Report: Managing and Running a Small Business, Financial Analysis

This report delves into the crucial aspects of managing and running a small business, using the Wiser Company as a case study. It begins by examining the essential considerations for resource planning and allocation, including financial, human, and strategic factors such as setting goals and utilizing tools like Gantt charts and Critical Path Analysis. The report then explores customer relationship management (CRM) processes, emphasizing customer portfolio analysis and customer intimacy. It also evaluates the benefits and drawbacks of transnational sales for small businesses. Furthermore, the report provides a detailed example of an annual itemized monthly cash flow forecast, break-even analysis, and the interpretation of key financial statements. Finally, it discusses relevant legislation and regulations impacting small businesses. The report aims to provide entrepreneurs with a comprehensive understanding of key business functions and strategies for success.

MANAGING AND
RUNNING A SMALL
BUSINESS

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1) Main considerations a small business or social enterprise needs when planning and
allocating resources................................................................................................................1
TASK 2............................................................................................................................................3
P2 Explain and evaluate different processes of customer relationship management for a small
business or social enterprise...................................................................................................3
P3) Way of small business can develop transnationally benefits and drawbacks..................4
TASK 3............................................................................................................................................5
P4 Produce an annual itemised monthly cash flow forecast showing fixed and variable costs
set against income for a specific organisation........................................................................5
P5 Explain how break- even analysis could be applied to an organisational situation..........8
P6) Interpretation on key financial statements for an organisation for contribution in
successful management..........................................................................................................9
TASK 4..........................................................................................................................................14
P7 Key legislation and regulations which have major implications on small business
companies.............................................................................................................................14
CONCLUSION..............................................................................................................................15
REFERENCES..............................................................................................................................16

INTRODUCTION
Being a business owner, an entrepreneur needs to develop various intellectual ideas
through which organisation can run in efficient manner. Employers are required to plan activities
of business which include identification of resources, capital utilisation and management, job
specification and more. In addition to this, they should set a proper vision, mission and
objectives of company so that people associated with them can understand and support in
achievement the same. Thus, this assignment focuses more on how entrepreneurs transfer their
idea into business and develop effective relationship with consumers (Durst, Yip and Lee, 2015).
Along with this, it also showcases some business activities like planning and allocating
operational resources, forecasting & budgeting, interpreting key financial statements, recruitment
& selection of employees etc. In this regard, Wiser Company is taken in report. It is a
consultancy company of UK which specialises in giving recruitment to young people. This firm
is led by Fin O'Kane and situated in London.
TASK 1
P1) Main considerations a small business or social enterprise needs when planning and allocating
resources
As in today's modern world, every entrepreneur wants to open outlet in highly populated
area so it requires to develop new and innovative ideas first. It would help them in opening
business and gain attention of customers towards products or services in an efficient manner. In
starting process, such firms are generally established on small scale but by developing innovative
ideas they rapidly expand their business in various locations. In general, main motive of such
companies is to earn higher profitability (El-Rafei and et. al., 2017). This would aid a nation in
improving its economical condition too. Therefore, Government support entrepreneurs in
launching small business by providing them sufficient funds on reasonable rate of interest. In this
regard, Wiser is a small consultancy company in United Kingdom which provide job to young
people. It has provided a calmly environment where creativity meets recruitment for building and
transforming employer brands. Various partners of world's best brands are associated with this
firm such as Worldpay, Just Eat, Expedia, Sky Betting and Gaming etc.
In order to expand business and increase growth of company, entrepreneurs of this firm
are required to develop a proper plan. In this regard for developing such a plan and planning or
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allocating resources, it is required by employers to concern on some major factors through which
functions of business can be carried out in an efficient manner:-
Financial resources: It is the main factor which every company whether small or big
requires to consider first before making a plan. Finance is required in each and every sector of an
organisation as without proper money, functions of business cannot operate in desired manner.
Therefore, a firm like Wiser which is a small consultancy required to arrange efficient funds.
For this process, they can take loan from banks or other financial institutions. In addition to this,
after getting proper fund, employers are needed to allocate the same in various departments in an
appropriate manner. They should keep an eye on every transaction of business so that
expenditures can be controlled and save money for future usage.
Human resource and their skills and qualities: For carrying out functions of business, it
is required by managers of an enterprise to recruit best candidates in workplace. Without skilled
and qualified workers, a company cannot achieve its success in a predetermined time. Therefore,
workers in an industry are considered as most valuable assets. So, it is required by such firms to
provide benefits and compensation to them in an efficient manner. In this regard, management of
Wiser Company use to recruit eligible and fresh candidates in workplace who have possessed
high skilled, abilities as well as capable to understand requirement of other companies and
complete the same on time (Javaid and Iqbal, 2017). Giving chance to inexperienced people aids
this firm in getting their fresh and unique ideas so that innovation in products and services can be
created. In addition to this, this enterprise provides them necessary training at the time of
recruitment so that they become able to work in desired manner.
