1 Explain the purpose content and format of a business plan A Business Plan is a document inwhich a business opportunity, or a business already under way, is identified,described and analysed, examining its technical, economic and financialfeasibility. The Plan develops all of the procedures and strategies necessaryin order to convert the business opportunity into an actual business project.Moreover, it should serve as a business card for introducing the business toothers: banks, investors, institutions, public bodies or any other agentinvolved, when it comes time to seek cooperation or financial support of anykind. ?In reality, there is no standard format for the presentation of a good business plan. Business plans vary in content and size according to the nature and size of the business concerned and on the emphasis that is placed on certain critical areas as opposed to others.
The plan should include the following sections: · Executive Summary? and Enterprise Description · Product or Service Description · Industry Analysis, Competition Analysis, Swot Analysis · Marketing Sub-Plan, Operations Sub-Plan, Human Resources Sub-Plan, Financial Sub-Plan · The Budget · Liquidity · Selected Options and Critical Measures · Milestone Schedule? 3.2 Explain the business planning cycle The business planning cycle is aplanning sequence designed to give structure to organisational and businessplanning. Typically, it has the following stages in the ongoing sequence:Plan: Develop andestablish (or review in the case of an existing plan) viable operational plansthat address all elements of the business. Set goals. Action: Implementthe Plan.
Investigate:Examine the efficacy of the Plan against measures of success defined in theplanning stage, look at increasing economy, efficiency and effectiveness inprocesses. Refine: Makechanges as required to perfect processes in delivery of the plan. 3.
3 Explain the purpose of a budget A budget is a plan for income andexpenses, which allows a business to operate within its means. A budget isusually drawn up for each financial year on the basis of estimated sales andcosts. The actual performance of the business can be monitored and measuredagainst this proposed plan. Different budgets can be created depending on whatparticular aspect of the business requires focus. The most common budget operatedat team leader level would be a cash budget for a particular purpose: forexample, a stationery budget or a discrete project budget, which would bemonitored and managed to ensure that the allocated cash is not exceeded and anyunderspend is declared such that it can be redistributed as required.
One wayof monitoring a cash budget is to use a Budget Control Chart: in this chart,all the activities have a budget assigned and during the year, the varianceBudget VS Actual Spend is tracked; when a variance arises, a manager can decidewhether or not formal corrective action is required. 3.4 Explain the concept and importance of business risk management In business it is reasonable toassume that things will go wrong either through omission (we forget to dosomething or fail to anticipate a potential problem), or, commission (we dosomething that we should not). These occurrences are collectively known as ‘risks’.The risk management processeffectively comprises 2 distinct phases: risk analysis and risk management. Thefirst phase (risk analysis) involves identification and evaluation of a risk,and assessment and selection of a suitable response. The second phase (riskmanagement) is concerned with resourcing the response (carrying out the actionsnecessary to prevent or manage the risk) and reviewing what effect the responsehad.
In risk management, it iscustomary to specify each individual possibility rather than adopt a ‘one-sizefits all’ approach. Having done that, each risk is evaluated on the basis ofits probability – the likelihood of the risk occurring – and the impact – theconsequence of that risk occurring. The grid below illustrates how to evaluateprobability and impact:Evaluation of the risk and itssignificance will effectD1 on the response that is selected. There differentresponses to a risk, which include: 3.5 Explain types of constraint that may affect a business plan A plan rarely comes to fulfilmentexactly as it has been envisaged. Things go wrong due to changes in theexpected circumstances; thorough consideration of possible constraints enablecontingency plans to be prepared and for potential setbacks to be overcomeD2 .Examples of constraints include: Legal Constraints- All UK business operate within the UK legal framework; laws can change andnew ones can be introduced that may affect plans. For example, an increase inrates of corporation taxation would impact business.
Financial Constraints – Unforeseen events would be likely to put pressure on limited funds.Similarly, expected sales may not materialise, making outgoings lessaffordable. Social Constraints- Businesses rely on having suitably qualified and experienced staff available.
If people leave the organisation there is no certainty that a suitablereplacement can be immediately found. Environmental Constraints – Businesses need to comply with environmental legislationand this may impose a constraint on preferred working practices. Technological Constraints – Technology is rapidly developing and it is importantfor businesses to be able to compete for business online, having web sitesoptimised for search engines so that potential customers can find the business.The absence of a good web presence can be a significant restraint.
