Managing and Running a Small Business

This report explores the various aspects of managing and running a small business, including financial resources, funding options, risk management, customer relationship management, and financial statement interpretation. It also covers topics like cash flow forecast, break even analysis, and key legislation and regulations impacting small and social businesses.

UNIT 29
MANAGING AND
RUNNING A SMALL
BUSINESS

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1 &TASK 2...........................................................................................................................1
COVERED IN BROCHURE......................................................................................................1
TASK 3............................................................................................................................................1
P4 Produce annual itemised monthly cash flow forecast with fixed and variable cost set
against income for specific organisation.....................................................................................1
P5 Explain break even analysis could applied to organisational situation..................................3
P6 Interpret key statement for organisation in relation to their contribution to successful
management of organisation.......................................................................................................4
TASK 4 ...........................................................................................................................................8
P7 Discuss key legislation and regulations and impact on small and social businesses.............8
CONCLUSION ...............................................................................................................................8
REFERENCES..............................................................................................................................10

INTRODUCTION
Managing and running a small venture includes the varieties of determinants by which a
person can work independently to generate maximum market share and revenues. Small business
enterprise is one of the privately owned venture, in which capital is supplied by a single person
or a group of person due to this they generate less profits as compare to the large or medium size
firm. To manage the small enterprise this report can examine properly financial resources and
capitals so that firm can invest in essential project for gaining higher profits and beating the
competition into the marketplace. This project report is based on the independent consulting firm
that is operated on Oldham that helps the local community by properly focus on the small and
social enterprise. This study involves the way of start up an business firm, types of secure
funding and ways of minimise risk that will impact the success of the organisation. It involves
the information that includes capacity management by examine resources and the objectives of
the business. Further it involves the customer relationship management process with their
advantage and disadvantage so that risk can be removed and profits can be enhanced. It also
explains the term transitional operation that analyse both drawback and benefits. Further this
project study the analysation of cash flow forecast, break even analysis and budget that helps in
interpreting the financial statement so that profits can be gained on higher terms and clients
easily understand the financial management of social and small business ventures(Spence, 2016).
TASK 1 &TASK 2
COVERED IN BROCHURE
TASK 3
P4 Produce annual itemised monthly cash flow forecast with fixed and variable cost set against
income for specific organisation
Cash flow forecast refers to that document that is helpful for estimating the amount of
financial resources that includes cash inflow and outflow of the business. It is adopted by the
consulting firm for analysing the overall income of the firm. This represents as a useful tool in
which business can control their extra expenses. It includes various sources of cash flow that can
be shown below.
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 Equity finance- It refers to that activity in which organisation get funds from their
investors. In this investors can sign the deal and decide the amount of sharing profit and
loss of the landed money. In this consultancy firm is the small enterprise in Oldham so
this is not an effective option to them as they lend money from their family and
friends(Lombardi, Makhni and Lombardi, 2019).
 Bank loan- It is most common way of borrowing money that is adopted by the
consultancy firm and many other business who want to expand and explore their business
enterprise. It is helpful for the company in arranging the funds so that they perform their
function smoothly. In this firm will pay the principle amount of interest to the bank on
their borrowed money.
 Budgeting, planning and controlling- This factor can helps the manager of consultancy
firm in taking the decisions regarding financial resources. It helps the organisation in
providing long term and short term benefits related to plans to the firm(Soundararajan,
Spence and Rees, 2018).
◦ Time series data- This is an effective tool for the manager of consultancy firm
because it helps in determines the production schedules that is beneficial for the
employees in completing their task on time frame and in the set price.
