Managing and Running a Small Business

This report covers the basic considerations and aspects of managing and running a small business. It includes topics such as cash flow forecasting, break-even analysis, interpretation of financial statements, and regulations and legislations. The report provides insights into the importance of resources, customer relationship management, and international expansion for small businesses. It also discusses various laws and regulations that impact small businesses. Find study material and solved assignments on Desklib.

Managing and
Running a Small
Business

Table of Contents
INTRODUCTION...........................................................................................................................1
LO1..................................................................................................................................................1
P1. Covered in Booklet...........................................................................................................1
LO2..................................................................................................................................................1
P2. Covered in Booklet..........................................................................................................1
P3. Covered in Booklet...........................................................................................................1
LO3..................................................................................................................................................1
P4. Cash Flow Forecast .........................................................................................................1
P5. Break even analysis..........................................................................................................2
P6. Interpretation of key financial statements........................................................................4
LO4..................................................................................................................................................9
P7. Regulations and Legislations ..........................................................................................9
CONCLUSION .............................................................................................................................10
REFERENCES .............................................................................................................................11

INTRODUCTION
Small business is determined as an enterprise which is independently operated and owned
enterprise and which has a limited size and generate small revenue which is dependent upon the
nature of a industry (Albadri and Aziz, 2019). In order to run a small business in an appropriate
manner, there are various factors which must be considered. This report covers basic
considerations and aspects which must be considered by a small scale business to achieve
business objectives and allocate resources. It also includes various processes of customer
relationship management and its evaluation upon a small enterprise. It also includes the way in
which small business can expand its business transnationally and its merits and demerits.
Further, it includes cash flow forecast that show variable and fixed costs which is set against the
income of a particular enterprise. This report also includes application of break even analysis and
important financial statements upon financial situation. Various important legislation and laws
which can have impact upon a small business is also elaborated in this report.
LO1
P1. Covered in Booklet
LO2
P2. Covered in Booklet
P3. Covered in Booklet
LO3
P4. Cash Flow Forecast
A cash flow forecast is determined as a document which helps a business enterprise in
estimating certain amount of money which will move out and move in your business. It also
consists of certain expenses and incomes (Kunaka and Moos, 2019). Here, an annual itemised
monthly cash flow is is developed for a small scale business which helps in showing variable and
fixed costs which is setted against income for a particular enterprise.
Particulars Jan Feb Mar Apr May June July
Augu
st
Septe
mber
Octo
ber
Nove
mber
Dece
mber
Cash inflows
1

Opening
balance 5000 5500 8770 13312 14179 19324 21248 26905 33197 39427 46398 53012
Cash sales 4000 4080 4162 4245 4330 4416 4505 4595 4687 4780 4876 4973
Credit sales 2000 2040 2081 2122 2165 2208 2252 2297 2343 2390 2438 2487
Total inflows (
a ) 11000 11620 15012 19679 20674 25948 28005 33797 40227 46598 53712 60472
Cash outflows
Fixed: Rent
and electricity 3000 2500 1500 2000 1200 3500 800 200 300 100 600 300
Variable :
Direct material 2500 350 200 3500 150 1200 300 400 500 100 100 400
Total outflows
( b ) 5500 2850 1700 5500 1350 4700 1100 600 800 200 700 700
closing
balance
( Total A- B ) 5500 8770 13312 14179 19324 21248 26905 33197 39427 46398 53012 59772
Interpretation- It has been interpreted from the above cash flow statement that total inflows is
more than the total outflows, which depicts that cash which is coming into an organisation is
more than cash going out of an organisation.
P5. Break even analysis
Break-even analysis is determined as a business tool which is used by organisations for
determining the profitability level. It helps the companies in covering costs in order to make a
profit. It is the point which helps in indicating profit in which a business entity bears no profit
and no losses (Lombardi, Makhni and Lombardi, 2019). It takes place when all the profits of a
business covers all expenses which are occurred in an enterprise. When a manager ascertains
break even point than it helps that manager of a small scale business in identifying the total
number of units which were sold.
Break-Even point is determined by manager of a small scale business in taking various
kind of important decisions and in increasing effectiveness of financial performance of an
2

