Business plan strategy should definitely be the first thing that should come to your mind when you think of starting your own business. It is indeed impossible to run your business without any plan in place beforehand.
A business plan may be viewed as a fundamental tool by banks and venture capital firms who see it as a prerequisite to invest funds in a business.A business plan is thus defined as a document that lays down strategies from marketing, financial and operational point of view for a business to achieve its goal.
A business plan strategy automatically takes you one step ahead of those who do not have one considering the fact that there are key strategic decisions which cannot be avoided by any entrepreneur at the start of the business. There are also some vital decisions that decide the existence of your business.
It is considered one of the primary things for any startup. Everything can go wrong if your business does not have a goal to go further with. Startups thereby can turn heads with its goal. Therefore, a compelling goal and a little mistake can either give your business the right kind of start it needs to take offor result in complete failure.
While writing a business plan, finance is considered the first and foremost priority for any business. Apart from deciding the source of fund, thinking about its repercussions and impacts is thus a really important process. A finance budget should not only include day to day expenses but also about investments in software solutions, marketing and other technologies required by the firm.
Before starting a business, you should have a target audience in mind so that all the marketing, sales and branding strategies are headed in the stated direction without wasting any time and money. This would enhance your brand perception and visibility effectively.
Future Growth Prospects
Future is not only about thinking about positive effects your business plan will have but also about planning in advance for the negative effect it can have.In case your current business strategy doesn’t work, or you want to expand your business further in future, you should be prepared with a backup plan from the starting to save time of planning everything again.
Gaining Market Share
A significant market share is as important as targeting the right type of audience. It shows your placement in the market as a new business. Conducting enough research should be the main idea behind gaining a significant market share.
Getting the Team
Getting the right type of talent pool within a limited budget is one of the most challenging tasks for a startup. While making a business plan, clarity should be made on the number of people required to carry on a business. However, they should also be provided with enough motivation to work for you.
It is not easy to run a company, especially in a dynamic business world. We see Founders and CEOs strugglingto face challenges during their course of business, it also their responsibility to find a solution ensuring to providea sustainable value in their companies.
Let’s talk about the challenges they face:
1. Making Consistently Good Decisions –
Past management decisions affect the whole performance of a company. Owners should not make decisions either too quickly or too slowly. This leads to making critical failures which is also a result of poor strategic planning.The management therefore cannot afford to lose the sight of their aspirations as they have to act as role models and demonstrate the conduct that will make their company profitable and productive.Decisions are to be made with clear view of their impact on future value.
2. Fighting for Survival –
It is very important for a company to survive in a competitive environment. And for that leaders need to start working in the business, i.e., keep up with the following survival challenges:
a. External challenges- economic changes, change in government policies, competitor’s actions, marketplace dynamics and pricing challenges.
b. Internal challenges- high employee turnover, weak teams, inadequate systems, lack of financial resources and poor decisions.
c. People challenges- hiring, firing, retaining the management team and improving workforce efficiency.
d. System challenges- change in technology and designing a knowledge-based infrastructure.
e. Financial challenges- shrinking margins, deteriorating balance sheets and an inability to generate working capital.
3. Developing a Viable Exit Strategy –
It is often said that it is easier to get into business than to get out of business. No owner would choose to exit a business but he should be prepared with a plan for building sustainable value that can be measured, managed and executed. Few of the important factors he should consider while designing an attractive exit strategy is scalability, brand equity, management terms and recurring revenues.
And if the exit strategy leads to sale of the business, owners must decide the acceptable price and terms.
These challenges are shown as a progression from low value to a high value plan. They are considered ongoing challenges, the owners and CEOs cannot avoid during their whole course of business.
A financial statement provides an overview of financial activities of a business. Hence, financial reporting is considered an important function for every business and management.
A sound financial statement helps a business to take its own correct decisions and concentrate on identifying its areas of concern. These statements are also used by company’s investors and creditors to evaluate its financial performance.Thus, it also helps a business to grow and develop in future.
