Managing and running a small business

This document discusses the main considerations for managing and running a small business, including planning resources, organizational structure, performance management, employment legislation, and business planning. It also explores different processes of customer relationship management (CRM) for small businesses, such as assessing customer value, acquiring and retaining customers, and effective communication channels. Additionally, it examines how small businesses can develop transnationally, including the benefits and drawbacks of partnerships, exporting, and setting up business units. The document also provides an annual itemized monthly cash flow forecast for a specific organization, showing fixed and variable costs set against income. Finally, it discusses key legislation and regulations that have implications on small businesses or social enterprises.

Managing and running a
small business

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1 Main consideration a small business or social enterprise needs to address......................1
TASK 2 ...........................................................................................................................................3
P2 Different processes of CRM for small business or social enterprise................................3
TASK 3............................................................................................................................................5
P3 How Small business can develop transnationally and determination of benefits and
drawbacks...............................................................................................................................5
P4 Annual itemised monthly cash flow forecast showing fixed and variable costs set against
income for specific organisation............................................................................................6
P5 How break- even analysis could be applied to an organisational situation.......................8
P6 Key financial statements for an enterprise in accordance with their contribution to
successful business management............................................................................................9
TASK 4..........................................................................................................................................14
P7 Key legislation and regulations that have implications on small business or social
enterprise..............................................................................................................................14
CONCLUSION..............................................................................................................................15
REFERENCES..............................................................................................................................16

Index of Tables
Table 1: Cash flow statement...........................................................................................................7
Table 2: Break even analysis...........................................................................................................9
Table 3: Profitability ratio analysis................................................................................................12
Table 4: Liquidity ratio analysis....................................................................................................13

INTRODUCTION
Managing and running a small business is an activity that implies to effective and
efficient operation of a business. This analysis will tend to examine the role of small business in
context of management. Different areas of small business will be covered starting up with the
key definitions of small business (Hatten, 2015). Management concept will be defined in order to
highlight its importance on this study. Present report is based on analysis of Softwire Ltd, a small
business enterprise in IT sector. Company usually provides its software development services to
some large scale business enterprises in UK. In accordance with this, main considerations
thatsmall business or social enterprise needs to address when planning and resource allocation is
discussed. Further, different procedures for Customer Relationship Management (CRM) for
Softwire are also evaluated along with forecast of cash flow showing fixed and variable costs. At
last, key legislation and regulation are also discussed that provide implication on small business
enterprise.
TASK 1
P1 Main consideration a small business or social enterprise needs to address.
Prior to establishment of business, it is essential for every business enterprise to make
effective planning and allocation of resources as it helps in understanding the requirements and
enables the organisation to achieve the business objectives. In present context, there are also
some important aspects have been identified which Softwire Ltd needs to address at the time of
planning and resource allocation. These essential considerations are mentioned as follows: Planning resources: It is the most important aspect which implies that every small
business enterprise needs to determine the resources which are required to accomplish a
specific project and achievement of business objectives (Bridge and O'Neill, 2012).
Planning of activities in organisation involves the utilisation and management,
identification of resources and skills required to create appropriate job specification. In
this context, Softwire also needs to identify the resources such as finance, material and
skilled employees for completion of specific business project. They also need to ensure
that resource must be effectively utilised and managed in order to achieve business
objectives.
1

