Chapter 4

Definitions

External professionals

External professionals

Highly-skilled individuals that businesses hire to provide expertise in a particular area of operation

Types of external professionals

Accountants, financial advisers, ICT specialists, legal advisers, marketing advisers

Accountants

Professional who manages, updates, analyses and reports a business’s financial information.

Role of accountants

create financial reports, ensure legal compliance, create budgeted reports

Financial advisers

A professional who provides expert advice to individuals and businesses in relation to monetary matters, personal finances and potential investments.

Role of financial advisers

Manage the business owner’s personal finances, analyse the feasibility of a business’s financial goals and recommend other possible investment opportunities, analyse and assist in the management of current business expenses

ICT specialists

A professional who develops and maintains the technological systems that are used by businesses to store and retrieve data.

Role of ICT specialists

Set up and maintain a website and customer database, ensure legal compliance related to data management, provide training to employees regarding privacy issues and establish security policies.

Legal advisers

Is a professional who provides expert advice to businesses regarding their legal responsibilities

Role of legal advisers

Provide advice relating to the drafting of contracts, ensure compliance with all relevant laws and regulations, protect a business’s trademarks and patents, provide in-house counsel for conflicts that arise between stakeholders, such as employees and management.

Marketing adviser

A professional who provides expert advice to businesses in relation to promoting and selling their products

Role of marketing adviser

Develop appropriate advertising strategies, provide branding and design assistance, develop digital and social media marketing strategies, develop effective public relation strategies.

Types of legal requirements for establishing a business

Business name, website domain, trade practices legislation, business tax compliance, work safe insurance

Business name

the title that a business operates under and what customers use to identify the business.

Website domain

website address that identifies a business’s online site.

Trade practices legislation

is the law that governs how a business interacts with customers and competitors

Examples of trade practices legislation

commit to guarantees and warranties, do not collude, do not falsely advertise goods/services

Business tax compliance

Is the extent to which an individual or business meets tax obligations

Work safe insurance

Compulsory insurance that assists employers to meet their obligation of financially compensating and supporting employees who become injured or ill because of their work.

Types of financial considerations

Establishing:

Bank accounts, financial control systems, recording-keeping strategies,

Bank account

is an arrangement made with a bank where a business or individual can deposit and withdraw money.

Importance of establishing a bank account

enables a business to separate business and personal spending, enables a business to properly calculate its bank balance and understand and its financial position, enables a business to accurately lodge its tax returns

Financial control systems

are processes and procedures used to direct and monitor a business’s finances. Includes budgeting and auditing

Examples of financial control systems

credit terms (tells how many days a product must be paid)

budgeting

auditing

Importance of establishing financial control systems

Help businesses avoid

• large financial losses

• fraud

• financial management

• low cash flow

Record-keeping strategies

Are methods used to keep track of the financial transactions of a business over a period of time. Including strategies and cash books

Importance of establishing record-keeping strategies

• accurately keep track of financial information

• enables business to conduct valid audits

• enables a business to form accurate business reports

Types of record keeping strategies

balance sheets

cash flow statements

income statements

The importance of choosing appropriate supplers

Price, quality, reliability, location, socially responsible suppliers

Price (suppliers)

if cost of supply is low is quality also low?

price charged by suppliers can impact the expenses of the business

Quality (suppliers)

influences the overall quality of a business’s output

affect business’s reputation

customer satisfaction is generally based on the level of quality of the goods/services customers receive

Reliability (suppliers)

could impact business production if delayed

affect reputation, enables business to meet customer demand

select suppliers that can deliver the correct quantity at the right time

Location (suppliers)

can reduce costs if local

environmentally friendly = choosing a local supplier

Socially responsible suppliers

business review CSR

sustainable

treatment of employees

Advantages of choosing socially responsible suppliers

can improve business’s reputation therefore improving its competitiveness

employees may be more motivated

can earn more revenue as customers are likely to have a better perception of a business that is socially responsible

Disadvantages of choosing socially responsible suppliers

less choice of suppliers when deciding on suppliers that meet their CSR objectives

socially responsible suppliers may not offer certain inputs needed for production

time consuming to find ethical suppliers or communicate

costly

Policies

written statements that outline the expected performance and behaviour of employees

Types of legislation that influence business policies and procdures

equal opportunity act, privacy and data protection act, occupational health and safety act, competition and consumer act

Types of policies created to establish business routines

Customer service policy, internet policy, social media policy, dress code, absence and time off policy

Procedures

are a series of actions that employees must follow in order to abide by the business’s policies

Advantages of policies and procedures

policies and procedures can ensure employees are aware of and following necessary legislation

improve relationship between employees and employers

provides clear instructions

can save time

Disadvantages of policies and procedures

objectives may not be achieved

employees may still be restricted

time consuming

additional expenses

Technological and global issues

Customer database, overseas suppliers, overseas retailers

Customer database

is a collection of information about existing and potential customers

Advantages of customer databases

can be used to predict the desires of potential customers and produce goods and services that satisfy there needs

maintain relationships w existing customers and their needs

employees develop new skills and knowledge

Disadvantages of customer databases

can lead to private customer info being hacked/leaked, negatively impacting the business’s reputation

employees may become frustrated

time consuming

costly

privacy breaches

Overseas suppliers

individuals or businesses that sell products to another business overseas

Advantages of generating contacts with overseas suppliers

wider variety

improve reputations provide ethically sourced inputs

access to resources that are not available domestically

cheaper

Disadvantages of generating contacts with overseas suppliers

face negative public perception

cheaper inputs may be of lower quality

employees may be required to travel overseas

challenging to maintain communication

government restrictions = higher prices

supplies can be damaged during delivery increasing expenses

Overseas retailers

A 3rd party business based overseas that a supplier can use to help sell their product.

Advantages of generating contacts with overseas retailers

enhance customer base

improve brand recognition

save time

minimise expense

improve sales

Disadvantages of generating contacts with overseas retailers

bad reputation

not increase the same service

lose some control

costly

Why should a business keep a separate bank account from owner personal spending?

Entity principle - an accounting principle that states that a business entity's finances should be keep separate from those of the owner, partners, shareholders, or related businesses.

corporate social responsibility

Is the ethical conduct of a business beyond legal obligations, and the consideration of social, economic, and environmental impacts when making business decisions.