bring the account in credit by the end of. the agreed period.
.
5. Inform him that your previous transactions with the bank and your books of
accounts would be sufficient for the bankers to sanction the over draft on
personal security.
6. Request the banker to give an early reply.
1. You are expecting an increased turn over in the coming season but you are not in
a position to finance yourself for additional stocks, and not able to obtain credit from your
171
supplies: Request your banker to allow you an over-draft for Rs.10,000, for a period of 3
months, on. your personal security.
ULTRA MODERN STORES
15, Gandhiji Road,
Mumbai,
7th January ‘98.
To
The Manager,
Indian Bank,
Mumbai.
Dear Sir,
We are pleased to report you, the steady progress of our business 8lnce its
establishment in January1991. The 200% increase in our turn over in the past six years is a
proof of our success in business.. We have been able to achieve this, mainly because of the
wide range of consumer goods readily available in our stores in large numbers
During the further pongal season, we anticipate a further rise in our turn over arid
as such we wish to add, other lines of goods also. On account of tight Deflation of money
market. our usual suppliers have expressed their inability to grant us a credit or a period of
more than one month.
Dear Sir,
Under these circumstances, we are obliged to approach you with a request for a
small over-draft of Rs. 10,000 would be sufficient to finance our increasing seasonal
stocks. We require this amount for a period of 3 months by the end of which we shall be
able to place the account in credit
At present we can give you only our personal guarantee as security for the over-
draft. However we wish to draw your attention to the operation of our current account in
172
your bank has been fairly maintained regularly. Trading and profit and Loss Account
balances as on the date of application are enclosed for your verification.
An early reply will help us to send the orders to our suppliers and having our stocks
in time.
Thanking you,
Yours faithfully,
Write a reply from the bank.
Indian Bank
The Manager,
Mumbai.
8th January ‘98.
To.
The Ultra Modem Stores,
15, Gandhiji Stores,
Mumbai.
Dear Sir
We regret to inform you that we are unable to grant you-the over-draft facility that
you had asked for. Though your increase in the sales had been satisfactory; your late
remittance of your previous debit account, arises a doubt regarding your trustworthiness.
Further more the deflation in the money market has tightened our hands.
The amount you have asked for is slightly heavy to be allowed for personal
guarantee. We are again sorry for the inconvenience.
Thanking you,
173
Request for credit
Hints:
1. Address to the agent of the bank.
2. State the reference as open credit.
3. State the reasons for credit and the potential demand for the product. –
4. State your financial difficulty and requirement.
5. Give details of your security along with its values
6. Assure prompt payment.
Sample letter
MALHOTRA BROTHERS
5, Bank Street,
Mumbai.
8thJanuary ‘98.
To .
The Agent,
State Bank of India,
Mumbai.
Dear sir
Ref: Open credit.
The recent business tour of European markets by our senior partner - Mr. J.K.
Malhotra has brought in large number of orders for our products.
The state trading corporation (STC) has at the same time requested us to supply a
considerable quantity of our products to some of the East African countries. This has
increased our I production activity beyond our expectation.
174
Since all these orders are to be supplied on credit ranging from four months to eight
months, we are obliged to approach you for a term loan for a period of one year for
Rs.70,000 This amount would cover 80% of our financial requir9ment, account increased
production activity. The remaining 20% being met by us from our internal sources.
Please let us know whether your bank can help us in this matter. We offer the
following securities. . –
1. Factory building - Rs.50,000
2. Land - Rs.40,000
3. Machineries. - Rs.30,000
We assure you that our payment is regular and prompt, An early reply is highly
appreciated.
Thanking you,
Yours faithfully.
Reply Letter
A customer of your bank has applied for a loan of Rs.10,000 against an old
building and some shares. As the manager of the Bank, write a tactful reply regretting your
inability to grant the loan applied for.
CA NA RA BANK
15, Bank Street,
Mumbai.
8th January ‘98.
To
M/s JAVANTHI & Co,
56,WorliRoad,
Mumbai.
Dear Sir,
175
With-reference to your application for a loan of Rs.10,000 against an old building
and some shares, we regret that we are not able to sanction the same for the following
reasons.
1. The shares given as security are not approved shares and these is heavy
fluctuation in share prices.
2. The security, an old building for which no valuation certificate and income
certificate has been submitted.
3. You have not specified the purpose for the loan supplied and your terms of
repayment have not been satisfactorily furnished.
As such we dare lodging the proposal adjourned. Thanking you and assuring you of
our best attention at all times.
Yours faithfully,
Hints for drafting reply from, the banks
Replies from the banks regarding credit may take place in three forms.
1. Approval
2. Denying & ask for more, securities
3. Rejecting
Hints for drafting denying and ask for more securities,
1. Acknowledge the receipt of application
2. Politely decline the otter stating the reasons like insufficiency of the securities..
3. Request the customer to supplement more securities
4. Await for reply.
Hints for drafting rejection letter
1. Acknowledge the application letter. -.
2. State the reasons for your in ability to sanction the credit. because of a negative
reply from the head office.
176
3. Tell him that you are persuading the head office and shall reply.
Sample letter
Denying and ask for more securities
State Bank of India
56, Bank Road,
Mumbai.
10th January
‘98.
To,
The Maihotra Bros,
Mumbai.
Dear Sir,
Ref : Open credit.
We have the pleasure to acknowledge your application for an open credit of Rs.
70,000. Your application had been forwarded to our head office for their favourable
consideration, since we are not authorized to sanction advances beyond Rs.20,000. The
nature and values of your securities have been noted and our local, values have already
been instructed to go into the matter and submit their report within a week.
We wish to point out here that in considering your application for loan our head
office has rejected your loan application with reference to the report of the local values.
However, we hope to convince our head office for granting the loan, if you provide
better securities.
We are eagerly awaiting for your positive reply enclosing additional securities.
Thanking you
Yours faithfully,
177
Over Draft
Over draft is an arrangement between a banker and his customer I by which the
customer is allowed to with draw over and above his credit I balance in the current account
upto an agreed limit. This is only a J temporary accommodation usually granted against
securities. The borrower i5 permitted to draw and repay any number pf times, provided the
total amount over drawn does not exceed the agreed limit. The interest is charged only for
the amount drawn and not for the whole amount sanctioned.
A cash credit differs from an over-draft. A cash credit is used for long term by
business men in doing regular business. Whereas over-draft is made occasionally and for
short duration.
Temporary Over - draft
Banks sometimes, grant unsecured over-draft for small amounts to customers
having current account with them. Such customers may be government employees with
fixed income or traders. Temporary overdrafts are permitted only where reliable source of
funds are available to a borrower for repayment.
Procedures
The banker may take some collateral security or may grant such advance on the
personal security of the borrower.
Generally, an over-draft facility is give by a bank on the basis of a written
application and a promissory note signed by the customer. In such cases an express contact
comes into existence. ln some cases, in the absence of an express contract to grant over-
drat, such an agreement can be inferred from the course of business. For example, If an
account holder, even without any express rant of an overdraft facility, over draws on his
account and his cheque is duly honoured by the bank the transaCt0fl considered as an over-
draft.
Banks should therefore obtain a letter and a promissory note incorporating the
terms and conditions of the facility including the rate of interest chargeable in respect of
the over-draft facility.
178
I Hints:
IV. Insurance correspondence
Business is full of risks. The risks of accident, theft, burglary etc cannot be
completely prevented despite utmost care. Hence the next best protection is insurance.
Production and marketing problems can be effectively shouldered only if some insurance
coverage is there, giving an opportunity to producer and marketer to have full
concentration in their affairs.
Definitions
Insurance is a contract between two parties, in which the insurer agrees to pay
indemnity to the insured in case of loss.
The insured pays a consideration called the premium to the insurer for the
protection.
Principles
The basic principles on which an insurance contract depends are
1. Utmost good faith
2. Indemnity
3. Insurable interest
1. Utmost good faith
When a contract is entered, the person who wishes to be insured has to give all the
relevant informations which may prove to be a good or bad risk.
2. Indemnity
The principle of indemnity is the controlling principle, which prevents insurance
from becoming a profit making organisation. The insurer agrees to pay indemnity to the
extent of actual loss.
3. Insurable Interest
When a policy is taken out, the insured, must have an insurable interest in the
goods which he is insuring..
179
This is an essential clause, as otherwise people may take out an insurance policy on
others possessions from which they do not derive any benefit and in case of destruction
claim indemnity.
Classifications
Insurance contracts can be broadly classified as life assurance and general
insurance.
1. Life assurance or Insurance
It is a contract whereby the insurer (insurance company) in consideration of a
premium paid either in a lump sum or in periodical installments, undertakes to pay an
annuity or a certain sum of money, either on the death of the insured (policy holder) or on
the expiry of a certain number of years.
2. General insurance
a) Fire insurance
It is an agreement whereby the insurer, in return for a consideration, undertakes to
indemnify the other party against financial loss which the insured may sustain by- reason
of certain defined subject matter being damaged or destroyed by fire or other defined perils
upto an agreed limit.
b. Marine insurance
It is an arrangement by which the insurance company or underwriter agrees to
indemnify, the owner of a ship or cargo against risk which are incidental to marine
adventure in consideration of a premium paid by the insured.
c. Miscellaneous insurance
i) Personal accident insurance
ii) Fidelity insurance
iii) Burglary insurance
iv) Motor-vehicle insurance
180
v) Workman’s compensation insurance
vi) The all-in-one policy.
Life insurance (or) Life assurance correspondence relating to life insurance
1. An enquiry regarding terms and conditions.
2. Submission of proposal for insurance to the insurance company.
3. Acceptance or refusal of the proposal.
4. Failure to pay premiums.
a. Remainder from the insurance company.
b. Notice of the lapse of the policy.
5. The proposal for surrendering the policy, conversion into -a paid up policy.
6. Applying for a loan against a policy.
7. Revival of the a lapsed policy.
8. Assignment of a policy.
Advantages or objectives of insurance
1. It acts as a tax shield.
2. It gives a higher security against unhappening.
3. It renders earnings to the policy holders by giving more and more bonus.
4. It grants loans from policy. For eg., Housing loan, Medical care loan and short-
term loans.
5. It encourages thrift (savings)
Procedure for taking up a life policy
The person intending to insure his life should study and consider the related
advantages which the various insurance plans offer and select the best type.
The agent of the LIC gives a proposal form and this must be filled and submitted to
the LIC.
181
The LIC will arrange for the medical examination by a doctor approved by them.
After studying all the papers, the corporation will decide whether or not to accept the
proposal. Lf it is accepted he will be asked to pay the premium. After the payment of first
premium, the LIC will proceed to issue the policy. The assurance however begins with the
acceptance of the first premium.
The LIC of India publishes several rates of premium in its prospectus. Premiums
are payable annually, half-yearly, quarterly or monthly according to the terms of the
contract. If the payment of premium is delayed a nominal interest should be paid.
Types of Life insurance policy
The LIC of India issues several kinds of policies to suit the needs of people, tastes
and pockets of different classes of people. Following re some of the important policies
issued by the corporation.
1. The whole life policy
Under this policy, premiums are payable throughout the life time of the life assured
and as such this is the cheapest form of policy. The policy money is payable only on the
death of the assured. It is therefore, particularly suited for those persons who wish to
provide financial assistance to their family or nominees.
2. The limited payment policy
Under this policy, premiums are payable for a selected period of year or until death
of the life assured, if it occurs within this period.
3. Endowment policy
Under this policy, the insured amount is payable to the insured on his - at1aining a
specific age or on a pre-determined date in the event of his dying earlier, to his family or
nominees. This is the most popular form of life assurance, since it not only makes
provisions for the family of the life assured in the event of his early death but also assures a
lump-sum at any desired age.
Premiums are usually payable for a term of years equal to the endowment term or
until death if its occurs within this period.
182
4. The double endowment policy
The policy is similar to an endowment policy with an advantage of payment to the
life assured himself, on his surviving the term of years selected, of double the amount of
the original sum assured.
5. The pure endowment policy
Under this policy, the sum assured is payable on the life assured surviving the
endowment term. In the event of his death within that term, all premiums paid, without any
reduction will be paid to the person entitled. However, in the event of death in the first and
second year of, policy, the benefit will be limited to 80% and 90% of the premiums paid
respectively. No medical examination in case of such policy.
6. Joint life policy
In order to effect some economy in the amount of premium, two or more persons
may simultaneously be insured under one policy, insured amount shall become payable
upon the death of any one of the person. Such policies are usually taken by partnership
firms.
7. Circular endowment policy
These policies are taken to provide funds for the education or marriage of the
children. In case of these policies the insured pays premium for a fixed period and the
corporation on its part agrees to pay a fixed amount for the objects arranged for, when the
children attain a certain age. The payment of insured amount will not be affected on
account of non-payment of premiums by the pre-matured death of the insured.
8. With or without profit policy
A with profit policy is one the holder of which is entitled to take the benefit of
bonuses declared out of the profits of the company every two years. Bonuses will be added
to the value of such policies and shall be paid on their maturity. In case of without profit
policy this benefit is not available.
183
9. Annuities
This type of policy provides for the payment of insured amount by monthly or
annual installments for a certain period. The fixed periodical payments may continue either
until death or for a specified number of years. Insured in this case is asked to deposit a
lump sum of money in the beginning of the policy. Insured may at his option get the
annuities into a lump sum amount. These policies are mostly taken with the object of
making provisions for one’s old age etc.,
10. Money back policy
This type of policy provides money back at regular intervals, before the policy
expires. For eg., on a twelve year policy, one gets 20% of the sum assured after four years,
anothter20% on the expiry of another next four years and the balances at the end of twelfth
year.
11. Ascending premium policies.
12. The convertable whole life assurance policies.
13. Cash and cover policy.
14. Progressive protection policy.
15. The multi purpose policy.
Sample letter
Write a letter to the LIC regarding the nomination
From
R. Anuradha,
56, Raja Street,
Madurai.
2nd February’98.
To
The senior divisional manager,
184
LIC of India
Madurai.
Dar Sir,
Ref : Policy No : 520 – Whole life policy.
I hereby give you notice that I have now nominated Mr. Ram as the person to
whom the money secured by the above policy shall be paid in the event of my death. The
other details are enclosed in the policy itself. Kindly do the needful.
Thanking you,
Yours faithfully,
Sample letter
Letter asking about surrender value of the policy.
From
R. Anuradha,
56, Sonaiyar St.,
Madurai.
2nd February ‘98
To
The Senior D.M.,
LIC of India,
Madurai.
Dear Sir,
Ref : Policy No : 6 – Whole life policy.
I intend to surrender my above life policy for a cash value of, as my financial
circumstance do not permit me to continue the payment of premiums.
185
I shall therefore, be glad if you let me know the present surrender value of my
policy.
Thanking you,
Yours faithfully,
Reply letter stating that policy has no surrender value
LIC of India
56, New Marg,
New Delhi.
2nd February ‘98
To
M/s. Anuradha,
New Delhi.
Dear Madam,
Ref : Policy No : 67 – Whole life policy.
This is receipt of your letter dated 25th January.
We regret to inform you that your policy does not have any surrender values, since
the maturity period runs own to five years and it is only six months since you have taken
the policy.
Moreover due to your irregularity in the payment of premiums, you have paid the
premiums only for four months. Our service charges tallies with your payment of
premiums. Therefore, there is no balance left out.
Thanking you,
Yours faithfully,
Sample letter
186
Reply from the branch manager discouraging the surrender and offer for a loan.
LIC of India
56, New Marg,
New Delhi.
2nd February ‘98
To
Mr. Raja,
56, Raja St.,
Madurai.
Dear Sir,
Ref : Policy No : 6 Whole life policy.
We are in receipt of your letter, we are sorry to know that you find it difficult to
continue your above policy and that you are thinking of surrendering your policy for cash
value.
The present surrender value of your policy is Rs. 2, 000 only.
While admitting that you are the best judge of your financial position, we regret to
inform you that the surrender of a policy is never interest to a policy holder gets less than
what he has paid. Moreover, he deprives his dependants of the provision he made for
them. When you have paid your premium for five years the policy will not easily lapse. We
presume that your difficulties are merely temporary in nature and if you can some how tied
over the present difficult period, your policy will mature, the sum thus accruing being
atleast 8 times higher than what you will be getting now by surrender.
In view of these facts, we suggest you to keep your policy in force with a loan from
the LIC as you entitled to a loan of 80% of the surrender value.
You should decide to accept our suggestions, please complete the enclosed loan
application form and send it along with your policy to us.
Thanking you,
187
Yours faithfully,
Sample letter
Letter requesting for loan against a policy
From
R. Anuradha
56, Raja St.,
Madurai.
3rd February ‘98
To
Senior D.M.,
LIC of India,
Madurai.
Dear Sir,
Ref : Policy No : 6 – Whole life policy.
Thank you very much for your letter intimating the present surrender value of my
above policy and for the valuable advice to continue my policy with a loan if necessary.
I have enclosed the duly completed loan application form and my above policy.
Please see that the loan is sanctioned as early as possible. I await an early
favourable reply from you.
Thanking you,
Yours faithfully,
Sample letter
Reply letter intimating the sanction of the loan
LIC of India
188
56, New Marg,
New Delhi.
3rd February
‘98
To
M/s. R. Anuradha
56, Raja St.,
Madurai.
Dear Madam,
Ref : Policy No : 6 – Whole life policy.
With reference to your letter requesting us for a loan, we are glad to inform you
that a loan of Rs. 1, 600 has been sanctioned on the security of the above policy, on our
usual terms of interest at 6% per annum payable every half year.
Please write to us for further adjustments.
Thanking you,
Yours faithfully,
Requesting the LIC for claiming the insurance money by the nominee.
From
R. Anuradha
56, Sonalyar St.,
Madurai.
3rd February’98
To
The Senior D.M.,
LIC of India,
189
Madurai.
Dear Sir,
Ref : Claming the nomination. Policy No : 7- Whole life policy.
I wish to bring to your kind perusal the demise of the above policy holder Mr.
Sundaresan.
As he has nominated me as his nominee. I request you to grant me the maturity
value of his policy. Kindly reply at the earliest.
Thanking you,
Yours faithfully,
Marine Insurance
It is a contract whereby in consideration of the payment of a sum of money called
premium, the insurer undertakes to indemnify the insured, in the manner and to the extent
specified in the contract against marine losses.
The word marine indicates not only the ocean marine but also inland marine.
Importance of the marine insurance
Marine insurance is very significant in international trade both the shipper of the
goods and the ship owner run the risk of incurring losses on account of the perils of the sea
to which they are constantly exposed. They would not venture upon their business unless
they are protected from such losses and it is the aim of the marine insurance to give them
this protection.