Goals, vision and targets: Every firm requires to set proper goals and objectives so that
management can evaluate in what manner they have to work to achieve the same. In addition to
this, they should provide proper guidelines and direction to workers so that they can support
enterprise in accomplishment of achievable target within set period of time. In context with
Wiser Group, it mission statement “To achieve profitable and manageable growth of business by
delivering high quality IT services and qualified employees in established companies”. Along
with this, its vision statement, “To be able to deliver high quality solution and meet expectation
of customers as well as to be renowned as having the greatest level of knowledge and
competence in own field”.
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Wiser Group is built on some values also which includes being real, smart and backing
own as well as taking ownership. Therefore, for achieving this target and carry business with
such values, its management uses two essential tools which are help in planning and allocating of
resources also. It includes Critical Path Analysis and Gantt Chart which further help in designing
a proper action plan also. Concept of these tools is explained in following manner:-
Gantt Chart: This technique is used by every business enterprise in order to set time of
different activities included in a particular project. It is type of bar chart which illustrates a
project schedule by giving a time framework of various tasks (Ludmila and Stanislava, 2015).. It
also illustrates the start and finish dates of list of tasks by representing activities on vertical axis
and time interval on horizontal. Thus, this tool is helpful in boiling down multiple activities and
timeline into single project.
Critical Path Analysis: This tool is used by many small and large companies in order to
stay on track and budget of a particular project (Cojoacă, 2017). It helps in measuring the time
taken in completing a project. Thus, through this technique managers can determine which tasks
have taken much time and so that they can manage duration of other activities in a proper
manner. It will help them in completing a project in given period.
TASK 2
P2 Explain and evaluate different processes of customer relationship management for a small
business or social enterprise
Every company seeks to get attention of large number of customers towards its services
and products. For this process they use various techniques in order to serve best services
(Chauma, 2017). This will help them in achieving growth and success of business in an effective
and efficient manner. It includes conducting proper research so that they can determine new
trends of marketplace and demands of consumers. In this regard, employers of a firm like Wiser
Company are required to concern on CRM (Customer Relationship Management) and CSR
(Corporate Social Responsibility). CRM is considered as an important tool or a strategy through
which employers of a firm can interact with customers easily and develop an effective
relationship with them. This tool aids them in making good communication as well as
understanding desires of consumers also in a better manner. In addition to this, such type of
management helps entrepreneurs in getting retention of loyal customers for long-term
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profitability of business. In context with Wiser Company, managers of this firm also use to
conduct business with ethical consideration and CSR activities. CSR activities define a process
of making proper decision by considering ethical needs of employees, their family members as
well as area where they live (Nowotarski and Paslawski, 2015). Providing welfare to workers
helps in improving condition and society too. CRM technique includes various procedures which
can be explained as below:-
Customer portfolio analysis: This type of analysis aids a firm in evaluating behaviour
and standard of consumers. They can identify purchasing power, status and lifestyle of people so
that employers can judge they need to target. Through this, they can manufacture and provide
services as per requirement of targeted audience.
Customer intimacy: This kind of strategy is used by employers to get close to targeted
clients. By getting closed with customers, an enterprise can develop good relations with them as
well as improved their services. This would also help them in getting reviews of people so that
necessary changes can be done in business and complaints of them can be solved in a limited
period of time. It will aid such companies in acquiring retention loyal customers by solving their
problems in an efficient manner.
P3) Way of small business can develop transnationally benefits and drawbacks
Transnational sales is considered as an important techniques used by employers of small
business like Wiser Company to sale products in foreign market place. This would also help
them in evaluating current position of them in a particular market as well as performance of
business too. Therefore, by determining actual position of business as well as sales performance
small business owners can take appropriate measures in increasing productivity. It includes
proper business plan, strong strategies and policies as well as various activities (O’Connor and
Kelly, 2017). As translational sales is used to summarise concept of coordination and
opportunities of international marketplace in a single way so, it would help employers in
determining demands of customers living at different place and belongs to different cultures in a
proper way. For example- Wiser Company has made a contract with Delta Capita to offer
candidates in big industries (dealing in construction sector) in the ratio 55:45. For this process,
managers of both companies has launched a joint venture for a year at Devonshire Square
London, UK. Along with this, both organisations has employed near about 8 to 10 employees
over there. Since both enterprises are dealing in small sector, therefore, to introduce sufficient
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amount of capital in new venture, they have taken loan from Barclays Bank of London on fixed
rate of interest for three years.
But adopting this technique, a firm gets various problems and benefits too which can be
explained as:-
Advantages:
 Translational sales help a firm in taking their business on next level and acquire a good
position at marketplace. In addition to this, it gives various opportunities to managers of
small businesses to take decision in independent manner so that problems can be resolved
in quick manner. Selling goods and services in new marketplace or in other countries aids a firm to
increase sales performances and get a higher profitability in business.
Disadvantages:
 In order to expand business at international level, an entrepreneur is required to concern
on many factors like developing proper strategies, arranging resources as well as prepares
various documents. So, it will consume lot of time as well as a complex procedure for
small business owners.