Balance sheet
Year 2017 (value in £) 2018 (value in £)
Fixed assets 150 200
Stock 25 30
Debtors 60 45
Bank 15 25
Total 250 300
Creditors 150 200
Bank overdraft 100 100
Total 250 300
Profit and loss account
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2017 2018
Sales 15 25
Cost of sales 20 15
Gross profit 35 40
Overheads 5 5
Net. profit 30 35
Cash flow statement
Cash
distributed Jan Feb March April May June July
Augu
st
Septemb
er Oct. Nov. Dec
Cash
distributed
Variable cost
Direct
material 1500 1250 1250 1300 1450 1580 1650 1458 1589 1685 1985 1785 1500
Direct labour 1250 750 500 500 1350 1400 1435 1445 1474 1458 1568 1589 1250
Overhead 1000 500 500 700 2700 2850 2950 2987 2250 1850 1650 1250 1000
Fixed cost
Selling
and
distributi
on
750 750 750 800 850
950 850 650 720 715 785 795
750
Total cost
use 4500 3250 3000 3300 6350 6780 6885 6540 6033 5708 5988 5419 4500
Cash
surplus/
deficit
2800
0 26250 24250 21950 18020
13190 8355 3915 32 -3426 -7114 -10580
28000
P5 Explain break even analysis could applied to organisational situation
Break even point refers to that effective tool which is relate to the profit, expenses and
cost of the organisation at several level of output. It reflects those level of production that shows
cost of production is equal to revenues for product. This term is highly beneficial to examine the
profits of consultancy firm by examine the proper sales in specified period of time. It is useful
for the manager in understanding the revenues at all stages. This method is followed under two
condition(Löfqvist, 2017). This break even analysis can known for cost volume analysis. In this
analysis algebraic equation is represented. In this manager of the consultancy firm can design the
algebraic equation that can be shown below.
Break even analysis is calculates as under:
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TFC= Total Fixed cost
P= Price
AVC= Average variable cost
Break even point= TFC/ (P- AVC)
Therefore, it could be effectively understood by a below example:
AVC= 8
TFC= 50000
P= 20
Hence, in this situation break even point = 50000/ (20-8)
= 2777.78
P6 Interpret key statement for organisation in relation to their contribution to successful
management of organisation
Balance sheet 2017
All numbers in thousands
Period ending 8778500
Current assets 725400
Cash and cash equivalents 7100
Net receivables 531300
Other current assets 43069
Total current assets 4188300
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Property plant and equipment 34200
Goodwill 155800
Intangible assets 133800
Other assets 1015000
Deferred long-term asset charges
Total assets 14554400
Current liabilities
Accounts payable 869800
Short/current long-term debt 790800
Other current liabilities 576000
Total current liabilities 539300
Long-term debt 3617300
Other liabilities 1906100
Deferred long-term liability
charges 137700
Total liabilities 6530900
Stockholders' equity
Misc. Stock options warrants 8004400
Common stock 7612100
Retained earnings 4700
Treasury stock 2217600
Capital surplus 19100
Other stockholder equity -85000
Total stockholder equity -1745000
Net tangible assets -4962400
Interpretation
From the above study balance sheet it is concluded that average level of profitability is enjoyed
by organisation. The total profit of firm is 16.06% and operating profit is 17.89%. In this
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rate of return is valued at 2.87% that termed as moderate rate of return. It is examined from
the above balance sheet that organisation liquidity is more(Rowe, 2020).
Profitability ratios:
 Gross profit ratio- This ratio is calculates with the net profit of organisation. As
consultancy firm has gained the gross profit of 44.98 million. By using this formula gross
profit can calculated in effective manner(Hopkinson and et. al., 2018).
◦ Gross profit ratio= (gross profit /sales)* 100
 Net profit ratio- This term can be calculates with total net profit and total sales. It is
calculates from minus all indirect expenses and adding all indirect income in the gross
profit.
◦ Net profit ratio= ( Net profit / sales)* 100
 Operating margin ratio- It is to be calculates with EBIT and the total sales.
◦ Operating margin ratio= (EBIT/ Sales)*100
Liquidity ratio:
 Current ratio- It refers to that tool that is useful for calculating the liquidity. It involves
the current assets and current liabilities. In this current assets are those that easily
convertible into cash within one year and current liabilities are those which are paid off in
a period of a year(Sotiriadis, 2018).
 Quick ratio- This term is used to determine the liquidity of the business as same as the
current ratio with the only difference is that it not included the stock of the organisation.
