Small business enterprises are the firms which are running their business with less funds and work force. It is very important for the managers and directors of such firms to manage all the activities of the organisation appropriately. For those organisations it is very important to follow all accounting principles, rules and regulations so that their financial statements can be formulated accurately (Johnson and Schaltegger, 2016). While running a small business a businessman is required to form appropriate strategies for the purpose of attaining higher profits and increasing sales. Main aim of this report is to analyse importance of managing a small business. The organisation which is chosen for this report is Rowlinson Knitwear which is a small manufacturing company of formal and school wear. Various topics are discussed under this report that are the way in which small business plans and allocation of resources in order to attain objectives and evaluation of small customer relationship management of small firm are included. Analysis of cash flow forecast, budget, breakeven point, interpretation of financial statements, implications of regulations and legations on a small business are also covered in this assignment.
Overview of the company
Rowlinson Knitwear is a manufacturing company of clothes which is based in UK and operating its business successfully. The organisation is currently dealing in school and corporate wear. The company was established in year 1935 by Mr. Wilfred Rowlinson. Currently the business is executed successfully by the directors, managers and employees.
P1 Main considerations that a small business needs to addressed while planning and allocating resources
Resource allocation and its planning is a very complicated process and managers have to pay high attention to allot appropriate resources to various divisions of company. In Rowlinson Knitwear management and other executives have to consider various factors that are required to be plan and mobilise resources within the organisation (O’Connor and Kelly, 2017). All the factors are discussed below:
Staff members and skills:
Employee are concerned with operational and business execution activities hence they are considered as an important asset of the company. Skills of workers help an organisation to attain all the objectives that are required be competitive in the market. The managers of Rowlinson Knitwear needs to consider the employee and their skills while planning and allocating resources and responsibilities in order to develop the organisation.
Vision, mission and strategic objective:
For all the companies and their owners it is very important to communicate with their employees and other staff members regarding organisation's vision, mission and objectives. It will help to gain their trust and result in increased engagement of them in their job responsibilities. Managers of Rowlinson Knitwear are required to consider these elements while allocating resources as it can help to motivate employees to work more productively. When worker perform their jobs with higher involvement than it can help to increase their work quality and result in attainment of organisational goals (Spence, 2016).
Finance is the main resource which is required to execute business activities. If an organisation is not having sufficient funds than it is not possible to perform operational activities appropriately. While planning and allocating funds the management of Rowlinson Knitwear required to analyse that firm is having adequate monetary resources. For this purpose, managers may evaluate final accounts like income statement, balance sheet and cash flow statement. Enough funds may help to execute business in appropriate manner and achieve organisational goals.
M1 Tools and techniques that are used to plan and allocate resources
Management of Rowlinson Knitwear can use following tools to plan and allocate resources to the functional departments of the company:
Critical path analysis:
It is a planning technique which is used to find various alternatives that can be used while allotment of funds. It is very beneficial for the company as it helps to find appropriate path in which a project can be accomplished in a specific period of time.
It is a horizontal bar chart which is prepared by various organisations to schedule all the operational activities with the time in which they are going to be completed. This technique can be used by managers of Rowlinson Knitwear while they allot resources to different divisions of the company as it helps to formulate impressive business cognition.
M2 Importance of planning and allocating resources
For all the businesses it is very important to plan while planning to allot funds to different departments of the company as it can help them to perform all operational activities appropriately. In Rowlinson Knitwear proper allotment of funds results in enhanced skills of employees, increased profitability and productivity. It is essential to allot resources appropriately so that all the departments can perform tasks successfully and contribute in the development of the company.
D1 Analysis of application of appropriate resources
Appropriate allotment of resources helps to achieve organisational objectives because it is very important for all the divisions of a company to have sufficient resources so that they can operate business appropriately. If the operational activities executed properly than it may help to achieve organisations objectives that are mainly related to profit and sales maximisation.