Marine insurance also helps traders to obtain financial assistance from banks. For
eg., if a shipper applies to a banker for credit facilities and offers shipping documents as
security the banker will not ordinarily grant the request unless the documents offered are in
respect of shipments which are insured. This is the another reason why shippers insure
their shipments.
Insurable interest
190
In marine insurance, the insured must have insurable interest in the property
insured. A person is said to have an insurable interest in something, when he is so situated
with regard to that thing, that he would benefit from its existence, and be loss by its
destruction or damage.
The following are the examples of persons having insurable interest.
a. The ship owner and the owner of cargo (goods) to the extent of the value of
their interest.
b. The mortgagee or hankers to the extent of the sum by the mortgager.
c. The insurer to the extent of his liability to the insured.
Kinds of marine losses
Marine losses are of two kinds
(1) Total Loss
a. Actual total loss
An actual total loss occurs when the subject matter insured fully destroyed or is so
damaged that it ceases to the thing insured. For eg:, when a vessel (ship) after leaving a
port disappears completely or when the goods of the ship were badly damaged that it has
become valueless.
b. Constructive total loss
It occurs when the subject matter is reasonably abundant because its total loss
appears unavoidable or when it is so badly damaged, but the cost of repairs would exceed
the value of goods. In every case of constructive total loss, the insured must give the
insurer a notice of abandonment. If this not done the loss will be considered as partial.
2. Partial loss
Partial loss means that only a portion of the goods are damaged.
a. General average
191
In order to avoid a danger threatening ship or its cargo, extraordinary, sacrifice or
expenditure is voluntarily and reasonably made, to prevent the ship from sinking, the
owner of the ship, the owner of the cargo and the persons entitled to transport, all these,
people should make a contribution to make goods the loss incurred for the benefit of all.
The contribution made by each is in proportion to the value of his interest in the ship,
freight or cargo and is called as general average.
b. Particular average
When however the goods are damaged which affects a particular interest in
accidental damage to the goods of a particular party by sea water or fire or to ship by
collapses, the loss should be beared by the party concerned and it is called particular
average.
Some important clauses in marine insurance-policy
1. FAA (Free of all average)
FAA exempts the insurer from liability of both particular average and general
average. •
2. FPA (Free of particular. average)
It exempts the insurer from liability for only particular average.
3. WPA (With particular average)
WPA means that particular average is covered by the policy, and the underwriter is
liable for it,
4. FGA (Foreign general average) .
192
It refers to a clause in marine insurance policy whereby the insurer in paying a
general average loss agreed to be bound by the calculation of the loss according to foreign
law.
5. AR (All risks)
Under this AR all the above set clauses are included.
Kinds of marine policy
1. Voyage policy
This policy insures the goods for a particular voyage. For eg., from Mumbai to
London.
2. Time policy
This policy insures the goods for a specific period. For eg., from 1st January 1997
to 31st December ’97.
3. Mixed policy
This policy covers the risk for a specified voyage and for a stated period of time.
4. Value policy
This policy states the value of the goods which is agreed by the insured and the
insurer, the value. It refers to the actual value of the insured goods.
5. Unvalued policy
In this policy the value of the goods is not stated at the time of issue of policy. But
it is to be appraised after the loss has occurred. Subjected of course to the limit of the sum
assured.
6. Floating (or) declaration policy
When a merchant makes frequent shipments of one and the same type of cargo and
does not wish to take out a separate policy for every consignment, he takes out a floating or
declaration policy for a round sum representing approximately, he total value of his
consignments during a particular period.
193
The premium is generally collected in advance for the full amount as each shipment
is made its nature and other particulars are declared and the amount of declaration is
reduced from the policy. When the total amount of declaration becomes equal to the face
value of income, the insured may take up a new policy and send it to the insurer for the
declaration.
7. Open policy
This is a kind of policy undertaking to insure a certain clause of goods to be
shipped to specified destination during period of time usually twelve months. The amount
of plicy being the maximum acceptable to the company on each shipment and being not
exhausted by declaration. A separate certificate is issued in respect of each shipments and
premium is collected against each certificate.
Sample letter
Write a letter to New India Assurance Co., for Rs. 30,000 for the value of goods sent
from Mumbai to Japan by S.S. Adam. The policy Includes W.P.A.
Raja & Co.,
56, Raja St.,
Mumbai.
6th February ‘98
To
The Manager,
New India Assurance Co.,
(Marine Insurance Division)
Mumbai.
Dear sir,
Ref: Covering the goods under marine insurance.
Please cover us the goods given below.
194
5 cases of Books value Rs. 30,000
Paintings value Rs. 20,000 to Japan per SS Adam leaving Mumbai on 8 th February
’98.
The cargo is to be insured from Mumbai warehouse to Japan warehouse. The rate
to be agreed by you is 3% W.P.A (with particular avg) addition 5% for the late risk.
We have enclosed a cheque of Rs. 2,000 towards premium calculated at the above
rate. Kindly issue the policy before 8th February ’98.
Thanking you,
Yours faithfully,
2. Write a letter asking for the issue of a floating marine policy
Raja & Co.,
Ref: Covering the goods under floating policy.
56, Raja St.,
Mumbai.
6th February ‘98
To
The Manager,
New India Assurance Co.,
(Marine Insurance Division)
Mumbai.
Dear Sir,
Please issue in our name a floating policy for R. 50,000 covering all risks (AR)
including package on our consignments of vegetable oil in tins to be railed from Mumbai
to port and laving by Bharat to Andarnan, the policy should cover the risk from 1St Feb to
31st Dec ‘98.
195
Thanking you,
Yours faithfully,
3. Sample Reply letter
Reply letter enclosing the floating marine policy.
New India Assurance Co.,
56, Raja St.,
Mumbai.
6th February ‘98.
To
M/s. Raja & Co.,
56, Raja St.,
Mumbai
Dear Sir,
Ref: Issuing floating marine policy.
We thank you for your letter of 6th Feb asking to issue a floating marine policy for
Rs. 50,000 on your consignments of vegetable oil. As you desired we enclose the
policy no: M 235 together With our debit note for Ps. I ,250, being the amount of premium
at 2.5% and including the stamp duty for Ps. 50.
Please declare each shipment to us, as and when made giving particulars of the
number of tins, destination value and the date of railway receipt (R/P) and other
particulars.
Thanking you,
Yours faithfully,
Sample letter
196
Your consignment of handicrafts to NewYork has been damaged during a voyage.
Submit a claim for compensation from the insurar1ce company stating all the necessary
facts.
Mysore Handicrafts
Palace Road,
Mysore..
7th Feb’98.
To
The Manager,
Oriental Insurance,
(Marine Insurance Division)
Mysore.
Dear Sir,
Ref: Claiming for compensation.
We have just received a report from our consignment at New York saying that our
shipment of handicrafts sent per SS Bay of Bengal, has reached them in a damaged
condition. This shipment was covered by the valued policy no: M 125 issued by you on
10th Jan ‘98.
The details of the damage
S.No Description Amount
1. Seven cases containing embroided Rs. 600
Products found in sunked condition
2. Five boxes of sandal wood products Rs. 1,400
Found broken and damaged
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3. To this must be added 10% of the invoice Rs. 2,000
Price for estimated losses surveyor fees Rs. 100
Total ____________
Rs.4,1000
_____________
According to the standing instructions the damage was surveyed by your authorised
representative at NewYork port, Mr. Robert, whose report we have enclosed, along with
the original invoice in support of the claim made. The policy and the case report of the
surveyor was also enclosed.
We now request you to arrange for payment and send us a cheque for the claim at
an easily date.
Thanking you,
Yours faithfully,
Fire Insurance
It is a contract whereby the insurer in consideration of the premium paid,
undertakes to compensate the insured for any loss, that may result due to the occurance of
fire.
Essential characteristics
1. It is a contract of indemnity
The insured can recover, in case of loss, only the actual amount of loss not
exceeding the value of the policy.
2. It is a contract of utmost good faith
It is the duty of both the insured as well as the insurer to disclose to each other
every material fact known to them, which will affect the contract of insurance.
3. The insured must have insurable interest in the property insured
198
The interest must exist both at the time of taking the policy as well as at the time of
loss.
4. It is the contract from year to year only
A fire insurance policy cannot be issued for a period exceeding one year. The
contract can however be renewed during the days of grace allowed under the policy.
5. The insurer is liable to compensate for loss, only when fire is the proximate
cause of loss.
6.The principles of subrogation and contribution are applicable to fire insurance
contract.
Difference between fire and life insurance
1. Fire insurance provides cover to losses of properties, while life insurance
relates to human life.
2. Fire insurance Is a contract of. indemnity while life insurance is a
contingent contract.
3. Fire Insurance contracts are entered into a maximum of one year at a time, but
life insurance contracts are mostly made for longer terms.
4. In case of life insurance contracts, insured is required to have insurable
interest in the subject matter insured, only at the time of the compensation of
the contract, but in fire insurance insured is required to have insurable interest
in the subject matter insured, both at the time when the policy is taken as well
as at the time when the loss takes place.
5. Unlike a life insurance policy, a fire insurance policy does not have any
surrender value.
What is fire?
It simply means production. of light and heat by combustion occurance only at the
ignition point and therefore there is no fire without ignition.
199
The loss by heating alone, cannot be taken as loss by fire, unless the subject matter
has been burnt by the fire.
Various occasions of the fire insurance correspondence
The correspondence in respect of\fire insurance., usually consist of the letters
pertaining to
1. A request for the insurance of a proposal submitted to the under writers.
2. A reply from the underwriters in acceptance or refusal of the proposal.
3. Negotiation of the terms, the rates of premium etc.
4. Notice of damage by fire.
5. The settlement of the claim.
Types of fire policy
a. Specific policy
In this case, policy is taken for a specified amount which is always less than the
real value of property. However, the specified amount will not help us in any way in
determining the amount of actual loss or claim except that it will lay down the maximum
limit up to which compensation can be claimed.
Insurance company is held liable for the actual loss upto the amount specified in the
policy. These policies are not subject to average.
b. Valued policy
Here the liability of the insurer is fixed at the contract of insurance. Insurers in the
case of valued policy agreed to pay the specified amounts I irrespective of the actual loss
suffered. This converts fire insurance contract from a contract of indemnity to a contingent
contract. However, these policies are rarely issued in practice, since its legality has
changed.
c. Average policy
200
A policy containing an average clause is called an average policy. Most of the
policies nowadays are issued subject to average, which contain this average clause.
d. Replacement policy
In this policy the insurer reserves with himself the right to replace the property
instead of paying compensation to the insurer for the property destroyed.
e. Consequential loss policy
This policy is also known as loss of profit policy. In the case of a fire, not only,
property of the firm is destroyed, but its earning capacity is also seriously affected till the
properties are re-built, thus fire also results in loss of profit that would have been earned.
The loss is further increased on account of non-recovery of standing charges of the
business. A consequential loss policy is taken to cover these losses i.e.,
(i) Loss on account of non-recovery of standing charges.
(ii) The loss of profits that would have been earned. Sample letter
Write a letter from progressive printers, asking details from New India Assurance
Co., regarding the fire insurance and request for a blank proposal.
Progressive Printers
56, Rajaji Road,
Coimbatore.
18th February ‘98
To
The Manager,
New India Assurance Co.,
Coimbatore.
Dear Sir,
Sub: Request for blank proposal for fire insurance.
201
We wish to get insured against loss or damage by fire, our stock of books, paper
and other printing materials, which is in our go down No 73, Gandhili Street, Coimbatore.
Kindly, let us know your premium rates and also send a blank proposal form at an early
date.
Thanking you,
Yours faithfully,
Reply letter from the New India Assurance Company
New India Assurance Co.,
56, Rajaji Road,
Coimbatore.
19th February ‘98.
To
The Manager,
Progressive Printers,
56, Raja Road,
Coimbatore.
Dear Sir,
We acknowledge your letter with many thanks. We are glad to in for you that our
representative Mr. R. K. Joshi shall call on you on 20th February at 10.00 am. He shall be
pleased to give all the information required by you, in request of cover note needed by you.
Mr. Joshi wilt supply the necessary forms.
We sincerely hope to have the privilege of extending our insurance cover to you.
Thanking you,
Yours faithfully,
202
Sample letter - Notice of damage
Write a letter from the king fireworks claiming for the insurance amount Rs.2
lakhs due to an unexpected fire accident.
King Fire Works
56, Raja Road,
Sivakasi.
19th February 98.
To
The Branch Manager,
New India Assurance Co.,
Madurai.
Dear Sir,
Ref: Claim for insurance amount Rs. 2 lakhs.
We are sorry to inform you that our stocks and buildings are damaged due to a
terrible fire accident. Although we took several precautionary steps to prevent the fire
accident, it is beyond to us. We have safeguarded and have given proper security in the go
down, an unfortunate electricity leakage destroyed our whole stocks and buildings. This
horrible accident was held on 15th February ‘98 at morning 5.00 A.M. We have struggled
to put off the fire more than three hours.
The accident held at un time, so we are helpless and nobody came forward to put
off the fire. We have informed for the fire station and neighbours also co-operated with us
to put off the fire. So the expenses to put off the fire is Rs. 2,000.
203
We expect your supervisor to value the damage as early as possible, because we are
in great need.
You also please send us a claim form to get our insurance amount. We expect you
to take quick and necessary steps to issue our insurance amount Rs. 2 lakhs.
We have taken a fire policy for the buildings and stocks for a amount of Rs. 3
lakhs, its number is Fl 220. We claim you only 65% of the insurance, including the put off
expenses.
Thanking you,
Yours faithfully,
Sample letter
The oriental fire insurance cc. is unable to accept a claim of Jayalakshmi Cotton
Mills, Salem for Rs. 20,000 under a fire policy. As the divisional manager of the company,
write a suitable letter to the policy holder informing them of your inability to accept the
claim.
Oriental Fire Insurance Co.,
(Fire Insurance Dept)
56, Rajaji Road,
Salem.
19th February ‘98.
To
The Manager,
Jayalakshmi Cotton Mills,
Salem.
Dear Sir,
This is in receipt of your letter dated 17th February ‘98.
204
We regret to inform you our inability to sanction the claim of Rs. 20,000 under the
fire policy.
We are unable to sanction the amount because of an unfavourable report from our
supervisors. They have estimated the loss to be upto Rs. 10,000. Further the report also
says that the loss could have been easily prevented if only you could have taken
immediated measures to rectify it.
Thanking you and assuring you of our best service at all times.
Yours faithfully,
Sample letter for change of address
Ravalgon Cotton Mills
14, Gandhiji St.,
Mumbai.
20th February ‘98.
To
The Branch Manager,
New India Assurance Co.,
Mumbai.
Dear Sir,
Ret: Change of address.
We wish to inform you that we are an insure in your company. We have taken a fire
policy for a period of one year, Its number is Fl 240. We have insured, the godown for Rs.
1 lakh The recorded address is Ravalgon Cotton Mills, 14, Gandhiji St., Mumbai.
But now we have changed our godown due to insufficiency of place, rather the new
address is nearer to. the Railway Station, which Will reduce our transportation cost.
The new address is,
Ravalgon Cotton Mills,
205
NO: 10, Nehru Street
Mumbai.
We suppose to inform this matter because to avoid unnecessary problems arising at
a later stage.
Thanking you,
Yours faithfully,
Sample letter
Letter regarding the extension of time period.
Raja Dress Place
14, Murmagoa Street,
Goa.
20th February ’98.
To
The Branch Manager,
Oriental Insurance Co.,
Goa.
Dear Sir,
Ref: Extension of time period.
We shall be thankful to you, if you kindly extend the time period of insurance
coverage, for a period of one year. We are in need to extend the maturity date for one more
year. We have taken a replacement fire policy, its number is RP 220, for the value of 2
lakhs.
So kindly extend the time period and accept the premium amount which has been
enclosed.
Yours faithfully,
206
Submit a claim for total loss by fire to yo9ur silk goods insured under a valued fire
policy and stored in your godown.
Rashmi Silk Palace
56, Rajaji Road,
Coimbatore.
20th February ’98.
To
The Manager, (Fire Insurance Dept.)
59, Raja Street,
Coimbatore.
Dear sir,
Ref: Claim for the insurance amount of 3 lakhs.
We wish to bring to your kind perusal, the terrific fire accident which took place at
our godown on 15th February ’98.
Despit heavy measures to prevent such accidents on our part, we were not able to
prevent it.
As you would be well aware of the recent bomb blasts and riots taking place in and
around coimbatore for the past one week. Our godown could not escape the dangers of the
riot. As a bomb had been implanted on a pettishop adjacent to our godown, both the shop
and the godown were reduced to ashes in the blast.
We could do nothing but to helplessly watch our godown an investment of Rs. 3
lakhs being reduced to mere ashes. Every brick and mortar of it was shattered to pieces.
We expect your supervisors to value the damage as early as possible because all our
stocks of latest design sarees have been destroyed.
Kindly please send us the claim form to get our insurance amount and take quick
steps to grnt us the insurance amount of Rs. 3 lakhs.
207
We have taken a valued fire policy for the buildings and stocks for Rs. 4 lakhs. Its
number is VP 333. Kindly reply at the earliest.
Introduction
Transactions in foreign trade pass through the same stages as in the internal trade
viz., Enquiry, Quotations, Order, Execution of orders etc. But on account of differences in
currency, language, laws and rules, Governments etc., the correspondence in foreign trade
is procedure oriented. Besides in our country, both import and export are subject to the
control of the Central Government. A few articles cannot b exported and likewise a few
items cannot be imported. The policy of the Government also varies from time to time
depending on the circumstances and business environment. Therefore, a clear knowledge
about the formalities to be. complied with is essential in both the cases. The procedure and
formalities involved are somewhat different in both cases, and so they are studied
separately. Let us now first take up the import trade for discussion.
Procedure for Import
Import can be made only by strictly adhering to certain procedures. In our country:
the following steps are necessary for importing the goods from any foreign country.
1. Obtaining of Licence and Quota
No importer is free to import goods from abroad without the permission of the
Central Government. Further, permission is limited to a few commodities, which are not
locally available. Therefore, the importer should first make sure that the article he wants is
not locally available and whether import of such article is allowed. If the article he wants
to import is permitted to be imported, he should apply to the Controller of Import. The
Controller of Import is an authority appointed by the Central Government issue licences.
The application has sometimes to be submitted through a sponsoring authority e.g.
