Improve Business Efficiencies with Stock, Quality, and Credit Control

Q 4 Stock Control. (2x5) x2 20 mks Definition: Is concerned with keeping optimum stock levels so that it doesn t have too much stock or too little stock. lead to efficiencies because you have the right stock, in the right place, at the right time to meet production requirements and satisfy consumer demand. Stock control can achieve efficiencies by eliminating the costs associated with carrying too little stock i.e. production stoppages due to a lack of raw materials and components for production, and lost sales orders because of a lack of finished goods for sale.

Saves money holding too much stock means larger warehouse and related costs, can increase insurance premiums By ordering stock only when needed, cash flow/ working capital is positively affected Makes effective use of storage space available Identifies slow moving stock EDI/ISDN facilitates this process Reduces risk of stock going out of date/becoming obsolete/goods being damaged or stolen

Quality Control Definition: Is concerned with checking/reviewing/inspecting work done to ensure it meets the required standards. As part of a quality control system the business may achieve a quality control symbol such as an ISO 9000 award. This symbol may be recognised worldwide and would be of huge benefit to the business in marketing its products internationally.

Effective Quality control leads to efficiencies in business because it minimises the costs associated with selling faulty goods to consumers Reduces Administrative costs associated with the return of goods. Prevents Loss of reputation and the ensuing lost sales. Reduces Lost productivity due to time spent dealing with complaints. leads to efficiencies in business because consistently high quality products are being sold, resulting in repeat purchasing, consumer loyalty and the ability to charge higher prices, as the business may become the market leader.

Credit control Credit control means monitoring which customers are given credit and for how long and ensuring they pay on time. It aims to minimise the risk of bad debts from customers who buy on credit. Firm controls the amount of goods sold on credit. Debtors pay debts on time. Bad debts are kept to a minimum. The credit worthiness of potential customers is checked in advance. Good credit control will ensure that maximum cash is collected from debtors. Firms will not have to relay on bank overdrafts to deal with cash shortages.

(B) Strategies to manage change (4x5) 2+3 state and expand Senior Management commitment to the change process. Consultation with trade unions and employee representatives regarding the proposed changes/involve all in the decision making process. Effective Communication between all parties throughout the change process. This will reduce uncertainty and tensions. Adequate funding for the proposed changes/ funding of new technologies and staff involvement/training.

Negotiation remuneration packages, productivity agreements, changes in work practices etc. Employee Empowerment/training/job rotation/job enlargement etc. Change in management style from controller to facilitator . Funding/Rewards- Adequate funding for the change process/remuneration packages for staff.

(c ) Effective Communications between stakeholders (4x5) Manager and employee Management and shareholders Management and lenders/investors Management and customers Managements and government agencies

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Data Protection Act 1988 & 2003 This act requires that any organisation storing information on other people on a computer or in manual files must ensure that the information is 1. Accurate 2. Kept up to date. Stored information can only be used for lawful purposes.

Data Subjects: the individual about whom personal information is kept. Data Controllers: the people or organisations who keep information about other people. Data Processor: a person or organisation who processes personal information for a data controller. If your information is being held for the purposes of direct marketing, you can have your details removed.

Rights of private individuals (Data Subjects) Right of access to files: they can request a copy of the information held on them. This must be supplied within 40 days of request. Right to correction of errors: you are entitled to have inaccurate data about yourself corrected or deleted. Right to compensation: can sue for any damage suffered as a result of someone wrongly using information about them. Right of individuals not to be subjected to automated decision making: individuals are entitled to have human input into the making of important decisions relating to them.

Responsibilities of business & other organisations (Data controllers) Allow data subjects access information about them. Correct or delete incorrect information. Only obtain personal information in a way that is fair and open. Use information only for the purpose for which it was given to them. Secure information from being seen or taken by others. Ensure the information is accurate and up to date. Retain the information only for as long as is necessary.