Financial statements usually include Income Statements, Balance Sheets, Cash Flows and Accounting Policies and Notes to Accounts. Therefore, financial reporting should be done in adherence to Generally Accepted Accounting Principles (GAAP).
Few of the common financial reporting mistakes that every small business should avoid are:
Balance Sheet Related Errors
- Classifying assets and liabilities- It is important to correctly identify what should come under assets and liabilities to correctly evaluate company’s financial position.
- Differentiate between long term liability and current liability- A long term liability put under current liability can increase the amount of debt to be paid in the coming year. This could make the finances look less stable on paper making a business lose its clients or even investor capital.
- Non preview of short/long term liability- It is necessary to clearly represent all loans and financial obligations to be able to repay them within the specified period, or else interest factor could come into effect causing financial losses.
- Lack of Creditor analysis- It is also necessary to know how much a company owes to its suppliers. This analysis indicates which suppliers are to be paid first so that there is no further interest issued and credibility of business is not affected.
- Nonpreview of Statutory Dues- It is highly necessary that the government dues and taxes must be reflected in the financials so that smooth payment follow up could be performed promptly to avoid non-payment/late payment fees, interest or penalties.
Income Statement Related Errors
- No sales forecasting- Missing out even one sale can throw off a business’ profitability ratios. This information is used to value a company. Missing this information can restrict a company from getting bank loans or funding it needs to move forward.
- No expense budget- In addition to sales forecasting, it also very important to account for each operating expense. Errors in recording these expenses can lead a business to overspend, since these figures are used to set future budgets.
- Wrong classification of Revenue- It is very necessary to treat the revenue as per its nature. Revenue is taxed under income tax Law as per their head of income. Therefore proper presentation of revenue figures is important to avoid wrong treatment of taxation.
- Wrong grouping of expenses- It is necessary to classify the expenses in the financials in correct head/group according to the nature of expenses so that the following objectives related to financials presentation could be meet out-
- To find out the unusual variancesby comparing with previous period comparative figures.
- To analyze the actual expenses figures with budget.
Cash Flow Statement Related Errors
- Absence of daily funds report- Daily funds report enables a business to manage its working capital requirements and also plan for emergency fund requirements.
- Missing debtor’s ageing- Getting paid is crucial for every business. Therefore, debtors must be recorded in a timely manner to know how long it would take to get funds realized so that a business can plan his funds position accordingly.
- Lack of ratio analysis- Ratios are necessary to determine the areas which require management’s attention and facilitate decision making in a more facilitative manner. Some of the important ratios are:
- Gross Profit Ratio
- Net Profit Ratio
- Receivables and Payable Ageing Ratio
- Net Working Capital Ratio
Outsource your finance and accounting services from Aristotle Consultancy and we’ll gladly assist you with all your concerns.
When Prime Minister Narendra Modi broke the news of demonetization to billions of Indians, many things happened. From lines gathering aroundATMs, mini protests outside banks to parties launching new e-wallet ventures. One thing nobody talked about was increase in price of Bitcoin by 10% overnight.
Bitcoins are the world’s first decentralized peer-to-peer currency, created and held electronically.Bitcoin was created by an anonymous person calling himself Santoshi Nakamoto. They’re produced (mined) by people and businesses using system created by Santoshi Nakamoto by solving some complex algorithmic equations. Every bitcoin transaction is recorded and verified in an open ledger called block-chains, thus preventing counterfeiting or double spending.
Who Prints It?
No one. The currency isn’t physically printed in the shadows of any Central Bank, unaccountable to the population and making its own rules. Instead, there are two ways of obtaining Bitcoin- either you ‘mine’ it or you buy it.
For mining, you will need mining software and some very heavy duty computing equipment and hardware as it is an intensive and tech-heavy proposition. Whereas, buying and selling can be easily done through companies- Unocoin, Zabpay, Coinsecure, BTCXIndia- which offer Bitcoin wallets and INR to BTC (Bitcoin)buying and selling.
Also, there are only 21 million bitcoins that the system has been programmed to allow. And as the number of bitcoins mined, reaches upper limit, their values are expected to shoot through the roof.