organisation. There are various efforts which are taken by an enterprise for the purpose of
increasing product sale so that a small scale business will be able in generating maximum profits
and in sustaining in a market for a long period of time (Takeaki, 2019). Manager can analyse and
collect certain financial information with the help of various resources for forecasting the sales
demand.
This will help in providing support to manager of small scale firm during formulation of
various budgets. Different efforts are done by an organisation for crossing break even point as it
will help in generating and evaluating various profits and also in ensuring long term duration and
existence of a company in market. This will help in allocation all the resources in that manner
which helps in utilising these resources at an optimum level. Another advantage which can be
seen is that it also helps in waste reduction and in bringing efficiency in certain activities related
to commercial (Psychogios and Prouska, 2019).
A formula exists can be used in this context by a small scale business for the purpose of
determining break even point. If the amount of fixed cost in an organisation is 30000, and a
variable cost is 10 per unit and the selling price is 15 than in such as situation, BEP can be
calculated by applying following formula stated below-
BEP= Fixed cost/ construction margin per product or unit
30000/(15-10)= 150000
3

P6. Interpretation of key financial statements
There are certain key financial statements for a small scale business in relation to the
manner in which they contribute to organisation's successful management. These financial
statements helps a business in analysing its financial position and in understanding contribution
of a business for a long run. Small scale business can utilise cash flow statement, Profit and loss
account and balance sheet (Runyan and Covin, 2019).
Profit and loss account- An income statement, also termed as profit and loss account is
determined as financial statement of an organisation which helps the company in showing its
4

expenses and revenue during a specific period of time. It helps in indicating the way in which
revenues transformed into net profit or net income. This account helps in analysing if the
business is achieving profits or losses.
5

From the above table, it has been interpreted that the balance sheet of the company is
453642 which is the firm's total amount.
6

Profit after tax
7

From the above table it has been interpreted that company's profit is 146147, 199292 amd
216977 in the year of 2015, 2016 and 2017 respectively. The net cash flow in the year 2015 was
199809 in year 2016 and it was 306878 in the year 2017. It indicates that company profit was
high in 2017.
Investing activities
From the above table, it has been interpreted that all the investing activities which was
formulated by small business organisation that the investment decisions of this company were
not good and it is suffering from losses continuously.
Financing activities
8

Balance Sheet- Balance sheet is determined as a statement of liabilities, capital and assets if a
business or other organisation at a specific period of time, which shows the detailed balanced
expenditure and income over a preceding period. It helps in knowing the financial position of an
organisation (Shastri, Shastri and Pareek, 2019). Small scale business must balance sheet in order
to analyse company's financial condition and position.
LO4
P7. Regulations and Legislations
In order to run a small scale business in an effective manner, it is important for it to
follows many laws and regulations which the government applied upon it. There are various
legislations, laws and regulations which can impact a small business enterprise which are
elaborated as follows-
Data Protection Act, 2018- The data protection act is a UK Act of Parliament that
updates various laws related to protecting certain laws related to protecting data in UK. It is
formulated by European Union and it is the updated version of Data Protection Act of, 1998. It
aims at protecting personal data of customers and employees on computers or on any kind of
organised file. Small businesses must protect the the data of its customers and employees to
achieve their trust.
Equality Act, 2010- This act aims in defining and bringing up diversity, equality and
certain human rights of employees working in an organisation (Steingold and Steingold, 2019).
As per this act, all the workers working in an organisation must be treated equally as per their
gender, caste, creed, nationality, and so on. Small scale businesses must treat its workers equally
and provide them equal job opportunities.
Health and Safety Act- The another important act which must be considered by small
scale business is health and safety act. This act aims to ensure that workers in an organisation
must be provided with appropriate health and safety facilities such as clean environment, and
many other facilities. Small scale business must ensure to provide high healthy and safe
environment to its workers in order to employee retention (Strekalova, Tokar and Kadeeva,
2019).
9

