Friday 22 March 2013

7 Purchase management and the steps involved in the purchase management.


Purchase Management
Purchase Management is a process of managing the whole purchase and related activities in an organization. The purchasing of an organization is highly depends on the re order level of the stocks for the further process of business activities. In the case of manufacturing companies the purchase is about 70 percent of the turn over of the business but in the case of service organizations it is limited to 40 percent of the turn over of the company. 

Process or Steps involved in the purchasing
Basically the purchase management process involves three major things such as (1) Purchasing planning (2) Purchasing Tracking and (3) Purchasing Reporting. the major process involved in the Purchasing are as follow:-

1.     Purchase requisition
The process of purchasing is stars when the purchase requisitions are generated from the internal organizations. This is the indication of the managers that there is an urgent need of purchasing of goods and services in an organization.

2.     Study of Market
The main process of purchasing is depends on the market trends and technologies for a particular product or services. The study of market and trends leads to the decision regarding the purchase of the goods and services.

3.     Making Purchase decision.
After the selection of a particular market the next process is to take the purchase decision for the particular concern. This is done through the effective analysis of quotations from different companies.

4.      Placing orders
After the finalization of the particular company with the analysis, the purchase order will be placed to the proposed company.

5.     Receipting goods and services received         
   The placing of an order is the final decision for the purchase of goods and services in the company. After the placing the next step is to the receipt of the same. This will happen the effectively only after the continous follow up activity.

6.     Accounting goods and services.
After the receipt of the goods and services it is necessary to account the number of items received in the organization. This is the main duty of the store keeper under the guidance of the accountant in the concerned organization.

7.     Receiving invoice and making payments
The receiving of invoice and making payments are the responsibility of the accountant. This will be happen only after the verification of goods and services along with the invoice received.

8.     Debit note incase of any defects in products.
Every organization is liable to pay the bills immediately after the receipt of items ordered. If there is any damaged goods they can return the goods and can be avail of the reduction of the value of money along with the invoice received.

These all are the process involved in the purchasing management of an organization.

Monday 18 March 2013

15 Strategic Business Planning and steps involved in the Strategic Planning process.



Strategic Business Planning
Strategic planning is a process of identifying the important things which we need to accomplish in the future course of business as per the priority basis. This planning will bring the entire organization in to a single set of ideas for the effective execution of plans and procedures  Strategic planning helps to improves the performance of the organization and solves major issues at a macro level.
Strategic planning should have the following qualities:-
(1)     It should be Specific
(2)    It should be Measurable
(3)    Strategic planning should be Agreed upon
(4)    Strategic planning should be Realistic
(5)    It should be Time bound.
The strategic planning does not means any future decisions or forecasting of business but emphasis on the basic plans which we need to reach after 3 or 5 years of business life. The strategic planning is the result of the study of where we are now which means over all assessment of the current position  what we need to do for achieving better future for the business and finally it is the understanding of how will close the gap or the threats for attaining the objectives of the business.


Significance of Strategic planning
1.       Long term impact of decision
Strategic planning deals with the future impact of the current decisions. It provides basic plans and ideas for the future course of actions of the business organization.
2.       Strategic planning is a continuous process
Strategic planning is a continuous process starts with the organizational objectives, then defines the strategies and policies to achieve in the future and develops a detailed plans to make sure that the strategies and plans implemented in the business to achieve a desired output.
3.       It is a Philosophy
Strategic planning is an attitude of the life which leads to the effective planning process of the organization to achieve the goals and objectives of the business in the current scenario.
4.       Strategic planning gives the Structure
In an organization Strategic planning gives three major plans and it links the future planning process of the organization. The three major plans are as follows:-
a)      Long range Strategic planning
b)      Short range Strategic planning
c)       Short range budget and operating plans





Steps of Strategic Business planning
The important steps involved in the strategic planning process are as follows:-
1.       Defining the Business
The Strategic planning creates a clear plan about the business and this should generate the future course of business ie, where will be the position of business after 3 or 5 years.
2.       SWOT Analysis
The term SWOT stand for Strength, Weakness, Opportunities and Threats.
The Strength and Weakness indicates the internal Assessments of the organization which includes organizational assets, resources, people, systems, partnership, suppliers and customers.
The opportunities and Threats indicates the external Assessments of the organization which includes market place, competitors, trends and technologies, economic cycles, government rules and regulations etc.
3.       Creating Strategic Action Plan
The strategic action plan includes the objectives of the business, initiatives for the smooth running of the business and the real action plans to be implemented in the business.
4.       Implementing the Strategy
The action plans we are selected should be implemented at the right time in the right place. The implementation of a strategy will leads to the trial and error methods of the business.
5.       Implementation and Review of Performance
After the implementation of the strategic plans we have to review the systems are good or unfavourable to the conduct of the business. It will be done with the help of suitable trial and error method.
                   These are the common steps involving in the process of strategic business planning.

Monday 4 March 2013

7 Meaning of Financial Statements- Need or Importance and Limitations of Financial statements.



Financial Statements
Financial statements are those statement which includes the income statement, balance sheets, statement of retained earnings and the statement of sources and uses of funds. The income statement includes the trading account and the profit & loss account of the business concern and the balance sheet includes the assets and liabilities of the business.
The financial statement provides the vital information relating to the profitability, liquidity and solvency of the business.  The main aim of the financial statement is to provide reliable information relating to the economic resources, business obligations, changes in net resources etc.

Need or Importance of Financial Statements.
The need or importance of financial statement is to satisfy the needs of the users of the financial statements and which provides relevant information's about the business to the interested parties like Government, management, creditors, share holders etc. The importance of Financial statements are as follows:-

1.      Importance to Management
In the competitive business environment, it is difficult to sustain the business without any advanced planning or forecasting. The financial statements helps the management to know about the current position of the business as up to date, accurate and systematic information relating to the business. It enables the management to identify the current position, progress of the business and the business prospectus which leads the managers to take necessary remedies and plans to develop the business environment.

2.      Importance to Share holders.
In the case of companies, management is separated from the ownership of the organisation and the share holders are not authorized to take part in the day to day business activities of the concern. But in the Annual General Meeting, the results and activities of the concern will be reported to the shareholders in the form of financial statements. This financial statements enables the shareholders to know about the performance of the management and it will give the relevant information of the effectiveness, efficiency and the current financial position of the business also.

3.      Importance to Leaders or Creditors
The financial statements provides the useful information or guide to the suppliers or the creditors of the company. This is done with the help of critical evaluation of the financial statements and which provides the clear idea about the liquidity, profitability and the solvency of the business enterprises.

4.      Importance to Labour
The financial statement provides the profit and loss account of the business. This enables the staff to identify the profit condition of the business and helps to negotiate for the better salary because the profit of the company depends on the salary for the staffs.

5.      Importance to the public
Every business is a social entity which includes the co- operation of the various groups which includes lawyers, trade unions, financial analysts, teachers, research scholars etc. These groups are intended to know the financial position of the business and this will be available only through the financial statements.

6.      Importance to National Economy
The economic development of a country is highly depends on the growth and development of business environment. Financial statement discloses the relevant details of the business to the needy and this is importance to the tax authorities and other statutory aspects in the country.
These all are the importance of the Financial Statements of a business organization.

Limitations of Financial Statements.
The important limitations of financial statements are as follows:-
1.      In formations provided through the financial statements will be incomplete and inexact.
2.      The qualitative information may be ignored in the financial statements.
3.      Financial statements provides historical data.
4.      The financial statements are based on the accounting concepts and conventions.
5.      Personal judgments will be affected to the financial statements.

These all are the important unavoidable limitations of the financial statements.
 

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