3. Operating Procedures
Goals
Define the five functions of
management.
Describe five types of policies that
should be included in an operations
manual.
5. Management Functions
manager
the person responsible for planning, organizing,
staffing, implementing and controlling the
operations of a business
management
the process of achieving goals by establishing
operating procedures
making effective use of people and other
resources
6. Planning
Strategic planning
planning for the three to five years ahead
setting broad, long-range objectives
Intermediate-range planning
planning for a one-year period
set target dates for task completion
Short-term planning
planning for daily operations
7. Organizing
Assignment of tasks
determining which employee is
responsible for specific tasks
Grouping of tasks into departments
grouping closely related tasks together
8. a plan that shows how the various jobs in a
company relate to one another
often represented in a chart
Allocation of resources across the
organization
determining the most efficient use of
resources
Organizational structure
9. Staffing
Managing the personnel needs of a
business through:
obtaining
training
compensating
10. Implementing
Implementing involves directing and
leading people to accomplish the goals
of an organization.
management style
the way a manager behaves toward and
works with employees
11. the manager is directive and controlling
democratic management
employees are involved in decision making
the manager provides less direction
mixed management
a combination of authoritative and
democratic management
authoritative management
12. Controlling
Controlling is the process of:
setting organizational standards
ensuring those standards are met
comparing actual revenues and expenses with
projected revenue and expenses
determining if operations are running effectively
inspecting products and services to ensure they
are meeting performance standards
14. Operations Manual
operations manual
contains all the rules, policies, and
procedures that a business should follow
to function effectively
employee handbook
details the rules, policies, and procedures
that apply to employees
15. Set daily operating hours that are convenient
for customers.
Customer Service Policies
Customer satisfaction is the goal.
returns
follow-up service
Operating Policies
16. often offered for customer convenience
The policy should cover:
whether you will offer delivery
delivery fee
delivery timeframe
Delivery Policies
17. application process
testing requirements
background checks
Safety Policies
Employees should be trained in emergency
procedures.
Hiring Policies
18. What type of information should
be included in an operations
manual?
19. Inventory Management
Goals
Prepare a purchasing plan for
inventory.
Describe the perpetual and periodic
inventory methods.
Determine how much inventory to keep
in stock.
21. Meet Inventory Needs
inventory
the stock of goods a business has for sale
Inventory costs include:
storage
insurance
taxes
purchase price of inventory
Inventory must be well managed if you want
to make a profit.
22. Purchasing Plan
The sales forecast can be used to
calculate required inventory.
Ending inventory =
Beginning inventory + Purchases ─
Sales
23.
24. What are some of the concerns managers have
regarding inventory?
26. Perpetual Inventory Method
perpetual inventory method
monitors inventory levels daily
efficient
avoids inventory shortages
stock card
a paper inventory record for a single item
electronic versions available
27. the minimum amount you want to keep in
inventory
indicates when you should place an order to
receive more units
reorder point
28.
29. Use a Computer
point-of-sale (POS) software system
updates inventory as each sale happens
provides up-to-date inventory levels
30. taking a physical count of merchandise at
regular intervals
Take a Physical Inventory
counting the number of items in stock
should be done once or twice a year
can highlight discrepancies caused by a
failure to record
sales
theft
damage
Periodic Inventory Method
31. How does the perpetual inventory method
differ from the periodic inventory method?
32. Manage Your Inventory
Costs of Carrying Inventory
Costs can increase for many reasons
including:
obsolescence
deterioration
interest fees
insurance
storage
33. Stock shortages can lead to:
loss of sales
loss of customer loyalty
Stock Turnover Rate
the rate at which inventory is sold and
replaced with new inventory
Months of inventory to stock =
Months in year ÷ Stock turnover rate
Costs of Being Out of Stock
34. What three factors determine the
amount of inventory a business keeps
in stock?
37. Manage Your Cash Flow
Create a Cash Budget
cash budget
shows the projection of your cash coming in
and going out
estimated cash flow
actual cash flow
the difference between the two
38.
39. Increase Cash Receipts
discounts for timely payment
tighter credit policies
collect unpaid accounts receivable
hold shipments to customers with unpaid bills
Decrease Cash Disbursements
inventory reductions
reducing the payroll
use credit from suppliers
reduce variable expenses
Improve Your Cash Flow
42. revenues
expenses
net income or loss over a specific
period or time
balance sheet
assets
liabilities
owner’s equity
income statement
43. Analyze Sales
Sales records can:
show trends and patterns
be used to forecast future sales
44. helps you decide what type of inventory to
stock
helps you increase sales and profits
Analyze Sales by Product
45.
46. Analyze Net Profit on Sales
Net profit on sales =
Net income after taxes ÷ Net sales
47. Calculate Net Sales
gross sales
dollar amount of all sales
net sales =
gross sales ─ returns
48. Calculate Net Income After
Taxes
Gross profit =
Net sales ─ Cost of goods sold
Net income from operations =
Gross profit ─ Operating expenses
49. Net income from operations ─ Interest
expense
Net income after taxes =
Net income before taxes ─ Income tax
paid
Net income before taxes =
50.
51. Calculate and Analyze Net
Profit on Sales
Net profit on sales =
Net income after taxes ÷ Net sales
Net profit helps to determine the
profitability of your business.
can compare with prior years
can compare against industry standards
52. Set and Meet Profit Goals
Profit goals reflect the amount of profit
you hope to earn during a particular
year.
53. Perform Breakeven Analysis
breakeven point
the volume of sales that must be made to
cover all business expenses
Profit occurs after the breakeven point
is exceeded.
54.
55. Analyze Debt and Equity
The four key areas entrepreneurs
should review using data from the
balance sheet are:
Ability to pay debt as it comes due
Return on assets
Amount of debt the company is using
Rate of return by the owners on their
equity investment
56. Ability to Pay Debt
A company is liquid if it has enough
money to pay off any debt.
Current ratio =
Current assets ÷ Current liabilities
57. Return on Assets
ROA indicates how profitable a
company is relative to the total
amount of assets invested in the
company.
Return on assets =
Net income ÷ Total assets
58. Debt Ratio
The amount of debt, relative to total
assets, used to finance a business
should be examined.
Debt ration =
Total debt ÷ Total assets
59. Return on Equity
The ROE is the rate of return the
owners are receiving on their equity
investment.
Return on equity =
Net income ÷ Owner’s equity
60.
61. Why is it important for an entrepreneur
to analyze the financial statements of
the business?
62. PERFORMANCE COMPENTENCIES
Demonstrate good communication skills
Describe project development and
implementation
Describe the partnership
Demonstrate the ability to make a professional
presentation
Answer questions effectively
63. GIVE IT A TRY
Development (description of the partnership
goals, description of planning activities used
to build a partnership, and roles of business
leaders and chapter members in developing
the partnership)
64. Results (description of concepts
learned from the project and the impact
of the project)
Implementation (description of
activities, level of involvement from
business leaders, and roles of business
leaders and chapter members)
65. Evidence of Publicity (description of the
recognition received as a result of the
partnership)
Degree of Involvement (hours spent
and contacts made)