P2 Different processes of customer relationship management for a small business
Customer relationship management:
It can be defined as the procedure which is used by the organisations in order to retain their customers. For all the business entities it is very important to maintain good relations with customers as it is required to increase profitability. In Rowlinson Knitwear appropriate processes are used by the managers in order to manage relations with customers (Customers relationship management processes, 2010). All the processes are as follows:
In this process customer data is analysed for various purposes that includes their taste, preferences, demands and needs. It is mainly used to set appropriate format for marketing campaign so that large number of customers get aware of the products that are sold by Rowlinson Knitwear. Decisions related to pricing of the products, their development and target market are related to this process.
It is a process that help an organisation to take care of all its customers. Various organisational processes like sales, marketing etc. are supported by this process. It guides the managers of Rowlinson Knitwear to improve the customer facing business procedure so that they attract large number of customers. Main purpose of this process is to generate leads form open market and convert them in to business contacts for the purpose of capturing large market share (Skolud and et. al., 2016).
It can be defined as the communication process in which direct interaction with customers is conducted that includes collecting their feedbacks, reporting their issues and queries. For the purpose of iteration emails, websites and voice mails can be used. It is mainly used to improve the delivering process of products.
All the above described processes are followed by Rowlinson Knitwear's managers to manage customer relationship because it can help to retain existing and attract prospect customers.
P3 The way in which small business can develop transnationally
Transnational development of business refers to the process of operatingbusiness beyond the boundaries. It is mainly concerned with the international trade in which businesses supply products all around the world to enhance profitability. While expanding business in different countries it is very important to the organisation to analyse the market conditions and other factors of the nations as it is required to formulate business expansion strategies. Rowlinson Knitwear can develop its business transnationally by offering its products to different countries (Ramadani, Hisrich and Gërguri-Rashiti, 2015). This will result in increased profits and sales of the company as people get attracted towards the organisation due to its quality of clothes. While launching business transnationally managers of Rowlinson Knitwear have to put extra efforts as it may help to grab development opportunities. There are various benefits and drawbacks of introducing business transnationally. All of them are described below:
Foreign trade:When an organisation launch it self transnationally than it will increase foreign trade for that company. This will result in increased profitability and funds for operational activities. If Rowlinson Knitwear supply its products nationwide than it will also increase liquidity that can be used to execute business more effectively.
Independence:Owner and other concerned persons of a business have right to make all the decisions regarding the expansion of business and its development. In Rowlinson Knitwear the managers are free to formulate decisions like expanding business transnationally that may result in enhanced profits (Burns, 2016).
Risk in terms of finance:The major risk that can be faced by Rowlinson Knitwear in future while introducing products transnationally is financial risk because small business does not have sufficient funds to operate business. Small organisations like Rowlinson Knitwear is not able to spend higher amount in promotional activities to aware customers the products that are offered by the organisation.
Long time period:It takes a long time to establish a business in different countries. Rowlinson Knitwear also have to wait for a long period to expand its business in transnationally (Olson and Wu, 2017).
M3 Elements of customer relationship management process
There are various elements that plays important role in customer relationship management process as they help to achieve goals of Rowlinson Knitwear. All the elements are described below:
Understanding market and customers:If a company is willing to attain objectives of a company than it is very important to understand the market and needs of customers so that appropriate products that they are willing to buy can be offered.
Gain trust of customers:Rowlinson Knitwear have to gain trust of its customers by offering good quality clothes to them. This will help to achieve of customer satisfaction.
Retaining customers:Rowlinson Knitwear use specific strategies to retain its customers. That includes providing them discounts and other offers on sales.
M4 Benefits and challenges of Stage model of internationalisation
Stage model: It is also known as process theory of internationalisation that includes integration, acquisition and use of skills and knowledge to launch business in foreign market. This model can be used by Rowlinson Knitwear while introducing itself in international market. It will help to increase profits and liquidity of the company. Following are the benefits and challenges of this model:
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This will help to introduce organisation's product in international market.
It can help to increase profits and sales of the company.
Managers require higher amount to invest in marketing and advertising activities in those countries where products are going to be introduces and it is not possible for small organisation like Rowlinson Knitwear to bear high cost.
Expansion in different countries require high time.
D2 Critical evaluation of customer relationship management process
For all the business entities it is very important to manage customer’s relationship appropriately at all stages. Effective customer relationship will result in higher retention rate of consumers and higher sales. When an organisation is launching its business transnationally than various challenges can be faced by the company. These challenges are lack of financial resources and long time period.
