Category: Commerce Notes PPT

A Company when formed requires a head start in regard to finance and resources, in this view the Company Needs to be promoted. So, the entire process involved in this method of Promotion by the promoters of the Company is known as ‘Promotion of a Company’. 

In simple words, Promotion means spreading information about any goods or services offered by a Company.

In terms of marketing, the term means making people aware of any particular brand, product, or service.

General Promotion includes,

However, Promotion for marketing includes,

• Sales Promotion- It is the process of increasing the sales of products. It includes advertising, campaigning, etc.

• Personal Selling- In this selling, a salesperson persuades customers to purchase a product.

• Non-personal Selling- It includes marketing and selling strategies like advertising, direct selling, product placement, guerilla marketing (a technique in which products are sold without meeting customers).

• Direct Selling-  In direct selling, a distributor can earn money either by selling the products directly to the customers (single-level marketing ) or by multi-level marketing in which a seller earns money both by direct selling and appointing new direct sellers and commission on their sales.

• Product Placements- This strategy refers to providing a space in a television program or a movie so the information of the product can reach a large audience at a single time. 

Also, Promotion can happen when a marketing Company provides coupons and discounts on the products to create brand awareness.

Promotion is an integral part of a Company that differentiates a business from its competitors. Every business needs to promote its products to create a brand identity and reach its target sales. 

Students who want to become an entrepreneur in the future and want to establish their companies are required to grasp this content to know the details about the formation of a Company, as Promotion is a crucial step in the formation and structuring of a Company Moreover, an extra detailed study is also required to be invested here. 

Idea Behind the Formation of Company

With the entire process by which a company is brought into existence, the birth of a Company and determining the purpose of its Formation is too studied vividly, and the persons who conceive the Idea of the Formation of the Company and invest their initial funds in the growth of the Company are known as the promoters for that particular Company. 

The promoters enter into the preliminary contracts with legal personalities and make arrangements, advertisement and the circulation of the Company’s prospectus is also done at the expenses and the efforts of the promoters. 

Define Promoters of a Company

Promoter is a person who conceives or catches the idea, studies the prospects of the business critically and analytically, chalks out a scheme for the organization, brings together the required workforce, materials, machinery, finance, and managerial ability, and then launches the enterprise.

Promoter is a firm or a person who does the preliminary work which is incidental to the formation of a Company, incidental works include – promotion, incorporation, floatation also the Promoters encourage the investors to invest their funds in the Company at the time of their promotion. 

 

Role of a Promoter

The role of a Promoter can be performed by an investment banker, underwriter, or even by a stock Promoter, who can perform the role in full or partially. 

• Promoters owe a duty of utmost good faith, so as to not mislead the potential investors. 

• They disclose all material facts about the Company’s business.

• Promoters have a fiduciary relationship with the Company and the investors or the shareholders of the Company, they must not hold any type of conflicts in decisions and. 

• Any gain they acquire from the property of the Company must be submitted to the Company only. 

• The Promoters are cautious and abandon themselves from the unfair advantage of their position as a Promoter. 

• A Promoter can be a shareholder in a particular Company. If the Promoter is the only shareholder, the Company may have to disclose such information prior to selling shares in compliance with the Securities and Exchange Rules

Function of Promoter

The function of a Promoter can be that of an investor as well as of a shareholder and also of the sole task of a Promoter who personally put the Company in action. The functions of the Promoter are listed below:

The Promoter conceives the idea of forming the Company. This is the initial step towards the formation of a Company.

The Promoter, after generating an idea, has to make a thorough and detailed investigation of the prospects and the capability of the business which is to be done with the sources of supply, nature of demand, the extent of competition, and the capital requirements.

The Promoter also is required to verify the reports made by the experts are free from bias. 

After verifying the idea, the Promoter needs to launch the projected Company.

At this stage, the Promoter needs to plan about setting out the mode of getting the required finance, negotiate with the vendors, check the availability of loans, etc.  