 Organisation structure: It is considered as a system which determines how the activities
will be directed in order to achieve the aims and objectives of organisation. In Softwire, it
is essential for employers and manager to develop an appropriate and suitable
organisation structure at the time of planning to accomplish business project (Burns,
2016). Effective delegation of responsibilities and authorities will help them in providing
proper direction to business activities and understanding to employees to complete those
activities effectively. In addition to this, organisation also needs to identify the effective
ways to manage their human resources and fulfil the present requirements. For this, they
need to apply proper recruitment and selection procedure for hiring qualified employees
at workplace which provide them support in accomplishment of business objectives. Performance management: It is also important consideration which implies that
management of Softwire needs to manage the performance of its employees when
planning for new business project. It helps in them in analysing capabilities of their
employees and requirement of skills to complete the project. Training needs to be
provided to employees to enhance their skills and knowledge related software
development. This aids the management in development of teams at work that will work
together effectively. Employment legislation: Key aspects of employment legislations are also need to be
analysed and addressed by organisation at the time of hiring and managing human
resource. For example: All rights and welfare facilities need to be provided to employees
by Softwire.
 Business plan: At the time of planning and resource allocation, it is essential for
employers of Softwire to articulate their business vision, goals and objectives because it
provides them direction to accomplish business activities (Weske, 2012). Further, they
also need to determine the key components of their business plan and needs to apply
effective project management techniques involving Gantt charts and critical path analysis
in order to complete the project on specific time duration and achievement of business
objective effectively.
There are various resources have been used by organization in order t achieve objectives such as:
2

Human resource: Qualified employees are required in organisation which provided them support
in accomplishment of business objectives. Employees will provide support to the organisation in
accomplishment of business objectives at workplace.
Financial resources: These implies to capital which is required for Software to expand and
establish newly developed business operations.
Economic resources: It implies to resources like land labour capital and Entrepreneur which is
required to establish business enterprise. Availability of these resources tends to provide
competencies to organisation to attain growth in market.
Physical resources: Software also requires machinery, computers and other electronic gadgets for
carrying out business operations.
Technological resources: It related to technical resources and Software which are required in
their business to provide services to clients effectively.
TASK 2
P2 Different processes of CRM for small business or social enterprise.
Customer relationship management is analysed as the overall framework used by
organisation for developing and maintaining profitable relations with their target customers
through delivery of superior values and product satisfaction. Assessment of customer value: Employers of Small business enterprise needs to apply
this research method to identify how the organisation is perceived by their clients and
their competitors in industry (Jasra and Khan, 2012). Analysis of customer value is very
important for employers of Software as it allows them to gauge how they are judged by
customers in comparison with their competition. For management of customer
relationship, Software needs to provide quality software and services to their clients at
low rates in order to raise their benefits and reduce expenditure.
 Acquiring and retaining customers: It is also important procedure that involves getting
new customers and retention of previous customers through creation of brand image,
loyalty, partnerships, equity, growing share of consumers, marketing programs and
collective events etc. In this context, employers of Software needs to raise image of
organisation in IT industry through develop new and latest Software as well as cyber
security which are not available at competitors. For retention of previous customers, they
need to improve and provide their services at low cost so that expenditure of clients will
3

decrease and their benefit will increase (Vyeoman and et.al., 2012). This will tend to
create positive perception of organisation between their client business enterprise and
they will never split to another competitor in IT sector. Further, company has also
developed partnerships with their client to secure their business information and provide
cloud computing service to protect data of their large number of customers. In addition to
this, Software can also conduct various marketing programs along with their clients to
promote their business and acquiring new customers market. These marketing programs
will also provide benefits to their clients by increasing promotion in market.
 Effective communication channels: These are considered as latest technologies and
communication channels which are used by organisation in order to remain in touch with
their potential customers and providing them information about new products and service
they have launched in market (Olson and Wu, 2017). For example: Software needs to
use social media, E commerce websites, company and clients websites, digital
advertisement, Emails and telecommunication media for building and management of
customers relationship.
Survival strategy: it is most important strategy that needs to be developed by organization for
creation of business strategy at workplace. In present context, branding and relationship
marketing are two important strategies through organisation will be able to survive its business
operations in market.
Customer’s satisfaction: it is also considered as important part of relationship marketing in
which organisation focus on increasing satisfaction of their customers. It is fact that clients get
satisfaction when they will get quality products and services at low prices. Further, organisation
is high achieved by organisation to raise competition in market.
Customer’s retention: It implies to adopting high level strategy that needs to be used by
organisation for achievement of success. In this I have achieved various important business
perspectives that need to be achieved by organisation.
Telemarketing: Call centres are also established by organisation to communicate with their
customers in order to sustain business operations in market.
The CRM process includes following steps like that of:
Customer portfolio analysis- This will include analysing the base of customers of organisation
so that it become easy to determine their level or group to which they are bellowing to. So for
4