Cash flow statement
Particular Amount
All numbers in thousands
Period ending 30/11/17
Net income 416900
Operating activities, cash flow
provided by or used in
Depreciation 492500
Adjustments to net income 168300
Changes in accounts receivable -27500
Changes in liabilities -54100
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Changes in inventory -
Changes in other operating
activities -34600
Total cash flow from
operating activities 961500
Investment activities, cash flow
provided by or used in
Capital expenditure -260200
Investments 14500
Other cash flow from
investment activities -400600
Total cash flow from
investment activities -646300
Financing activities, cash flow
provided by or used in
Dividends paid -
Sale purchase of stock -1035700
Net borrowings 813300
Other cash flow from financing
activities -92500
Total cash flow from
financing activities -329300
Effect of exchange rate
changes 9000
Change in cash and cash
equivalents -5100
Period Ending 9/30/2017 9/30/2016 9/30/2015
Net Income -2,372 1,173 -4,662
Operating
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Activities, Cash
Flows Provided
By or Used In
Depreciation 5,151 2,082 733
Adjustments To Net Income -3,589 -832 3,069
Changes In Accounts Receivables -2,393 -100 223
Changes In Liabilities 2,806 -514 -870
Changes In Inventories - - -
Changes In Other Operating Activities 619 -1,086 857
Total Cash Flow From Operating Activities 222 723 -650
Investing
Activities, Cash
Flows Provided
By or Used In
Capital Expenditures -250 -120 -186
Investments - - -
Other Cash flows from Investing Activities -25,356 -9,395 -2,576
Total Cash Flows From Investing Activities -25,606 -9,515 -2,762
Financing
Activities, Cash
Flows Provided
By or Used In
Dividends Paid - - -
Sale Purchase of Stock 1,000 1,000 9,774
Net Borrowings 24,641 5,388 -598
Other Cash Flows from Financing Activities - - -
Total Cash Flows From Financing
Activities 25,641 5,388 9,176
Effect Of Exchange Rate Changes - - -
Change In Cash and Cash Equivalents 257 -3,404 5764
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Interpretation- From the above cash flow statement it is determine that 961500 is
generate from the sales by the consulting firm. This also reflects the negative results related to
the investment and finance around -329300 and -646300.
TASK 4
P7 Discuss key legislation and regulations and impact on small and social businesses
The functions of small and medium sector organisation that involves the key legislation
and regulation can impact majorly on the economy of the business. That legislation and
regulation that was imposed by government of country can be shown below(Tarhini, Yunis and
El-Kassar, 2018).
 Consumer law 2015- This law is helpful for protecting the business unfair trade
practices and this regulation is mainly follow by all the organisation to retain the
customer for the longer period of time. It involves the goods and services act so that
quality goods and services can be delivered to the customers and all the organisation must
follow this rule(Lukamba, 2016).
 Competition law, 1998- As per this law organisation can deal with same product and
service and price related to rival firms. This code of conduct is removing the unnecessary
practices that is added by the company for gaining additional profits. It referred to as a
mandatory law which is imposed by UK government for the businesses that was operate
their business in that nation.
 Employment law, 1996- It refers to that that is develops for the right of employees
regarding safety, discrimination and indifference. It is significant term for the
independent consulting firm to provide the equal and fair rights to the employees so that
company will gain higher profits and revenues by retaining the employee for a longer
period of time(Nardelli and Broumels, 2018).
CONCLUSION
From the above report analysis it is to be concluded that managing and running a small
business is an essential term for the country economy and the local community because it helps
in enhancing the standard of living and also gives the purpose to the local people to live their
life. This report inculcates the various resources of small and social enterprise on the basis of
which objectives are decided for achieving that task on time. Further, in this various process of
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customer relationship management helps in fulfilling the society demand by reflecting the
various services towards the welfare of society and community. As small and social enterprise
may develop transnationally and it also inculcates the pros and cons so that opportunities can be
captured easily and challenges can be fulfilled for company benefits. It involves the annual cash
flow forecast that involves the fixed and variable cost for setting the income for further
completing objectives. At last it includes the key legislation and regulation like consumer law,
employment law etc. to maintain the loyal customers and employees so that company will
sustain for a longer period of time by gaining high revenues.
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REFERENCES
Books and Journals
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business: Dynamic impacts on local credit and labor markets (No. w23843). National
Bureau of Economic Research.
Hopkinson, P. and et. al., 2018. Managing a complex global circular economy business model:
opportunities and challenges. California Management Review. 60(3). pp.71-94.
Löfqvist, L., 2017. Product innovation in small companies: Managing resource scarcity through
financial bootstrapping. International Journal of Innovation Management. 21(02).
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Lombardi, J.M., Makhni, M.C. and Lombardi, J.S., 2019. Building and Managing a Successful
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Spence, L.J., 2016. Small business social responsibility: Expanding core CSR theory. Business &
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Tarhini, A., Yunis, M. and El-Kassar, A.N., 2018. Innovative sustainable methodology for
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