Business operations refer to activities that businesses engage in daily to increase

the value of the enterprise and earn a profit.

Business operations - The most important factors that influence an operation and
thus, the final result of business operations is represented by 4Ms: Manpower,
Method, Machine, and Materials (Bao, 2019).

Operations management is the process that generally plans, controls, and

supervises manufacturing and production processes and service delivery.

Importance of Operation Management (OM)

For a production or manufacturing company to be successful, OM is a major unit that
must first stand. OM sees to the effective delivery of the products; it provides plans
and schedules what and how it must be done. With OM, people achieve more, and
productivity is increased.

Diagram of Business Operation

The figure shows the IPO (Input-Process-Output) of a business enterprise. As shown

in the figure, the 4Ms (Manpower, Method, Machine, and Materials) are in the input;
in the process is the way these 4Ms are utilized, and the output is the product or
service being offered by the organization.

Manpower. This refers to the human workforce involved in the making of products
(Aduana, 2016).
Method. The manner or the system of transforming raw materials into a finished
product is called method (Aduana, 2016).

Machine. This refers to the equipment used in the manufacturing of goods or

delivery of services.

Materials. This simply refers to raw materials needed in the manufacturing of goods.
Value Chain refers to the process where the business acquires raw materials, adds
value to them through manufacturing and other procedures to produce a finished
product, and then sells it to consumers. Supply Chain, on the other hand, signifies
the phases and stages the product or service goes through to reach the consumers
(Tarver, 2020).
The supply chain includes the flow of all information, products, materials, and funds
between different stages of creating and selling a product to the end. The concept of
the supply chain comes from an operational management perspective.

Five Steps in the Value Chain Process

1.Inbound Logistics: This involves receiving materials, storing them, and controlling
inventory.
2.Operations: This involves activities wherein the entrepreneur adds value to the
product through manufacturing and assembly of merchandise that transforms raw
materials into a finished product.
3.Outbound Logistics: This involves activities required in reaching end users.
Examples are warehousing, recording of inventories, order fulfillment, and delivery.
4.Marketing and Sales: This involves activities associated with convincing
customers to procure the offered product.
5.Service: This involves activities that maintain and improve the value of the
product, like customer assistance and warranty provision.

Supply Chain Functions (Tarver, 2020):

• Product development
• Marketing
• Operations
• Distribution
• Finance
• Customer service

Developing Business Model

A company's plan for making a profit is referred to as a business model (Kopp,
2020). It identifies and explains the goods and/ or services to sell, target market, and
projected expenses. Business models are essential for new and established
business enterprises. They help new businesses to attract investment, hire talents,
and encourage management and staff. Established businesses should regularly
update their plans to cope up with trends and challenges in the future.
Three Sections of Business Model (Parsons, 2020):
1. Resources - Everything it takes to make something: design, raw materials,
manufacturing, labor, and so on.
2. Dissemination - Everything it takes to sell that thing: marketing, distribution,
delivering a service, and processing the sale.
3. Rate - How and what the customer pays: pricing strategy, payment methods,
payment timing, and so on.

A financial forecast is an estimate of future financial outcomes for a company or

project, usually applied in budgeting, capital budgeting, and/or valuation.

Simplified Financial Forecasting (Advani, 2020)

1. Start with expenses, not revenues.

2. Forecast revenues using both conservative reality and aggressive dream.

3. Check the key ratios to make sure your projections are sound.

a. Gross margin. This refers to how much of the total revenue is the total direct cost
during a period (i.e. quarterly, annual, or bi-annual).

b.
Operating profit margin. This refers to how much of the total revenue is the total
operating cost—direct cost, overhead, excluding financial costs—during a period i.e.
quarterly, annual, or bi-annual).

c. Total headcount per client. You must divide the number of your employees by
the number of expected clients. You should consider revisiting your forecast about
revenue and payroll expense as your business grows.
Top 5 Forecasting Problems Your Business May Face

