You are literate and intelligent person. You're no Einstein, but you can manage costings and budgets quite satisfactorily.

There is, however, one area that you do not seem able to get the grips with: the whole grey and foggy world of accountancy conventions and financial mumbo-jumbo, the world of balance sheets, capital and revenue transactions, working capital and the like. You feel slightly guilty about this, because you know it lies at the heart of every business. You also feel slightly resentful because, deep down,you have a suspicion that it isn't really all that complicated. It's just that no one has ever explained it to out in simple language, without all the accountants jargon. You are quite right. It is indeed basically very simple. But some very sophisticated people come unstuck because they do not really understand how it all works.

So get a little help by understanding the following accounting terminology in use in the business world today. Don't let accountancy jargon prevent you from knowing your business. Learn the basic language and understand it uses.

Remember, there are three (3) documents which depict your business: the Profit and Loss account for the past, the Balance Sheet for the present, and the Cash Flow forecast for the future.

BALANCE SHEET

WORKING CAPITAL

Current Assets

  Raw material 50.00
  Work in progress 140.00
  Finished goods 90.00
  Cash in hand 150.00
  Cash at bank 240.00
  Debtors 150.00
  --------------------------------------------------------
  TOTAL CURRENT ASSETS 820.00
  --------------------------------------------------------

Less Current Liabilities

 Creditors 30.00
 Proposed dividend 140.00
 --------------------------------------------------------------
 TOTAL CURRENT LIABILITIES 170.00
 --------------------------------------------------------------

So, Net Working Capital (Current Assets less Current Liabilities) = $650.00

PROFIT AND LOSS

CASH FLOW

The Importance of Organisation

The organisation structure is the basic framework within which the manager and his subordinates operate. The organisation enables similar activities to be grouped and assigned to appropriate specialist workers to achieve the objective of the organisation.

Steps in Forming an Organisation

1. The objectives of the organisation are established
2. The activities necessary to achieve these objectives are listed
3. These objectives are classified and grouped in the best way
4. Groups are assigned activities and the authority to perform them
5. The groups are co-ordinated through authority relationships

• Unity of Objective -- All parts of the organisation must contribute the attainment of the objectives of the company.


• Span of Control -- The manager must supervise only those subordinates that he can effectively cope with.


• Delegation -- By giving authority to those actually performing the job, the firm will be able to get work done effectively.


• Unity of Command -- At best, each subordinate must have only one superior.


• Clear Lines of Authority -- Lines of authority must move clearly with ultimate authority from a manager to a subordinate.


• The Principle of Responsibility -- The responsibility of a worker to his manager for delegated authority is absolute, and responsibility should be on par with the amount of authority given.

• Functional Departmentation
• Divisional Departmentation
• Organisation based on geographical area
• Organisation based on product
• Organisation based on customer
• Organisation based on process
• Matrix Organisation

1. There are very clear task assignments and trained individuals find the jobs that they are interested in
2. Staff members within a department can easily communicate and use one another's knowledge, training and experience to solve problems
3. This type of organisation provides a suitable environment for new managers who must translate their academic knowledge into business action
4. This form of organisation is easy to explain because the majority of employees understand the role of each unit

1. In some organisations, the functions may be as important as the area covered by the firm
2. The staff may develop a narrow outlook and be unable to see the business as a whole
3. This form of organisation may defeat the purpose of training managers with a wide experience

• Geographical
• Product & Service
• Customer
• Processor Equipment

Organisation based on geographical area

1. Knowledge of local business, economic and social factors help decision-making and the creation and maintenance of customer goodwill
2. Managers get the opportunities to learn all the company functions

1. The headquarters staff may sense a loss of control. Some organisations attempt co-ordination by centralising at least one activity, but in other organisation, co-ordination is maintained by audit checks and periodic consultation by key staff

Organisation based on product

1. Staff and equipment can specialise
2. Co-ordination may be increased and customers can be given better service
3. The manager and his staff can be made responsible for profit and thus control mechanisms are intrinsic to this

1. It can lead to a duplication of effort as each division attempts to solve similar financial, operating, personnel and sales problems
2. Since the brand managers are competitors, the attainment of individual aims may become more important that those of the whole organisation

Organisation based on customer

1. The organisation is able to devote manpower and other resources to the special needs of customers

1. There is need for careful co-ordination

Organisation based on process

1. Economies of scale are achieved by grouping activities round a process which cannot be sub-divided.
2. Clear-cut technical considerations determine departments
3. Similar types of equipment and specialised labour are centralised

1. The matrix organisation combines the strengths of functional and divisional departmentation. The project group operates within its terms of reference, but it makes use of the expertise of specialists
2. This organisation provides a blending of technical and market emphasis for the organisation that is trying to bring out innovative products.

1. This form of organisation is very expensive because of a number of specialists are needed and the product that is brought out may not be a commercial process
2. The unity of command is lost because each individual has more than one supervisor
3. Authority and responsibility are bound to overlap causing conflicts. The project leader has to ensure that members communicate so that gaps in efforts and inconsistencies may be eliminated. The group must be driven by a sense of urgency to complete the project.
4. This matrix form of organisation is difficult to explain to employees because it cuts across conventional ideas, but those involved in the project feel a sense of purpose and can work together effectively.

Effective management requires that you:-

• Know what you want your team members to do
• Make sure they know what you want them to do
• Train them on how to do it
• Motivate them to want to do i

..Rex Houze is president of Leadership Management Inc, and co-author of Bridging the Leadership Gap..

The ideal location of your business depends on the kind of business you’re running. Before you begin scouting a location, consider some factors that can help you select the right location for your business.