Directorate of General Technical Development. The licence may be a general licence or an
individual licence. General licence is one, which is issued for imports from any country,
whereas individual licence or specific licence applies to specific countries. The import
licence has two identical copies one for exchange control purposes and the other for-
customs purposes.
208
A certificate specifying the quantity and the value of goods, which the importer can
import, should also be obtained along with the import licence. The certificate is called
Quota Certificate.
2. Obtaining Foreign Exchange
After getting the Licence and Quota, the importer has to make arrangements for
obtaining the necessary amount of foreign currency. In our country, under exchange
Control Act, the importer has to prepare an application in the prescribed form. A Foreign
Exchange Bank on the presentation of the import licence should endorse that form. When
the Reserve Bank of India approves, the importer can get the necessary amount of foreign
currency from the Exchange Bank concerned.
3. The Indent
The word Indent means an order for goods. The importer who has a licence is at
liberty to place the order directly with the foreign country or through intermediaries like
Indent Houses. In our country, majority of the traders has little knowledge about the
foreign markets. To them, indent houses are -highly useful, as they are in a better position
to buy for their customers, the right types of goods at competitive prices. The licence
holder should approach the indent houses and request them to procure the goods for him
from abroad. If the prices etc. are agreeable to the importer, the indent house enters all the
details of the order in a form called Indent Form and get it signed by the importer. The
Indent Form is a kind of letter from the indentor to the Indent House requesting him to
indent the goods mentioned therein on the terms and conditions stated in the Indent Form.
4. Confirmation of Indent
The Indent House then sends a copy of the Indent Form to the prospective seller or
supplier in the foreign country. If the foreign supplier accepts the order, he confirms it and
demands the opening of an irrevocable Letter of Credit in his favour through a bank having
a branch in the exporting country.
5. Opening the Letter of Credit
209
When the exporter demands a letter of credit to be opened in his favour, the
importer should approach his bank to instruct its branch in the exporting country to open a
letter of credit in favour the exporter Under this arrangement, the exporting party after
executing the order and obtaining the relevant shipping and other documents and preparing
his invoice can draw bill of exchange and submit the same to the bank in the country and
receive the payment of his bill. It should be noted that almost all the exporters unless they
know the financial ability of the importer - or have had long business dealings with them,
require an Irrevocable letter of credit be opened in their favour so that they may receive
payment without delay. Thus the purpose of a letter of credit is to ensure payment for the
goods sent because the importer is unknown to the exporter. Moreover, if the importer
makes default it would become difficult to take legal action against him. To avoid all sorts
of such complications, it is better to ask the importer to open an irrevocable letter of credit.
Kinds of Letter of Credit: A letter of credit may take any of the following types.
1. Documentary Letter of Credit: It consists of a condition that documents of title to
goods must be sent along with the Bill of Exchange. Documents of title to goods means
and includes Bill of Lading etc.
2. Clean Letter of Credit: It contains no conditions for the - acceptance. and
payment of the bills of exchange. A clean letter of credit is always desirable.
3. Revocable Letter of Credit: It can be withdrawn at the discretion of the issuing
banker without the prior consent of the foreign dealer concerned.
4. Irrevocable Letter of Credit: It cannot be withdrawn by the issuing banker
without the consent of the foreign dealer i.e., exporter. A foreign dealer generally demands
an irrevocable letter or credit.
6. Sending the Advice Note
After the letter of credit is opened, the exporter shall arrange for procuring the
goods, pack them properly, mark the cases with the special mark of the importer and send
the cases to the ship which would reach the country of destination. On receipt of the goods
on board, the Master shall issue a document known as “Bill of Lading”. Immediately after
210
despatching the goods, the exporter should send an “Advice Note” to• the importer. The
advice note will indicate the date on which the goods have been shipped and the date on
which the ship is expected to reach the Port of destination.
7. Sending of Documentary Bills
The exporter after obtaining the Bill of Lading and other documents like Certificate
of Origin, Consular Invoice etc. prepares his Invoice and also a Bill of Exchange for the
amount of the Invoice. The exporter then submits the Bill of Exchange along wjth other
shipping documents now termed as Documentary Bills of Exchange to the banker where
the letter of credit is opened in his favour.
Kinds of Documentary Bills: Documentary Bills are of two types viz., (i) D.P.
Bills, and (ii) D.A. Bills. -
1. Documents against Payment (D.P. Bills): In case of D.P. Bills, the Banker of the
importer shall deliver the documents only where he pays the full amount of the bill.
2. Documents against Acceptance (D.A. Bills): In case of D.A. Bills, the Banker of
the importer shall deliver the documents only when the exporter accepts the bill of
exchange drawn on him. In this case, he need not pay the amount to get the shipping
documents immediately but can pay the amount after a few days usually after thirty or
sixty days.
8 Clearing of the Bills
When the documentary bills are submitted to the banker in the foreign country, he
then sends all the documents along with the bill of exchange to its branch in the importing
country. The banker in the importing country on receipt of the documents instructs the
importer to make payment of the bill if it is a D.P. Bill or asks the importer to accept the
Bill if it is a D.A. Bill. After acceptance or payment, the importer can take delivery of the
documents.
9. Securing the Goods from the Customs
211
After the importer gets the shipping documents that entitle him to take delivery of
the goods shipped to him, he has to fulfill certain formalities before he can take delivery of
the goods. When the ship carrying the goods arrives at the port, it is usually notified in the
newspapers. When the ship arrives, the goods are unloaded from the ship and keep, in the
custody of the Customs house. The importer has to undergo certain customs and other
formalities before the goods are delivered to him. They are the following:
1. He has to first obtain endorsement for delivery on the Bill of Lading or
Delivery Order from the shipping company or its agents. The shipping
company shall make the endorsement of issue delivery order only when the
freight etc. has been duly paid.
2. Then he has to fill in three copies of the Bill of Entry Forms, obtainable from
the customs office. The bill of entry contains the fact that the goods of a
specified quantity, value and descriptions are entering the boundaries of a
country from another county
3. He has also to fill in another form called Application to Import in duplicate
and present .them at the Landing and Shipping Dues Office, where on payment
of the dock charges, he will be returned one copy of the Application to Import.
4. He should then present the copy of the Application to Import along, with the
three copies of the Bill of Entry at the Customs Office. It examines them
carefully and if it finds them in order then allows the importer to take away the
goods. If they are dutiable, the customs office calculates the duty payable and
tl3e importer must pay the amount before the goods can be released.
Clearing Agents
The customs formalities referred above are rather complicated and many importers
find it troublesome to go through them. They, therefore, engage the services of a class of
mercantile agents, who do the work of clearing the goods from the customs for the
importers. They pay a small charge for their service.
Correspondence
212
From the correspondence point of view, importing can be divided into two parts:
1. Direct importing, and
2. Importing through Indent houses.
1. Direct importing
Here, the intending buyer makes a direct enquiry with the foreign manufacturer,
asks for quotations, places orders and obtains the goods. An illustrative series of such
correspondence is as follows:
1. Direct Enquiry with the Manufacturers
CHE1%NAI PLASTIC PRODUCTS LTD.
Regd. Office: Dhan Building, Bose Road,
Chennai -600002.
10th March 2000.
Messrs. Samsang & Co.,
156, New Bazaar,
Tokyo,
Japan.
Dear Sirs,
We have been manufacturing plastic products of a very wide variety for the last
twenty years. The use of plastic products in our country has been rapidly increasing in the
recent past. So we plan to multiply our production capacity by installing four additional
machines.
Your name was suggested to us by the Trade Commissioner of your country during
his recent visit to Chennai. We have already obtained Import Licence as actual users. Will
you please send us an illustrative catalogue of your latest machines for use in the
production? We expect a very reasonable quotation from you.
213
An early reply will be greatly appreciated.
Yours faithfully,
For Chennal Plastic Products Ltd..,
Director - Purchases.
2. Reply to Letter No. I
SAMSANG & Co.
Administrative Office,
156, New Bazaar,
Tokyo,
Japan.
25th March 2000.
The Director (Purchases),
Chennai Plastic Products Ltd.,
Dhan Building, Bose Road,
Chennai -600002- India.
Dear Sir,
Many thanks for your enquiry regarding the Samsang Machines. We have pleasure
in enclosing an illustrated catalogue of our products. The machines of your requirement are
illustrated on pages 10 to 25, which are of latest addition to our products. Our Research
Department consisting of the most competent technical staff has invented these machines
of superior design, simple handling and maximum capacity of turn-out These machines are
highly suitable for the manufacturing activity you are engaged in. In particular, we
recommend you our Multi - Product Machine with designing part adjustable for different
designs. For each machine we supply you five different design patterns which you can fix
according to your requirements. Besides that, the in-built patterns provide you Blocks,
214
Cubes, Plates, Wires, Balls and other usual items for manufacturing different products
separately.
We give you two-year guarantee on all these machines. The enclosed Proforma
invoice shows the Trade Discount, Packing description and other details. The rate
mentioned is firm for 30 days only: While placing your order you are requested to deposit
with us 25% of the Invoice value. You will get a 5% Cash Discount on an initial deposit of
50% or above of the Invoice value. The balance of the Invoice will have to be paid to the
banker of your firm through whom you will be receiving the DIP Bill and other
documents.
We shall be pleased to book your order for delivery within 15 days from the receipt
of the order.
Yours faithfully,
For Samsang & Co.,
Sales Executive.
Ends: 1. Proforma Invoice.
2. Catalogue.
3. The importer places the Order
Chennai.
12th April 2000.
Messrs. Samsang & Co.
Dears Sirs,
We acknowledge with thanks your letter of 25th March and the illustrated
catalogue received on 6th April.
Your products have been examined by our technical and production departments
and found quite suitable for our line of activities. We have pleasure in ordering:
215
The rates are c.i.f. Calcutta and are at the current rate of exchange, subject to
changes as on the date of the shipment of machines.
According to your special offer, we are enclosing a draft for Rs. 50,000 (payable in
Yeas) on Grindlays Bank Ltd., Tokyo, and have claimed the special Discount of 5%.
Marks and Number: Each of the packages should be marked as under:
Calcutta
Packing: Your details about packing as mentioned in your catalogue, are acceptable
to us and we do not wish to have any other special packing.
Payment: You may please draw on us a D/P Bill for the balance and send it though
the Chennai Branch of our bankers, Grindlays Bank Ltd.
Delivery: We shall be thankful for your shipment of machines and the design-
patterns within 10 days from the receipt of this order. Your are also requested to ship the
goods only by a vessel of the shipping Corporation of India.
Yours faithfully,
For Chennai Plastic Products Ltd.,
Director-Purchases.
4. Shipping Advice from the Exporter
Tokyo,
Japan.
22nd April 2000.
The director (Purchases),
Dear Sir,
216
We have pleasure to inform you that 5 packages, 4 containing a machine each and
one containing 20 design-patterns, have been shipped by us per Jalakrid which left for
Calcutta on 21 21st April. Each package is marked and numbered as per your instructions.
You will receive the original Invoice and other documents along with the D/P Bill
sent through Grindlays bank Ltd. You are requested to honour the Bills promptly when it is
presented to you. The second copy of each document is enclosed now.
Soon after taking delivery, please check up the machines and send us your report
about the condition in which you have received them.
Soon after taking delivery, please check up the machines and send us your report
about the condition in which you have received them.
Your technical staff, we trust, will be able to install the machines as per guidelines
mentioned on the top of the machine. Should you need any help in the matter, you may
kindly contact the General Manager, Mumbai Packaging industries (P) Ltd., Thana (Dt),
Maharastra. We have already requested him to depute three of our technical staff members
who are engaged in their factory for the ‘on-the Machinery-Training’ to their workers. Out
staff members will be glad to assist you in the matter of installation and also the fixing of
different design-patterns
5. A Letter requesting the Clearing Agents to Arrange the Clearance of Goods
Chennai.
1st May 2000.
Messers. Das & Co.
20, shakespear Sarni,
Clive Row,
Calcutta- 700 001.
Dear Sirs,
Please arrange to clear, on our behalf, the goods mentioned below from Calcutta
Docks on their unloading. The details are as under:
217
Name of the Ship: Jalakrid.
Goods: Machines and Design-Patterns.
Packages: 5 packages, each bearing the mark.
We are enclosing the D/L Original Invoice, Insurance Policy and the Import
Licence. Please return these documents after the goods have been cleared from the docks.
The packages may be sent through Patel Roadways (P) Ltd. The Motor Receipt and
your Bill may be sent through Grindlays bank Ltd., Chennai. Your are requested to arrange
for insurance in transit also.
Yours faithfully
Encls: Four, as detailed above.
10. The Banker informs the buyer
BANF OF INDIA
Head Office: Mumbai, India
1l6,M.G.Road,
Calcutta - 700 001.
2nd May 2000.
The Secretary,
Jainsons Cotton Mills Ltd.,
Nehru Nagar,
Calcutta -700001.
Dear Sir,
We hold a D/P Bills in your name received from Messrs. Sheikh & Co., Cario. This
is in respect of4O bales of Egyptian cotton that you have bought from them. The Bill is for
Rs and the flank’s Commission thereon is Rs
218
Kindly arrange to pay the above amount and take delivery of the documents within
15 days. You can avail yourself of our special service of foreign trade customers in the
matter of clearing of goods.
Please let us know, by return of post, whether you wish us to arrange for the
clearing of the bales from Mumbai harbour and storing them in a duty- paid warehouse? If
you so wish, please remit’ or allow us to debit your account with Rs. 6,850 for the duty and
clearing charges.
Yours faithfully,
For Bank of India,
Manager.
Letter of Credit
As already noted, at exporter invariably requires the importer to send him (the
exporter)! letter of Credit issued it his favour by a banker.
This guarantees the exporter of payment of his bill before the importer takes
delivery of goods. The following are the different stages involved in the issue a1d
confirmation of the Letter of Credit.
1. Importer requests his banker to open an Irrevocable Letter of Credit
2. Importer informs the exporter about the opening of Letter of Credit.
3. The banker informs the exporter of the Letter of credit having been opened in
his favour.
11. The Importer requests the Banker to open an Irrevocable Letter of Credit in
favour of the Exporter
JIINS0NS COTTON MILLS LTSL
Nehru Nagar,
Calcutta-700 001.
27th March 2000.
219
The Manager,
Bank of India,
116, M. G. Road,
Calcutta -700001.
Dear Sir,
We request you to kindly open by cable an irrevocable Documentary Credit in
favour of Messrs. Sheikh & Co., Cairo for the amount of Rs (Rupees only) available to
them by draft at 30 days by your agent in Cairo.
This Credit is in respect of a shipment of Egyptian cotton Bales as mentioned in the
enclosed sheet.
The draft by the beneficiaries should accompany the following documents.
1. Bills of Lading (2)
2. Commercial Invoices (3), to evidence shipment of Cotton Bales as Specified in
the enclosed sheet.
3. Insurance Policy(l)
4. Consular Invoice (1)
5. Certificate of Origin (1).
The Credit is to be established in local currency with your Cairo Correspondents to
be availed of by the beneficiary’s Bills in such currency on the correspondents.
The Credit is to be confirmed to:
Messrs. Sheikh & Co.
Head Office: Ahuluva Bldg., Cairo,
and shall cease to be valid after 31st July, 2000.
Pail shipment Not Allowed.
220
Invoice to be made c.i.f. Calcutta and to include the bank commission also.
Special instructions: Documents to be forwarded to us by Air Mail.
Yours faithfully,
For Jainsons Cotton Mills Ltd.,
12. The importer informs the Exporter of the arrangements being made to open an
irrevocable Letter of Credit in his (exporter’s) favour
JAINSONS COTTON MILLS LTD.
Nehru Nagar,.
Calcutta -700 001,
27th March 2000.
Messrs. Sheikh & Co.
Head Office: Ahuluva Building,
Cario,
Dear Sirs,
Many thanks for your letter accepting our order dated We are pleased to inform you
that we have instructed the to open an irrevocable credit for Rs in your favour, available in
your local currency and valid up to 31st July
This credit will be confirmed by the Cairo Branch of the Bank of India. They will
accept your draft on them for 30 days.
Please attach the following documents to your draft and surrender them against
acceptance:
1. Bills of Lading (2)
2. Commercial Invoices (3)
3. Insurance Policy for Rs
4. Consular Invoice (1)
221
5. Certificate of Origin (I).
The Invoice should be made to include c.i.f. Calcutta and the bank commission.
Please advise us by air mail immediately on the despatch of goods.
Yours faithfully,
For Jainsons Cotton Mills Ltd.,
13. The Foreign Correspondent of the Importer’s Banker (who himself is generally a
banker) informs the Exporter that the Credit is available and the Exporter can draw
on him
This is the procedure to “Confirm” the credit. Such information is also generally in
the form of a printed proforma, which is completed with necessary details and sent to the
exporter. However, if a letter is to replace such a printed proforma, it will be in the
following style:
BANK OF INDIA
Head Office: Mumbai (India)
24/12, Central Avenue,
Cairo.
4th June 2000.
Messrs. Sheikh & Co.,
AhuluvaBuilding,
Cairo.
Dear Sirs,
The Calcutta Branch of the Bank of India has instructed us to open an Irrevocable
Credit for Dinars in your favour, valid till 31st July, 2000.
We are pleased to inform you that you are authorised to draw on us at 30 d/s.
against this credit. Please send your draft to us for acceptance immediately after the
despatch of goods to Jainsons Cotton Mills Ltd., Calcutta, as specified in the enclosed list.
222
You are requested to enclose the following documents with your draft for its
acceptance:
1. Bills of Lading (2)
2. Commercial Invoices (3)
3. Insurance Policy (1)
4. Consular Invoice (I)
5. Certificate of Origin (I).
Please note that your draft is to include all charges to Mumbai and our Commission
@5%
yours faithfully,
Manager.
Importing Through Indent Houses
Her intenting buyer buys goods through indent houses. An illustrative series of
such correspondence is as follows:
Letter from the importer to the indent House
AGARWAL & GUPTA (P) LTD.,
Booksellers & Publishers,
22, Borivill, West Mumbai – 400 092.
Ref: GR/NR/Imp.
The Marketing Officer,
M/S. Tribeni Tissues limited
New Kamani Chambers,
32, Nicol Road,
Mumbai- 400 001.
223
Dear sir,
Sub: Indent for “Gateway natural Tracing Paper” for total value: 1,294.18 C.I.F
equivalent to Rs. 23,847/-
We request you to kindly forward a copy of our order to your principal M/s. Wiggins
Teape Overseas Sales Ltd, Belgrave house, Basing Views Basingstock (U.K.) for the
supply of Gateway natural Tracing Paper Extra smooth finish in size 40 X 20 yards.