this it is very much required to define target of company based on the customers they want to sell
their products.
Customer intimacy- This is process under which company get familiar with their individual
which is their target as well. For this company need to build up their relationship and predicting
that how well customers are buying or purchasing their products.
Network development- this will refer to as identification of stronger relationship within
organisation which will be very successful in serving their customers.
TASK 3
P3 How Small business can develop transnationally and determination of benefits and
drawbacks.
Transnational sales strategy is considered as international business structure in which
global activities of organisation are coordinates through cooperation and independence between
its head office, operational divisions and internationally located business units or outlets. In this,
transnational business strategy will offer the centralization benefits to small business enterprise
provided by the global strategy along with the local responsiveness characteristics of domestic
strategies. SMEs in UK internationalise their business with an aim to achieve benefit of first
mover, develop potential for growth, acquiring more customers, development of its own small
home market and discourage its competitors (Heidelberg, Olson and Wu, 2017). These will
provide them support in increasing their market presence and brand equity. In present context,
there are various ways through which small business enterprise can internationalize their
business such as: Partnership: It is also important strategy through which business can expand its
operation by collaborating with other organisation in different country operating IT
sector. In this, Software can internationalise their business by making partnership with
other organisation in international market to increase their sales and growth in IT sector.
Benefits- this is very easy to form or incorporate as the registration process is very
convenient.
Drawbacks- while instability which means that any partner could leave at anytime as will
forming to indefinite period of time. The death or insolvency of any partner may be leading
to dissolution of partnership.
5

 Exporting: This functional of international trade refers to transfer of good to client in
another countries where organisation needs to expand business operation (Cowling, Liu
and Ledger 2012). Software must increase its business practices by squiring new
customers in other countries and providing them product and services. This will tend to
create their market share in other country and help in expansion of business.
Benefits- Company can significantly expand your markets, leaving you less dependent on
any single one.
Drawbacks- there is high administration costs may rise as you may have to deal with export
regulations when trading outside the European Union. Setting business unit: Small business enterprise also internationalise their business by
setting new sales outlets in subsidiary nations where they have their presence or another
countries. It is possible when the company has good financial strength and capable to
generate financial resources from market.
Benefits- They are easy to form, and the owners enjoy sole control of the business profits
Drawbacks- the biggest of which being that the owner is personally liable for all business
losses and liabilities
 Joint venture: Softwire can expand its business operations at international level by
making a joint venture with large scale organisation in IT sector which has their global
business organisation. Company will be able to make it relationship with new enterprises
in international market.
Benefits- one of the biggest advantage of joint venture is as this provides the opportunity to
gain new insights and expertise.
Drawbacks- While on other hand the objectives of a joint venture are not 100 percent clear
and rarely communicated clearly too all people involved.
P4 Annual itemised monthly cash flow forecast showing fixed and variable costs set against
income for specific organisation.
Cash flow is considered as flow of cash inside as well as out of the business enterprise.
Cash inflows are analysed as the movement of cash in to the business. The investment which is
made by employers in Softwire is a one off cash inflows whereas the payments by clients are
considered as regular source of cash. Cash outflows are movements of cash out of the business
enterprise. The most important of estimating cash flows are to ensure that prudent view must be
6

taken about the size and time of payments (Romero and Martínez-Román, 2012). In this context
cash inflows are mainly achieved by organisation from cash sales to their clients, payment
received from debtors and the cash from their other financial sources such as bank loans, equity
share payment. Further Cash outflows results from the payments given to overheads such as rent,
wages along with raw materials and other variable costs.
7

