Business Operations and Financial Management
Business Operations
Operations cover the annual functions of your business. Evaluate each step to develop a manual, and limit operations to key issues.
Operations Include:
- Facilities
- Product planning and inventory control
- Supply and distribution
- Order fulfillment and customer service
- Financial control
- Contingency planning
Facilities Considerations
The facilities considerations of the operations plan include the type of location and access to facilities.
Production Planning
Production planning takes into account:
- Number and types of employees necessary to produce the product or service.
- Time and number of people required to produce the product/service.
- Social media and advertising strategies.
Quality Control
Quality control includes regular inspection throughout the production process.
Supply and Distribution
Do not depend on just one supplier or distributor. Work out payment plans and communication methods. Develop excellent relationships.
Distribution Considerations
If possible, use several distributors.
Potential Offshoring Costs
Possible hidden offshoring costs include:
- Lower quality levels
- Lower productivity levels
- Additional time to describe project requirements
Contingency Planning
Contingency planning takes into account:
- Planning for emergencies
- Devising a disaster plan
- Safeguarding records and data
- Adequate insurance
Financial Management
Take control of your finances. Read your financial statements at least monthly and don’t ignore bad news. Set policies and stick with them.
Financial Accounting Methods
- Cash-basis accounting
- Accrual-basis accounting
Global Financial Considerations
Global financial considerations include:
- Foreign currency exchange
- Differing standard payment terms
- Additional taxes
- Banking costs and practices
- Currency fluctuations
- Customs charges
Key Financial Forms
- Income statement: Shows whether your company is making a profit.
- Cash flow projection: Shows whether the company has the cash to pay its bills.
- Balance sheet: Shows how much the company is worth overall.
General Financial Terms
- Accounts payable
- Accounts receivable
- Assets
- Cost of goods
- Depreciation (tax deduction)
- Fixed costs (ongoing expenses that occur regardless)
More Financial Terms
- Gross Profit: Income before operating expenses.
- Gross Sales: Total sales before any costs.
- General and Administrative Expense (G&A): Operating and administrative expenses.
- Net Income/Net Profit: Income/profit after all expenses/costs.
- Net Sales: Sales after commissions and returns.
- Net Worth: Value of a company after deducting liabilities from assets.
Cash Flow Projections
You will often not receive full payment at the time of a sale. Some industries have long lag times between orders and payment. Design payment terms accordingly. Differentiate income for each product or service line. Be conservative in your projections.
Balance Sheet Details
In addition to general financial terms, note:
- Land: Subject to different tax treatment and often retains higher value.
- Facilities: Buildings, warehouses, or other property, excluding land and equipment.
- Short-term notes payable: Debts to be paid off within a year.
- Other current liabilities.
Assumption Sheet
An assumption sheet explains how you arrived at your numbers. Develop one whenever you do financial projections. List straightforward information without needing substantial detail or sentences; just provide data in each category. Include it at the conclusion of financial forms.
Break-Even Analysis
To determine total sales needed to break even, calculate fixed expenses and the gross profit margin. Use the equation: TOTAL SALES NEEDED = FIXED EXPENSES / GPM
Financial Worksheets
Prepare financial worksheets by entering figures from previous worksheets into the appropriate lines on each. If using Business Plan Financials, all figures will automatically be entered from one worksheet to the appropriate line(s) on the Income Statement, Cash Flow, and Balance Sheet worksheets.