Financial planning is the cornerstone of every business’s continued success. The

process of allocating funds and determining how to best use those funds to achieve
both short- and long-term business objectives is vital and powerful. Even though
there is a well-prepared financial planning, your business could encounter some
problems like the following:

1. Organizational misalignment
2. Financial forecasting inefficiencies and lack of data credibility
3. Operational data issues
4. Cumbersome financial consolidation
5. Difficulty with translating foreign currency

Benefits of Financial Forecasting

Financial forecasting is really beneficial and will aid you and your business to:
• assess the success of your efforts to determine the long-term viability or value of an
activity
• take control of your cash flow and purposefully direct your company
• develop benchmarks for use in future forecasts
• perform contingency planning during challenging financial times
• anticipate the impact of new expenses
• identify financial problem areas and their causes
• reduce financial risk
• create an environment of certainty and stability
• make future budgeting much easier

Components of Financial Forecasting

These elements feed into a financial forecast:
• Monthly financial statements
• Risks and opportunities on the horizon
• Actions you can take or are taking to minimize risks and capitalize on opportunities
• Resources available to bring the forecast to fruition
• Obstacles that can potentially arise and plans for overcoming them

Profit is the money a business pulls in after accounting for all expenses

The three major types of profit are gross profit, operating profit, and net profit--all
of which can be found on the income statement.
1. Gross profit is the sales minus the cost of goods sold. Sales are the first line item
on the income statement, and the cost of goods sold (COGS) is generally listed just
below it.

2. Operating profit is calculated by deducting operating expenses from gross profit.

Gross profit looks at profitability after direct expenses, and operating profit looks at
profitability after operating expenses.

3. Net profit is the income left over after all expenses, including taxes and interest,
have been paid.

This simplest formula is total revenue – total expenses = profit. Profit is calculated
by deducting direct costs, such as materials and labor, and indirect costs (also
known as overheads) from sales.

BUSINESS PLAN - is a written document prepared by the entrepreneur that

describes all the relevant external and internal elements involved in starting a new
venture

Implementation – process of executing a plan or policy so that a concept becomes

reality.

IMPORTANCE OF BUSINESS IMPLEMENTATION

1. Change brings about change meant to help improve the company or solve a
problem.
2. Organizational Development will make workers feel valued, help maintain or
improve employee retention.
3. Increased Cooperation helps unite departments, opens the line of
communication and create a diverse culture within the organization and increases
efficiency and productivity.
4. Clear Priorities refers to priorities or deadlines that will guarantee a realistic
implementation of the plan.
5. Moving Forward is to make business implement and execute the strategies to
move forward and grow
BUSINESS IMPLEMENTATION STRATEGIES
➢ Get staff and management involved
➢ Invest in training
➢ Consider outside factors
➢ Open communication

Business operation – everything that happens within an organization to keep it

operating and earning money.

BUSINESS OPERATION ELEMENTS

1. Process assures the business operations impact on productivity and efficiency.
2. Staffing refers to the number of people needed to do the work planned in the
work process.
3. Location refers to the place where the business operation is happening.
4. Equipment or Technology refers to the digital machines needed for optimum
business operations.

PRODUCT refers to something you can pin point at.

SERVICE refers to any activity that you cannot drop on your foot.

TYPES OF PRODUCTS

1. Durable – this is to have a long interval between repeat purchased because of the
long-lasting nature of the product

2. Non – durable – this is to have stronger repeat purchases because products are
consumable

3. Services – these are essential tangible because there are no physical products
involved.

A business record is a document (hardcopy or digital) that records business

dealings.

Business records include meeting minutes, memoranda, employment contracts,

and accounting source documents.
IMPORTANCE OF KEEPING RECORDS

1. Monitor the progress of the business – this is to closely monitor the progress of
the business like its improvements, which items are selling, and changes to be
made.

2. Prepare the financial statements – this includes the income statement and
balance sheet.
➢ Income statement shows the income and expenses of the business for given
period of time.
➢ Balance sheet shows the assets, liabilities, and equity in the business on a given
date.