Particu
lars /
month
Jan
uar
y
Febr
uary
Ma
rch
Apr
il
Ma
y
Jun
e
Jul
y
Au
gus
t
Septe
mber
Oct
obe
r
Nove
mber
Dece
mber
Sales
revenue
170
00
1751
0
180
35.3
185
76.4
191
33.6
197
07.7
202
98.9
209
07.9
21535
.1
221
81.1
2284
6.6 23532
Cash
inflow
170
00
1751
0
180
35.3
185
76.4
191
33.6
197
07.7
202
98.9
209
07.9
21535
.1
221
81.1
2284
6.6 23532
Fixed
expense
s
Rental
expense
s
100
0 1000
100
0
100
0
100
0
100
0
100
0
100
0 1000
100
0 1000 1000
Salary
of
personn
el
300
0 3000
300
0
300
0
300
0
300
0
300
0
300
0 3000
300
0 3000 3000
Admini
stration
expense
s
170
0 1700
170
0
170
0
170
0
170
0
170
0
170
0 1700
170
0 1700 1700
Variabl
e
expense
s
Materia
l
425
0
4377
.5
450
8.83
464
4.09
478
3.41
492
6.91
507
4.72
522
6.96
5383.
77
554
5.29
5711.
64
5882.
99
overhea
ds
340
0 3502
360
7.06
371
5.27
382
6.73
394
1.53
405
9.78
418
1.57
4307.
02
443
6.23
4569.
32
4706.
4
8

Cash
outflow
765
0
7879
.5
811
5.89
835
9.36
861
0.14
886
8.45
913
4.5
940
8.54
9690.
79
998
1.51
1028
1
10589
.4
Net
cash
inflow
935
0
9630
.5
991
9.42
102
17
105
23.5
108
39.2
111
64.4
114
99.3
11844
.3
121
99.6
1256
5.6
12942
.6
Openin
g cash
balance
220
0
1155
0
211
80.5
310
99.9
413
16.9
518
40.4
626
79.6
738
44
85343
.3
971
87.6
1093
87
12195
3
Closing
cash
balance
115
50
2118
0.5
310
99.9
413
16.9
518
40.4
626
79.6
738
44
853
43.3
97187
.6
109
387
1219
53
13489
5
Table 1: Cash flow statement
(Source:Softwire Technology Ltd, 2017)
As per this, budget it has been analysed that cash flow of company has increasing continuously with monthly growth. Cash
outflow has also increased but at low rate as compared to every month. It is analysed that net cash inflow of Softwire is grown from
3650 in year January to 7109 in July. This clearly states that company is able to expand and operates its business operations in
competitive market. Cash inflow of company in market has been increased which clearly determines that his position in effective.
From the above table, it is clearly analysed that the variable cost are total expenses that changes in proportion with the
production output. Variable will tend to increase or decrease on the basis of production volume of organisation they usually raise as
the production increases. Fixed costs are the cost which is independent from the output (Hutt and Speh, 2012). This will continuous
remain constant through the relevant changes and these are usually considered as the sunk for the relevant range. In present context,
Monthly cash flow forecast of Softwire is determined in this table which stated that the variable cost of products which is 60000,
90000 and 120000. Further, the fixed of Softwire for eacg product is 15000 dollars. There are various cash outflows such as
depreciation and taxes which are deducted from earning before tax to generate net income which is 6000, 10886, 17082,24856,34521
9

and 46447. Thus, it can be said that organisation is profitability is excellent and they are able continues their business operations and
achieve growth in industry.
P5 How break- even analysis could be applied to an organisational situation.
Break even analysis is the most popular business tool that is used by small business enterprise to determine their level of
profitability. It provides organisations with targets to cover the costs and make profits. It is used by managers to disclose the cost
structures and various number of units which are required to be sold by organisation to cover its cost and achieve profitability ( Durst
and Wilhelm, 2012). Through application of break even analysis managers will be able to determine when the business will expected
to cover all its expenses while simultaneously making more profits. Moreover, identification business start up cost will help the
owners of Softwire determine the sale volume required to meet the business expenses on continuous basis. In this context, break even
analysis is also prepared for the Softwire to determine the cost and business situation.
Break even analysis
Product 1 2 3
Price per unit 20 45 13
Variable cost per unit 14 29 7
Contribution margin per unit 6 16 6
X sales mix percentage 29.00% 57.00% 14.00%
1.74 9.12% 0.84%
Sum: Average CM per unit 11.7
10