To overcome the challenges the organisation is recommended to formulate budgets so that sufficient funds can be acquired to operate business in different countries. it is also necessary to have adequate resources so that all the activities can be carry out in proper way.
P4 Cash flow forecast that shows fixed and variable costs
Cash flow statement: It can be defined as a statement in which information regarding cash inflows and outflows are mentioned. It is mainly made for a specific time period. It helps stakeholders to analyse that organisation is financially strong or not. While Rowlinson Knitwear is willing to expand its business in different countries than it is very important for the managers to forecast possible future expenses that may take place in future (Nowotarski and Paslawski, 2015). A forecasted cash flow for Rowlinson Knitwear is as follows:
Forecasted Cash flow Statement
Selling and distribution
Total variable expenses
Total cost use
From the above forecasted cash flow it has been analysed that organisation may receive a surplus of 6392 in upcoming period, total variable expenses are 63753 and total fixed cost is 24000. Total estimated revenues of the company are 94145.
P5 Application of Break even analysis
Break Even analysis:
It can be defined as the point where the organisation is not in profits and loss. At this stage all the expenses of the company get recovered with the sales of the products. Formula for calculation break even point is as follows:
BEP = Fixed cost/ selling price per unit – variable cost per unit
Calculation of BEP=
Fixed cost= 12000
Selling price per unit= 10
Variable cost per unit= 4
BEP= 12000/6 = 3000.
The organisation needs to sell 3000 units to recover all its expenses.
As Rowlinson Knitwear is currently operating business in UK successfully. The organisation is a small business firm hence it is very important for the company to analyse the point where it can recover all its expenses with the help of sales. With the help of BEP analysis company can easily recover its total expenses that are incurred during the production process as it can guide to manufacture appropriate units (Chauma, 2017).
Application of BEP:
It is used to determine the actual point where the company can achieve higher profits.
BEP analysis guide the managers to set appropriate prices for the products that are manufactured by the company.
Managers may get the idea of such units that needs to be manufactured to recover all the costs that are related to production process.
From the above image it can be analysed that when revenues and total costs meet than it results in break even point. Fixed costs always remain same for the production and variable costs always fluctuate according to production units (Falkner and Hiebl, 2015).
P6 Interpretation of key financial statements and its contribution in successful management of business
These are the statements that are formulated by the accountants and managers of a company and analysed by internal and external stakeholders in order to determine that organisation is attaining profits or facing losses. Main purpose behind formulation of financial statement is to analyse actual performance of company. Following statements are formulated by the accountants of Rowlinson Knitwear:
Income statement:It is mainly formulated to record all the income and expenses of an organisation so that actual profitability can be analysed. In Rowlinson Knitwear income statements is formulated to determine t all the incomes and expenses of the company that have taken place in a specific time period (MacDonald and Coffield, 2015).
Balance sheet:It is formulated to analyse over all performance of the company. It depicts liquidity, assets, liabilities, equities and other elements that are required by stakeholders to make strategic decision. It helps the external stakeholders like investors to determine that organisation is able to provide them good returns on their amount invested or not.
Cash flow statement:All type of cash related transactions that are related to cash inflows and outflows are recorded in cash flow statement. It helps determine the actual liquidity of the company for a specific period of time. Following are the financialstatements of the company:
Cost of Goods Sold
PROFIT BEFORE TAX
Taxes - 20%
- Acc Depreciation
- Net Value
TOTAL EQUITY + LIABILITIES
Cash flow statement:
From the above statements it ash been analysed that Gross profits of Rowlinson Knitwear are 3500, total sales is 15000 and cost of sales is 11500. net profits of the company according to the income statements are 1240 which means the organisation is earning profits continuously. From the balance sheet of the organisation it has been analysed that organisation is having 3500 cash and total assets of the company are 19400. Organisation is having internal liabilities that include equities are 9240 and total liabilities of the company are 10160. From the cash flow of the company it has been observed that total cash that organisation is having is 3500. According to above analysis it has been identified that organisation is in good situation because it is generating profits continuously (Javaid and Iqbal, 2017).
