1. 18 What Is Management? Section 18.1How to Manage a Business
Section 18.2 Managing
Expenses, Credit, & Cash Flow

2. How to Manage a Business
18.1
How to Manage a Business
Learn about management functions
Study the management function of planning
Examine the management function of organizing
Investigate the management function of directing
Explore the management function of controlling
Understand the importance of a healthy business environment
Section 18.1: How to Manage a Business

3. What Is Management?
Management is the skillful use and coordination of all the business’s resources in a systematic and effective way to achieve particular goals.
Management Functions include:
Planning
Organizing
Directing
Controlling
Section 18.1: How to Manage a Business

4. Planning
Planning is an ongoing process of setting goals, deciding when and how to accomplish them, and determining how best to accomplish them.
Three types of plans are used in business management:
Strategic Plan. A strategic plan lays out a broad course of action to achieve a long-term goal.
Tactical Plan. A tactical plan outlines specific major steps for carrying out the strategic plan.
Operational Plan. An operational plan details the everyday activities that will achieve the goals of the tactical plan.
Section 18.1: How to Manage a Business

5. Organizing
Organizing is an ongoing process of arranging and coordinating
resources and tasks to achieve specific goals.
Organizing creates structure. It puts the people and resources in the right places and in the right combinations to maximize production and minimize costs.
One of the most important organizing tasks is choosing and hiring the best employees, training them properly, and assigning them authority and responsibilities.
Managers create organization charts that outline the chains of command within the business and the working relationships between different groups of people.
Section 18.1: How to Manage a Business

6. Directing
Directing is an ongoing process of leading, influencing, and motivating employees so they will work together to achieve specific goals.
Leaders must have good interpersonal skills. These are skills used by people as they interact with others.
The ultimate goal of directing is team building, which is motivating individuals in a group to work together to achieve a shared goal.
The three basic leadership styles are:
Authoritarian
Democratic
Delegating
Section 18.1: How to Manage a Business

7. Controlling
Controlling is an ongoing process of setting performance standards, measuring actual performance, comparing actual performance to the standards, and taking corrective action if actual performance does not meet the performance standards.
Businesses set performance standards on many components—production, costs, customer service, employee actions, equipment, finances, inventory levels, product quality, profits, and sales.
Many businesses use the controlling management function to monitor the quality of the goods or services they sell.
A quality control program is a program used by a business to ensure that its products or services meet specific quality standards.
Section 18.1: How to Manage a Business

8. Maintaining a Healthy Business Environment
Workplace climate refers to the general feeling in a business, and is shaped by the psychological states and attitudes of the people who work there.
A company image is the perception (thoughts, attitudes, opinions, and beliefs) that the public holds about a company. Companies build image every time they interact with the public.
Section 18.1: How to Manage a Business

9. Managing Expenses, Credit, & Cash Flow
18.2
Managing Expenses, Credit, & Cash Flow
Learn about managing expenses
Explore the role of credit in business
Investigate cash-flow forecasting
Examine ways to improve cash flow
Section 18.2: Managing Expenses, Credit, & Cash Flow

10. Managing Expenses Expenses are the costs of doing business.
Managing expenses is a two-step process that involves:
Knowledge. A manager must be knowledgeable about the expenses the business incurs.
Action. Once a manager knows the extent of existing costs, he or she can act to reduce future costs.
Section 18.2: Managing Expenses, Credit, & Cash Flow

11. The Role of Credit
Credit is the granting of extended time to pay off a debt.
When one business gives another business an extended payment time for purchased goods or services, it is called a trade credit.
When a business gives consumers an extended payment time for purchased goods or services, it is referred to as consumer credit.
Every person or business that has ever used credit has a credit history, which is a record of credit transactions and includes information about whether or not they were repaid in accordance with the credit terms set by the creditor.
Section 18.2: Managing Expenses, Credit, & Cash Flow

12. Forecasting Cash Flow
A cash budget is a record on which a business owner forecasts (predicts) incoming and outgoing cash flows for an upcoming period (typically a month) and later compares actual cash inflows and outflows to the forecasted amounts.
Forecasting cash flow is a three-step process:
List and Total Any Expected Incoming Cash Payments over the Next Month.
List and Total Expected Outgoing Cash Payments for the Next Month.
Subtract Expected Cash Outflows from Expected Cash Inflows.
Section 18.2: Managing Expenses, Credit, & Cash Flow

13. Improving Cash Flow
In general, businesses should continuously work to reduce cash outflows and increase cash inflows. Here are some methods they can use:
Take advantage of trade credit offered by other businesses.
Collect payments from customers as soon as possible.
Offer discounts to customers who pay in cash.
Do not allow customers to buy on credit if they have overdue bills. Insist they pay in cash.
Be insistent on collecting overdue payments.
Shorten the payment time for customers using credit.
Do not tie up cash in excess inventory.
Make sure inventory is not lost, damaged, or stolen.
Reduce cash paid out in salaries and wages.
Section 18.2: Managing Expenses, Credit, & Cash Flow