The lender monitors procurement and maintenance of fixed assets, using relevant software to categorize transactions, to confirm the business plan presented is being followed. Recording Equipment & Appliances, Furniture & Fixtures, Real Estate Property, Vehicle pictures, serial and model numbers to meet general insurance claims, scheduling maintenance to extend the asset life span and applying depreciation rates to monitor the assets book value, provides the lender with a valuable asset to repossess.
Purchases, processes and inventory levels of the core products, offered for sale, are also closely monitored by the lender to spot variations from the presented business plan and deviations in set trends. The lender periodically sees purchase orders, process or inventory reports with associated values and quantities and with the software, can compare and spot items that are overstocked from various cost centers, by location and red-flagged by reorder levels and lag-times, allowing for better decisions on credit approvals.
Costing and pricing calculations are automatically generated within the product file, greatly assisting the operation to not under sell its true cost. Operational, administrative and financial expenses as entered produces a prorated factor, which is applied across the product range, along with every direct input unit value, results in an accurate cost and using selective pricing formulas, the software calculates a profitable price. The lender benefits from the knowledge that no product can accidently be sold under its prorated cost.
Recording all sales activities, is chief among the benefits to both the lender and the borrower, limiting theft by assigning one cashier, shift responsibility, while recording breakages or spillages and managing credit sales, with access to any credit account for total payment. A point of sale device, linked directly to the main software, instantly updates both payment transactions including bank deposits, and inventory records, including re-ordering. The lender, with full access to all computer analysis and reports, can offer the borrower seasonal support and may even reduce interest rates as the business grows and the borrower proves to be of less risk, having transformed the presented business plan into a strong balance sheet.
Such a balance sheet reflects much more than financial ratios, it shows discipline, commitment, dedication and responsibility. Leadership is the essential attribute that moves small into medium or large. Small sales volumes are increased by listening to what customers and consumers need and want, and supplying it on a competitive and timely basis. Small purchases or production volumes are expanded by clearly communicating to suppliers and factory workers, to address cost and quality as driven by sales. Small assets grow as profits are reinvested into core or other internal types of operations, but assets values increase or decrease as a direct result of the surrounding economic growth.
Discipline is necessary to stay the course and implement the presented business plan, with contingencies for every foreseeable event that may have a negative effect and financial reserves to deal with unforeseen events and reposition the business back on track. Complying with all laws, rules and regulations, with experienced professional guidance, will offer some level of comfort against fines and penalties, which can cripple or completely destroy business. The insurance industry offers health and life compensation to workers and management, and offers to replace, repair and rebuild assets lost, damaged or destroyed under its general policy, but this financial payment is never enough to reposition the business, hence calling on reserves, lenders or investors, for survival.
Commitment is vital to attain pre-assigned evaluation points and is frequently measured by financial indicators or customers served. Whether the business is labeled ‘for-profit’ or ‘non-profit’, loyalty to the mission is paramount but the mission itself must be clear, achievable, and measurable, mainly because, as in life, business has no fixed definition of success. Clearly communicated to all stakeholders, the mission commits all to act in the best interest of each other. Achievements detailed in the strategic plan are scheduled and based on prudent research and available material and human resources. Measuring results in weighted value, percentage gains or losses against preceding conditions, for example, a ten percent gain in net asset value or a five percent increase in customer accounts, year over year.
Dedication is crucial to all stakeholders; workers, management, lenders and investors, simply to emphasize and understand the concerns of each group. Workers are not just devoted persons employed and paid periodically to undertake specific tasks and responsibility; they are families depending on the business expansion. Management, also employees with families, assigned persons that carry the greatest portion of the responsibility for the implementation of the strategic plan. Lenders or bondholders depend heavily on the business ability to protect the principal borrowed and pay the interest income, owed by the growing business. Investors, who are also shareholders and may from time to time serve as directors or as employees, depend on dividend payments, growth in net asset value, directors’ fees or management salaries, to meet their own family obligations.
Responsibility is essential to make and execute the difficult decisions, to meet targets and achieve the mission, though delegated to management, with productive elements assigned to workers on a daily basis, but ultimately this responsibility belongs to the board of directors. The roles remain the same no matter the size of the entity, and so-called small business persons must understand how to separate these roles. Whether as employees involved in daily physical or mental tasks; as a worker, one is expected to sell, purchase, produce, maintain, record and bank, or in management, one must set targets, schedule, assign, evaluate and report. While, it is the board of directors who are, elected from among investors or appointed based on a needed skill, responsible for the strategic plan, a long-term vision and an attainable mission.
The strategic plan details all historical data and records work-in progress and future tactics, departmentalized and formulated under policies and procedures that are guided by industry rules and regulations, and national laws. Extracts from the strategic plans are used to update and communicate to investors via an equity prospectus, to lenders via a business plan and to all stakeholders and in some cases, the general public via an annual report. The strategic plan directs management implementation and workers’ productivity, again no matter the size of the entity, to meet targets and achieve the mission. However, it is important to note that most mission statements call, in one way or another, for a pleasant work environment.
Corporate Governance is the official term presently used to encapsulate non-financial objectives. Understanding that financial earnings do not exist in a vacuum is the key to maintaining both customer loyalty and net asset growth. There is a need to preserve a climate of social and political stability, respect for all laws and a juridical system resulting in low incident of crime, and high levels of moral behavior. This is broken down to individual performances, at every level and in every role, at home, school or work, in each and every communication and interaction, connecting to dots between every aspect of daily life and economic growth, more than a code of ethics, but moral responsibility.
The individual’s character carries more risks and rewards than financial ratios will ever indicate. Workers at a five-star hotel can present numerous problems because of cultural differences. For example, if the employment pool is restricted locally, individuals may naturally speak using a tone that is totally acceptable in the surrounding areas, but hotel guests, at such pricing levels, may find offensive. On the other hand, a unique group of individuals, which can be motivated to bridge cultural divides, will offer exclusive benefits to build referrals and customers’ loyalty. Hence, the damage or benefits will never be clearly reflected on the balance sheet.
Management, inclusive of enterprises with fewer than twenty employees, is constantly networking in the local society to open doors, gaining access to other leaders and decision-makers, to receive benefits that are not expressed or disclosed financially. While, also focusing on gaining market share, it must also recognize the numerous benefits competition brings. Social responsibility can be seen as indirect promotions, build the corporate image and goodwill, but such plans and activities have a more direct purpose, to raise the standard of living in the surrounding communities, making and sustaining a safe, investment friendly environment which encourages and is responsible for net asset growth.
Rationale
T.A.J & Associates Company Limited uses this occasion to comment on topics that have been covered, both academically and by the mainstream media, to add its opinion and point out investment opportunity, not to invoke any social action.
