1. Entrepreneurship: Ideas in Action © Cengage Learning/South-Western ChapterChapter Operations Management 10.1 Operating Procedures 10.2 Inventory Management 10.3 Financial Management 10

2. Entrepreneurship: Ideas in Action © Cengage Learning/South-Western Chapter 10 Slide 2 Ideas in Action Andrew Jensen’s company developed after he provided entertainment at his parents’ anniversary party. Andrew’s advice to perspective entrepreneurs is to: follow your dreams follow your heart focus on whatever drives you to get up every day Entertaining and Planning

3. Entrepreneurship: Ideas in Action © Cengage Learning/South-Western Chapter 10 Slide 3 Lesson 10.1 Operating Procedures Goals Define the five functions of management. Describe four types of policies that should be included in an operations manual.

4. Entrepreneurship: Ideas in Action © Cengage Learning/South-Western Chapter 10 Slide 4 Terms manager management organizational structure authoritative management demographic management operations manual

5. Entrepreneurship: Ideas in Action © Cengage Learning/South-Western Chapter 10 Slide 5 Management Functions manager the person responsible for planning, organizing, staffing, implementing and controlling the operations of a business management the process of achieving goals by establishing operating procedures making effective use of people and other resources

6. Entrepreneurship: Ideas in Action © Cengage Learning/South-Western Chapter 10 Slide 6 Planning Strategic planning planning for the 3-5 year time horizon setting broad, long-range objectives Intermediate-range planning planning for the one-year time period set target dates for task completion Short-term planning planning for daily operations

7. Entrepreneurship: Ideas in Action © Cengage Learning/South-Western Chapter 10 Slide 7 Organizing Assignment of tasks determining which employee is responsible for specific tasks Grouping of tasks into departments grouping closely related tasks together

8. Entrepreneurship: Ideas in Action © Cengage Learning/South-Western Chapter 10 Slide 8 a plan that shows how the various jobs in a company relate to one another often represented by a chart Allocation of resources across the organization determining the most effective use of personnel Organizational structure

9. Entrepreneurship: Ideas in Action © Cengage Learning/South-Western Chapter 10 Slide 9 Staffing Managing the personnel needs of a business through: hiring training compensating

10. Entrepreneurship: Ideas in Action © Cengage Learning/South-Western Chapter 10 Slide 10 Implementing implementing directing and leading people to accomplish the goals of an organization management style the way a manager behaves toward and works with employees

11. Entrepreneurship: Ideas in Action © Cengage Learning/South-Western Chapter 10 Slide 11 the manager is directive and controlling democratic management employees are involved in decision making the manager provides less direction mixed management a combination of authoritative and democratic management authoritative management

12. Entrepreneurship: Ideas in Action © Cengage Learning/South-Western Chapter 10 Slide 12 Controlling Controlling is the process of: setting organizational standards ensuring those standards are met comparing actual revenues and expenses with projected revenue and expenses determining if operations are running effectively inspecting products and services to ensure they are meeting performance standards

13. Entrepreneurship: Ideas in Action © Cengage Learning/South-Western Chapter 10 Slide 13 What are the functions of management?

14. Entrepreneurship: Ideas in Action © Cengage Learning/South-Western Chapter 10 Slide 14 Operations Manual operations manual contains all the rules, policies, and procedures that a business should follow to function effectively employee handbook details the rules, policies, and procedures that apply to employees

15. Entrepreneurship: Ideas in Action © Cengage Learning/South-Western Chapter 10 Slide 15 set daily operating hours that are convenient for customers Customer Service Policies Customer satisfaction is the goal. returns follow-up service Operating Policies

16. Entrepreneurship: Ideas in Action © Cengage Learning/South-Western Chapter 10 Slide 16 often offered for customer convenience The policy should cover: delivery radius delivery fee delivery timeframe Safety Policies Employees should be trained in emergency procedures. Delivery Policies

17. Entrepreneurship: Ideas in Action © Cengage Learning/South-Western Chapter 10 Slide 17 What type of information should be included in an operations manual?