Quantity: Approx. 92 rolls.
1. 50%-60/65 gms, and
2. 50%-85/90 gms.
against our Import Licences Nos P/L 2711016/XX/53/B/37-38 of 2-10-98 &
P/L2718283/C/XX/55/B/39-40 of 30-12-99.
We shall open an Irrevocable Letter of Credit with our banker, Bank of India,
Kalbadevi Branch, Bombay- 400 002, for Rs 23, 847/- in favour of your principal through
the London office of Bank of India.
Thanking you and awaiting you reply, we remain.
Yours faithfully
For Agarwal & Gupta (p) Ltd.,
Sales manager.
Encl: Indent.
2. Letter from the indent House Enclosing the indent
TRIBENI TISSUES LIMITED
A Member of the Teape Group
New Kamanl Chambers, 32, Nicol Road, Mumbai – 400 001.
Phone: 275477
Email: [email protected]
224
Ref: VV/OM/GWT.
M/s. Agarwal & Gupta P Ltd.,
22, Borivil West,
West Mumbai-400 092
Dear sirs,
We thank you for your order worth Rs. 23, 847/- and pleased to enclose our forma
indent B-4697 for your signature. Kindly return one copy of the indent duly signed for our
records.
Please arrange to open a letter of credit for his order as per particulars furnished in
the attached sheet as early as possible.
On receipt of your credit details, we shall arrange to forward your order to our
associates to process the same at the mill for an early shipment.
Yours faithfully,
For Tribeni Tissues Limited,
Marketing officer.
Encl: As stated above.
3. Letter of the Indent House intimating acceptance of the Indent
TRIBENI TISSUES LIMITED
New Kamanl Chambers, 32, Nicol Road, Mumbai- 400 007
Phone: 275477
Email: [email protected].
VV/OM/gnt 6th February
2000.
225
M/s. Agarwal & Gupta (P) Ltd.,
22, Borivili west,
West Mumbai- 400 092.
Dear Sirs,
Indent No. B-4697
L/C No. K.40/47
In connection with the above we are enclosing herewith our Associate’s acceptance
letter Ref: VSR/s.c. dated 29th January 2000 in original for your information
Our Associates have received your letter of credit and released the order to the mill
and they anticipate having the paper ready for shipment by the end of March 2000.
We trust you will find this in order.
We now request you to amend your letter of credit to read as “All Bank charges are
for openers account”. Please arrange to make the above amendment as early as possible.
We now look forward to receiving your amendment advice for the above.
Yours faithfully,
For Tribeni Tissues Limited,
Marketing Officer.
4. Letter from the Exporters Confirming the Order received and Acknowledging LIC
arrangement
WIGGINS TEAPE OVERSEAS SALES LTD. LINCOLN’S IN HEWS LONDON
(Successors to the business of Charles Morgan & C. Ltd.)
Samuel Jones & Co. Ltd., Wiggins
Teape (Stationery) Ltd.
P.O. Box 88, Belgrave House
226
Basing View, Basingstoke –
AamshireRG2l 2EE
Telephone: Basingstoke (0256) 20262
Telegrams & Cables:
Wigteape Basinstoke
Telex 858628/9
When replying please quote our
Ref: VSR/SC
M/s. Agarwal & Gupta (P) Ltd., 27th February 2000.
22, Borivili West,
Mumbai -400092.
India.
Dear Sirs,
INDENT NUMBER B-4697- OUR 0V1658771F11N
We acknowledge with thanks receipt of your Letter of Credit No.K40/ 47 for a sum
of 1,294.19 through the Bank of India.
We have accordingly instructed our Mill to proceed with this order, and they
anticipate having ‘it ready for despatch by the end of March 2000.
Please note that all bank charges covering the above Letter of Credit are for the
account of openers. Enclosed is or official order confirmation, which we trust is to your
satisfaction.
Yours faithfully,
For Wiggins Teape Overseas Sales Ltd.,
Zone F.
227
Encl: Official Order Confirmation.
5. Letter intimating Shipment and Negotiation of Documents
TRIBENI TISSUES LIMITED
Phone: 275477
Email: [email protected] \
15th March 2000.
Ref: UVIOMJGNT.
M/s. Agarwal & Gupta (P) Ltd.,
22, Borivili West,
West Mumbai -400 092.
Dear Sirs,
Indent No.: B.4697 LIC. No.: K40147
We have pleasure in enclosing herewith shipping documents covering the above
indent expected to arrive by 14-2000 for your information.
1. Copy of Non-negotiable Bill of Lading No.18.
2. Copy of Invoice No. WF/UK/l328 dated 26-2-2000
3. Copy of Insurance Certificate.
4. Copy of the Packing List
Please note that the original and duplicate invoices and duplicate Insurance
certificates and two copies of Bills of Lading have been forwarded to Bank of India,
Mdmbai-2 along with a sight draft for £ 1,294.18 drawn against your above mentioned
Letter of Credit.
We trust that you will receive the consignment shortly.
228
Yours faithfully,
For Tribeni Tissues Limited,
Marketing Officer.
6. Letter of the Importer requesting the Banker to retire the Bill of Exchange
AGA1IWAI & GUPTA (P) LTD.
22, Borivlli, West Mumbai - 400 092.
1st April 2000.
The Manager,
Bank of India,
Foreign Exchange Dept,
Kalbadevi Branch,
Mumbai -400002.
Dear Sirs,
Ref: L/C No. K1401147 for £ 1,293.49.
Favouring: M/s. Wiggins Teape Overseas Sales Ltd., London.
We request you to retire the sight Bill of Exchange for £ 1,294.18 + £ 6.01 =
£1,300.19 of the above beneficiary and release the documents under intimation to us.
Enclosed here with Foreign Remittance Application Form “A” duly filled in and
signed The exchange copies of relevant “Import Licences” are already lying with you.
Thanking you, we are.
Yours faithfully,
For Agarwal & Gupta (F) Ltd., .
Marketing Manager.
7 Letter to the Clearing Agents to Clear the Goods..
229
AGA1IWAL & GUPTA (P) LTD
22, Borivili, West Mumbai - 400 092.
3rd April2000.
M/s. Batliboi & Co
Clearing Forwarding& Shipping Agents,
Sree Mahavir chambers,
1-5, Banji Road,
Mumbai .400001.
Dear Sir,
We learn from the agents of the India Steam Ship Company that their vessel
S.S.Sultana carrying our shipment of tracing paper is expected to arrive on 15th instant.
Please collect the relevant shipping documents from us and arrange to clear the
goods soon after its arrival.
Yours faithfully,
For Agarwal & Gupta (F) Ltd.,
Marketing Manager.
Export and import
Introduction
Exports are very important to every country for its speedy development. In our
country, the Central Government is taking all positive measures to expand our export and
has set up various bodies and institutions for its promotion. Besides, several incentives are
also offered to Indian Exporters to increase the exports. Recently, the Government has
decided to exempt export incomes of all business firms from taxation. 100% Export
oriented units are excluded from. MRTP Act. Therefore, the formalities to be complied
230
with are comparatively lesser in case of an exporter. However, there are certain
commodities, which cannot be exported.
Similar to import trade, export maybe direct or indirect i.e., through Indent Houses.
Procedure for Export
According to the Export and Import Rules in effect in India, an export transaction
has to pass through the following stages.
1. Enquiry for Goods: The first stage in an export transaction is the receipt of an
enquiry. Though the prospective buyers can buy goods from the exporter directly, they
usually buy through the Indent Houses or Export Commission Houses. Therefore, the
enquiry may be made either directly or through his agent. The exporter should attend to the
enquiry in detail. The exporter has to send a quotation usually a C.I.F. quotation. A
standard contract form may be sent to the importer to give him an idea of the terms relating
to payment, packing, settlement of disputes etc.
2. Receiving an Order or Indent: The next stage is the receipt ‘of an order from
the foreign importer by the Indian exporter. The order should contain the specifications and
particulars of the grade to be sent, their packing, the marks and numbers to be put on the
cases, the time for shipment, instructions regarding insurance and the method by which the
exporter is to recover the amount of the invoice.
3. Obtaining the licence and Quota: if the goods to be exported require any
licence, it should be properly obtained from the date of its issue. However, this may be
extended up to a further period of three months. Along with the export licence a quota
permit is also issued. This is especially in the case of goods, which are in short supply in
our country.
4. Demanding the Letter of Credit: The exporter will usually ask the foreign
importer to open a letter of credit in case of new importers, C.W.O. (Cash With Order) or
deposit of full price may be insisted upon. Besides, the exporter should fix the exchange
rate with his banker. This will avoid the possible reduction of profit, which may arise due
to fluctuations in the exchange rates.
231
5. Obtaining the Shipping Order: When all these formalities are over, the
exporter should arrange for the collection of the goods ordered, their packing and marking
according to the instructions contained in the order. Special care is needed for packing
because goods are liable to damage by seawater and other perils of the sea during transit.
Besides shipping companies charge freight not merely on the basis of weight but also on
the basis of volume and space occupied. This being so, the maximum quantity should be
packed in the minimum space besides consistent with safety. Then he should select the
ship through which the goods can be transported to the destination port. He should obtain a
shipping order, which contains instructions to the Captain of the ship to receive on board
the vessel the specified quantity of goods from the exporter concerned.
6. Compliance with Exchange Regulations: Under the Foreign Exchange
Regulations Act, the exporter has to make a declaration that he will surrender the foreign
exchange earned to the extent of the full value of the goods to the Reserve Bank of India
within the prescribed period. This is not required in case of exporters dealing with the
traders in Nepal and Bhutan.
7. Obtaining of Consular Invoice: In order to avoid the trouble in assessing the
import duty on advalorern basis, the exporter may get a consular invoice from the Consul
of the importing country residing in his own country. The exporter fill in a special invoice
form available from the Consul, affirms the accuracy of his statement regarding full
particulars of the goods shipped and gets it sealed and signed by the Consul. The customs
authorities readily accept such invoice as the true statement of the goods and assess the
import duty on this basis.
8. Customs Formalities: After obtaining the shipping order but before loading the
goods into the ship, the Indian exporter should undergo certain customs formalities. They
are as follows
1. First he has to fill in the Application to Export Form in duplicate and the
shipping Bill in triplicate.
2. These forms should be first presented to the Shipping and Landing Dues
Off ice where ship dues, if any, are to be paid.
232
3. One copy of the application to export is retained by the Landing and
Shipping Dues Office and the remaining documents are returned to the
shipper.
4. The returned copy of the Application to Export is then passed on to the
customs office. If any export duty is payable on the goods, it is collected
by the Customs Office.
5. The customs office keeps one copy of the Shipping Bill and returns the
other copies to the exporter or his agent. A Customs Export Pass is also
issued to the exporter.
9. Loading the Goods: The exporter should then arrange to send the goods to the
docks or direct into the ship. When the goods are being taken through the dock gates, the
exporter hands over one copy of the Shipping Bill to the customs peon at the dock gate.
This copy is afterwards collected and used by the customs authorities for inspecting the
shipment.
1O. Obtaining Mate’s Receipt: When the goods are taken into the steamer,
shipping order and the shipping bill are surrendered to the Captain of the ship or his
assistant known as the Mate. If the mate is satisfied with the number of packages and their
packing conditions, he issues a receipt.. it is known as “Clean Mate’s Receipt”. If the
packing i defective they will make a mention of it on the face of the receipt and such a
receipt is known as “Foul Mate’s Receipt”.
11. Bill of Lading: The exporter should then deliver the Mate’s Receipt to the
shipping company and the shipping company in exchange of it issues a Bill of Lading to
him. A Bill Of Lading is an official receipt for the goods shipped and contains an
undertaking to carry the goods to their destination. It also contains the terms and conditions
on which the goods are being carried. The Bill of Lading is document of title to goods
shipped and is transferable by endorsement and delivery. It is generally made out in
triplicate.
12. Insurance: Goods that enter into export trade are exposed to the perils of the
sea. Hence, it is necessary to insure them against such risks. it is done by getting a marine
233
insurance policy from an Insurance Company. The policy will be usually sent along with
the Bill of Lading and other documents to the importer.
13. Certificate of Origin: Sometimes goods exported from certain countries
treated favourably in the matter of levying import duties in the importing country. Such
concessional treatment is the result of trade agreements between the two countries
concerned. If the goods are subject to the benefit bf such favourable treatment, it is
necessary for the exporter to obtain a certificate called “Certificate of Origin” for the goods
shipped. It is also sent to the importer along with other documents to enable him to daim a
reduction in import duties.
14. Preparation of Invoice: After having shipped the goods, the exporter prepares
the invoice relating to the goods. The invoice should contain the description of the goods,
their price and other charges to be recovered from the importer. The charges recoverable
from the importer depend upon the terms of sale. For example, if the goods are sold on
CI.F. basis, insurance and freight are not recoverable from the importer. If not, they are
separately shown on the invoice and can be recovered.
15. Securing Payment: Finally, the exporter should take steps to secure payment.
If a letter of credit is opened in favour of him by the importer, he can. draw a bill of
exchange and submit all other documents along with bill of exchange to the banker and can
get payment. If no such letter is opened, the usual way of drawing a Bill of Exchange and
its collection shall be followed.
SPECIMEN LEITUS IN EXPORT TRADE
1. Letter of Enquiry from a prospective Foreign Buyer.
SMITH & SONS (1’) LTP.
901, Queen Victoria Street,
London E.C. 4.
20th March 2000.
The Sales Manager,
234
Radha Silk Emporium,
105 1, Mount Road,
Chennai -600002.
INDIA.
Dear Sir,
One of our best clients has entrusted us with the Purchase of 10,000 window
curtains made of spun silk and we are interested to know if you can provide us with a
variety particularly suitable for the London Market. We prefer only light colours.
As rigid price limits have been fixed, an effort should be in made to provide a
really competitive quotation. Your quotation will not be expected to include special
packing as the goods will be repacked in London:
The size of this trial order will probably help you in assessing the value of this
connection and it is hardly necessary to remind you of the benefit likely to follow from the
supply of a satisfactory product.
Yours faithfully,
For Smith & Sons (P) Ltd., cYtbA4u74Ofl
Manager (Import).
2. Letter from the Exporter replying Enquiry
RAIHIA SILK EMPORIUM
1051, Mount Road, Chennai -600002.
India.
15th April 2000.
The Export Manager,
M/s. Smith St Sons (P) Ltd.,
235
901, Queen Victoria Street,
London E.C.4.
Dear Sir,
Thank you for your enquiry of 20th March 2000. We are ready to supply our
Rainbow Window Curtains made of spun silk, at a special price of 20 per piece. These
curtains have the special qualities you require and it has proved its popularity in the East.
We have sent today under a separate registered parcel, samples of our window curtains.
It is only the size of the order that enabled us to quote this special price and we trust
you will not regard it as a standing quotation for both large and small orders.
We look forward to receiving instructions without delay.
Yours faithfully,
For Radha Silk Emporium,
Sales Manager.
3. Letter from the Buyer Enclosing the Indent
SMITH & SONS (P) LTIL
910, Queen Victoria Street,
London E.C. 4.
10th May 2000.
The Sales Manager,
Mrs. Radha Silk Emporium,
1051, Mount Road,
Chennai -600002.
India.
Dear Sir,
236
We have received you letter of 15th April 2000 and the samples of Rainbow
Curtains.
As the goods are up to our expectations, we have pleasure to enclose our indent
No.3181 covering this transaction. Please inform the approximate time when you can ship
the goods so that we may advice the buyers accxding1y. V
We have every reason to believe that this shipment will be successful and we hope
to give you further business in the neat future.
Yours faithfully,
For Smith & Sons (P) Ltd.,
Manager (Import).
4. Letter from the Exporter Advising shipment
RAUHA SILK EMPORIUM
1051, Mount Road,
Chennai -600002.
India.
30th May 2000.
The Import Manager,
Mrs. Smith & Sons (P) Ltd.,
901, Queen Victoria Street,
London E.C.4.
199
Dear Sir,
Ref: Indent No. 3lgj for Window Curtains
237
This is to inform you that we shipped 4 bales containing Rainbow curtains
measuring approximately 5 sq. metres per S.S Queen Victoria on 29th May 2000. A copy
of our Invoice and other documents are enclosed for your information
The document are being forwarded to you as usual, through our bankers, The
Chartered Bank, Chennai - 1.
We are confident of having provided you with exactly what your customer require.
We await further business in the near future.
Yours faithfully,
For Radha Silk Emporium
Sales Manager.
Secretarial correspondences
Company Secretary’s Correspondence
A public limited company has the members of public subscribe and buy its
shares. This is done on the basis of the prospectus issued by the company. The company
itself is formed by informing the public about its formation. The prospectus should not
contain untrue or misleading information. Penal actions can be taken if such misleading
statements are made. A company thus incorporated becomes an artificial person created by
law with a perpetual succession and a common seal which is the signature of the company.
Such an incorporated company must have a company secretary who is a key executive
figure involved in general administration and day-to-day administration. Company
secretaries reach that position by their qualification, or being an associate member of the
Institute of company secretaries and experience. The job is a highly responsible one with a
high level of commitment, motivation, integrity and Confidentiality as requirements.
A company secretary has to correspond with the public, shareholders directors,
registrar of companies and also the SEBI (Securities Exchange Board of India. And
company Law Board. He has to prepare notices for meetings, design agenda for them, edit
and issue the prospectus and correspond with the staff of the company. He has to conform
to statutes and contracts. The secretary should be impartial in his communications. He
238
should be business-like in his dealings Without mincing words. He should be unoffending
and polite. The following are Some of the specimens of routine correspondence handled by
a company secretary.
THE CREPENDEL LIMITED
(Registered Office)
17 Barracks Road Perambur
Chennai 600 012
Notice
Notice for the monthly meeting of the board of Directors
Date and Time : 19 March 1998 at 4.00 p.m.
The Board Room of CREPENDEL Block 1.
1. Minutes of the meeting held on 17 January 1998.
2. Points arising.
3. Declaration of Dividends.
4. Executive salaries and revision.
5. Any other matter with the permission of the Chair.
6. Schedule for the next meeting.
Mantra Chowdhry
23 Link Road
West Anna nagar
Chennai 600 040.
2. Letter of allotment of shares:
THE CREPENDELE LIMITED
239
(Registered office)
17 Barracks Road
Perambur
Chennai 600 012
Dear Madam:
The Company is pleased to allot you 100 shares at Rs. 125/- each. The premium on
the share has been fixed within the norms of the SEBI. Since you had applied for 300
shares and paid 10% on application, the balance after adjustment will be refunded to you.
