ACCOUNTING SYSTEMS Essay Example
This technical report critically examines the organization and its internal business environment. First, the report gives a description of the organization. The report then gives the organization’s background information followed by a description of its key goals. Further, it identifies the risks that are a threat to those goals, the revenue cycles, and business cycles with an attachment of the organization’s database.
The firm is in the retail of home products industry. It trades in a wide range of products such as freezers, refrigerators, and other home appliances. It is an in a very competitive industry thus provides quality goods and services to its customers. Despite this, it boasts of a huge market share, a phenomenon that can be attributed to its competitive prices and customer loyalty.
In any organization there has to exist several business processes for it to remain competitive in today’s world. The organization has a number of core businesses. First, is sales and marketing as a core business process1. It has to identify its customers, deliver goods and services in exchange for money. It has obligation to its customers of informing, reminding, and persuading customers to buy the goods. Therefore, sales and marketing is a core activity to the business. It is achieved through extensive advertising campaigns coupled with other strategies so that the organization makes sales. Another core business process is accounting2. It entails keeping and updating records of the activities of the business. The organization through the accounting department has to be held accountable of cash and tax returns. Accounting also helps determine the amount of profit made in a given trading year. Notably, its accounting systems have been computerized making the process more efficient.
Product and service delivery is yet another core business of the organization3. It has to ensure that it constantly provides quality goods and services to its customers in exchange for money. In an attempt to ensure repetitive purchases from its customers, it offers after sale services and customer care support in case a customer needs their helps. A superb product and service strategy is a key factor in good performance of the organization.
Finally, product development is also a core business for the organization4. It has to undertake research and development in its operations to ensure that it provides quality goods and services to its customers. In addition, research and development is equally important for its production process. An efficient production process helps a business cut on its cost of production. Consequently, it is in a position to provide goods and services to its customers at very competitive profits thus increased profits.
Its corporate vision is to be a world-class organization in the retail of home products. On the other hand, its mission is to supply its esteemed customers with quality products to meet and surpass their needs. It is no doubt that their corporate vision blends well with its mission that has an effect of making it competitive on a global scale.
Business growth is one of the goals of the organization. Business growth encompasses an increase in its market share, production of more quality goods, and a soar in its profits. It hopes to meet this goal through empowering its employees. Employees are provided with the goal of the company and encouraged to integrate their personal goals with the bigger goal of the company. In the end, the organization is thus able to meet its goal.
Another goal of the organization is ensuring a good flow of information between its employees and management. Good communication is key to the success of any business. The organization intends to facilitate it through making meetings more productive. That is, identify the purpose of every meeting and sticking to that objective throughout the meeting. It has an effect of reducing time wasted on unnecessary matters thus making the meetings more productive
The organization also intends to foster understanding among its workers. Its employees who largely work on tasks as teams need a consensus in their commitment and understanding to accomplish the task. Notably, understanding also makes workers more productive through increased innovation. They are able to tackle problems with an open mind approach that results to better ideas of production of goods and services thus meeting customer needs.
Raising capital is also another goal of the organization. It intends to expand its capital base to increase its production to meet soaring needs and wants of its customers. The organization intends to strike a balance between debt and equity to come up with an optimal capital structure. A huge capital base is beneficial to the organization particularly in that it will give it economies of scale in its production processes. Consequently, production costs are likely to subside thus the organization is able to price its products competitively.
Another key goal of the organization is corporate responsibility. It intends to give back to the society through donations and public education to improve the general welfare of the public. In addition, it has very strict policies on payment of corporate taxes. Corporate responsibility is particularly good for the organization since its helps it in winning trust of the public thus increased customer loyalty.
Finally, the organization intends to strike a good relationship with its customers and suppliers. It intends to have a credit system in place for its trustworthy customers and maintain a good relationship with its suppliers. A good relationship with its customers fosters customer loyalty while a good relationship with suppliers ensures quality raw materials.
Business risks are the threats that hinder a company from meeting its goals and objectives. They can broadly be classified into internal and external business risks. Internal business risks are those that arise from within the organization while external business risks are as result of external forces.
Internal Business Risks
Organizational and Operational (Moderate)
They arise from the organization’s operations and administrative ways of the management and include inaccurate record keeping, use of obsolete technology and volatile supply chains such that the organization periodically runs out of stock5. An organization that suffers from these organizational and operational failures is likely to lose its customers who regard such a company as unreliable.
Strategic risks (High)
They hinder an organization from meeting its goals. Strategic risks encompass variation in product demand and technological change6. Both variables have an effect of changing customers view on an organization’s products deterring it from meeting its goals.
Research and Design (Moderate)
For an organization to remain competitive, it has to carry out innovation consistently. Innovation ensures quality production processes and products. Therefore, an organization that cannot undertake innovation adequately risks collapsing thus unable to meet its goals.
Financial risks (Moderate)
They entail the financial resources available to an organization. An organization that has less financial resources may be less empowered to carrying out research and design, extensive advertising campaigns and pay its suppliers. Consequently, it reduces the overall chances of an organization meeting its goals.
Employee Risks (Moderate)
Workers play a significant role in the success of any organization. Instances where a key employee falls sick or resigns and a lengthy industrial action are detrimental to any organization. Both have an effect of an organization being less equipped to meet its goals.
External Risk Factors
Compliance Risks (Low)
An organization has to conduct its operations as stipulated by the authorities. Policies and laws are dynamic thus change daily, thereby affecting compliance of an organization. In extreme where a company cannot meet certain policies such as taxation and health and safety it risks running out of business thus cannot meet its goals.
Natural Risks (Low)
An organization conducts business in a given location. Natural disasters such as floods, earthquakes, and prolonged power failures significantly deter an organization’s activities. Consequently, it is unable to meet its goals.