18. Entrepreneurship: Ideas in Action © Cengage Learning/South-Western Chapter 10 Slide 18 Lesson 10.2 Inventory Management Goals Prepare a purchasing plan for inventory. Describe the perpetual and periodic inventory methods. Determine how much inventory to keep in stock.

19. Entrepreneurship: Ideas in Action © Cengage Learning/South-Western Chapter 10 Slide 19 Terms perpetual inventory method stock card point-of-sale software system periodic inventory method stock turnover rate

20. Entrepreneurship: Ideas in Action © Cengage Learning/South-Western Chapter 10 Slide 20 Meet Inventory Needs inventory the stock of goods a business has for sale Inventory costs include: storage insurance taxes purchase price of inventory Inventory must be well managed if you want to make a profit.

21. Entrepreneurship: Ideas in Action © Cengage Learning/South-Western Chapter 10 Slide 21 Purchasing Plan The sales forecast can be used to calculate required inventory. Ending inventory = Beginning inventory + Purchases ─ Sales

22. Entrepreneurship: Ideas in Action © Cengage Learning/South-Western Chapter 10 Slide 22

23. Entrepreneurship: Ideas in Action © Cengage Learning/South-Western Chapter 10 Slide 23 What are some of the concerns managers have regarding inventory?

24. Entrepreneurship: Ideas in Action © Cengage Learning/South-Western Chapter 10 Slide 24 Track Your Inventory perpetual inventory method monitors inventory levels daily efficient avoids inventory shortages stock card a paper inventory record for a single item electronic versions available

25. Entrepreneurship: Ideas in Action © Cengage Learning/South-Western Chapter 10 Slide 25 the minimum amount you want to keep in inventory indicates when you should place an order to receive more inventory reorder point

26. Entrepreneurship: Ideas in Action © Cengage Learning/South-Western Chapter 10 Slide 26

27. Entrepreneurship: Ideas in Action © Cengage Learning/South-Western Chapter 10 Slide 27 Use a Computer point-of-sale software system updates inventory as each sale happens provides up-to-date inventory levels

28. Entrepreneurship: Ideas in Action © Cengage Learning/South-Western Chapter 10 Slide 28 taking a physical count of merchandise at regular intervals Take a Physical Inventory counting and recording actual units should be done once or twice a year can highlight discrepancies caused by a failure to record sales theft damage Periodic Inventory Method

29. Entrepreneurship: Ideas in Action © Cengage Learning/South-Western Chapter 10 Slide 29 How does the perpetual inventory method differ from the periodic inventory method?

30. Entrepreneurship: Ideas in Action © Cengage Learning/South-Western Chapter 10 Slide 30 Manage Your Inventory Costs of Carrying Inventory Costs can increase for many reasons including: obsolescence deterioration interest fees insurance storage

31. Entrepreneurship: Ideas in Action © Cengage Learning/South-Western Chapter 10 Slide 31 Stock shortages can lead to: loss of sales loss of customer loyalty Stock Turnover Rate the rate at which inventory is sold and replaced with new inventory Months of inventory to stock = Months in year ÷ Stock turnover rate Costs of Being Out of Stock

32. Entrepreneurship: Ideas in Action © Cengage Learning/South-Western Chapter 10 Slide 32 What three factors determine the amount of inventory you keep in stock?

33. Entrepreneurship: Ideas in Action © Cengage Learning/South-Western Chapter 10 Slide 33 Lesson 10.3 Financial Management Goals Describe strategies for managing cash flow. Evaluate a business’s performance through financial statement analysis.

34. Entrepreneurship: Ideas in Action © Cengage Learning/South-Western Chapter 10 Slide 34 Terms cash budget gross sales net sales

35. Entrepreneurship: Ideas in Action © Cengage Learning/South-Western Chapter 10 Slide 35 Manage Your Cash Flow Create a Cash Budget cash budget shows the projection of your cash coming in and going out estimated cash flow actual cash flow the differences between the two

36. Entrepreneurship: Ideas in Action © Cengage Learning/South-Western Chapter 10 Slide 36

37. Entrepreneurship: Ideas in Action © Cengage Learning/South-Western Chapter 10 Slide 37 Increase Cash Receipts discounts for timely payment tighter credit policies collect unpaid accounts receivable Decrease Cash Disbursements inventory reductions payroll deductions cautious use of credit from suppliers reduce variable expenses Improve Your Cash Flow

38. Entrepreneurship: Ideas in Action © Cengage Learning/South-Western Chapter 10 Slide 38 What are some ways you can improve your cash flow?