Please keep this letter of allotment until the share certificates are sent to you.
2. Letter regretting the allotment of shares:
THE BLUEBELL TOYS LTD.
23 Pennya Industrial Estate
White Fields
Bangalore 560 086
Regd office: 14 Kempe Gowda Circle
Bangalore 560 003.
Ms. Savithri Gopalan
17 East Kamaraj Street
Thiruvanmiyur
Chennai 600 041
Dear Madam:
The board of directors regret that the shares you have applied for have not been
allotted to you as the issue has been over subscribed. The amount you have remitted for the
shares is refunded by the enclosed cheque drawn on Deepti Bank, Bangalore for Rs.
25,000/-
240
We thank you for your interest in our company and request you to mail the duly
signed receipt.
Yours faithfully
Secretary
4. letter indicating the issue of Bonus Shares:
THE DUNREICH LIMITED
(Ultimate in auto-spares)
Regd Office: 23, Sairam Street
First Line Beach Road
Chennai 600 001.
Dear sir:
The Board of Directors of the Dunreich Limited has resolved to allot bonus shares
to existing shareholders at the ratio 1:1 This entitles you to one additional shares for every
share held by you. The breakup of allotment and certificates will be sent to you soon.
Company Secretary
SINDHOOR CONFECTIONERJESD COFFEE
Regd Office: 17 Bouleward Road
Red fields
Coimbatore 641 090
March 13 1996
Mr. A. Bhimaraja Naicker
23. 70 feet Road
R.K. Puram
241
Coimbatore 640 018.
Dear Sir:
Your concern and anxiety about the non-enhancement of the usual dividend in spite
of huge profits is appreciated. This has a valid reason. The Board of Directors decided last
year that the company required to buy two new estates at Coorg, Mercana and this has
necessitated a greater allotment to capital building. You would appreciate that in the long
run this move would prove to be wiser.
This explanation is offered at the direction of the board which anticipated such
clarification being sought by our shareholders.
Yours faithfully
G. Srinivasan
Company Secretary
6. Reply to shareholder on the allotment of Bonus shares:
THE FITNESS FOODS LTD.
Regd Office: 17 Trunk Road
Chittoor 517 002
Andhra Pradesh
M.S. Vidyalatha
17 Vallivedu Street
T.Nagar
Chennai 600 017.
Dear Madam:
Thank you for your letter. I appreciate your eagerness and enthusiasm.
242
However, 1 am unable to answer your specific question on dividend projections
and allotment of bonus shares owing to the confidentiality of the matter. All the
information you have sought will be available to shareholders at the AGM on 15 December
2003.
Yours faithfully
Narayana Gowda Secretary
7. A letter from the company secretary to the director who could not attend a Board
meeting.
Ms. Nandhinj Saha
Director
27, 3 rd Cross, 4 th Main Indira Nagar
Bangalore 560 040.
Dear Madam:
I am enclosing a brief extract of the minutes of the board meeting on 3 March 1998.
You will begetting the detailed minutes soon. Most of the decisions taken relate to the
modernisation of the plant and office. There was consensus on all matters and the
resolutions adopted were unanimous. Pending matters have been deferred to the board
meeting to be held on 15th April 1998.
Chennai 600 007.
Dear Mr. Paulson:
We welcome your idea of transferring the shares between your two daughters.
Though hares are freely transferable, they cannot be passed on without some formality
being observed. The contractual relationship between you, a member of Leonex
Corporation and he company makes it obligatory that an instrument of Transfer is
presented to the authority mentioned in the enclosed format on a blank paper. Then the
instrument of transfer shall be presented to the company along with the share certificate.
243
The instrument will be executed by the by the transferror (in this case David Paulson) in
favour of his daughters (Ms. Margaret and Ms. Miranda), the transferees. Iris mandatory
that we complete this exercise within two months. Please forward the instrument of
transfer duly signed to enable us to do the needful.
Yours sincerely
S. Govindaraman Secretary
9. Letter to a Director on holding of AGM
Ms. LeenaVakil
Director
73, Greams Road
Adyar
Chennai 600 020.
Dear Madam:
Your suggestion to hold the AGM of our company on April 7 1997 at Ooty is well
taken. But rules governing the conduct of such meetings are unambiguous.
“The AGM shall be held either at the Registered office of the company or at some
other place within the same city/town or village ii which the registered office is situated”.
The Board has no discretion or power to charge the venue of the meeting.
Yours faithfully
A. Ananthanarayan
Secretary
Advertisement Preparation
I. Classified advertisements
Classified advertisements are found in all the dailies. Under classified
advertisements, only a small space is provided for each advertisement. They are called so
because advertisements are grouped under different heads. Some of such heads are
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personal messages such as anniversaries, air conditioners/refrigerators, astrology, business
proposals, pagers, fax/modems, packers and movers, pest control services, restaurants/fast
foods, television, tuition/coaching, vehicles, auto finance, situation vacant, situations
wanted, matrimonial, rental, real estate, property for sale/purchase etc. Advertisements,
which are related to a particular category namely, anniversaries, will be given one by one
before they give another category of advertisements. So the similar natured advertisements
are categorised, grouped and are shown together This enables the readers to have a look
over the topics by simply identifying its locality in the newspaper.
Classified advertisements are normally given in small letters and each
advertisement occupies only a small space. They are given one after another without
giving much space between them. So now-a-days, most of the newspapers started giving
the matter within boxes. Normally advertisement is made in an attractive manner to catch
the eye of the readers. But this is not the case here because the advertisers have to give full
details within the limited space. Otherwise, readers may not have full idea of the
advertisement. However, now-a-days, some newspapers follow the practice of shading the
advertisements with different colours. This will at least help the readers to differentiate one
with another, if not attractive. However, such advertisements cost higher.
Classified advertisements are not sales promotion advertisements. They are in the
nature of informing some news to others. For example, in case of situation vacant
advertisements, advertisers simply inform that there is some vacancy in their office, in case
of tuition coaching advertisements, institutions inform the public that they provide
coaching for such and such courses and those who are interested can make use of their
services.
Mostly newspapers allot a separate page for classified advertisements. In Hindu,
during weekdays we can find such advertisements under the heading “Classifiedsmart” on
R.No. 8 arid on Sunday a special magazine for dassifiedsmart is published. In some
newspapers, which are circulated over a small area, only a portion of page like half of a
page, quarter of a page is, provided daily for classified advertisements.
Essentials of a Good Classified Advertisement
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A good classified advertisement should fulfill the following essentials.
1. Brief and Concise: A classified advertisement should be brief and concise. Cost
of advertisement is determined as per the number of words used including punctuation
marks. So it should be brief and concise so that the cost will be minimum. Normally,
classified advertisements are repeatedly given till their requirement is fulfilled. Very often,,
people rendering services advertise through classifieds to keep in touch with the public.
That is, to say we are here and providing such services etc. In case of educational
institutions, advertisements are given very frequently say once in two days, once in a week
etc. during June and July. This is common in case of newly started institutions. So
advertisers should write their message in a brief and concise manner.
2. Complete: Another essential that is to be fulfilled by the classified advertisers is
completeness. Advertisement should be complete in all respects. It should give all the
necessary details. The very purpose of advertisements is to inform the public some
message so that those who are in need of such an information will utilise the same. This is
possible, only when it is complete. So the advertiser should give due weight age to this
aspect and confirm himself that it covers all the essential aspects
3. Clarity: It should be clear and unambiguous. It should show its idea directly and
clearly. Each sentence must be as simple as possible Each and every aspect should be
clearly given. For example, in case situation vacant advertisements, one has to be very
careful in including the aspects like the nature of the job, educational qualifications
required, experience expected, salary promised, the last date (if any fixed) for applying etc.
Specimen Classified advertisements
Many groups are advertised in Classified advertisements column However, the
groups, which are related to business are given special attention here.
1. Situations vacant
Some of the specimen advertisements for advertising situations vacant are given
below.
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A. Advertisement for the Post of Secunty Officers
Type 387, 388, 389, 390, 391
II. Direct mail advertising
Direct Mail advertising is advertising made through mail directly to the former
customer or persons having consuming potential. It is commonly adopted by publishers of
books, Jewellery shops, textile showrooms etc. Book publishers adopt this technique to
send their catalogue to all the educational institutions and book sellers. to make them
known the arrivals, their rates etc. This is normally made at the time of opening of the
academic year. Jewellery shops and textile showrooms etc. follow this technique while
they offer discount during off- season. They used to keep the addresses of customers while
they buy goods in their shops. This will enable them to contact through mail when they
require.
Direct mail advertising is a direct appeal to their potential customers. This is made
with a hope that such customers will visit the shop and purchase some goods. Customers
also will be very much impressed by seeing such a direct appeal and also feel very intimate
to the shopkeeper. Such an impression will create a cordial and close relationship between
the customers and the shopkeeper.
If advertisement is made in a newspaper, magazine, television etc., it can be read!
watched only by those who have access to them, in other words, such advertisements can
reach only the readers of newspapers/ magazines or viewers of TV, cinema etc. Even in
such case also, cent percent attention to the contents of advertisement is not possible. This
is because mostly people. a’ old advertisements, feel very bore to hear! watch
advertisement etc. This defect is however eliminated in direct mail advertising because it
approaches people directly. So they can read leisurely at home and also keep it in their
bags! brief cases. However, mailing list is to be carefully prepared to include mainly those
who frequently buy such things and are interested to avail discounts etc. This will help
avoiding wastage considerably.
Factors to be Considered while Adopting Direct Mail Advertising
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It is necessary to consider the following factors while adopting the technique of
direct mail advertising.
1. Approaching Proper Persons: As it is direct mail advertising, mail list should
be prepared carefully. It should be sent only to those who are interested in the products of
the advertisers. For e.g. in case of books, catalogues are sent only to professors,
educational institutions, librarians of colleges! schools etc. Similarly, in case of saris, mails
are sent to their regular buyers of saris from the shop. If proper person is approached,
automatically sales will be improved.
2. Enclosures: Normally, in case of direct mail advertising, along with catalogue
price list cum order form is also sent. This will enable the persons to place order for goods
that they want without any delay.
3. Attractive Gift Offers: It should offer certain discount, free gifts etc. so that
people who received the mail will be influenced to place orders.
4. Guarantee Periods: As goods are offered through mail, people may have some
doubt about the quality etc. of the goods. So guarantee period should be allowed. During
such period, if purchaser face any difficulty in the usage of the products, he should be
allowed to. return the goods and get back their money. This type of facility will encourage
the people to buy goods without any hesitation.
5. Testimonials from Prominent People: People may be impressed by including
the testimonials from prominent people about the product. The satisfactory reports of such
people will create confidence in the minds of general public about the product.
Limitations of Direct Mail Advertising.
The main drawbacks of Direct Mall advertising are as follows:
1. People may not have faith in the goods offered through direct mail advertising.
However, they can be removed, when goods offered are well known. In case of goods
which are new, a company has to struggle a lot in convincing the customers about the
quality etc. of the products.
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2. People may not be interested in opening and reading the mail. If this is the case,
advertiser has to design the advertisement copy very interestingly. Further, it should be as
brief as possible so that people will find time to read the message.
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UNIT – V
AGENDA, MINUTES OF MEETING
Introduction
A company, being an artificial person cannot act on its own. Some human agency
is, therefore, essential to decide the course of action to be taken by the company and to
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conduct the business of the company. The company administration is generally left to the
Board of Directors. Neither an individual nor a single director can decide the course of
action to be taken by the company and the Board of Directors as a whole should decide the
broad corporate policies. It is therefore, essential for the Board of Directors, to meet from
time to time to conduct the affairs of the company. Similarly, the members, in whom the
ultimate authority lies should also meet from time to time to consider the past conduct of
the directors and the future plans. The Companies Act also provides that only the members
acting in a General Meeting can decide certain matters. Therefore, it is needless to say that
company meetings constitute an V important part of the company administration.
Moreover, it is also essential for a proper understanding of the company administration to
know how the company meeting are summoned and conducted.
KINDS OF COMPANY MEETINGS
The meetings of a companies can be broadly classified into four kinds.
1. Meetings of the shareholders.
2. Meetings of the Board of Directors and their Committees.
3. Meetings of the debenture holders.
4. Meetings of the creditors.
The meetings of the shareholders can be further classified into four kinds namely, I.
Statutory Meeting, 2. Annual General Meeting, 3. Extra Ordinary General Meeting, and 4.
Class Meeting.
1. Meetings of the Shareholders: It is already stated that the meetings of the
shareholders can be classified into four kinds, Now we shall discuss them in detail.
1. Statutory Meeting: This is the first meeting of the shareholders conducted after
the commencement of the business of a public company. Sec. 165 of the Companies Act
provides that every• public company should hold a meeting of the shareholders within 6
months but not less than one month from the date of commencement of business of the
company. Usually, the statutory meeting is the first general meeting of the company. It is
252
conducted only once in the life time of the company. A private company or a public
company having no share capital need not conduct a statutory meeting. V
2. Annual General Meeting: The Annual General Meeting is one V of the most
important meetings of a company. It is usually held once in a year. This meeting is to be
conducted by every company whether public or private, limited by shares or guarantee,
having or not having a share capital.
As the name suggests, the meeting is held annually to transact the ordinary business
of the company.
3. Extra Ordinary General Meeting: Statutory meeting and annual general
meetings are called ordinary meetings of a company. All other general meetings other than
these two are called Extra-ordinary General Meetings (Article 47 of Table A, Schedule 1).
As the very name suggests, these meetings are convened to deal with all the extra-ordinary
matters which fall outside the usual bushiness of the Annual General Meeting. These
meetings are generally called for transacting some urgent or special business which cannot
be postponed till the next Annual General Meeting Every business transacted at these
meetings are called special business.
4. Class Meeting: Class meetings are those meetings, which are held by the
shareholders of a particular class of shares e.g. preference shareholders or debenture
holders. Class meetings are generally conducted when it is proposed to alter, vary or affect
the rights of a particular class of shareholders. Thus, for effecting such changes it is
necessary that a separate meeting of the holders of those shares is to be held and the matter
is to be approved at the meeting by a special resolution. For example, for canceling the
arrears of dividends on cumulative preference shares, it is necessary to call for a meeting of
such shareholders and pass a resolution as required by Sec. 106 of the Act. In case of such
a class meeting, the holders of other class of shares have no right to attend and vote.
2. Meetings of the Board of Directors
Meetings of the directors are called Board meetings These are the most important,
as well as, the most frequently held meetings of the company. it is only at these meeting
253
that all important matters relating to the company and its policies are discussed and
decided upon.
Since the administration of the company lies in the hands of the Board of directors,
they should meet frequently for the proper conduct of the business of the company. The
Companies Act, therefore, gives wide discretion to the directors to frame the rules and
regulations regarding the holding and conduct of Board meetings. The directors of most
companies frame rules concerning how, where and when they shall meet and how their
meetings would be regulated. These rules are commonly known as Standing Orders.
Duties of the Secretary in the Board Meetings and Other Meetings
It is the Board Meeting in which much of the real work of managing the business of
the company is transacted. - Therefore, it is more appropriate to divide the duties of the
secretary under three heads.
1. Duties of the secretary before the meeting.
2. Duties of the secretary during the meeting.
3. Duties of the secretary after the meeting.
1. Secretary’s Duties Before the Meeting:
1. To issue notice of the meeting to the directors.
2. To prepare the agenda for the meeting.
3. To arrange for the attendance at the meeting of other officials of the company
such as Auditors etc. whom the Directors may also desire to consult.
4. To have in readiness all the documents requiring the attention of the Board and
Cheques, transfers, Share certificates etc. requiring the signature should also be kept ready.
5. To have in readiness the company’s seal and indexed copies of the Memorandum
and the articles for reference.
2 Secretary’s Duties During the Meeting:
1. To get the signatures of the Directors in the Director’s attendance book.
254
2. To ensure that all the required documents, papers etc. are on the table for ready
reference.
3. To read the minutes of the previous meeting.
4. To produce the Banker’s pass book with a statement on the financial position of
the company.
5. To take down notes of the business transacted. This will form the basis of the
minutes to be drawn up later on.
3. Secretary’s Duties After the Meeting:
1. To write up the minutes as early as possible after the completion of the meeting.
2. To issue necessary instructions to the company officials about the decisions of
the Board for their executions.
Notice of the Meeting
A meeting cannot be held unless a proper notice of it is served to all the members
of the company. In other words, the notice should be given to all those who are concerned
with the business of the meeting and are entitled to attend it. The Companies Act contains
elaborate provisions regarding the notice of the meetings particularly for general meetings.
The legal provisions can be summed up as follows:
1. Length of the Notice: The length of the notice required for convening a general
meeting is not less than 21 days. According to Sec. 171 of the Act, the general meeting can
be called only by giving to every member not less than 21 days notice. The expression “not
less than 21 days” means “21 dear days” i.e. the date of serving the notice and the date of
holding of the meeting are to be excluded. For example, to count 21 clear days for a
meeting to be held on 30th March, the notice should be served on 8th March. Intervening
holidays however, are counted as the period of notice.
2. Shorter Notice under Special Cases: However, a shorter notice is permissible
in the following cases.
255
1. If the meeting is of any other type and the Company has a share capital, with the
consent of the holders of 95% of such part of the paid-up capital having voting right.
286
2. If the company has no share capital, then any number of members having not
less than 95% of the total voting power exercisable at that meeting.
3. To Whom the Notice Should be Sent: Sec. 172(2) states that the notice of the
meeting of the company should be sent to every member, entitled to attend and vote and
having a registered address in India or who have supplied an address to the company for
this purpose.
1. By ordinary post to the registered address within India by prepaying the postage,
or
2. By registered post or under certificate of posting if a member so desirous and a
sum sufficient to cover the expenses is received from him in advance.
4. Contents of the Notice: Every notice should specify the place, the day arid the
hour of the meeting and the business to be transacted at the meeting. In case of an Annual
General Meeting, it should be held only in the registered office during business-hours on a
day which is hot a public holiday. Other general meetings can be held at any other place.
The notice should also specify the business to be transacted in the meeting. The business
may be general business or special business. If the notice does not specify the nature of the
business, it is bad in law. Moreover, the meeting cannot deal with a matter which is not
specified in the notice.
5. Explanatory Statement: It is not only enough to state the nature of the business.
It is also necessary that all material facts relating to the special business should be
circulated to the members along with the notice of the general meeting. The explanatory
statement should contain the following particulars.
