Business Performance Analysis and Improvement for ZZA Accountancy

This report provides a comprehensive analysis of ZZA Accountancy, a small-sized business facing challenges in profitability and operational efficiency. The report identifies three key issues: the absence of an online presence, long customer waiting times, and outdated software operations. It then delves into investment appraisal techniques, including payback period, net present value (NPV), performance metrics, and SAFE criteria, to evaluate potential solutions. The analysis includes detailed calculations of payback periods and NPV for three proposed projects: developing an online website, hiring two employees, and upgrading software. Performance metrics and SAFE criteria are used to further assess the viability of each option. The report concludes by recommending a draft plan for improvement, addressing project risks, and suggesting modifications to optimize ZZA Accountancy's business performance. The report highlights the need for continuous improvement and strategic changes to enhance the company's competitiveness.

Improving Business Performance
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Executive Summary
Now a days, each organization places emphasis on framing the operational strategy with the
aim to get the desired outcome or success. By framing the operational strategy business unit is able
to make effective use of the resources to the significant level. For this report ZZA Accountancy is
selected who provides tax refund, self assessment, translation and bankruptcy services to the
customers. ZZA Accountancy is facing 3 problems such as lack of online service, customer waiting
time and software program which may cause of declining the productivity and profitability aspects.
On the basis of investment appraisal techniques it can be summarized that business unit needs to
develop online website which is financially more liable for the project. Further, business unit needs
to undertake continuous improvement and radical change strategy which will help business
enterprise in achieving success in the dynamic business arena.
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Contents
INTRODUCTION ...............................................................................................................................4
TASK 1.................................................................................................................................................4
Introduction of the organization.......................................................................................................4
TASK 2.................................................................................................................................................4
Stating the three changes to the operational problem......................................................................4
TASK 3.................................................................................................................................................5
Literature review on the investment appraisal techniques...............................................................5
TASK 4.................................................................................................................................................6
Calculating and evaluating the 3 options ........................................................................................6
TASK 5 ..............................................................................................................................................10
Literature on Radical change (RC) and Continuous improvement (CI)........................................10
TASK 6...............................................................................................................................................11
Evaluating change and using CI or RC approach .........................................................................11
TASK 7...............................................................................................................................................11
Constructing draft plan .................................................................................................................11
TASK 8...............................................................................................................................................12
Literature on project risk and identifying the risk factors ............................................................12
TASK 9...............................................................................................................................................12
Evaluating the draft project............................................................................................................12
TASK 10.............................................................................................................................................12
Modified draft plan .......................................................................................................................12
............................................................................................................................................................18
............................................................................................................................................................19
appendix ............................................................................................................................................19
References..........................................................................................................................................20
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INTRODUCTION
Business organization makes use of operational strategy which helps them in getting the
desired outcome or success. Operational strategy defines the ways in which company will employ
and make use of the resources for producing the product or services (Understanding operations
management, 2016). In the present era, business enterprise frames operational strategy which helps
them in making optimum use of resources, personnel and work process. Thus, by preparing suitable
operational strategy which supports the corporate aspects business unit is able to make
improvement in their business performance to the large extent. Moreover, this strategy provides
deeper insight about the areas which company need to improve. Thus, by identifying this aspect
corporation is able to achieve success in the strategic business arena. For this project report report,
ZZA Accountancy is selected as an organization.
TASK 1
Introduction of the organization
ZZA Accountancy is the small sized business organization which established in 2009. It is
self employed firm who serve approximately 200 customers. This accountancy firm offers wide
range of services to the customers who include self assessment, tax refund, divorces, benefits,
translation and bankruptcy etc. The profitability aspect of the company is constant because gross
margin of the accountancy firm is not increasing with the very high pace. Besides this, the process
which is followed by ZZA Accountancy is highly stable.
TASK 2
Stating the three changes to the operational problem
ZZA Accountancy offers variety of services to their customers but still profitability aspect of
the business unit is not very high. It indicates that company needs to make changes in its operation
strategies and other aspects. Thus, by conducting investigation Accountancy firm has identified
there are mainly three problems which might cause of sloe growth in profitability aspect are
enumerated below:
 Online website: From investigation it has been identifying that ZZA Accountancy needs to
develop its online website. Moreover, due to the absence online services customers cannot
contact with the business unit through the means of internet. Besides this, customers are not
able to get information or service through online. This aspect closely affects the convenience
of the customers to the large extent. Now, each person has smart and they make use of
internet. Hence, customers prefer to make use of the services of firm who offers high level
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of convenience to them (Ramani, 2016). In order to overcome this problem company needs
to develop effective and attractive website. Through this, Accountancy firm is able to make
interaction with the large number of customers. It also offers opportunity to the business unit
to serve the large number of customers. Thus, this strategy will provide assistance to the
firm in enhancing their productivity and profitability.