39. Entrepreneurship: Ideas in Action © Cengage Learning/South-Western Chapter 10 Slide 39 Prepare and Analyze Financial Statements Prepare Financial Statements balance sheet assets liabilities owner’s equity

40. Entrepreneurship: Ideas in Action © Cengage Learning/South-Western Chapter 10 Slide 40 revenues expenses net income or loss cash flow statement cash inflows cash outflows income statement

41. Entrepreneurship: Ideas in Action © Cengage Learning/South-Western Chapter 10 Slide 41 Analyze Sales by Product Sales records can: show trends and patterns be used to forecast future sales Analyzing sales by product will help you determine how each product contributes to the success of your business. can help you prioritize floor space for products

42. Entrepreneurship: Ideas in Action © Cengage Learning/South-Western Chapter 10 Slide 42

43. Entrepreneurship: Ideas in Action © Cengage Learning/South-Western Chapter 10 Slide 43 Analyze Net Profit on Sales Net profit on sales = Net income after taxes ÷ Net sales

44. Entrepreneurship: Ideas in Action © Cengage Learning/South-Western Chapter 10 Slide 44 Calculate Net Sales gross sales dollar amount of all sales net sales = gross sales ─ returns

45. Entrepreneurship: Ideas in Action © Cengage Learning/South-Western Chapter 10 Slide 45 Calculate Net Income After Taxes Gross profit = Net sales ─ Cost of goods sold Net income from operations = Gross profit ─ Operating expenses

46. Entrepreneurship: Ideas in Action © Cengage Learning/South-Western Chapter 10 Slide 46 Net income from operations ─ Interest expense Net income after taxes = Net income before taxes ─ Income tax paid Net income before taxes =

47. Entrepreneurship: Ideas in Action © Cengage Learning/South-Western Chapter 10 Slide 47

48. Entrepreneurship: Ideas in Action © Cengage Learning/South-Western Chapter 10 Slide 48 Why Net Profit on Sales is Important Net profit on sales = Net income after taxes ÷ Net sales Net profit helps to determine profitability of your business. can compare with prior years can compare against industry standards

49. Entrepreneurship: Ideas in Action © Cengage Learning/South-Western Chapter 10 Slide 49 Set and Meet Profit Goals Profit goals reflect the amount of profit you hope to earn during a particular year.

50. Entrepreneurship: Ideas in Action © Cengage Learning/South-Western Chapter 10 Slide 50 Breakeven Analysis breakeven point the volume of sales that must be made to cover all business expenses Profit occurs after the breakeven point is exceeded.

51. Entrepreneurship: Ideas in Action © Cengage Learning/South-Western Chapter 10 Slide 51

52. Entrepreneurship: Ideas in Action © Cengage Learning/South-Western Chapter 10 Slide 52 Why is it important for an entrepreneur to analyze the financial statements of the business?

53. Entrepreneurship: Ideas in Action © Cengage Learning/South-Western Chapter 10 Slide 53 PERFORMANCE INDICATORS EVALUATED Develop a partnership with business by describing partnership goals, planning activities, and roles of business and FBLA leaders. Implement the partnership with business project by describing activities, defining roles of participants, and encouraging involvement from business leaders.

54. Entrepreneurship: Ideas in Action © Cengage Learning/South-Western Chapter 10 Slide 54 Acquire knowledge of business operation by implementing an active business partnership. Develop a stronger understanding and relationship between school and the business community. Describe the results from the business partnership project.

55. Entrepreneurship: Ideas in Action © Cengage Learning/South-Western Chapter 10 Slide 55 THINK CRITICALLY 1.How can a business benefit from participating in the partnership? 2.How can the FBLA Chapter benefit from the partnership?

56. Entrepreneurship: Ideas in Action © Cengage Learning/South-Western Chapter 10 Slide 56 4.What is one strategy that could be used to increase involvement of more businesses in this project? 3.Why is publicity so important for this project?