Fixed costs 10000
BEN Of units to sell 248 487 120
Products Sale in 4957.26 21923.08 1555.56
Sum: Break Even sales 28435.9
Table 2: Break even analysis
(Source: Softwire Technology Ltd, 2017)
From the above table, it is clear that Softwire has determined its prices for three products along with their variable cost which
is incurred on products of those products. It clearly states that if organisation needs at break even position where will not achieve any
profit or loss then their average cost per unit is required to be 11.7 dollar. It also shows that Fixed cost of organization 10000 Dollars
which will never change. When the organisation will arrive at average cost of 11.7 per unit of sale then they will be able to achieve an
break even sales of around 28435.9 dollars. Thus, it can be said that break-even analysis will apply in the situation is neither having
profit nor loss.
P6 Key financial statements for an enterprise in accordance with their contribution to successful business management.
For the successful business management. Managers of small business enterprise needs to analyse the key main financial statements of
enterprise which is used for accurately tracking the financial data which is used for day to day business operations. In this context,
there are three main financial statements that has been important for manager of Softwire to analyse such as :
Balance Sheet: This statement is used by managers to provide overall financial snapshot of Softwire. These balance will determine
the current assets exist in organisation along with the current liabilities that organisation needs to settle from their profits (Sadgrove,
11

2016). From the below balance sheet it could be interpreted that firm is increasing its total liabilities and share holder equity in each
of its year.
Opening Year 1: Year 2: Year 3: Year 4: Year 5:
ASSETS
Current Assets
Cash 150,000 160,000 170,000 180,000 190,000 200,000
Marketable securities 60,000 20,000 40,000 50,000 80,000 70,000
Accounts receivable, net 20,000 23,000 63,000 63,000 40,000 45,000
Inventory 12,000 22,000 23,000 33,000 40,000 56,000
Prepaid expenses 30,000 30,000 25,000 23,000 20,000 40,000
Other 12,000 12,000 12,000 12,000 12,000 12,000
Total Current Assets 284,000 267,000 333,000 361,000 382,000 423,000
Long-Term Assets
Property, plant, and equipment 23,000 23,000 25,000 14,000 25,000 21,000
Less accumulated depreciation 16,000 15,000 15,000 11,000 10,000 14,500
Net property, plant, and equipment 7,000 8,000 10,000 3,000 15,000 6,500
Other long-term assets
Total Long-Term Assets 7,000 8,000 10,000 3,000 15,000 6,500
Total Assets 291,000 275,000 343,000 364,000 397,000 429,500
LIABILITIES AND
SHAREHOLDERS' EQUITY
Current Liabilities
Short-term debt 15,000 15,000 15,000 14,000 14,000 145,000
Current maturities of long-term debt 15,000 15,000 15,000 16,000 14,000 15,000
Accounts payable 11,000 10,000 12,300 19,000 20,000 40,000
Income taxes payable 15,000 15,600 14,000 18,000 17,000 17,500
Accrued liabilities 16,001 15,000 14,000 13,000 15,000 13,000
Other 1,000 1,000 1,000 1,000 1,000 1,000
12