 Company is required to hire 2 employees: The problem which is facing by the accountancy
firm is the more waiting time of the staff. In the present time, customers do not want to wait
for the long time. High waiting time is one the main factors which closely affect his
satisfaction level of customers and hereby negatively hamper the gross margin of the firm.
ZZA accountancy is facing this problem because they have very short staff as only one
people who offers the services to the customers. Hence, business unit needs to employ two
employees which enable them to quick or faster services to the customers. It also enables
firm to serve more customers at one time. Hence, by offering the faster services small sized
business unit is able evolve satisfaction among the customers which may turn into loyalty in
the near future. Further, when company serves more customers then it may also result into
high profitability.
 Software operations: ZZA Accountancy also needs to employ latest software which helps
them in resolving the problems or issue within the suitable time frame. Moreover, when
business unit takes longer time to resolve the issues then it closely influence the satisfaction
of the customers. Word of mouth publicity of the firm is also affected when company makes
fails to offer suitable solution within the suitable timer frame. Thus, by offering the solution
more quickly Accountancy firm is able to attract the large number of customers. It enables
firm to maximize their sales and profitability aspects.
According to the Hayes & Wheelwright model ZZA accountancy lies in the maturity phase.
Moreover, in this company needs to make changes in their operational strategy which helps them in
attaining competitive edge over others. Through this, business unit is able to convert maturity phase
into the rapid growth.
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(Source:Kerzner, 2013)
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TASK 3
Literature review on the investment appraisal techniques
Business organization can evaluate the viability or suitability of change by employing
different investment appraisal methods are as under:
Investment appraisal methods
 Pay back period: According to the view points of Hoerl and Snee (2012) payback period
method of capital budgeting provides deeper insight about the time frame within which
business unit is get back the initial investment. Easy to calculate is one the main attributes of
this method which encourage manager to make use of this method. Besides this, it helps
company in identifying the time after which they are able to make profit. However, it is to
be critically evaluated by Molnau (2014) that it only entails the time period within which
company is able get initial investment. Nevertheless, it does not provide information about
the cash flow which is generated by the firm during the suitable time frame. Besides this, it
does not undertake time value of money concept which also limits the significance of this
method.
 Net present value: Ramani (2016) said that net present value method offers highly realistic
outcome because it considers time value of money concept. This method of investment
appraisal serves information about the return which business unit will get after the
predetermined time frame. However, Baum and Crosby (2014) argued that it is highly
difficult for the investment manager to undertake suitable discounting factor for the
computation. If manager fails to employ suitable factor then this method will offer highly
biased results.
 Performance matrix: As per the view points of Upton, J. and et.al., performance matrix helps
organization in evaluating the performance and activities of project. This metrics helps in
supporting the needs of the wide range of stakeholders from customers, investors or
shareholders to employees. Safety, time, cost, resources, scope, actions and quality are the
seven parameters which assists in evaluating the project to the significant level. This
statement has been contradicted by Stevanović and Pucar (2012) that these parameters
which are undertaken by the experts have less value or importance as compared to the
mathematical tools or techniques.
 SAFE criteria: In accordance with the view points of Dyson and Berry (2014) Safe criteria is
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usually employed by the firm with the aim to evaluate the feasibility, suitability and
acceptability of the project. By taking into account this criteria business unit is able to
assess the risks which are associated with the particular project. Besides this, it also provides
information about the performance of particular project or option.
TASK 4
Calculating and evaluating the 3 options
Investment appraisal techniques are adopted by the business unit for assessing the viability
or profitability of project. Payback, net present value as well as ARR is the most effectual tool
which helps manager in making most suitable and effective decision making. Net present value
undertakes time value of money concept. Thus, if assists ZZA accountant in making most viable
decision.