Bitcoins can be used to buy products and services from various websites including Microsoft and Dell. But if you think that bitcoin can be a substitute for your normal currency in future, think again.
Lack of Regulation
As there is no supervising authority price manipulation becomes common. If the user suffers a loss due to an exchange or the dealer deducting unfair transaction charges, he has no one to complain to. And if the bitcoin wallet is hacked into or some bitcoins are lost, there is again no recompense.
There is sharp price volatility in this currency. On a certain date, the price being as high as $1140, can be seen to be down for more than 30%. The main reason for this is that there is no underlying to which the value of currency can be determined. Its price is determined by demand and supply forces around the world.
Faulty Price Discovery
Bitcoin prices are discovered through exchanges that are unregulated with very lax KYC compliance process. Wash trades, front-running and trading with insufficient funds is said to be common in many of these exchanges. In other words, the value of bitcoin is determined largely by unregulated pools of investors.
Apart from having various issues with bitcoins, it is still believe that digital currencies will exist, and thrive, in the future. What excites more about this is the building block technology behind them- the Block-chain.
The Block-Chain Revolution
Block-chain technology is where the ledger is distributed to peers across a network, promising enhanced security, trust and transparency over traditional bookkeeping systems. If data is spread to multiple entities, and each is maintained as an independent record of transactions, hacking and manipulation of such decentralized data becomes a task. It is thus already used in the financial services industry and is likely to grow popular in future.
Making a payroll is considered as a cumbersome process and is often outsourced to a third party consultant. A payroll is the cumulative sum of financial records for employee salaries, which includes work salaries, withdrawal of Provident Fund, claiming ESI, LWF (Labor Welfare Fund), calculating correct taxes, deductions and any bonuses. Hence, it is very important to pay close attention to how it is managed.
Here are some of the issues a company faces and should avoid while making a payroll. Let’s also talk about how one can take care of the same.
Inexperienced Payroll Processing- Due to inaccurate client’s workforce information, processing of employee salaries might get delayed. It can also result into making crucial errors while processing such information.
Hence, it is very important to provide the business with all the accurate information for timely and sound payroll processing.
Making Incorrect Deductions- While payroll processing, making deductions are considered one of the most complex parts as there are both State and Central laws to be applied while making deductions like Employee’s Provident Fund (EPF), Professional Tax (PT), Employee’s State Insurance (ESI), Labour Welfare Fund (LWF) and Income Tax (IT)/TDS deduction. Excessive deductions can lead to lower take home salaries for employees.
Hence it is necessary for companies to be thorough and updated with all the laws regarding deductions.
Misclassifying Employees- In a company, all employees are not actually considered the same. There are independent contractors, freelancers, interns or temporary employees which are to be treated differently when it comes to payroll. Diversity in employees can lead to payroll issues.
Therefore, at the time of hiring, it is important to understand how they’ll work within an organization and treated according to applicable laws.
Not Accessing the Right Leave and Overtime Information- Leaves are managed differently across different organizations and there are also several rules for overtime according to State and Central Laws with certain exceptions. All of this is usually overlooked while computing payroll which leads to mistakes.
It can be avoided by knowing the importance of this rule for the business as it directly affects its employees.
Not keeping up with Regulatory Changes- Over time, payroll regulations keep changing. And keeping up to date with the change in significant regulations is very important for a business to avoid errors.
Hence, a company should try to be regularly updated with all the new or changed regulations regarding payroll.
No Proper Filing of Tax Returns- There are different set of rules for filing tax returns. It sometimes becomes a complicated process and directly impacts employees’ take home salary.
Therefore, all the tax deductions should be carefully made in accordance with the applicable tax rules so that the correct amount is reflected in employee’s accounts.
These are some of the issues a company can keep in mind to avoid making errors in a payroll. Though mistakes can be corrected but avoiding them is always considered better than wasting time and money in correcting them.
To know more about Payroll Outsourcing, call us at+91-8130464163