CONCLUSION
From the above report, it has been concluded that in order to run a small scale business in
an appropriate manner, there are various things which must be considered by an organisation
such as if the firm has adequate resources or not. An enterprise must have adequate financial and
skilled human resources to achieve business goals and objectives. Further, it concludes that there
are various ways by which firm can expand its business at international level such as joint
venture, selling to agents and distributors or selling directly to customers. While expanding
business, it must consider all the drawbacks and work on it such as cultural differences and
language barriers. There are certain laws and regulations which must be considered by a small
scale business such as health and safety act and equality act.
10

REFERENCES
Books and Journals
Albadri, M. and Aziz, A., 2019. The Effect of BMT Management On Performance To Distribute
Productive Financing In Small Business Sectors In Cirebon. AL-AMWAL: JURNAL
EKONOMI DAN PERBANKAN SYARI’AH (2019) Vol. 11(1). pp.1-14.
Attaran, M. and Woods, J., 2019. Cloud computing technology: improving small business
performance using the Internet. Journal of Small Business & Entrepreneurship. 31(6).
pp.495-519.
Dvouletý, O. and Orel, M., 2019. Entrepreneurial Activity and Its Determinants: Findings from
African Developing Countries. In Sustainable Entrepreneurship (pp. 9-24). Springer,
Cham.
Iacobucci, D. and Rosa, P., 2019. Managing Portfolio Entrepreneurship: A Case Study. In The
Family Business Group Phenomenon (pp. 89-110). Palgrave Macmillan, Cham.
Kohler, M. J., 2019. The Tax and Legal Playbook: Game-Changing Solutions To Your Small
Business Questions. Entrepreneur Press.
Kremer, C., Rizzuto, R. and Case, J., 2019. Managing by the Numbers: A Commonsense Guide
to Understanding and Using Your Company's Financials. Hachette UK.
Kunaka, C. and Moos, M. N., 2019. Evaluating mentoring outcomes from the perspective of
entrepreneurs and small business owners. The Southern African Journal of
Entrepreneurship and Small Business Management. 11(1). pp.1-11.
Lombardi, J. M., Makhni, M. C. and Lombardi, J. S., 2019. Building and Managing a Successful
Private Practice. In Orthopedic Practice Management (pp. 73-83). Springer, Cham.
Psychogios, A. and Prouska, R., 2019. Managing People in Small and Medium Enterprises in
Turbulent Contexts. Routledge.
Runyan, R. C. and Covin, J. G., 2019. Small Business Orientation: A Construct
Proposal. Entrepreneurship Theory and Practice. 43(3). pp.529-552.
Shastri, S., Shastri, S. and Pareek, A., 2019. Motivations and challenges of women entrepreneurs:
Experiences of small businesses in Jaipur city of Rajasthan. International Journal of
Sociology and Social Policy. 39(5/6). pp.338-355.
Steingold, F. S. and Steingold, D., 2019. Legal guide for starting & running a small business.
Nolo.
Strekalova, G., Tokar, V. and Kadeeva, Z., 2019, June. The quality of human resourses and the
small business of the Tartarstan republic: Interrelation and interdependance.
In Volgograd State University International Scientific Conference" Competitive,
Sustainable and Safe Development of the Regional Economy"(CSSDRE 2019). Atlantis
Press.
Takeaki, W. A. D. A., 2019. Decline of Business Brings Growth Opportunities. Annals of
Business Administrative Science. 18(1).
Truong, L., 2019. CRITICAL FACTORS BEHIND SUCCESS AND FAILURE OF SMALL
BUSINESS: A Study in Food Truck Industry in Finland.
Online :
4 Tips for Expanding Your Business Globally. 2019. [Online]. Available Through:
<https://www.entrepreneur.com/article/289496>
11

5 Step Process For CRM. 2019. [Online]. Available Through: <https://bizfluent.com/list-
6531382-five-step-process-crm.html>
Pros and Cons of International Business. 2019. [Online]. Available Through:
<https://www.worldwideerc.org/news/pros-and-cons-of-international-expansion/>
Break-Even Analysis: What, Why and How. 2019. [Online]. Available Through:
<https://www.cleverism.com/break-even-analysis/>
12