Competitive Constraints – It can be difficult for businesses to predict theactions competitors will take in reaction to business activity. Competitorswith bigger budgets may react to your marketing activity and swamp projectedgrowth as a result. 3.6 Define a range of financial terminology The Profit & Loss Statement – The Profit & Loss (P&L) Statement is a summaryof transactions over a period. It shows income generated, costs incurred &either a profit or a loss for the period.
It records relevant transactions todetermine various levels of Profit (or Loss) from the organisation’s activitiesover the period. In outline, the main sections of a P statement are:· Sales · Less direct costs ofsales · Gross Profit · Less Expenses · Net Profit The Balance Sheet- The Balance Sheet is a snapshot of an organisation’s financial position at agiven point. It shows all the assets, liabilities and accumulated reservesshowing the organisation’s net worth.
It shows what is owned and owed by thebusiness. In outline, the main sections of a Balance Sheet are:· Fixed Assets o Current Assets(Stock, Debtors people that owe money, Cash) o Current Liabilities(Trade Creditors money owed, Other Creditors) · Net Current Assets o Less Long TermLiabilities · Total Net Assets · Financed by: o Initial Capital o Retained Profits o Shareholders’ Funds The Cash Flow Statement – The Cash Flow Statement lists the inflows and outflows of cash(cash is all money in actual notes or cheques, bank transfers, etc.) for anorganisation over a given period. It can be either a forecast or a record ofhistorical data. It records net cash flows, along with opening and closingbalances. It helps businesses to manage funds, monitor cash needs and providesan indicator ofD3 solvency – ie. how much cash is available. Costs – Allbusinesses incur costs and it is important to minimise costs to improveprofitability.
As a team leader you will have considerable impact oncontrolling costs. The main categories of cost within a business include:· Employee Costs· Property Costs· Materials Costs· Supplies Costs· Support ServicesCosts· Storage Costs· Selling Costs· Transport andDelivery· Administration Costs· Depreciation Costs· Maintenance Costs· Overheads Different Types of Cost Classifications:· Variable costs:costs that move with changes in the volume or activity of the business. · Fixed costs: coststhat remain constant in the short term irrespective of the level of activity. · Direct costs: costsdirectly attributable to a product or process. Indirect costs: costs which arenot directly attributable to a product or process. · Capital Costs: costsof acquiring or upgrading physical assets such as property, industrialbuildings or equipment. 3.7 Explain the purposes of a range of financial reports The principal statements ofaccount or reports are the profit and loss statement, the balance sheet and thecash flow statement.
Reports are prepared by businesses for 2 main audiences: External Audiences– Financial accounting: concerns the preparation of the annual accounts forfiling in line with legislative requirements for reporting and taxation. Internal Audiences– Management accounting: concerns information for monitoring and control of thebusiness and for making associated management decisions. They are producedthroughout the reporting year – typically monthly.Beyond the necessity for upwardreporting of information, it is incumbent on team leaders and managers todisseminate information to other stakeholders. Provision of open, timely andrelevant information to those who it affects is an essential element ofeffective management.Dissemination of informationshould take account of: · What you need orplan to disseminate – the message · To whom – theaudience · Why – the purpose · How – the method · When – the timing The purpose of the disseminationactivity may be to: · Raise awareness · Inform · Engage · Promote results 4.1 Explain methods of measuring business performance 1.
Check the progress against objectives. It might be obvious tore-examine the business plan if we are pitching for investment or launching anew product; but it’s just as important to assess the objectives on an ongoingbasis. 2.Review financial targets. Consider whether poor sales orprofitability can just be blamed on market conditions or this can be attributedto staff poor performance. 3.Assess staff levels and performance.
If staff productivity isdown, business should establish the cause. Business should consider whetherthey have all the skills needed in the teams – it might be time to launch atraining drive or bring in some new recruits. 4.Benchmark the firm. Weighing up the firm’s position against competitors will helpidentify gaps in the offer. Business should look at what’s driving success inthe sector and try to pinpoint what enables a successful local competitor to doso well.