1. Determine Your Business Activity

Do your customers come to you, or you go to your customers? Do you have employees? Do you manufacture products for distribution? Answer to these questions can quickly narrow down your location choices.

If your type of business depends heavily on pedestrian or drive-by traffic, such as a florist, gift shop, or clothing boutique, you’ll want to seek out popular retail locations, such as a downtown area or a mall, where there are few restrictions on signage that can help attract passing customers.

If customers typically seek out your type of business, such as a child care service, beauty salon, or fitness centre, you’ll want to seek out a space that easily accessible from population centres, major roads and public transportation.

If your customers do not typically come to you, other location factors may be more important than physical proximity to your customers. For example, if you conduct much of your business online, establishing a home-based business might be more desirable and economical than leasing commercial office space. If you are manufacture products for distribution, an ideal location might be an industrial park near major transportation ports.

2. Ease of Access

If your business is a customer destination, consider how people get around in the area where your business will be located. For example, if you are scouting out a location in a suburban area, most people may get around by car. You’ll need to make sure you close to major streets, and have plenty of parking. If you are scouting a location in an urban area, consider areas around public transportation hubs or areas of the city where there is a lot of foot traffic.

If your business does not have customers driving to your location, then traffic and accessibility are an issue only for your employees. But parking, foot traffic, automobile traffic, and sidewalk accessibility are all important things to consider.

3. Proximity to Your Competitors

While it may seem counter-intuitive, operating a business close to your competitors is often very beneficial. This is especially true if you have a retail business that relies heavily on foot traffic.

Shopping malls are a good example of why proximity to your competitors is an important factor. Most major pedestrian malls are congested with clothing shops and cost of retail space is often very high.

The reason for this is that the number of potential customers increases exponentially on a per-store basis around a concentration of similar business. For example, while one store might attract 50 customers, two stories might attract 200 customers, and three stories might attract 1, 000 customers.

4.Consider your operational requirements

One of the things to consider when searching for a location is the type of facility you need: office space, retail space, industrial space or restaurant space, for instance. Keep in mind any special requirements you have. Do you need kitchen facilities, meeting rooms, special communications wiring or high energy consumption capabilities?

5.Stay Close to Big Brands

Choose a location where you can have big brands as your neighbours. These brands are successful because they are made a wise choice in choosing their location, so you can learn a lot from them.

They may have paid expensive location selection consultants to find a business location, but you’ll get the benefits of that effort for free.

6. Balance cost with other factors

Obviously, the cost of location is important to consider, but be sure to look at the big picture as well. For example, no matter how attractive the price of a site might be, if your customers can’t get there easily, or if the infrastructure can’t support the necessary wiring for your Internet Company, your business probably won’t last very long. Spending more on a good location will probably pay off in the long run with lots of business. A big mistake that sometimes happens when starting a business is that sometimes or small business owners base their location decision solely on the current size and costs.

7. Zoning and Signage

Before setting up shop, check with you local zoning authority to make sure you will not break any city ordinance or zoning policy in your preferred location. Also, consider you signage requirements, and compare them to signage regulations set by your local government. Many communities set restrictions on the size and appearance of signs.

8. Home Based Business

Convince and low star-up costs are just few of the reasons that make a home office an attractive business location. However, running a home based business isn’t for everyone. Because most residential areas are not zoned for commercial businesses, your local government may have tight restrictions on the types of businesses permitted to operate out of a home.

What if your business expands, but the location you chose has no room for growth? The most likely result will be you would have to relocate into another location which will cost more money and the customers you have already had gained.

In conclusion, when deciding to buy a location for your business, think of it as like buying your second home. By getting the location right, you’ll enjoy life more…and you’ll make more money in the process.

“Failing to Plan is Planning to Fail” 

For many people succession planning consists of placing personal property in joint tenancy, executing a will, and buying some life insurance. These measures taken by themselves may not be very effective for the owner of a closely held business 

Many business owners are so focused on the daily operational concerns of running a business they do not taken the time to plan for the transition of their business assets. Consequently, succession planning is not done, is put off until retirement is imminent, or is rushed into in a crisis.

Waiting too long can be a serious problem for the company and/or intended heirs. Options could be reduced or no longer available because of bad timing. Failing to provide for an orderly transaction is one of the top reasons for bankruptcy in small businesses that ere, before an unplanned ownership change forced the issue, operationally successful.

There is no specific time in the history of a closely held company when succession planning should begin, but the earlier the question is faced, the better the result. In a family operation, the Succession Plan can provide a firm foundation for orderly transaction, provide confidence in management and relieve owners of a potential burden.

The worse strategy for succession planning is doing nothing at all. This is the best way to create havoc and often has been the demise of an otherwise healthy company. In the event of the death of the owner(s) without a funded and protected succession plan, chaos ensues, the government is often the heir of reality and family life is bitterly interrupted. Insurance helps but is certainly not the whole answer; planning for managerial succession is still a great question that must be addressed and answered.

THE STAGES OF COMPANY GROWTH

1. Initial start-up period(also called “Survival”)
2. Building Value Period
3. Developing a Self-Sustaining Organization
4. Providing for an Orderly Transaction To New Owners

• What are the retirement goals of the current owners (timing and required financial compensation)?
• Which option makes sense: sell to family, sell to an outsider or liquidate?
• What is a fair market value of the enterprise?
• What do I do about heirs that do not or will not participate in the business?
• Does it make sense to designate heirs a number of years ahead of the transfer?
• If family members are buyers of preference, to what degree do they get a “break” on buying the company?
• Have family members received appropriate and adequate training in management to take over either as manager or owners? 
• Have can a sale be structured for minimum tax consequences?
• How do I protect the Successions Plan in the event of the untimely death of a key owner or preferential heir?