1. A statement of material facts. The facts having a direct bearing on the company
should be disclosed fairly and in a manner not to mislead the shareholders.
256
2. The nature of concern or interest of any director or manager in the approval of
the special business.
3. The shareholding of the interested director or the manager if it is not less than
20% of the paid-up capital.
4. If the special business relates to the approval of a document, the time and place
where the document can be inspected shall be specified..
SOME HINTS ON THE CONTENTS OF NOTICE
The drafting of the notice of general meetings requires some more clarifications on the
contents so that the students will understand how to draft a notice for the general
meetings. Some hints on the contents of notice are given below.
1. Description of the Meeting: It should be spcci&a1Iy mentioned on the top of
the notice that it is for the Annual General Meeting or Statutory Meeting and so on.
2. Date of the Notice: The notice should bear a date. The date of the notice is the
date of posting the notice to individual shareholders. According to Section 171 of the Act,
only giving not less than 21 days notice can convene a general meeting of a company.
Therefore, the time gap between the date of the notice and the date of the meeting should
be not less than 21 clear days.
3. Date, Time and Place of the Meeting: The notice should specifically mention
the date, time and place of meeting. In case of Annual General Meeting, it should be held
only at the Registered office, during business hours and on a day which is not a Public
Holiday. The other general meetings can be held at any other place and on any other date.
However, for the convenience of the shareholders, general meetings including Annual
General Meetings are now invariably conducted at public places like Community Halls,
Hotels etc.
4. Nature of the Business: The business transacted at a meeting is of two types
namely, 1. ordinary business, and 2. special business.
257
Both ordinary business and special business can be transacted in the AGM. But in
case of other meetings, only special business can be transacted. Special business should be
separately shown in the notice.
5. Separate Resolutions for Appointment of each Director: The Act also
provides that separate resolutions are to be passed for appointment of each director. For
example, if two directors are to be appointed two resolutions, if they are three then three
resolutions should be passed separately. - -
6. Appointment of Directors Retiring by Rotation: According to section 173(1),
appointment of directors retiring by rotation is an ordinary business. 4t is also presumed
that the appointment of directors, in any manner other than by rotation is a special
business.
7. Text of the Resolutions: In case of ordinary business, the text of the resolution
need not be given, whereas in case of special business the whole text of the resolution
should be given.
8. Right Person should issue the Notice: Only the Board of Directors has the right
authority to issue orders to convene the meeting. Neither the managing director nor the
manager nor the secretary has the right to issue notice of the general meeting. : -
9. Proxy Rules: The proxy rules should be indicated prominently on the notice by
way of a note. The proxy rules shall not apply for the Board Meetings.
10. Explanatory Statement: Section 173(2) of the Act requires - that an
Explanatory Statement should be enclosed in case of every special business. The statement
should disclose all material facts and the nature of interest of the directors. Mere
explanation is not sufficient.
11. Documents available for inspection: If the special business relates to the
approval of a document, it should be mentioned that .the document is available for
inspection. The time and place where the document can be inspected shall also be specified
in the notice itself.
AGENDA FOR THE MEETING
258
The term Agenda means the “things to be done” or “business to be transacted at a
meeting’. In order to transact the business of a meeting systematically and without
omission of any important item, it is necessary to put down the items of business to be
done on a paper called the “Agenda Paper” or Agenda.
The Agenda should be circulated amongst the members along with the notice of the
meeting. No business should be transacted at a meeting unless it is specified in the Agenda
Paper.
The preparation of the agenda is the work of the company secretary. He should do
this job in consultation with the Chairman of the company. In preparing the agenda, the
secretary should take care to include therein all the business to be transacted. The matters
should be presented clearly and in a summary form so that the members. can grasp the
matters in advance and to form some opinion.
The agenda should be so drafted as to help the quick disposal of the business. The
usual practice is to put the routine items first and the complex matters latter. So that routine
matter can be disposed of first and the latter part of the meeting can be utilized for
discussion of more important items. It is also considered advisable that matters of similar
or allied character should be placed in continuous order.
There are generally two ways in which the agenda for a meeting can be prepared.
1. By referring to the business very briefly by writing just one line about each item.
For example,
1) to read the minutes.
2) to pass the transfers.
3) to produce financial statement.
2. By giving more details about each item and even sometimes including suggested
drafts of the resolutions for consideration of the meeting. For example,
1) to read and sign minutes of the meeting held on 25th March 2000.
2) to pass transfer of 208 to 215.
259
The second method is found more suitable as it helps the secretary to write the
minutes easily.
Definition of Minutes
The term minutes can be defined as the written record of the business done at a
meeting. E.g. resolutions and decisions of the meeting. But speeches and arguments are
not recorded in the minutes. Only resolutions and decision are recorded in the minutes.
The minutes differ from reports. Reports contain records of what was said while minutes
are records of what was done.
Sec. 193 of the Act provides that every company must keep its minutes containing
a fair and correct summary of all the proceedings of the General and Board meetings in the
books kept for this purpose. The objective of minutes is to keep a correct and authenticated
record of the decisions of the meeting. Therefore full, true and correct information should
be recorded in the minutes so that even an ordinary man can get a correct idea of the
precise nature of the business transacted at the meeting.
Writing of Minutes
Minutes being an authenticated record of the meetings, great care and caution is
needed in entering the information correctly in the minutes books. It is the duty of the
company secretary to write the minutes of the meetings.
The minutes though intend to serve as a permanent record available for future
reference, they should not be too lengthy. The secretary while writing the minutes should
avoid all superfluous words. The language should be simple and brief. In this connection,
E. Martin in his book “How to Take Minutes” observed as follows: “They are analogous to
a telegram than to a letter to a j3recis than to a narrative”. He further suggests that the
secretary should commence writing of the minutes as soon after the meeting as possible. If
it is done so, he will be able to record the minutes without any omission because the
proceeding, will be still fresh in his mind and he will be remembering clearly the details of
the discussions on the various matters considered at the meeting.
Some Hints on the Writing of Minutes
260
A few hints on the writing up of the minutes are given below:
1. Heading of the Minutes: The minutes of each meeting should have a heading
containing the nature of the meeting, date, time and place of the meeting. The usual way of
writing the heading will be like this. “Minutes of the Sixth Annual General Meeting held
on Wednesday, the 11th November 1999 at 3 PM. at the Registered Office of the
Company, 182, Anna Salai, Chennai - 600 002”.
2. Names of the Members Present: The minutes should contain the names of all
those who are present in their capacity as members and also those who are present in some
other capacity. It is usual to attach to the minutes a list of all the members and others
present at the meeting.
3. Sub-headings of the Business: To facilitate reference to d particular item in the
minutes, it is advisable to write in the margin or at some other suitable place, a brief
appropriate sub-heading or a marginal note. Each heading should be numbered and
underlined. It is also advisable to write the heading slightly bolder than ordinary
handwriting in which the minutes are written.
4. Dates and Figures: Dates and figures must be mentioned and not skipped over.
For instance, if a reference is made in the minutes to letters and reports, their dates should
always be mentioned.
5. No Reference to Personal Feelings: It is advisable not to make any reference to
the feelings of the individual directors or members.
6. Brief and Short: It is not necessary to record word by word the discussions
which led to the adoption of a certain resolution or the taking of a particular decision. It is
sufficient if the resolution passed or decision taken is proceeded by a short 1ecription. It is
usual to mention the name of the proposer and seconder to the resolution.
7. Special Resolution etc.: If a resolution is required to be passed by a given
majority as in the case of special resolutions, the minutes should state that the resolution
was carried by the requisite majority and also the number of members who voted for and
those against the resolution.
261
8. Tense and Voice: The minutes should always be written in simple past tense
impersonal passive voice. E.g.: It was decided to
9. Rough Draft: Minutes once written cannot be materially altered. Hence, great
care should be taken in preparing the minutes. Therefore, it seems to be advisable for the
secretary to write a rough draft of the minutes before writing the minutes in fair in the
minutes book. This will avoid the necessity of altering the minutes subsequently.
PRECIS WRITING
A. ESSENTIALS
1 Summary of all important points:
A good precis should be a summary of all the important facts. It should not contain
any unimportant detail The essentials must be sifted and retained. Conclusions and definite
opinions must not be omitted.
1) Length: It should normally be one-third of the original passage.
Form: Precis of speeches and articles in direct speech must appear in indirect
speech. They must be in the third person and in the past tense.
The language and the style:
The language and style of the precis should be simple and clear.
Figurative language in the original should. be reduced to plain, straight forward
English in the precis.
It must be note that the .original expression need not be changed merely for the
sake of changing them. If a phrase in the original expresses an idea in the best possible
way, it can be retained.
Order of Points: The precis should normally maintain the order of the various
points as found in the original unless it has been badly arranged in the original itself.
Connection of ideas: The transition from one idea to the next should be natural
and logical.
262
255. What points must be borne in mind in precis - writing?
The main points that should guide precis-writing are enumerated below:
1. The passage must be read sufficiently thoroughly to understand the
subject-matter.
2. The passage should be read /through again and again.
The important points to be included in the precis should be underlined.
3. Now these points, must be briefly noted in our own words The language
of the original must be avoided as far as possible, unless certain phrases
used in the original convey the meaning in the best possible way.
4. From the brief notes made, a Continuous summary of the passage must
be prepared.
5. Our personal comments or our own views must not be incorporated in
the passage.
6. The passage must be in third person, in indirect speech and in past tense:
7. The high flown language used in the original must be reduced to simple,
straight forward English.
8. The words in the summary must be counted. If it is too long, details must
be eliminated; if it is too short, important ideas omitted must be added
back so that the length of the passage is one-thjrd of the original.
9. Now a fair copy of the precis must be written.
10. It should be made sure that it is intelligible to the reader who has never
seen the original.
11. A note stating the number of words used in the precis must be appended
at the foot of the precis.
356. Make a precis of the following passage:
263
Many entrepreneurs especially in the small-scale sector ,‘ and particularly those
with a technical background are conscious of the need to maintain a minimal level of
quality in their products However, while this is true in the beginning, a number of these
entrepreneurs give in to the tempation of laxity in their quality standards merely to be able
to Survive.
What really happens is that in maintaining the quality hat these entrepreneurs had
originJly sçt for themselves hey find they are priced out of the market. A number
Unscrupulous persons take to producing similar produce using substandard materials and
dumps them in the market priced appreciably lower than those produced by quality
The customers get greatly influenced by lower priced products without quite
realizing their qualitative difference. The result is that the lower priced substandard
products rare sold out much quicker than the higher priced quality ones. The retailers also
tend to b swayed by the sale of lower priced products and are reluctant either to stock or
Lpush the sale of higher priced products even though of much superior quality.
Small-scale entrepreneurs find themselves in a quandary; and they feel that if they
have to compete with the price i tag of the substandard producers, they have little choice
but to use cheaper and substandard materials themselves, as otherwise they are unable to
cut down their manufacturing costs sabstantially.
However, you as a. small-scale entrepreneur would be ‘“ advised to desist from
such a temptation. You must appreciate that your gains on substandard products would be
ry temporary. The poor quality would soon enough be own in the market and among users
and your credibility be affected. You may find it impossible to regain lost “ity and may
never be able to re-establish yourself.
It does not mean that you should go on producing quality goods and not be able to
sell at the price which gives a reasonable profit margin. It also does not mean that ou start
selling at a price lower than your costs and being burdened by heavy losses.
You will have to devise ways and means to keep producing quality goods and
selling them at a price covering our costs and allowing you a reasonable profit margin
against all the odds of cheaper, substandard products. What are these ways and means?
264
First the foremost you have to let the customer know that your products are of a
particular standard. You have also to let him know that the cheaper products are below the
minimum standards. You have to go to a step further and get the prospective customer to
understand the harm the substandard products can cause him.
Perhaps the most effective way of educating your prospective customers will be to
highlight the quality features of your own product, the better quality of material that you
use and its effect on the usage and life of the product, the heat treatment that you give and
its advantages; the specia1 quality checks that you conduct.
In other words, the way to beat the substandard products is through an imaginative
and educative advertisement and publicity policy. The exact approach will differ from
product to product and the target clientele. However the objective must be that your target
clientele gets your message in a manner that is convincing.
Advertisement and publicity are specialized areas and you would do well to consult
specialists in them. However it is you who will have to spell out to them the strengths o
your products. You shall have to apprise them with why quality is so important in your
specific product. You shall have to put them wise on what damage could take place if
certain standards are not maintained.
Similarly, you should carry out a detailed critical study of your production
processes with a view to seeing if costs can be reduced, You must take a critical look at
your other needs and see if these can be cut down. You must see if wastage in materials
can he brought down.
Another useful approaches which. Will go a long way in helping you maintain the
quality of your product and a good share of the market is to shift your target consumers to
quality-conscious groups. There are consumers who are extremely particular about quality.
In fact, they usually get de— devoted to brand names in their quest for quality products.
In shifting your customer target to this group you may have to further improve your
quality. You may need to incorporate features which give added value to the consumer’s
ego. You may have to spend some money on improving the looks and finish of your
products. Your packaging will need to be designed keeping in view this sophisticated
265
clientele. Your advertisement and publicity will have to be of a much higher standard.
However expenditure in these directions would yield you good dividends.
Solution:
Competing with Sub — Standard Products
Many technical entrepreneurs in the small — scale sector are aware of the need for
maintaining quality in their products. But a number of them tend slowly to lower their
quality in the need for survival.
Many unscrupulous persons begin producing similar products using sub-standard
materials, and price them very low. Quality producers cannot compete with them.
The low-priced, sub-standard products sell fast because consumers do not realize the
quality difference. Retailers also prefer to tock them.
Unable to cut manufacturing costs, tpese quality conscious entrepreneurs tend to
use cheaper materials. But they should avoid this temptation because users will soon
realize the poor quality aid lose faith in their credibility.
Days to sell quality goods at a price ensuring reasonable profit must be found.
They should convince the prospective customers the harm that cheaper products
can cause them, of the superior materials used in their own products and the quality checks
applied thereon through effective advertisement and publicity. policy.
They must consult specialists in advertisement. They should clearly tell them the
3pecial features o their products, and damage resulting from sub-standard and ones. The
message must reach the target consumers in a most convincing manner.
Production process must he critically restudied to reduce costs, and overheads and
to prevent wastage.
Another approach consists in shifting the target consumers to quality-conscious
groups. For this, the looks and finish of the products must be improved and packaging well
designed. The quality of the product and a good share of the market can be maintained
thereby.
266
B. Precis of Speeches
257. Make a precis of the following speech:
Chairman’s Speech at the Annual General Meeting on 30th May, 1886
Ladies and Gentlemen,
I extend to you all a cordial welcome o the 84th Annual General Meeting of your
company.
The notice calling this meeting, the audited Accounts and Director’s Report for the
year ended 31st December 1985 have been with you and with your permission I shall take
them as read.
Your company continued to make very satisfactory progress in 1985.
Notwithstanding the highly competitive environment in the Paint Industry, a great market
penetration was achieved. This enabled your company to increase its market share: The
sales turn over increased by 28% from Rs.34.13 crores in 1984 to Rs.43.83 crores in 1985.
Profit be fore tax increased by 63% from Rs.1 05 crores in 1984 to Rs 1.71 crores in 1985.
Based on the good performance of your company in 1985, the Directors have
recommended, for your approval a higher dividend of Rs.1.50 per share, as against Rs.1
per share last year. Besides the amount to be transferred to reserves is Rs.47 lakhs, as
against Rs. 8.4 lakhs last year.
Several bold decisions were taken by the Government in 1985-86 to stimulate
industrial growth. Industrial licensing was liberalized, the concept of broad-banding
introduced, assets limitation for MRTP companies raised from Rs.20 crores to Rs. 100
crores, and R & D effort and updating of technology encouraged. Direct taxation was
reduced to generate surpluses for growth and the concept of MODVAT was introduced o
minimize the cascadin3 effect to excise levies.
It is now incumbent on industry to respond to these measures by increasing
production, lowering costs, improving service levels and the quality of goods, The
management and workers have a joint responsibility for achieving these objectives. I am
267
sure your company will not be lacking in its efforts to contribute to these national goals, as
indeed it has proved in 1985.
Your company has rationalized a wide range of its pro ducts to meet specific
customer requirements. Greater emphasis s being placed on Research and Development for
which the company is making fresh investments. New Products for marine and protective
coatings have been introduced. The company has further consolidated its position in the
areas of marine protective coatings, packaging coatings and industrial plaints. Along with
this significant headway has been made in the area of building paints. The flagship brands
of your company. i.e Superlac Emulsion and Superlac Enamel are now supported by a
wide variety of other products which help the company to make further inroads in the
decorative paint market.
Some recent developments, however have caused us a certain amount of concern.
One is the amendment to the Bonus Act the financial implications of which remain to be
watched since they are not linked with possible increases in productivity, and will place
additional burdens on the company. The other is the increase in the cost of petroleum based
products used in the paint industry and the higher excise duties levied on paints and
varnishes, all of which will adversely affect our cost structure. The introduction of
MODVAT in the paint industry has not provided the relief we expected from it. It will be
our endeavor to bring these to the attention of the authorities in the hope of se— curing
appropriate relief’s.
Under the able leadership of Mr. Vinod Krishna, Managing Director of your
company substantial progress has been made in 1985. The results for 1985, in terms of
turnover, volume of goods sold and quantum of profit, are the highest achieved by the
company. We now have a team poised to take the company to greater heights;
organizational effectiveness is being enchanted to meet the challenges of the future. More
emphasis is being put on plant modernization and quality improvement, recruitment, and
training and development. It is the quality and dedication of people that makes an
organization. There is an increasing awareness that the company’s progress can only be
through innovative approaches and dedicated team work.
268
In the ultimate analysis, the real test lies in the market place. I have no doubt that
with the determination shown by your management team, together with carefully
formulated marketing strategies your company will continue to make good progress.
During the year the Board of your company has undergone some changes. The
Board has been strengthened by the addition of Mr. B,S., who was appointed Additional
Director from 16th October 1985. The Company will greatly benefit from his wide
experience and wise counsel.
Mr. C.P. whole—time Director of the company retired from the services of the
company on 31st March 1986. He had a long association with the company. The Directors
and I wish to place on record our sincere appreciation of the services rendered by him.
I take this opportunity to express our gratitude for the active support received from
our associates in the U.K. Messrs, International Paints Ltd.
Your company continues to receive invaluable help and guidance them in the area
of product development. M express my warm thanks to my colleagues on the Board for
their support and guidance.