Computation of payback period and net present value of the three projects are as follows:
Project 1:
Years Project A
Cumulati
ve cash
inflow PV factor @10% Present value
0 (Initial investment) -4000 0.909
1 3000 -1000 0.826 2478
2 5000 4000 0.751 3755
3 6500 10500 0.683 4440
Total discounted cash
inflow 10673
NPV (Total discounted cash
inflow – initial investment) 6673
Payback period: 1+ 1000 / 5000
= 1+.02
= 1.02 years
Project 2:
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Project
B
Cumul
ative
cash
inflow PV factor @10% Present value
0 (Initial
investment) -12000
1 5000 -7000 0.826 4130
2 5500 -1500 0.751 4131
3 6000 4500 0.683 4098
Total
discounted
cash inflow 12359
NPV (Total
discounted
cash inflow –
initial
investment) 359
Payback period: 2 + 1500 / 6000
= 2+.25
= 2.25 years
Project 3:
Year
Project
C
Cumul
ative
cash
inflow PV factor @10% Present value
0 (Initial
investment) -1000
1 1200 200 0.826 991.2
2 2000 2200 0.751 1502
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Total
discounted
cash inflow 2493.2
NPV (Total
discounted
cash inflow –
initial
investment) 1493.2
Payback period: .83 year
Performance Metrics
Performance
parameters
Project 1 (Online
website)
Project 2 (recruiting 2
employees)
Project 3 (Software
operations)
Safety 7 3 3
Time 8 4 7
Cost 9 7 5
Resources 8 4 4
Scope 8 7 6
Quality 7 5 4
Accuracy 7 4 3
Total 54 34 32
SAFE criteria
Suitability Acceptability Feasibility Rank
Improvement
option 1 (Online
website)
Yes Yes
No Yes
Improvement
option 2
(recruiting 2
employees)
No No No No
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Improvement
option 3 (Software
operations)
No No No No
Summary table
Payback
period
Net present
value
Performance
Metrics
SAFE criteria Rank
Improvement
option 1
1.02 years or 1
year and 2
months
Yes Yes Yes Yes
Improvement
option 2
2.25 years or 2
years and 2
months
No No No No
Improvement
option 3
.83 year or 8
months
No No No No
On the basis of the above mentioned analysis it has been assessed that project or option 1
proves to be more fruitful for the business organization. Option is more viable or feasible according
to the outcomes of investment appraisal tools, performance metrics and SAFE criteria. Thus, ZZA
Accountancy firm needs to develop website which enables them to offer services to the customers
via online. This option or project will make remarkable contribution in the sales and profit margin
of the business organization.
Methods Reason for selection Benefits Drawbacks
Payback period In this, Accountancy
firm is able to recover
the initial investment
within 1 year and 2
months.
It helps in framing the
competent strategic
framework by
providing information
about the time which
business unit is able to
recover their initial
investment.
It does not consider
time value of money
concept which is one of
the main drawbacks of
this method.
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Net present value
(NPV)
NEPV of option A is
higher as compared to
the rest of options
available.
This methods offer
highly suitable results
by taking into account
the time value of
money concept.
This method does not
make any
differentiation between
the proposals which are
available to the
business unit.
Performance Metrics Project will offer high
level of support to the
business enterprises.
It offers different
framework which helps
in evaluating the
project in an effectual
manner.
This metrics only place
emphasis on
performance rather than
other aspects.
SAFE criteria This project is safe
because it has lower
level of risk.
This criteria helps in
assessing the
suitability, acceptability
and feasibility of the
project in an effective
manner.
It makes analysis of
particular option which
limits the significance
of this method.
TASK 5
Literature on Radical change (RC) and Continuous improvement (CI)
Continuous improvement: According to the view point of Kerzner (2013) continuous improvement
is the ongoing process in which business unit continuously makes effort to improve the product or
services which are offered by them. Usually, business organization continuously examines their
process and activities with the aim to identify and eliminate the problems. Through this, company
can easily identify and grab the opportunities which are available at marketplace. In addition to
this, it also helps business enterprise in framing the cost effectual strategies and policies which
make contribution in the attainment of organizational goals and objectives. However, it is to be
critically evaluated by Burke (2013) that for making continuous improvement company has to incur
huge expenses which impose high level of cost in front of it. Thus, it is not an going process,
business organization undertakes it on a periodical basis.
Radical change: As per the view points of Walker (2015) in radical change employees of the
business organization react in different manner towards the changing methods or approaches. In
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