Total Current Liabilities 73,001 71,600 71,300 81,000 81,000 231,500
Long-Term Liabilities
Long-term debt less current maturities 16,000 15,000 23,000 25,300 35,000 30,000
Deferred income taxes 10,000 45,000 30,000 35,000 38,000 25,000
Other long-term liabilities 15,000 15,000 20,000 25,000 28,000 26,000
Total Long-Term Liabilities 41,000 75,000 73,000 85,300 101,000 81,000
Shareholders' Equity
Common stock 23,000 30,000 36,000 39,000 38,000 270,000
Additional paid-in capital 36,000 35,000 30,000 40,000 40,000 45,000
Retained earnings 25,000 45,000 26,000 17,000 28,000 39,000
Other 10,000 10,000 10,000 10,000 10,000 1,000
Total Shareholders' Equity 94,000 120,000 102,000 106,000 116,000 355,000
Total Liabilities and Shareholders'
Equity 208,001 266,600 246,300 272,300 298,000 667,500
Profit and loss statement: These statements are also referred as the income statement that enables Softwire to project the sales and
expenses and typically cover the period of few months to year (Storey 2016). From the below profit and loss statement it could be
identified that there is no stability into profits of firm as they are different in each month.
Period Starting: Month
1
Month 2 Month
3
Month 4 Month
5
Month
6
Month
7
Month
8
Month
9
Month
10
Month
11
Month
12
Totals
Sales
Sales 40000 50000 30000 30000 45000 55000 65000 60000 70000 90000 75000 78000
610,00
0
Other 1,800 1,400 1,100 1,100 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 13,400
13

Total Sales 41,800 51,400 31,100 31,100 46,000 56,000 66,000 61,000 71,000 91,000 76,000 79,000 623,40
0
Less Cost of Goods
Sold
Materials 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 12,000
Labor 3,100 3,210 2,000 4,563 2,563 1,563 1,789 1,456 1,563 1,500 1,300 1,200 25,807
Overhead 2,000 2,000 2,000 2,000 2,500 2,533 1,400 1,450 1,520 1,533 6,300 1,000 26,236
Other 1,400 1,500 1,600 1,700 1,500 1,200 1,300 1,400 1,500 1,522 1,800 1,300 17,722
Total Cost of Goods
Sold 7,500 7,710 6,600 9,263 7,563 6,296 5,489 5,306 5,583 5,555 10,400 4,500 81,765
Gross Profit 34,300 43,690 24,500 21,837 38,437 49,704 60,511 55,694 65,417 85,445 65,600 74,500 541,63
5
Operating Expenses
Salaries and wages 300 200 100 300 100 200 200 245 263 520 532 963 3,923
Employee benefits 500 120 150 150 150 210 130 120 155 161 154 155 2,155
Payroll taxes 100 100 100 100 100 100 100 100 100 100 100 100 1,200
Rent 100 100 100 100 100 100 100 100 100 100 100 100 1,200
Utilities 200 320 230 212 125 450 500 630 230 140 152 153 3,342
Repairs and
maintenance 100 105 105 106 140 150 163 163 145 178 190 200 1,745
Insurance 100 100 123 156 190 200 300 300 400 560 550 960 3,939
Miscellaneous 500 500 600 800 900 100 200 700 800 900 100 400 6,500
Other 200 320 230 212 125 450 500 630 230 140 152 153 3,342
Total Operating
Expenses 2,100 1,865 1,738 2,136 1,930 1,960 2,193 2,988 2,423 2,799 2,030 3,184 27,346
Operating Income 32,200 41,825 22,762 19,701 36,507 47,744 58,318 52,706 62,994 82,646 63,570 71,316 514,28
9
Interest income
(expense) 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,300 2,100 2,300 2,500 2,600
14

Other income
(expense) 1,500 1,400 1,800 6,000 9,000 8,000 4,000 5,000 3,000 1,000 2,000 4,000 46,700
Total Non-operating
Income (Expense) 3,500 3,400 3,800 8,000 11,000 10,000 6,000 7,000 5,300 3,100 4,300 6,500 49,300
Income (Loss) Before
Taxes 35,700 45,225 26,562 27,701 47,507 57,744 64,318 59,706 68,294 85,746 67,870 77,816 563,58
9
Income Taxes 5,000 6,000 6,000 4,000 7,000 8,000 9,000 8,000 5,000 4,000 6,000 4,000 72,000
Net Income (Loss) 30,700 39,225 20,562 23,701 40,507 49,744 55,318 51,706 63,294 81,746 61,870 73,816 491,58
9
Cumulative Net
Income (Loss) 30,700 69,925 90,487 114,188 154,69
5
204,43
9
259,75
7
311,46
3
374,75
7 456,503 518,373 592,189 491,58
9
Cash flow statement: These statements have been used by managers to point out how much money is coming in to the cash inflows
and going out of the cash outflows.
15