Before concluding, I am me the shareholders will join me in conveying their
appreciation and thanks to employees their at various levels in the company who are
geared to the successful results in 1985, and who are geared to meet the challenges” of the
future.
Solution:
Chairman’s Speech at the 184th Annual General Meeting of the India Paints Ltd.
held on 30th May 1986,
The chairman, after formally welcoming the shareholders appreciatively spoke of
the greater sales turnover a Rs.43.83 crores and the profit before tax at Rs.1.71 crores in
1985 despite heavy competition in the point industry.
The higher dividend of Rs 1.50 per share had bee recommended.
He also welcomed the various liberalization policies o the Government announced
in 1985 and urged the industries to respond by increasing production, lowering costs and
269
mi proving quality of goods. He was sure that this company would contribute to these
national objectives.
The chairman added that the company had rationalize a wide range of its products
to meet customer’s needs. New products for marine and protective coatings had been
introduced. The speaker that that along with its packaging coating and industrial paints, it
had made significant progress in the area of building paints.
However, the amended Bonus Act, the increased cost of petroleum-based products
and the higher excise duties caused concern to them.
The speaker also praised the services of Mr. V. K., its Managing Director for the
best results shown.
He pointed out that plant modernization, quality improvement and innovative
approaches would receive top emphasis and hoped that the company would achieve a
greater share of the market.
He also referred to changes in the Board and appreciated the services of the retiring
whole-time director Mr. C.1.
The speaker ended his speech the a vote of thanks t their associates in the U.K. to
his collegues the and to the employees.
(Total No. of words in the original passage: 873)
(Number of words in the precis: 251)
C. Precis of correspondence.
258. What points must be looked into while preparing a precis of a correspOüdence
i) The addresses salutation, complimentary close etc. found in the letters must be
totally omitted.
ii) Only the important point that emerges from each letter must be noted.
iii) The precis can be prepared taking the series of letters passing between the two
parties as a whole.
270
iv) Suitable heading must be given for the series of letters for which precise is
attempted.
259. Give a precis of the following series of letters from 1 to 4
Southern Paper Company
52, Anderson Street
Madras 600 001.
2nd June, 1986.
Messrs Singaram Stores,
17, South Car Street,
Pennadam.
Dear Sirs,
We thank you for your letter dated 27th May and confirm that we can supply
newsprint (Double Crown) at Rs.3 per ream. Your orders will be executed within a week.
We look forward to receiving your order.
Yours faithfully,
For Southern Paper Company
T.A. Saied
Partner
Letter No. 2
Singaram Stores
17. South Car Street
Pennadam.
6th June. 1986,
Messrs Southern Paper Company,
271
52, Anderson Street,
Madras — I
Dear Sir,
We thank your for your letter of 2nd June quoting sate for foreign newsprint at
Rs.96 per ream.
As we have to supply a very large quantity of paper to one of our valued publisher
customers, will kindly see your way to reduce the rate still further?
If the rate suits us we assure you of repeat orders.
Yours faithfully,
R. Singaram
Proprietor.
Southern Paper Company,
52 Anderson Street,
Madras — 1
10th June, 1986
Dear Sirs,
We have already quoted the lowest rate and any further will only erode the very
low profit that we make the sales. However, we are prepared to offer at Rs.89 ream
provided each order is for more than 100 reams paper.
We hope OU find this quite competitive,
Yours faithfully,
T.A. Saied
Partner.
17, South Car Street,
272
Dear Sirs,
We thank you for your letter of 10th June finally quoting yout rate at Rs. 89 per
ream.
We have enclosed our order Form No. 115 for the supply 150 reams of foreign
newsprint. Please treat this as urgent and effect delivery before 25th June.
Yours faithfully,
R. Singaram,,
Sole. Proprietor.
Correspondence between M/S ingaram Stores, Pennadam and M/s Southern Paper
Company, Madras.
On 2nd June 1986. Messers Southern Paper Company wrote to Messrs Singaram
Stores quoting foreign newsprint Double Crown at Rs.90 per read and offering to supply
within a week. Singaram Stores, on 6th June asked for a still lower rate assuring repeat
bulk orders. On 10th June, Southern Paper Company agreed to reduce it to Rs.89 pro
vided each order is for more than 100 reams of paper. MIS Singaram placed orders an 14th
June for the supply of 150 reams of paper requesting delivery before 25th June.
Memos and Note making, Expanding note
The literal meaning of the word-Memorandum is a note to assist the memory.
Memo is the short form of memorandum. A memorandum is mainly used for internal
communication between executives arid sub ordinates and also between the officers of the
same level.
Memos are often, used at the horizontal and downward levels of communication
amongst the executives of the same level, communication from top to bottom and very
rarely upward memorandum is sent. An employer may ask any explanation from his sub-
ordinate regarding various matters, in the form of a report which is usually confidential.
273
The form of a Memo
The Memo differs from letters that are sent out by the firm. Since a memo moves
from one department another or from one employee to another, it is essential to write the
name of the person sending the memo and the name of the receiver and his designation or
department. It must also have reference numbers.
The word from and to are used in memos. There is no salutation. The writers
signature is put without super scribing, and there is no complimentary close.
The memo is probably dated, is written in a direct style and as brief as possible.
Contents of a memo report
1. Headline
2. Inside address of sender and receiver.
3. Body of the report
4. Signature of the sender
5. Enclosures if any
Memos are usually of the following kinds.
1. Inter office o.r inter departmental memos.
2. Memo informing of the action taken.
3. Memo seeking explanation.
4. Memo informing of transfer.
5. Memo seeking the superiors approval for the action taken.
6. Memo seeking suggestions from the officials of the same status.
7. Circular Memos.
The different occasions that a Memo takes place
1. Charge sheet
2. Warning note
274
3. Job instruction
4. J Extension of probationary period.
5. Memo informing a cut in salary.
6. Asking for explanation -for going on leave without permission.
7. Intimating transfer.
8. Memo seeking some explanation.
9. Asking for superiors approval for transfer.
10. Asking suggestions from equal officials.
11. A memo as a circular.
Sample Memo
A memo to inform, the extension of probationary period.
Janata Bank Ltd.,
26, Bells Road,
Bangalore.
3rd March ‘98
Ref No: 227
From
Zonal Manager,
Janata Bank.
To
Mr. Raja,
Probationary Officer,
Janata Bank.
275
Whereas Mr. Raja probationary officer, Janata Bank. joined the bank from 1996
and he is confirmed in the service of the bank with the effect from 28th February 1998 and
his work progress etc were not found satisfactory, it is therefore considered necessary to
extend his probationary period by two months, so as to provide him an opportunity to the
arrive drawbacks.
146
Now therefore the probationary period by Raja is hereby extended by two months .
(ie) upto 30th April 1998.
c.c. To Branch Manager,
Bangalore.
II. Memo informing a cut in salary
State Bank of India
Maduari
3rd March ‘98
Ref No: 999
From,
The Manager
SBI
To
Mr. Rajaram,
Clerk,
SBI,
Sub: Information regarding cut in salary.
You remained away from your duty on 25th February ‘98 from 10.30 A.M. to 5.30,
P.M., without any prior permission and please note that your salary and ennoblements for
the above period will not be given to you.
276
c.c. To Staff Section.
IlI. A memo intimating the transfer of the employee
56, Raja Road,
Bangalore.
3rd March ‘98
Ref No: SS 220
From
Marketing Manager
Ashok Leyland Ltd.,
To
Mr. Raja,
Sales Representative,
Ashok Leyland Ltd., Sir
Ashok Leyland Ltd., (Marketing division)
Sub: Proceeding of the marketing manager dated on 1St March 1998.
The following transfer is ordered, Mr. Raja, sales rep, Ashok Leyland Ltd.,
Madurai. Branch office, is transferred to the Trichy branch. He shall join the duty within
four days, from the day he is relieved from the Madurai office. Since the transfer is made
at his request no TA will be given.
c.c. To Branch Manager,
Trichy.
A memo asking suggestions from equal office.
Raja & Co.,
Chennai.
5th February ‘98.
277
Ref No: S 230
From
Mr. Suresh
Sales Manager.
To
Mr. Ram,
Finance Officer
Ref: Funds for exports.
A newly established wing of the sales department has successfully explored a good
number of foreign markets for our products. The profit margin in the export sale also
appears to be better. Time has now come to decide how to arrange the supply to export
markets (ie l whether by reducing the home market supplies or by increasing e production.
No doubt, the second alternative yield higher profit to the company. However the increase
in production requires installing additional production capacity, additional hands in the
sales department and other extra actives due to increased production. All these involves the
problem of finance a matter of your department.
You are therefore requested to send in your suggestion in the directions of sources
to raise funds and their cost and returns, along with the fund flow statement to enable the
board of directors to take a final decision in this matter.
A copy of the statement from the production manager and a statement from our
department are enclosed for your information, •You are requested to send your suggestions
to us, by this week and, so that we can prepare a consolidated report and submit it to the
board which has its meeting during the end of this month.
c.c.. To all directors.
To
Mr. Raja
Office Peon
278
From the past five months, we have received a number of complaints regarding your
imprope4r work in the office time. You have just got6 the permanent job but your have
misused your freedom and not attend the office in the afternoon time and doing some
personal work. So we want a suitable and a proper explanation regarding this matter.
c.c. To personnel Manager.
II. Draft a memo to a clerk who has huge arrears of works pending with him.
Reliance Co., Ltd.,
Mumbai
7th March ’98.
Ref No: R 21
From
Administrative Manager,
To
Mr. Raj,
Office Clerk,
If is three months since we are receiving complaints regarding the slow completion of the
files at your disposal.
This stagnates the work, completely in one section of our office. Your delay regarding
the accounts files causes huge problems.
Try to clear out the files as early as possible. Otherwise the company would surely
take severe action and may even not hesitate to depromote you.
c.c. To Section Manager.
Warning note
Warning note is also a type of memorandum, which is considered as a preliminary, or
prior notice before issuing charge sheet. It is an intimation given to the sub-ordinates
279
warning them that they are dearailing from the company’s rules and regulations and giving
then a chances to rectify their wrong doings.
It is an awareness note created to abide the rules and regulations of the company policy
and administration. As the memorandum, it is also an internal communication mostly flow
downward from top to bottom (ie) from superiors to sub-ordinataes.
As it is preliminary stage of charge sheet, if the wrong doings of the sub-ordinate
continues even after the warning note, they are charged by their activities and necessary
action is taken thereafter.
Charge sheet
Charge sheet are also one kind of memo given by the superiors to the sub-ordinates
seeking some explanation. These charge sheets are mainly used for internal
communication.
Charge sheets are the sheets consist of several charges framed against the sub-
ordinates for their wrong doings.
These charge sheets should certainly have a feed back as their reply from the sub-
ordinates giving adequate explanations to their superiors.
Charge sheet process
1. Charge Sheet: It was the first step in the actual process of issuing charge sheet, in
which various charges are pointed out one by one and sent to the concerned sub-
ordinate.
2. Explanation: The feed back process, whereby the sub-ordinate numbly pertain his
position and the actual to the superior in a detailed manner. If it is a satisfied and
genuine explanation, the process comes to an end or else if the explanation given by
the subordinate was unsatisfactory and unreliable, the next step enquiry will proceed
on.
280
3. Enquiry: The next step in the process, if the explanation was unsatisfactory. Here
an individual or a committee is appointed to enquire into the matter and pertain the
facts.
4. Punishment: The concluding part of the process in which actual remedial work is
done. Punishments may be classified as
a) Suspension: suspension order is given to those sub-ordinates if their offenses was
proved. Moreover, it is subject to minor or meager matters.
b) Disliegal: If it is a servere offense, strong or heavy punishment like dismissal,
imprisonment were given.
Occasions or Chances of using charge sheets
1. Not observing punctuality
2. Vacating the office premises earlier than the closing time.
3. Wandering here are there which results in low production, accidents etc.,
4. Having huge arrears of work pending 4’ith continuously.
5. Doing some independent bass which ultimately affects the ordinary work.
6. Mishandling some valuable spare parts, documents etc.,
7. Using unparliamentarily words, assaulting etc.,
8. Gheraowing the official.
Sample letter
Mr. Albert has stolen a few spare parts from the stores dept. He was caught red
handed by the security forces. Draft a charge sheet against Mr. Albert asking for an
explanation and inform him that an enquiry is likely to be conducted against him after 10
days.
Fenner India Ltd.,
Madurai.
12th March 98,
281
Ref No: p 100
From
The personnel Manager,
Madurai.
To
Mr. Albert
Instrument Mechanic
Maintenance Dept.,
Fanner India Ltd.,
On the 7th March you were found guilty of having stolen spare parts trom our
stores dept. In spite, the warning given by the security officer, you have entered into an act
which is liable for punishments When the security persons found you red handed in the act
of stealing, you had assaulted upon the security guards and you had also abused them with
unparliamentarily words.
On further enquiry you had confessed that you were also indulged n the earlier
theft also. Hence the following charges are made against you.
1. Stealing of spare parts worth Rs. 5,000
2. Assaulting the security personnel
3. Using unparliamentarily words
4. Also found involving in the earlier theft.
Before we decide to hand over the case to police authorities for taking further
criminal proceedings against you we would like to hear from you exactly, what do you
want to say for the above charges.. Your explanation should reach us before the end of this
month. Also you are requested to appear before the officers of General Manager on 22nd
of this month for an enquiry with the disciplinary committee
c.c. The Production Manager
282
II. Reply letter
Fenner India Ltd.,
Madurai.
13th March ‘98..
From
Mr. Albert
Instrument Mechanic
Maintenance. Dept.,
Fenner India Ltd.,
I was quite surprised on receiving the charge sheet for no fault of mine.
Actually what had happenned was that I had caught the security officer red handed in
stealing those parts.
In his own fear of being caught, the security officer had presented the matter
before you in a completely topsy - turvy manner.
He had also threatened me to keep quite or else it would be harmful to my whole
family. Since I have old parents and three little children to look after, I thought of keeping
quite and now my calmness had only harmed me all the more.
Kindly maintain secrecy about my letter to you, or else it may harm my own
family. Kindly enquire into the matter fully and give me justice.
c.c. To PM (Production Manager)
Draft of Business drafts
A report is a statement or account of a certain event or happening or occurrence,
prepared after careful investigation.
Objects or Purposes of a Business Report
The object of a bass report is to group altogether, as briefly as possible, all
important data showing the true position of affairs, pertaining to a particular matter or issue
283
and making appropriate recommendations or suggestions dictated by the circumstances.
The purpose of every report is to give information to some person or body of persons not is
possession\of the full facts of the subject with which it deals.
Characteristics and features of a good bss report.
1. Grammatical accuracy: Every report should have grammatical accuracy. All the
ordinary rules of grammar and construction of sentences applied to the drafting of reports.
2. Simple and unambiguous language: The language should be simple and
unambiguous. The report should be free from ornamental language, figures of speech,
phrases, etc.,
3. Good arrangement and clearness: The subject matter of the report should be
symmetrically arranged.
4. Accuracy: It is very necessary to ensure that the facts presented in the report are
accurate, reliable and complete.
5. Objectives of recommendations: The concluding remarks including the various
recommendations and suggestions should be unbiased. It should be based on the objective
data rather than on mere imaginary calculations or illusions or mere impression.
6. Brevity: Repeatations and exaggerative. remarks should be avoided in the report.
The report must deal with the subject matter as briefly as possible.
Broad Classifications of Reports
Reports can be broadly classified as (i) Reports by individuals (ii) Reports by
committee.
(i) Reports by individuals: The report by an individual is generally on a subject
matter (le) suitable for investigation by a single person If the subject is connected with an
organization and management of a company, the person deputed to write a report is often a
secretary. This report is generally in the form of a business letter and is written in the first
person singular and informal in tone.
284
(ii) Reports by committees: Before taking any decision on some important matter
or a problem, the management of an organization many time appoints a committee with a
person as a secretary and another as a-chairman and one or two persons as members. The
main purpose of management is to obtain a considerable opinion after the matter has been
thoroughly investigated and discussed by the committee: The committee investigates the
problem, gather evidences and then prepares its report. Such a report being the result of
matured study and thorough investigation carries weight age with the appointing authority.
A committees’ report should have the following.
1. It should have a title or heading.
2. It should make a reference to the appointing authority, stating that terms of
reference and date of appointment of committee.
3. It should be in the third person.
4. The opening paragraph should clearly state the objects of the Committees
investigation.
5. The subsequent paragraph should contain the investigation carried out and
evidence taken.
6. The findings of the committee should be clearly stated.
7. Signatures of the chairman, members secretary along with the date should be
presented.
How to write a report or format of a report
I. Introductory material
a. Title page
b. Letter of transmittal
c. Table of contents
d. Summary or synopsis
II. Body material
285
e. Introduction
f. Textual content
g. Conclusions
h. Recommendation
III. Supplementary material
i. Appendix
j. Bibliography
a. Title page: The title€ sheet also called cover page is set apart for writing the title
or tie heading of the report, the persons or authority whom it is addressed, the date of
submission, the name of the author etc.
b. Letter of transmittal (preface): It is a covering letter presenting the report and
is addressed to the person or authority to whom it is submitted. It serves as a preface to the
report.
c. Ta bleat contents: The table of chapters with the title and page marks of each
chapter is given on a sheet after the letter of transmittal.
d. Summary or synopsis: If the report is very lengthy, the. author of the report
may give a separate summary or synopsis of the report after the table of contents.
e. Introduction: It is the first part of the body of the report wherein the terms of
reference, the subject of study, its importance and scope, definition of technical terms used
in the report are stated.
f. Textual content: Also called the text proper gives light on the central point of
the report. It consists of the development or findings.
g. Conclusions: The inference., drawn by the author is stated under this heading in
a systematic way.
286
h. Recommendations: Not all reports will have this particular part. If the particular
subject matter of the report calls for any suggestion or recommendations at the end of the
text proper.
i. Appendix: The data used along with charts and diagrams are generally included
as a appendix to the body of the report.
j. Bibliography and References: If the report is based on exclusive research, the
author is expected to add a list of references and bibliography so that the readers wilt get
an idea of the books and reports referred to, white drafting the report.
Index: An index of the contents is given after the bibliography, if the author finds
it necessary.
Signature: The report must be signed by the persons submitting it. In the case of
important reports all the members of the committee or commission are expected to sign it.
Otherwise the signature of the chairman is enough. If there is no unanimity among the
members the opinion of the majority is submitted in the report. However: the dissenting.
members are also allowed either to submit a separate minority report or to sign the
majority report with notes of dissent.