 In translational sales, enterprises are required to sell goods or services in domestic as well
as foreign marketplace. This would demand them to arrange necessary finance and
resources. So it would directly impact on budget and financial performance of business.
TASK 3
P4 Produce an annual itemised monthly cash flow forecast showing fixed and variable costs set
against income for a specific organisation
Cash Flow Forecast is a kind of plan which reflects how much income a company has
expected to be received in and paid out during an accounting period. Generally, entrepreneurs
used to make a proper plan first which includes how much money is required to carry out
functions of they expect to earn by sales. In addition to this, it also shows money required for
purchasing equipments (Parkin, Fielder and Ashby, 2016). Thus, through cash flow forecast
Wiser Company can estimate finance required in business and make necessary arrangements.
Along with this, its management can keep track of cash flow in business and control over
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expenses. In this regard, some of the major sources available at marketplace from where they can
get required funds are explaining as beneath:-
Equity Finance: This type of financing is a procedure of raising funds by selling shares
in an organisation i.e. to sale of interest of ownership to raise capital. For small enterprises, there
are various ways like financing capital from family or relatives, venture capital, royalty financing
and more.
Bank Loan: It is a traditional and most approachable way of sourcing fund in which
small organisations can get desired capital by taking loans from commercial and private banks on
a fixed rate of interest which they have to pay in given period of time.
Budgeting, planning and forecasting: These are the three major important pillars used in
recognising trends of future. This process also aids a firm in determining long-term plans, mid-
term budgets and short term forecasts. These would help in making sure that financial targets are
covered on time, strategic objectives are achieved and more (Skolud, and et. al., 2016). In this
era, planning refers to align resources and capital with strategy as well as to measure
performance. While through budgeting, entrepreneurs can ensure accountability and execute
strategy. On the other hand, by forecasting they can adjust finance and other aspects so that
future requirements can be met. In this process, managers of Wiser Company has used following
techniques for forecasting, planning and budgeting:-
Measure moving average: This method is used to achieve an overall idea of trends in a
particular data. It is majorly used in forecasting long-term trends of a company.
Time series data or information: It has provided various applications for manufacturing
enterprises to set up and streamline production schedules. This would help in executing a plan at
estimated budget.
Balance Sheet, cash flow statement, profit and loss account of Wiser Company:
Year 2017 (value in £) 2018 (value in £)
Fixed assets 120 220
Stock 30 45
Debtors 80 65
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Bank 30 35
Total 230 340
Creditors 130 150
Services in hospitality,
education, business,
healthcare, state/local, and
GSA.Bank overdraft
80 50
Total 670 905
Working capital 30 80
Profit and Loss Account at the year ended
2017 2018
Sales 40 60
Cost of sales 20 17
Gross profit 20 43
Overheads 8 9
Net. Profit 12 34
Cash flow Statement
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Cash budget for the year
Quarter 1 Quarter 2 Quarter 3 Quarter 4 Year
Beginning cash balance 28000 30250 31550 29650 28750
Budgeted cash receipts 13400 37550 64690 92370 118170
Total cash available 41400 67800 96240 122020 146920
Cash distributed
Direct material 1500 1050 1650 1500 1550
Direct labour 1300 660 850 850 680
Overhead 500 650 630 700 670
Selling and distribution 550 750 740 800 760
Total cost use 3850 3110 3870 3850 3660
Cash surplus/ deficit 37550 64690 92370 118170 143260
P5 Explain how break- even analysis could be applied to an organisational situation.
It is a most beneficial method used by various associations for determining a relationship
among cost, revenue and profits at various level of output (Ali and Babiker, 2017). Through
Break-even analysis entrepreneurs can evaluate on which point of production their revenues
becomes equal to costs. So, iervices in hospitality, education, business, healthcare, state/local,
and GSA.t is also termed as profit contribution analysis. In addition to this, BEP can be applied
under two major conditions in an organisation that are Linear cost & Revenue relationship and
Non-linear & Revenue relationship. Thus, based on both methods a firm can apply this analysis
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by using various methodologies that are Graphical, Algebraic methods, Profit volume ration and
Contribution analysis.
(Source: Break-even Point, 2018)
In context with Wiser Company, its managers has used Algebraic method which helps in
making decision regarding to complex situations. According to this method, break-even quantity
of output can be determined by TFC (Total Fixed Cost), P (Price) and AVC (Variable costs per
unit of outcomes).
Qb = TFC/ (P-AVC)
For example: variable cost is 9 per unit, fixed cost is 40,000 and selling cost is 18, then Break-
even point is measured as:
=40000/(18-9)= 4444.45
P6) Interpretation on key financial statements for an organisation for contribution in successful
management
It is necessary for small enterprises to track financial data in an accurate way which is
crucial for running day-to-day operations. Keeping an eye on every sort of data related to cash
transaction aids a firm in seeking funds from investors so that business can be moved on higher
level. In addition to this, it would also helps in ensuring if products or services are offering on
right price as well as determining cash flow so that taxes can be filed easily. Generally, three
basic statements of finance are important for a company like Wiser. Concept of these statements
can be explained as:-
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Illustration 1: Break-even Point