Is it price, customer service or a recent advertising campaign? 5.Establish whether the customers are satisfied. Businessshould talk to customers and we will quickly discover if we are keeping up withtheir expectations and demands. Even if the majority of feedback is positive,they will always highlight areas where we can improve. Business should takenote and act quickly on anything important. 6.
Encourage staff feedback. Business should listen to theemployees – they can provide you with insight into where we are working welland where we are not performing, and why. 4.2 Explain the uses of management information and reports Nowadays, all medium and largecompanies have developed management information systems that are able toextract all numeric data (financial, project receive and delivery dates, etc.
)with a simple click of a button. This has enabled a new visibility to projectdata to key internal and external stakeholders via reports. The role of theteam leader is to present such reports and highlights in a simple way and showpattern and trends of data to the stakeholders; the team leader can alsounderstand if there are shortfalls in the team performance so that issues canbe addressed. 4.3 Explain how personal and team performance data is used to inform management reports When data are grouped togetherinto reports, a team leader can understand if the team is performing well.
Forexample, the financial reports are flagging that the gross margins in a quarterare 30% against a target of 40%; at this stage, the team leader will startgoing more deeply into the raw data and finds out that few suppliers (that domost of the work) have a high hourly rate. The team leader can now address 2issues: they can ask the team members to try to use cheaper suppliers and/orthey can contact the expensive suppliers and negotiate a new cheaper hourlyrate with the promise of sending them more work. 4.4 Describe a managers responsibility for reporting to internal stakeholders The manager is responsible forbridging the gap between the stakeholders and the internal stakeholders of theorganization will always ask for more information in order to make businessdecisions. Since the manager is the person who is getting the information fromdifferent sources and providing the information to internal stakeholders, he orshe must assure that the information incorporated in reports should bevalidated by authentic sources for accuracy.The manager should keep in mindthat internal stakeholders might misinterpret the information.
Aresponsible manager will invite all the relevant stakeholders in a meeting togive them understanding on the provided reports to bring everyone on the samepage. Internal stakeholders might have some queries or need furtherclarification regarding the reports and it’s manager responsibility to providethe platform or communication channels where internal stakeholders can raisequeries and get the earliest feedback on it. The decision maker in theorganization may seek project manager’s input in decision making, because he orshe has the detailed understanding of the information provided to management. 5.
1 Explain the principle of accountability in an organisation Every employee/manager isaccountable for the job assigned to him or her. In practice it requires theperson to complete the job in line with agreed (or commonly understood)expectations and inform his superior accordingly. Accountability is theliability created for the use of authority. It makes the person who isaccountable, answerable for performance of the assigned duties.
When authorityis delegated to a subordinate, the person is accountable to the superior forperformance of assigned duties. If the subordinate does a poor job, thesuperior normally remains accountable for the poor performance. Accountabilityrequires the subordinate to explain the factors causing poor performance. 5.2 Explain the difference between ‘authority’ and ‘responsibility’ The authority is “a power that is delegatedformally. It includes a right to command a situation, commit resources, giveorders and expect them to be obeyed, it is always accompanied by an equalresponsibility for one’s actions or a failure to act” (from BusinessDictionary).
An essential component ofmanagement, authority confers power to a manager to enable organisationalobjectives to be achieved, including making decisions and giving instructionsto subordinates. A manager will not be able to function efficiently withoutsufficient authority. Authority is delegated from above but must be accepted bysubordinates.Responsibility is a task whichsomeone is expected/nominated to complete.
For example, it is a qualitymanager’s responsibility to ensure the quality of goods produced. 5.3 Explain the meaning of delegated levels of authority and responsibility Authority and responsibility isusually delegated such that the person being delegated to has a specified setof parameters within which they can act. This concept of delegated levels ofauthority is used widely in financial delegation. For example authority andresponsibility might be delegated for an office stationery budget. In this case,responsibility would include, say, ensuring that the budget is properlyadministered. The delegated level of authority, for example, might be forindividual items up to £50 in value. Beyond that value, it would requirereferral and approval by the line manager it would be the individual’sresponsibility to ensure that this is done.
D1affect D2Youhave made some good points in this section, now you need to relate them to andconsider how they can affect a business plan, giving examples of a scenario isa good way to do this. D3Youhave made a good start, giving a strong definition to cashflow statements(turnover) You now need to define the terms you have used above such as:Gross profitNet profitDebtCredit