Types of reports
1. Formal and informal reports.
2. Routine and special reports.
3. Statutory reports.
1 (i) Formal reports
The physical make up tone and wording of these reports must suit the formal
occasions with which they all are concerned. They generally deal with complex problems
and the conclusions drawn from the data given in them have wide range in significance.
The formal reports/are of the following types..
287
a. Informative reports: This report give information about the subject, on which
they are written For eq., A report. on the production problems and sates problems ih a
company..
b. Analytical report: This report present an analysis of the investigation carried
out and the conclusions drawn. They may also make suitable recommendations. For eq.
market service,. Accounting reports etc., S ‘
c. Research report: These reports are about products resulting from laboratory’
research and experiment. They also describe the methods employed to test the products.
1(ii). Informal reports,
Any report may be presented in an informal style. A report given by a secretary tà
the Managing Director may be called as strictly formal report. But at the same time a
report by an employee of an organisation to another equal rank will be extremely informal.
Informal reports are often meant for exchange of ideas or i information. Eg.,
Memorandum.
A memo-does not contains salutation (or) a complementary ‘close.
Functions of memorandum
1. A memorandum communicates information horizontally (ie)from one
department to another.
2. They also convey messages vertically downwards
3. They serve as a record of the discussions held and decisions
4. Memorandums are brief, crisp and relevant.
2 a. Routine reports
These reports are written as a matter of usual routine or practice. They are generally
written in accordance with asset pattern. Sometimes printed forms, with blanks which
could be filled in or used for preparing such reports. For eg., Annual report of the branch
manager of a company to its Head office.
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2 b. Special reports
These reports deal with special situations of every kind. These reports may be short
or long. For eg., A project report on starting a hotel at a sea side resort is a report of this
kind. Special reports can be classified as
a) Report of a specialist
b) Feasibility report.
c) Survey reports
d) Press reports
a. Report of a specialist: This Is a report prepared and submitted by a specialist at
the request of an organization or an authority. In this report, the specialist first refers to the
appointing authority, the date of appointment and the nature of the problem involved. Then
he gives details of his studies and findings and finally his recommendations. For eg, Report
of a firm of consulting engineers on a building needing repairs.
b. Feasibility or possibility report: When an organisation proposes to extend its
operation to a new place, it needs a feasibility report;. For eg., A bank thinking of opening
a new branch at a new place, gets a special report from the top executive. Similarly, when
an organisation proposes to introduce a new product and wishes to know its prospects, it
tries to get a feasibility report from an expert or an experienced person.
c. Survey report: Insurance company’s appoint qualified and licensed surveyors
when. a property insured against fire or marine risks gets damaged by fire or perils of the
sea, and the insured intimates the damage or loss to the insurance company, the surveyor of
the company visits the place of damage, inspects the property, studies the terms of the
policies, assess the damages and suggests the compension payable in his report. This report
is called a survey report.
d. Press report: The press plays an important role in the life of the civilized man.
The press reports must be accurate and true and should not be influenced by personal
feelings. The press report may be in the form of an extensive account of an important event
289
Forge., floods might have caused damages to life and property, the reporter may visit the
place interview the people and write a detailed report.
3. Statutory Reports
These are the reports which are. required to be prepared and submitted under the
law.
a. Statutory reports
b. The director’s report to the share holders.
c. Auditor’s reports
d. The annual report of the managing committee of a cooperative housing
society.
a. Statutory report: According to Companies Act, 1956, the board of directors of
every limited company must prepare and forward to its members a report called a statutory
report, at least 21 days before, the day on which the statutory meeting is to be held. This
report must contain.
1. Total no of shares allotted, whether fully paid up or partly paid up.
2. Cash received by shares.
3. An abstract of receipts and payments.
4. The name, address, occupation of the directors of the company.
5. Particulars of any contract.
b. Director’s report to the members: The Companies Act, 1956 requires the
board of directors of every company to prepare its report and place it before the company
in the annual general meeting along with the balance sheet and profit and loss account, The
directors report contains the following information.
1. The state of the company’s affairs.
2. Dividend declarations.
3 Amount proposed to be carried on to reserved capital.
290
4. Any major change in the financial commitment.
The report should also deal with, any changes which have occurred during the
financial year (ie) in the nature of company’s business or in the company’s subsidiaries or
classes Of business in which the company has interest.
c. Auditor’s report: The auditors are required under the Company’s Act 1966 to
make a report on the account of the company examined by him and on the balance sheet
and profit and loss account of the company
Sample feasibility report
To
The Chairman,
Raja Engineering Works Ltd.,
Bombay.
24th March ‘98.
Sir,
You had asked me to report to you on the possibility of locating our new chemical
project at a suitable place in the state of Gujarat. After considering -various possible
locations, I have come to the conclusion that the most suitable place for our purpose is
Broach. I give below full information about “GIDC” industrial estate in this town.
Broach district in south Gujarat, .with\i rich alluvial soil, a green forest and
abundant mineral wealth, promises to be an existing growth centre. Its huge potential will
be tremendously increased with the commissioning of the famous Narmada Project.
Broach ,the head quarters of Broach district, is one of the oldest town situated on
the bank of the river Narmada. It is served by the Western Railway, double line road gauge
which connects directly to Bombay, Ahemedabad and Delhi. Broach is just 74 kms from
Baroda and 66 kms from Surat on national highway.
291
The GIDC has developed an estate of 40 acres with complete infrastructural
facilities. The state has been so selected that it can be extended easily to 500 acres. In fact
the expansion of the estate by another 100 acres is already under consideration.
The open pints range in size from 800 sq.m. to 10,0000 sq.m. A number of
prominent, medium and large size chemical, textile and engineering units have decided to
locate their projecs this estate. The following are some of the details.
Terms and conditions.
The current premium price for obtaining a plot at Broach is fixed at Rs.12 / sq.m.
Plots: Initially 25% of the. total amount should be paid balance 75% amount to be
paid in 6 yrs with 15% interest.
Sheds: Initially 20% of the total amount.
Other amenities (facilities).
1. Abundant water: GIDC has a two phase, programme for water supply. in first
phase 2 lakh gallons of water will be supplied per day. The second phase will give more.
2. Adequate power: At present, Broach town and the industries around it receive
power from the 10 megawatts (mw) Broach substation. However, additional power is
planned for.
3. Shopping and commercial sector: Commercial zones for the establishment of
shops, office, bank, post office etc have also been planned. Telephone are available for
every unit in the estate.
4. Banking: The Broach industrial estate is served by about 15 banks which would
take care of all financial requirements.
5. Medical care: Well qualified medical personnel both private and public provide
medical aid. There is also a maternity home, public dispensary and a family planning
centre.
6. 8roach the town: Broach is the lovely town offering everything one
may require In a prosperous industrial and commercial establishment.
292
Plenty of housing facilities, a civil hospital, cinemas, state govt depts,
a number of schools and colleges.
7. Broach - the incentive area: Broach also offers a-great investment opportunity.
If offers special incentives which provide you with up to 85% of your capital requirements
for setting up an industry.
a. Cash subsidy: Industries receive a special cash subsidy of 15% on capital
investment upto Rs.1 crore from the central govt., -
b. Income tax remission: Another significant benefit in Broach is that the Govt of.
India has planned to offer remission of income tax on 20% of our project for a period of
10 yrs.
c. Liberal assistance: All the major national financial institutions along with the
four Gujarat corporations offer maximum assistance in the form of lcng, term loans for
investment in fixed capital upto Rs.30 lakhs from the Gujarat State financial corporation.
(GSFC)
d. Foreign exchange loans: All these incentives plus its proximity which is poised
to go on stream shortly, make Broach an excellent location for an ancillary estate.
Yours truly,
Secretary.
Report on declining sales
To
The Directors,
Beauty Cosmetics Ltd.,
Bangalore
25th March ‘98.
Sir,
Sub: Report on the declining sales of our cosmetics.
293
We have carefully examined the various causes of steep decline in the sales of our
cosmetics as desired by you in the resolution passed at the boatels meeting held on 20th
March ‘98. A brief report of our investigation and recommendation is being sent herewith.
We hope that a quick action will be taken on these recommendations so that any
further decline is arrested.
Resolutions
i. That a sub committee be appointed to study the causes of the decline in sales of
the cosmetics produced by the company and to make recommendations for the promotion
of sales.
ii. That the sub committee may consist Mr. Shri Ram, Chairman & Mr. Choudhary,
Secretary. “
Work done .
1: The. sub committee scrutinized the sales report for different quarters of 1997 and
compared them with the sales reports for the previous year.
2. The sub-committee made a careful study of the cosmetic market in order to
ascertain whether there had been a general decline in. the entire market or the decline has
been peculiar to our company alone.
3. The sub-committee interviewed the whole sale dealers stocking the cosmetics of
our company as well as the retailers and a large number of customers.
4. The subcommittee actually circulated nearly 1,000 questionnaires to the users.
5. The committee has analyzed several products of our company by some chemists
in order to as certain. their quality.
Findings
1. The subcommittee found that there have been a steep decline in the company’s
sales during the year 1996 Nov and this trend continues till today. This decline was
peculiar to the products of Beauty Cosmetics Ltd., and there had been no general slump in
the market. .
294
2. The questionnaire reveals that the consumers have not satisfied with the quality
of our products, some of them have clearly stated that there has been a deterioration of
quality. Our shampoo leaves the hair dry and rough. The ladies using face creams report
that after a little while starts looking caky or masky. The antiseptic talcum powder does not
act as an effective deodorant.. The chemists report also point to the unsatisfactory quality
of our cosmetics.
3. Our publicity also to be improved we are still following the old modes of
publicity like sending long wordy insertions in the dailies. Our publicity department has
not cared about the more effective media like radio and televisions, Our insertions also are
not attractive. They are not designed to appeal to the consumer psychology. During the last
two years, some rival enterprises have entered the market in a big way. They offer most
attractive terms to their dealers. They have also offered door -to-door delivery and
producing quality goods with high .publicity.
Recommendations
1 . The first thing to be done is obviously, to take care of our products. It appears
that we shall have to appoint better qualified chemists and to follow strict quality control.
2. We should give a new look to our products and to built a massive advertising
campaign to boost the sales,.
3. We should revise the terms of sales on the basis of market information relating to
credit and discount sales.
4. We should also undertake door-to-door publicity and sales and offer attractive
gifts and bonus coupons.
5. We should make a review, of sales promotion schemes every 3 months during
the next year
295
A copy of the questionnaire circulated among the consumers and the chemists.
report on the quality of our products are enclosed for your reference.
yours faithfully,
Market Report
Market report is a form 0f technical writing about the position prevailing in a
market during a gien period. The position of the market means the tendency of price, the
attitude of the dealers operating there, the underlying economic processes and their
possible effects on the future turn of trends. In a dynamic economic structure of today’s
markets, commodities and securities are subject to frequent fluctuations induced by back
forces of demand and supply, the impact of Government’s monetary, fiscal and general
economic policy by the expectations and forecasts of the dealers and operators composing
of the market. Knowledge of the various factors influencing the market conditions is
essential for entrepreneurs and dealers to plan their policies and design their strategies.
Another important feature of modem organized market is the speculative activity
conducted by a professional class of operators who trade on anticipated changes in prices.
Their activities ar noted with interest by industrialists, investors, dealers, brokers and
general buyers and sellers. Hence, information about the economic forces at work in a
market over a period is conveyed through a Market Report.
Market report, like any other report, is a systematized treatment in writing of the
observed facts at play in a market with reference to a product, security or money over a
specified period. Market reports reveal the movements of prices as on a particular day or
during a week. Daily market reports bring out the sensitive currents and gross currents
while weekly market reports represent synopsis view of the business transacted during the
week with reference to the salient force. resulting in balancing the demand and supply.
Monthly and annual reports give a factual account of changes in prices over a period of one
month or year.
Uses of Market Report
The important uses of market reports are the following:
296
1. They provide accurate information about the transactions in a particular market
during a specified period. This information is helpful to producers, consumers,
businessmen and Government policy makers.
2. Since they reflect the tendencies in the nature of demand and supply, crucial data
is provided for speculative operators in the line. They furnish hints or clues to the
speculators to base their forecasts of the price movements.
3. They facilitate comparative study of different markets in different areas for a
product at different periods. They help the traders to bid accurately at the right time and at
the right place.
4. Glaring variations in price level in different markets are ironed• out because
dealers knowing the movement of prices through market reports can engage in
countervailing contracts.
5. Market reports published in newspapers and periodicals make readers familiar
with the transactions in the market and give them scope for wise investment
6. They serve as a guide to the Government also in framing their fiscal, monetary,
and other regulatory policies to reconcile the interest of the industry, trade and consumer.
Contents of a Market Report
A market report contains information or particulars about the following.
1. Period under reference-Daily, Weekly etc.
2. Name and area of the market to be reviewed.’
3. Date on which the reports being compiled.
4. Types of commodities dealt with.
5. Estimate of demand and supply of the products or securities.
6. Details of business transacted i.e., volume of purchase or sales, their value etc.
7. Prices ruling in the market.
297
8. Extent of fluctuations in prices during the period under review with reference to
the factors or events which have caused such fluctuations.
9. Indications regarding the turn of future trends in prices.
Writing a Market Report
The students should note the following hints while drafting a market report.
1. Mention the market, under report i.e., Stock Exchange, Wheat Market,
Bullion Exchange etc.
2. Specify the location of the market, Example: Bombay Stock Exchange,
Calcutta Jute Exchange.
3. Refer to the period of review.
4. Highlight the main features of the transactions during the period.
Report Writing
5. Specify the operating and closing quotation of prices.
6. Explain briefly the underlying political, economic and international
causes of changes in prices. The cause and effect processes should be
sufficiently analyzed.
7. Give an intellectual appraisal of the trends with projections of future
changes.
8. The report should be drafted in indirect speech ad the wordings should be
usually in past tense.
9. Technical terms and phrases should be used whenever necessary to
explain the exact stage of things in the market.
10. The report should not be too lengthy or too short.
11. Exact details should be quoted.
298
12. Concluding remarks about the attitude of the dealer or operators, the
Government, the working of the firms in the line and conjecture about
future changes should be indicated.
Form of Market Report
Market reports are generally published daily in all popular English dailies like The
Hindu, The Financial Express, The Economic Times, Times of India. A careful analysis of
various ‘reports reveals that the reports follow’ an identical pattern for drafting the reports.
The usual form of a market report is as follows:
1. Heading: A heading is usually given in all the reports. The heading should be
short and indicative of the main trend in the market. Examples: “Equity steady in Data!
Street”, “Steep fall ‘in coconut oil”, “Oil easier in Madras”.
2. Introduction: The date, place and name of the market are usually mentioned in
the introductions.
Examples: 10th October Mumbai Cotton Exchange, 27th February Alleppey
Market.
3. Opener: The writer should mention his general finding about the characteristics
of market trend. . Examples:
“The Mumbai Stock Exchange presented slightly better understand on Monday.
Some buying was in evidence in several scrips at lower levels.. The turn over was
moderate”.
“Prices of coconut oil and copra suffered a steep fall in Alleppey market last
week”.
4. Body of the Report: The body of the report should contain transactions made
during the week or day as. the case my be. The following are the examples.
“Gujarat Fertilizer witnessed wide price fluctuations. The scrip went to Rs.570
from Rs.565 and met with a flurry of selling orders to drop to Rs.552. The closing rate was
Rs.558”.
299
“Century fluctuated both ways between Rs.897.05 and Rs.907.50 before closing at
Rs.900. Bombay Dyeing varied to Rs.72 from the days opening of Rs.66.50”.
“Coconut oil opened Rs.15 lower at Rs.3,225 a quintal and slumped to close at
Rs.3,050. About 8,200 quintals were reported transacted for spot delivery. On Monday this
oil went down further by Rs.100 to Rs.2,950”.
5. Closer: The concluding remarks about the present trend and predictions about
the future are generally specified. Example “The market is still firm and shall move
forward”.
SPECIMEN MARKET REPORT
1. Weekly Report about the Madras Edible Oil Market
A sharp drop in groundnut oil and coconut oil featured trading on the oilseeds and
oils exchange last week. Gingelly oil too yielded modest ground.
Groundnut oil lost Rs.40 at Rs. 1,440 a quintal and 171 quintals were traded last
week. Gingelly oil ordinary and agmark varieties went up by Rs.20 each initially before
closing Rs.30 to close at Rs. 1,600 and Rs.1,750 a quintals. Thus there was a net loss of
Rs.10 each in this oil.
Coconut oil declined sharply to Rs. 512 at mid week from the opening rate of
Rs.612/- but recovered partially to end the week at Rs.586 for a tin of 16.5 Kg.
Arrivals of groundnut kernels from the upcountry centers of Tamil Nadu averaged
110 tons daily and price of new crop was put at Rs.470-490 for a bag of 80 Kg and that of
old crop al Rs.520-530. The oil content of the fresh crop is expected to be 28-30 Kg for a
bag of 80 Kg of kernels. The summer crop arrivals will gather volume from the middle of
March.
Butter and gee were quoted at Rs.100 and Rs.200 per Kg.
2. Daily Report about the Madras Stock Exchange
MIXED TREND IN MADRAS
300
A mixed trend was in evidence on the Madras Stock Exchange. Plantations and
cements that remained firm despite some profit-taking at higher levels. The turnover
remained large. The sharp rise in Tube Investment to Rs.24.25 from Rs.22 on keen
institutional buying was a feature.
ABC further hardened by Rs.3.47; Madras Cements met with profit taking and
dropped to Rs.25.75; Mettur Chemicals lost 50 paise at Rs.23.50; Oriental Hotels were in
demand 75 paise at Rs.23.25; Gwalior Rayon declined to Rs.4, from Rs.5 1.75; Lower
upcountry advises, Kothari Industrial rose further to Rs.27.20 from Rs.26.75.
SI Viscose gained a rupee to RsJ49 while Lakshmi Mills lost a rupee to Rs8 I.
Madura Coats shaded to Rs.28.75 from Rs29 Tea Estates and CWS India were in keen
demand at Rs.37SO and Rs.37.75
Amurtanjan went up to Rs50 from Rs.48, FACT were a shade lower at Rs.5, Loyal
Textiles lost is.2 at Rs.165 Renowned Auto noted industrial l buying at Rs,27 against
Rs.26.5O.
Consolidated Coffee rose to Rs.35 from Rs.34, Neelamali remained firm at Rs.
11.75 though Peria Karamalai eased slightly to Rs.8 40.
Notes
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