Particu
lars /
month
Jan
uar
y
Febr
uary
Ma
rch
Apr
il
Ma
y
Jun
e
Jul
y
Au
gus
t
Septe
mber
Oct
obe
r
Nove
mber
Dece
mber
Sales
revenue
170
00
1751
0
180
35.3
185
76.4
191
33.6
197
07.7
202
98.9
209
07.9
21535
.1
221
81.1
2284
6.6 23532
Cash
inflow
170
00
1751
0
180
35.3
185
76.4
191
33.6
197
07.7
202
98.9
209
07.9
21535
.1
221
81.1
2284
6.6 23532
Fixed
expense
s
Rental
expense
s
100
0 1000
100
0
100
0
100
0
100
0
100
0
100
0 1000
100
0 1000 1000
Salary
of
personn
el
300
0 3000
300
0
300
0
300
0
300
0
300
0
300
0 3000
300
0 3000 3000
Admini
stration
expense
s
170
0 1700
170
0
170
0
170
0
170
0
170
0
170
0 1700
170
0 1700 1700
Variabl
e
expense
s
Materia
l
425
0
4377
.5
450
8.83
464
4.09
478
3.41
492
6.91
507
4.72
522
6.96
5383.
77
554
5.29
5711.
64
5882.
99
overhea
ds
340
0 3502
360
7.06
371
5.27
382
6.73
394
1.53
405
9.78
418
1.57
4307.
02
443
6.23
4569.
32
4706.
4
Cash
outflow
765
0
7879
.5
811
5.89
835
9.36
861
0.14
886
8.45
913
4.5
940
8.54
9690.
79
998
1.51
1028
1
10589
.4
16

Net
cash
inflow
935
0
9630
.5
991
9.42
102
17
105
23.5
108
39.2
111
64.4
114
99.3
11844
.3
121
99.6
1256
5.6
12942
.6
Openin
g cash
balance
220
0
1155
0
211
80.5
310
99.9
413
16.9
518
40.4
626
79.6
738
44
85343
.3
971
87.6
1093
87
12195
3
Closing
cash
balance
115
50
2118
0.5
310
99.9
413
16.9
518
40.4
626
79.6
738
44
853
43.3
97187
.6
109
387
1219
53
13489
5
Thus, these are the key financial statement that needs to be considered by managers of
Softwire in order to analyse the financial position of their business and expectation to achieve
growth in the future.
Ratio analysis of Softwire Ltd for the period of 2015 and 2016 is as follows:
Profitability ratio analysis
Particulars Formula 2015 2016
Gross profit 2654042 2851497
Net profit 1290410 2812335
Turnover 11860347 10851706
GP ratio GP / sales
* 100
2654042/ 11860347*100=
22%
2851497/10851706*100=
26.28%
NP ratio NP / sales
* 100
1290410/11860347*100 =11% 2812335/10851706*100=
25.92%
Table 3: Profitability ratio analysis
(Source: Softwire Technology Ltd, 2017)
Interpretation: From the above ratio analysis, it is clearly identified that company
performance in the market is Excellent in comparison with customers because its profitability
ratio has increased in comparison with last year. As per table, it is identified that gross profit of
company has been increase from 22% in year 2015 to 26.25 % which is considered as gross
profitability.
17