3. Identify sources of income – this information will help to separate business from
non-business receipts and taxable from non-taxable.

4. Keep track of the deductible expenses – this will keep the record especially the
expenses that will be greatly needed when preparing the tax return.

5. Keep track as the basis in property – this record serves as the basis amount of
the investment in property for tax purposes.

6. Prepare the tax returns – preparing the income tax return.

7. Support items reported on the tax returns - usually keep the records for three
years including the bills, credit card and other receipt, invoice, checks or any proof of
payments to support deduction or credits claimed on the return.

FINANCIAL FORMS/RECORDS

Financial forms/records usually have set of standards or reporting, and any

differences are very minimal.

Account’s receivables – these are valuable not only to decision on extension of

credits, but also to make accurate billing and maintenance of good relations with
customer. These records will reveal how effective is your firm’s credit and collection.

Inventory records – these records will be used to control your inventory items.

Accounts payable – these liability records show what your firm owes.

Sales records – these could be used in the analysis of the effectiveness in

advertising and promotions.
Production records – these records provide a basis for your product costing and
detect lost profits/costs as a result of idle manpower.

Payroll records – show the total payments you pay your employees and provide a
basis for computing some legal payments.

Cash records – show all receipts and disbursements made by your firm.

Duties and Responsibilities of Book keeper

➢ Recording transactions such as income and outgoings and posting them to
various accounts.
➢ Processing payments
➢ Conducting daily banking activities
➢ Producing various financial reports
➢ Reconciling reports to third-party records such as bank statements.

Types of Record Keeping Systems

1. Electronic records - the stock records are stored electronically

2. Written records - are common and cheap but at times difficult to read due to
varying and unique handwriting.

SPECIFIC TYPES OF ACCOUNTING RECORDS

1. Journals – is the book of original entry. It is where all business transactions are
chronologically recorded for the first time.

Guidelines in Using the General Journal

1. Date column – it shows the date of occurrence of the transaction. The year and
month are not rewritten for every entry unless they have changed, or a new page is
needed.

2. Particular – it shows the account debited and credited as well as a brief

explanation of the transaction is entered on the next line slightly indented from the
credit account.
3. Posting Reference – it is used when the entries are posted until the amount
which are transferred to the related ledger account.

4. Debit Column – it is first money column where the amount of the debit account is
entered.

5. Credit Column – it is the second money column where the amount of the credit
account is entered.

When to Debit?
When cash or non-cash items are received, the said cash or non-cash items must be
recorded in the debit column. This means that the debit balance increased. It is
called Value Received.

When to Credit?
When cash or non-cash items are given, the said cash or non-cash items must be
recorded in the credit column. This means that the credit balance is increased. It is
called Value Parted With.

The following steps will be undertaken in determining account balances for every
account title
1. Add all the debit side to generate total debit.
2. Add all the credit side to generate total credit.
3. Subtract total debit to the total credit.
4. Determine the balance of each account.
2. Ledger – is another book of accounts used to record business transactions and
events. It considered as the book of final entry.

The ledger appears like a capital letter T. it has two sides namely the debit side and
the credit side. Both sides consist of the same columns which are as follows:

1. Date
2. Particulars
3. Folio or Post Reference
4. Amount
TRIAL BALANCE - After all the account in the ledger have been added and
balances have been computed, the next bookkeeping procedure is to prepare the
trial balance.

Trial balance is the listing of the debt and credit balances of accounts from general
ledger with the following purposes:
1. To prove the equality of debit credit
2. To determine the nominal accounts to be closed
3. To serve as basis of making draft financial statement

Once the trial balance is not in balance possible errors could have been committed
in the bookkeeping process such as:

1. Erroneous recording in the journal

2. Erroneous posting to the ledger

3. Mathematical mistakes
4. Omission

Forecast is advance information that could help us prepare and ready for any
incoming event.
Profit is the gross income. The amount of gross profit provides information to the
entrepreneur about revenue earned from sales.

Cost refers to the purchase price of the product including of the product including the
total outlay required in producing it.