Business Entrepreneurs Critical Mistakes -Myassignmenthelp.Com

Question: Discuss About The Business Entrepreneurs Critical Mistakes? Answer: Introducation The cash flow management for the business is the process of analyzing, optimizing and monitoring the total amount of cash receipts reduced by cash payments. The net cash flow is the important measure for measuring the financial health of any business (Bhandari and Iyer 2013). Benefits of the cash flow management It helps in planning for unforeseen events that may be faced by the company in near future. It helps in analyzing the liquidity of the business and monitoring the cash inflows and cash outflows for better future planning. Three components of the cash flow planning Operating cash flow it is cash flow that is generated from the internal operations Investing cash flow it is internally generated from the non-operating activities Financing cash flow it is the cash from and to the external sources like shareholders, investors and lenders (Call, Chen and Tong 2013). Purpose of the cash flow planning Purpose of the cash flow planning is to deliver the information regarding the gross payments and gross receipts of the company for the specific time period. The net changes in the cash flow are equal to the cash and cash equivalent figure reported under the balance sheet of the company (Farshadfar and Monem 2013). Estimation required for preparing the cash flow budget Various estimations required while preparing the cash budgets are Estimated inflows of cash for the time frame Estimated outflows of cash for the time frame Estimation of the companys future cash position Cash flow equation Estimated cash inflows + Estimated sales Estimated cash outflows = Ending cash balance Largest component of cash outflow in retail business Cost of the goods to be sold is the largest cash outflow component in the retail business. The retail companies purchase the stock for the purpose of resale and the cost of these stocks are referred as the cost of goods sold. Therefore, it is the largest component. main financial statements Balance sheet Cash flow statement [Being computer purchased through cheque] Resolving issue regarding supply Look for any other supply who can supply within the time frame or Place bigger order for covering up the shortfall or Resolving the issue through communicating with the supplier Improving the cash flow of the business To improve the cash flow in short term period the company can Reduce credit period that is offered to the buyers Ask the supplier for allowing longer payment period Offer discounts on loans held with the borrower (Lee and Parker 2013) Financial report analysis Analysis of the financial report assists in comparing the financial data over the period of time. It further helps in analysing the following Liquidity of the business that is the monetary worth of the company on specific day Efficiency of the business that is how efficiently is can turns its inventory to revenue Profitability of the business that is ability of the company to face competition. Cash receipts from sale of the services and goods Revenue $ 200,000.00 Cost of goods sold $ 150,000.00 Gross profit $ 50,000.00 Operating expenses $ 100,000.00 Net income $ (50,000.00) Cash flow Month 1 Month 2 Month 3 Opening cash position $ (600.00) $ (50,420.00) $ (48,957.00) Total receipts $ 203,020.00 $ 4,680.00 $ 3,716.00 Total payments $ 252,840.00 $ 3,217.00 $ 5,960.00 Net cash flow $ (49,820.00) $ 1,463.00 $ (2,244.00) Closing cash position $ (50,420.00) $ (48,957.00) $ (51,201.00) Purchasing or redecorating decision Choosing of project Both the proposals seem good for the improvement of the company as both can be used to increase the revenue. If with the new wood fire pizza is sold at ($ 15.00 - $ 4.50) = $ 10.50, then the total income will be (150*12*$ 10.50) = $ 18,900. Therefore the sales revenue will be increased by 9.8%. On the contrary the revenue can be increased by 20% if the establishment is restored. Therefore, the brothers shall choose the option of restoring the establishment (Coates 2014). The shareholders will be convinced as the 2nd option will give them more returns on their investment. Consulting for taking decision regarding redecorating or purchasing the equipment The decision shall be taken after discussing the matter with the people who have wide experience regarding this, for example, the people who have wide knowledge of hospitality. Further, various accounting are required to be prepared before taking the final decision. Necessary records Necessary records required to maintain are the files required for paying taxes and the details of financial working of the business. Other records required to be maintained are company name, working dates on restaurant, invoices, net and gross amount paid and any deductions from gross amount. Importance of budget Budget assists in analysing whether the company will gain benefit in the future or not. It recognizes the business part that can be improved and reveals the amount of money that is projected to exit and enter in the business. It also helps in the following aspects Planning budgets provide the guidelines and roadmap to the management and owners for planning the product prices on the basis of expected