Nirav B Patel Hoboken | What are the functions of management

What are the functions of
management?
Nirav B Patel Hoboken

Operations Management
Operating Procedures
Inventory Management
Financial Management

Operating Procedures
Goals
 Define the five functions of
management.
 Describe five types of policies that
should be included in an operations
manual.

Vocabulary
 manager
 management
 organizational structure
 authoritative management
 democratic management
 operations manual

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

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

Organizing
 Assignment of tasks
 determining which employee is
responsible for specific tasks
 Grouping of tasks into departments
 grouping closely related tasks together

 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

Staffing
 Managing the personnel needs of a
business through:
 obtaining
 training
 compensating

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

 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

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

What are the functions of
management?

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

 Set daily operating hours that are convenient
for customers.
 Customer Service Policies
 Customer satisfaction is the goal.
 returns
 follow-up service
 Operating Policies

 often offered for customer convenience
 The policy should cover:
 whether you will offer delivery
 delivery fee
 delivery timeframe
 Delivery Policies

 application process
 testing requirements
 background checks
 Safety Policies
 Employees should be trained in emergency
procedures.
 Hiring Policies

What type of information should
be included in an operations
manual?

Inventory Management
Goals
 Prepare a purchasing plan for
inventory.
 Describe the perpetual and periodic
inventory methods.
 Determine how much inventory to keep
in stock.

Vocabulary
 perpetual inventory method
 stock card
 point-of-sale software system
 periodic inventory method
 stock turnover rate

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.

Purchasing Plan
 The sales forecast can be used to
calculate required inventory.
 Ending inventory =
Beginning inventory + Purchases ─
Sales

What are some of the concerns managers have
regarding inventory?

Track Your Inventory
 You will need to take a physical
inventory once or twice a year.

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

 the minimum amount you want to keep in
inventory
 indicates when you should place an order to
receive more units
 reorder point

Use a Computer
 point-of-sale (POS) software system
 updates inventory as each sale happens
 provides up-to-date inventory levels

 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

How does the perpetual inventory method
differ from the periodic inventory method?

Manage Your Inventory
 Costs of Carrying Inventory
 Costs can increase for many reasons
including:
 obsolescence
 deterioration
 interest fees
 insurance
 storage

 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

What three factors determine the
amount of inventory a business keeps
in stock?

Financial Management
Goals
 Describe strategies for managing cash
flow.
 Evaluate a business’s performance
through financial statement analysis.

Vocabulary
 cash budget
 gross sales
 net sales

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

 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

What are some ways you can improve
your cash flow?

Prepare and Analyze Financial
Statements
 Prepare Financial Statements
 cash flow statement
 cash inflows
 cash outflows

 revenues
 expenses
 net income or loss over a specific
period or time
 balance sheet
 assets
 liabilities
 owner’s equity
 income statement

Analyze Sales
 Sales records can:
 show trends and patterns
 be used to forecast future sales

 helps you decide what type of inventory to
stock
 helps you increase sales and profits
 Analyze Sales by Product

Analyze Net Profit on Sales
 Net profit on sales =
Net income after taxes ÷ Net sales

Calculate Net Sales
 gross sales
 dollar amount of all sales
 net sales =
gross sales ─ returns

Calculate Net Income After
Taxes
 Gross profit =
Net sales ─ Cost of goods sold
 Net income from operations =
Gross profit ─ Operating expenses

Net income from operations ─ Interest
expense
 Net income after taxes =
Net income before taxes ─ Income tax
paid
 Net income before taxes =

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

Set and Meet Profit Goals
 Profit goals reflect the amount of profit
you hope to earn during a particular
year.

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.

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

Ability to Pay Debt
 A company is liquid if it has enough
money to pay off any debt.
 Current ratio =
Current assets ÷ Current liabilities

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

Debt Ratio
 The amount of debt, relative to total
assets, used to finance a business
should be examined.
 Debt ration =
Total debt ÷ Total assets

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

Why is it important for an entrepreneur
to analyze the financial statements of
the business?

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

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)

 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)

 Evidence of Publicity (description of the
recognition received as a result of the
partnership)
 Degree of Involvement (hours spent
and contacts made)

Nirav B Patel Hoboken | What are the functions of management

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