Following ratios are calculated for the company:
Name of ratio
Current assets/current liabilities
Quick assets/current liabilities
Net profit ratio
Gross profit ratio
From the above calculation it has been analysed that Rowlinson Knitwear is having good profitability and liquidity because the above mentioned ratios shows a good performance and position of the company.
M5 Application of quantitative and analytical techniques
Analytical and quantitative techniques play vital role in the evaluation of cash flow and break even analysis. All such type of techniques are mainly used to improve organisational performance. It also helps the stakeholders to determine actual status of the company in the market. Cash flow provides information of cash inflows and outflows and break even analysis help to analyse actual units that can be manufactured by the organisation to recover expenses.
D3 Evaluation of financial statements
Financial statements like income statement, cash flow and balance sheet are formulated to analyse overall performance of Rowlinson Knitwear. It guides the stakeholders to make strategic decisions about making investment of providing credits to the organisation. Managers also evaluate financial statements to form strategies that can be implemented in order to enhance performance of the company. Financial statements results in successful business management as it guides managers to properly formulate their strategies.
P7 Key legislations and regulations that impact activities of small business organisation
For all the business entities it is very important to follow key legislations and regulations that are imposed by the government of the country. All the legislations that should be followed by Rowlinson Knitwear are as follows:
Health and safety act 1974:
According to this act organisations needs to look out that their manufacturing activities do not harmits employees. Rowlinson Knitwear is also required to follow this act because it is very important to follow it to operate business successfully (Hammer, 2015).
Data protection act:
This act guides organisations to protect their confidential information so that it cannot be misused by others. Rowlinson Knitwear's executives are required to keep their data safe so that employees who may leave organisation in future.
Record keeping act:
In this act companies are directed to keep proper record of organisation's activities so that it can be presented to the legal authorities to assure that organisation is not part of any illegal activity. Rowlinson Knitwear requires to follow this act so that its stakeholders may get exact information of the company.
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All the above described acts are required to be followed by Rowlinson Knitwear as it may help to execute business smoothly with less interference of legal authorities (Goss, 2015).
M6 Implication of key legislations
There are various legislations that are imposed by legal authorities of the countries where different type of companies operate business. All the small and large organisations including Rowlinson Knitwear should follow all the rules to execute operational activities successfully. Main impact of these legislations is that it helps to keep the data safe and have detailed report of all the activities.
D4 Critical evaluation of key legislations and regulations that affect small business firms
Key regulations including data protections, record keeping, health and safety act affect small business entities such as Rowlinson Knitwear positively as well as negatively. Positive impact of the legislation is that it helps to keep detailed information and records and negative impact of them is that for all the small entities it is not possible to follow the rules as they operate business on a small scale.
From the above project report it has been concluded that for all small businesses it is very important to manage operational and execution activities appropriately so that business can achieve success. If the managers are not able to manage the business than it may result in decreased profitability and liquidity. For small business it is very important to manage customer relations so that predetermined goals of the organisations can be achieved. While launching a business in a new location it is very important for the business entity to forecast future expenses and make a budget.
Burns, P., 2016. Entrepreneurship and small business. Palgrave Macmillan Limited.
Chauma, C. N., 2017.The application of project management tools and techniques in ICT SME projects in Western Cape (Doctoral dissertation, Cape Peninsula University of Technology).
Falkner, E. M. and Hiebl, M. R., 2015. Risk management in SMEs: a systematic review of available evidence. The Journal of Risk Finance. 16(2). pp.122-144.
Goss, D., 2015. Small Business and Society (Routledge Revivals). Routledge.
Hammer, M., 2015. What is business process management?. In Handbook on Business Process Management 1. pp. 3-16. Springer, Berlin, Heidelberg.
Javaid, M. I. and Iqbal, M. M. W., 2017. April. A comprehensive people, process and technology (PPT) application model for Information Systems (IS) risk management in small/medium enterprises (SME). In Communication Technologies (ComTech), 2017 International Conference on (pp. 78-90). IEEE.
MacDonald, R. and Coffield, F., 2015. Risky business?: Youth and the enterprise culture. Routledge.
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