Further, Net profits of company is also increased from 11% in 2015 to 26% in 2016
which is implies that it has high profitability in IT industry as compared to other competition.
However, it can be said that organisation has strong profitability position in market and able to
regulate and expand its business operations.
Liquidity ratio analysis
Particulars Formula 2015 2016
Current assets 4697980 5931739
Current liabilities 2591724 2207497
Current ratio Current assets /
current liabilities
4697980/2591724=
1.81
5931739/2207497=
2.69
Stock 0 0
Prepaid expenses 0 0
Acid ratio Current assets –
(stock + prepaid
expenses) / Current
liabilities
4697980 – (0 + 0) /
2591724 = 1.81
5931739 – (0 + 0) /
2207497 = 2.69
Table 4: Liquidity ratio analysis
(Source: Softwire Technology Ltd, 2017)
Interpretation: As per the above table, it is clear that current ratio of Softwire has been
increased from 1.81 in 2015 to 2.69 in 2016 which is considered as excellent. Liquidity ratio
has been calculated for determining liquidity which is held by organisation in present. Adequate
amount of liquidity has been achieved by Softwire in the form of current assets and its liabilities
in market are decreased. This clearly states that company has strong liquidity position in market
which provides competencies for expansion of business operations.
Further, while calculation of acid ratio, it was analysed that stock and operating expenses
of organisation was not given in the financial statement therefore it is clear that Acid ratio will
be same as the current ratio.
However, it can be said that ratio analysis helps in determining the overall financial
health of the organisation. Liquidity position of business enterprise is quite good and it will be
able to settle its dues within one year.
18

TASK 4
P7 Key legislation and regulations that have implications on small business or social enterprise.
There are various legislations which are made by government to monitor the operations
of small business enterprise in UK. These legislations provide both positive and negative
implication on operation of small business enterprise.
Some of these legislations are mentioned below:
Tax and employment legislation: These are analysed as legislations which are related with the
payments of tax for small business (Burns. 2016). In present context, government of UK is also
providing focus on Increase in growth of small business enterprise. For this, they have decreased
tax rates and provided rebates which has reduced the cost of organisations and increased profits.
Moreover, employment laws states that organisation needs to fair consideration, rights and
welfare facilities to their employees at workplace.
Record keeping laws: As per law, small business enterprise operating in UK needs to keep
proper record of their income, tax and expenses (Goffee and Scase, 2015).
Health and Safety Act: This act clearly implies that organisation needs to focus on safety and
health of employees at workplace. They provide them healthy and secure working environment
to remove all work related problems. Health and safety act implies that organization needs to
focus on promising health work environment to their employees at workplace.
Environment act: This act also provided understand that organisation needs to carry out ethical
business operations and does not provide any harm to environment. It is also required for
organisation to supports the government in sustainable development and adopt effective waste
management to remove all the business restrictions.
Equality act: this act was developed by government to protect right of employee working in
organisations. It clearly provided understanding that organisation needs to provide equal
opportunities to employees in order to participate in various important business perspective that
needs to be achieved for protecting rights of employees.
Data protection: It implies regulation which are made by government to protect the rights of
individuals at workplace. High protection and performance has been accomplished by managers
Small business enterprise needs to protect data of their customers in order to resolve problems.
19

CONCLUSION
In this report, it has been concluded that there are management and regulation of small
business is also crucial task as it requires analysis various consideration that provide influence on
business operations. Financial position of Softwire in market is excellent they are able to operate
their business activities and achieve growth. Cash flow is considered as flow of cash inside as
well as out of the business enterprise. Cash inflows are analysed as the movement of cash in to
the business. The investment which is made by employers in Softwire is a one off cash inflows
whereas the payments by clients are considered as regular source of cash. Break even analysis is
the most popular business tool that is used by small business enterprise to determine their level
of profitability. It provides organisations with targets to cover the costs and make profits.
20

REFERENCES
Books and Journals
Bridge.S. and O'Neill, K., 2012. Understanding enterprise: Entrepreneurship and small business.
Palgrave Macmillan.
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Goffee. R. and Scase, R. 2015. The Real World of the Small Business Owner (Routledge
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Sadgrove. K., 2016. The complete guide to business risk management. Routledge.
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Online
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