manufacturing cost. Further, it helps in keeping the track of resources. Controlling it helps in controlling the expenses of the company. It set the financial objectives towards which the company can work. This in turn, will assist the managers to have control on the cash utilization and expenses. Effect of dates on sales budget preparation The financial year dates generally have an impact on the large companies and small companies as the annual event may generate large amount of revenue or expenses. Generally the important events occur for 1 to 2 months before the end of the financial year. Therefore, the business gets sufficient times for paying all the outstanding dues or collects all the due payments from the customers. Decisions regarding family business Technological recommendations Various technological tools that can be used where accurate financial information and purchase budgets are not available are excel, powerful tools for access with proper controls on data. Further, the workflow tools and data management tools can help in improving the consistency and can highlight the focus areas for the purpose of additional attention. Recommended software As the business is small, they can use the Microcrosoft Excel for maintaining all the financial data (Anderson, Sweeney and Williams 2014). Software they can further use is FactuSo that will help in covering all the commercial records like goods receipts, invoices, remittance, customer order, customer budgets and delivery notes. Advantages of using software Using the software has various advantages like precision and speed of operation and further the real time financial status of the company can be analysed through computerized accounting system (Schorr et al. 2013). Another advantage is that the data has to entered once only and then through pitting up the formula all the calculation are generated automatically. It further minimizes the manual error. The data are kept in up to date version and the computation are accurate as the human errors are avoided. Sales budget analysis Variance analysis Financial Year Budgeted Actual Variance Reason 2007/08 $ 350,000.00 $ 290,000.00 Unfavourable Variance is unfavourable as the actual sale is lower by $ 60,000 as compared to the budget 2008/09 $ 400,000.00 $ 250,000.00 Unfavourable Variance is unfavourable as the actual sale is lower by $ 150,000 as compared to the budget Events to justify the scenarios Sales of the company were low as compared to expectation as it can be seen that the actual revenues were low as compared to the budgeted sales Too high expectations. As it can be seen that the budgeted sales for 2nd year were more than the 1st year whereas the actual sales were lower in 2nd year as compared to 1st. Therefore, it can be said that the expectation regarding sales were high Suppliers may have increased the prices of raw materials which in turn lead ABC Pizza Plaza the unfavourable variance. Adam Smith case Requirements not met by Adam Cash book Through the cash book Adam could maintain the records related to casgh receipts and cash payments Sales records through this Adam could maintain the receipt books, invoice books, documentation of credit card and cash register details (Schiff and Szendi 2014) Bank account it helps in maintaining the deposit books, check books and the bank statements Purchase records it helps in maintaining the petty cash system, invoices, statement for credit card and purchase related documents. Suggested techniques The coffee shop owner can use for improving the accuracy of the budgeting with regard to the beverage stock purchase is the simple technique. Initially, he must prepare the data regarding beverages and drinks that he must purchase on regular basis. Further, through the database he will be able to know the stock of the drinks and beverage and can plan accordingly when to purchase new stock. However, he must avoid using manual system and maintain the data through computerised system. Reference Anderson, D., Sweeney, D. and Williams, T., 2014.Modern business statistics with Microsoft Excel. Nelson Education. Bhandari, S.B. and Iyer, R., 2013. Predicting business failure using cash flow statement based measures.Managerial Finance,39(7), pp.667-676. Call, A.C., Chen, S. and Tong, Y.H., 2013. Are analysts' cash flow forecasts nave extensions of their own earnings forecasts?.Contemporary Accounting Research,30(2), pp.438-465. Coates IV, J.C., 2014. Cost-Benefit Analysis of Financial Regulation: Case Studies and Implications.Yale LJ,124, p.882. Farshadfar, S. and Monem, R., 2013. Further evidence on the usefulness of direct method cash flow components for forecasting future cash flows.The international journal of accounting,48(1), pp.111-133. Lee, T.A. and Parker, R.H. eds., 2013.Towards a theory and practice of cash flow accounting (RLE Accounting)(Vol. 50). psychology. Schiff, A. and Szendi, J., 2014. Helping small business entrepreneurs avoid critical mistakes in QuickBooks accounting software.The Entrepreneurial Executive,19, p.169. Schorr, M., Sylvester, M., Dopf, G., Henrich, D., Liebich, G., Conrad, M., Reccius, A., Klein, M., Hohendorf, M., Roesinger, A. and Soltek, R., 2013.Providing accounting software application as enterprise services. U.S. Patent 8,442,850.