Data Protection Commissioner Appointed by the Government and is an independent power to enforce the provisions of the Act. The Commissioner also 1. maintains a register, available for public inspection, 2. Gives general details about the data handling practices of many important data controllers, such as Government Departments and State-sector bodies, that keep sensitive types of personal data.

3. Helps businesses develop codes of practices to help them operate within the Act. 4. Investigates complaints from the public about businesses that may be breaking the law. If the Commissioner does not accept your complaint, you may appeal to the Circuit Court against his/her decision within 21 days.

Q5 (a) Discuss the functions of HRM using the following headings Performance Appraisal (5m) Training & Development Recruitment & selection Identify vacancies/prepare job description & specification/advertise/screen applicants/conduct interviews/select the most suitable

Q5 (b) benefits of Theory Y approach to managing (3 x5) Morale is higher important role Greater effort benefit business Increased output/better quality/customer satisfaction sales Intrapreneurship is encouraged better ideas product innovation Responsibility passed to staff reduces workload management can focus on important issues Less industrial relations unrest saves time & money Employees are empowered competent to be managers

Boxty Ltd 2011 ROI 14% Current Ratio 1.5:1 Acid Test Ratio 1:1 Debt/equity Ratio 0.3:1

Boxty Ltd.2012 Net Profit Sales Current Assets (incl Cl. Stock) Long Term Loan Ordinary Share Capital Current Liabilities Retained Earnings Closing Stock 55,000 800,000 160,000 200,000 400,000 80,000 100,000 90,000

ROI Net Profit /Capital Employed x 100 = 55K/400k +100Kx100=7.86% Current Ratio CA/CL 160k/80k=2:1 Acid Test Ratio CA-Cl. Stk/CL 160k-90K/80K= 0.88:1 Debt/Equity Ratio Long term debt/ord. share capital+ retained earnings 200k/400+100k=0.4:1

Analyse the significance of the trends over the two years for the following stakeholders: (i) Investors/ Shareholders;5m (ii) Suppliers;5m

Existing shareholders/Investors will be interested in the ROI. It has fallen by 6.14% from the previous year The return is still higher than that of risk-free investments in financial institutions of about 3% Dividends payable are impacted by the level of loan interest and repayments Potential investors will be interested to see whether it is worthwhile investing money into the business.

They will have particular interest the debt: equity ratio. This will give investors an indication of how highly / lowly geared the business is. In this case the business had a lower debt to equity ratio in 2011 (0.3:1) compared to 2012 (0.4:1). Potential investors may be concerned that the business has increased long term debt with high interest payments.

(ii) Suppliers Suppliers who have supplied goods on credit will be interested in the businesses ability to pay for the goods. They will have particular interest in the liquidity ratios (Current ratio and Acid test ratio). The Current ratio will give them an idea of the businesses ability to pay its current liabilities out of its current assets. This business in 2011 had 1.50 available to pay for every 1 liabilities. 2012 with 2 available to pay for every 1 liabilities. (positive stock ?

The Acid test ratio indicates a businesses ability to raise cash immediately to pay for its current liabilities. Suppliers will be interested in whether this business can pay back its debts immediately, if needed. In 2011 the business had 1.00 available immediately to pay for every 1 it owed. The situation deteriorated in 2012 with the business only having 88c available to pay for every 1 it owes. Failure to improve on this will result in the business having difficulty in buying goods on credit in the future.

(iii) Employees The employees wish to know how secure their jobs are and the likelihood of them being able to negotiate a pay increase. They would be very interested in the profitability of the business. The drop in the NPM% diminishes their chances of obtaining a pay increase. Management could be looking at ways to reduce the wages bill.

Profitability would be of great concern to an employee if they own shares in the business, as they would be interested in the amount of dividend being paid out. Dividends payable depend on the net profit of the company. In this situation the business in 2011 ? Decrease not good 2012 Net Profit 55,000 Sales x100 800,000 x100 = 6.88% very low

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