Technological Risks (High)
In today’s highly competitive world, an organization has to keep up with the latest trends in technology. It could do so through interaction with other organizations, attending shows and exhibitions and online reading. However, an organization that is unable to keep up with the latest trends in technology is faced out of business thus less chances of meeting its business goals.
Political and Economical Risks (Extreme)
A change in government regime and policies could significantly affect a business. For example, a regime that passes and implements policies that deter business activities could significantly affect an organization. Further, economic risks such as recession, inflation, and high interest rates could deter an organization from meeting its goals7.
A business cycle describes economic occurrences during a certain period. A business cycle has four stages, which can help achieve the aforementioned goals addressed. The four are as follows:
Contraction: A period whereby the economy starts to slow down. Growth rates are at their lowest almost turning negative.
Trough: The economy worsens off and the GDP could be negative. It takes place during recession. The economy deteriorates, but there is a chance of it improving.
Expansion: The economy starts recovering exhibiting a positive GDP. An economy with good leadership and policies in place can stay in this phase for long. However, unemployment may still be rampant especially if expansion is preceded by a very harsh contraction phase.
Peak: At this stage, the expansion phase slows. It is prior to regression.
A number of factors cause business cycles such as demand and supply. Consumers in anticipation of a better future tend to buy more goods in the present time. They also tend to buy more goods especially where they anticipate inflation in future days. An increase in aggregate demand has an effect of organizations hiring more employees. An increase in employment and demand marks the expansion phase.
A business cycle also depends on availability of capital that relies on interest rates. Organizations could raise capital through either equity or debt financing. When capital is highly available it could turn an economy from expansion to peak. Peak phase is marked by high inflation that is detrimental to business.
R evenue cycle
The three data entries are important mainly because of a number of reasons. Firstly, it helps in the pooling of information. Pooling of information provides ease of extraction of information that user can rely on to support a decision. A firm decision can be reached upon through considering previous data and present data to determining a trend thus arriving on a decision.
Another importance is that it saves on organization’s IT costs to manage information. A database enables organization of data thus can be easily retrieved with minimal costs.
It also helps protect the organization’s data from malicious persons. A username and password login could be put in place to protect data. Another importance is that it helps the organization in its marketing strategies. A database helps collect essential information about buyers such as frequency and quantity that could be used in formulating a marketing strategy. An organization can monitor operations through the data collected. Therefore, if a problem arises it can promptly be corrected. Finally, the organization can keep its data orderly. For example, data regarding customers, suppliers, and employees is organized.
Controls to Mitigate and Residual Risk Identification Risks
The organization should develop a risk management plan. Securing of an insurance policy is one way. An insurance policy helps insure the company against unforeseen losses8. For example, when fire burns part of the organization, it is able to find compensation thus business is not terminated. In addition, the organization should insure key employees. If a key employee falls sick or passes away, the organization can claim compensation to replace that position. Therefore, an insurance policy as a risk management plan is beneficial to ensure the organization meets its goals.
Seek help from an internal control expert. An internal control expert is an individual employed by firms to identify weaknesses and correct them. They are able to view a problem more rationally and correct it9. It helps mitigate risks prior to their occurrence thus the organization is in a position to meet its goals.
Another way through which the company should mitigate risks is through being conscious about cash10. It entails keeping updated books of records and engaging in activities that provide revenue to the organization. Proper management of cash flows insures against bankruptcy thus organization stays in business meeting its goals.
A review of the internal controls would also help mitigate risks11. To mitigate financial risks, the organization should implement an internal control where employ sign a document before issuing and upon receiving payments. It encourages transparency thus no embezzlement of funds. Another internal control is limiting the number of people with access to the internet at the workplace. It protects against leaking of important information regarding the organization online.
Anderson, Chris. «Top Ten Core Business Processes.» Bizmanualz. Last modified 2009.
Business Victoria — helping business grow. «Types of business risk | Business Victoria.»
Accessed May 21, 2014. http://www.business.vic.gov.au/disputes-disasters-and-succession-planning/how-to-manage-risk-in-your-business/types-of-business-risks.
Jackson, Steven, Roby Sawyers, and Greg Jenkins. Managerial Accounting: A Focus on Ethical Decision Making. New Jersey: Cengage Learning, 2008.
Kent, Jessica. “How to Reduce Business Risks | Chron.com.” 2014. Accessed May 20. http://smallbusiness.chron.com/reduce-business-risks-95.html.
Spiceland, J. David, and Sepe James. Intermediate Accounting. New Delhi: McGraw-Hill Publisher, 2001.
Weygandt, Jerry, Paul Kimmel, and Donald Kieso. Managerial Accounting: Tools for Business
Decision Making. New York: John Wiley and Sons, 2009.
“Steven et al, Managerial Accounting: A Focus on Ethical Decision Making (New Jersey: Cengage Learning, 2008), p.15”
“Weygandt, J et al Managerial Accounting: Tools for Business Decision Making (New York: John Wiley and Sons, 2009), p.24”
Ibid Steven et al, p.19”
“Chris Anderson, Top Ten Core Business Processes 2009, http://www.bizmanualz.com/blog/what-are-the-ten-core-business-processes.html”
“Business Victoria — helping business grow. Types of Business Risk | Business Victoria,” 2014”
Ibid, Business Victoria — helping business grow.
“David Spiceland, and James Sepe, Intermediate Accounting (New Delhi: McGraw-Hill Publisher, 2001), p.43”
“Jessica Kent, “How to Reduce Business Risks | Chron.com, 2014” Accessed May 20. http://smallbusiness.chron.com/reduce-business-risks-95.html”
Ibid, Spiceland and Sepe, p.45
11 Ibid, Kent, n.pg
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