After making necessary arrangements and modes of raising the required finance, he needs to print the documents like the Memorandum and file with the registrar and then kick start their publication, all this has to be done in accordance with the provisions of the Companies Act.

Define Legal Consultants of a Company

Though legal consultants are not promoters “technically”, they play a major role during business setup and promotion. A legal consultant is a person who gives professional and expert legal advice to a business or individual on a contractual basis. A legal consultant works with a law firm and is a part of a legal counsel team and gets hired by an enterprise to look after its legal matters. Usually, the CEO or Company leaders take legal suggestions from them before taking any step for the Company’s advantage.

Role of a Legal Consultant

A lawyer can be a legal consultant for any enterprise. He can work for a business either full-time or part-time. His roles are 

• Overseeing Contracts- Legal advisors look for all vendor and client contracts. These consultants help companies to know and understand law-related formalities. In terms of brand promotion, they help clients to know the risks, advantages, and some financial related issues associated with it.

• Provide Cost-Effective Legal Suggestions- A legal consultant gives commercially sensible and cost-effective suggestions for the effective legal management of promotional contracts.

• Drafting- A legal consultant is responsible for reviewing previous promotional contracts and drafting new contracts for their clients. They are well aware of the terms and conditions associated with different promotional contracts.

• Damage claims- When the sentiments of a Company get hurt by its competitor during brand promotion, it can claim compensation for the same from the competitor. This involves a hectic legal procedure that is handled by a legal consultant of the Company. He drafts the necessary documents for the financial losses faced by the enterprise due to defamation.

 

Functions of a Legal Consultant

The functions of a legal consultant involve managing and operating the legal activities in a Company. He makes every legal process simple, so the business owner can focus on other perspectives such as finances, marketing, etc. Further, he assists enterprise owners to draft a promotional plan with minimum legal faults. His functions include,

• Provide Legal Defense- Legal consultants defend the companies from legal proceedings. For example, if a competitor Company demands a claim for its defamation due to brand promotion, he stands against the prosecution and defends his client.

• Legal Correspondence- These legal experts handle the legal communications with the promotion team in the case of marketing.

• Resolving Disputes- Legal experts also solve disputes between two parties. They can solve these problems without making anyone go to court. 

 

Promotion Stage of Company Formation

There is a defined stage to the promotion of Company’s formation, the stages include as hereunder:

1. Stage 1. Promotion Stage:

Promotion is the foremost stage in the formation of a Company. He performs aggregated activities to design and to bring an enterprise to operate as a business. 

2. Stage 2. Incorporation:

This is a registration stage, where the registration of the Company brings it to existence. A Company is correctly constituted only when this is duly registered under the Act.

3. Stage 3. Capital Subscription Stage:

This ‘capital subscription stage’ and ‘commencement of business stage’ are only relevant in the case of a public company having a share capital. In this stage, necessary capital is to be acquired for the Company. 

4. Stage 4. Commencement of Business Stage:

After receiving the certificate of incorporation, a private company can start its business, while a public Company can start its business after getting the ‘certificate of commencement of business.

According to Harold Koontz, “Management is an art of getting things done through and with the people in formally organised groups. It is an art of creating an environment in which people can perform and individuals can cooperate towards the attainment of group goals”. As a manager, one has to effectively manage the employees to get better outcomes. Practises implemented by the managers for better management are known as Recent Trends in Management. 

Emerging Trends in Management 

Managerial trends keep changing from time to time based on dynamic market conditions. Some of the emerging trends in management are : 

Total Quality Management 

Total Quality Management (TQM) is a systematic approach followed by the entire organisation to efficiently achieve the company’s objectives to provide services and products with a high level of quality that satisfies the customer. TQM aims at continuous improvement of practises in the organisation.

The Principles of TQM are as follows:

• Customer Focussed- Customer satisfaction is the basis for determining the quality. An organisation may perform various methods to promote better quality but ultimately quality is determined by the customer.

• Continuous Improvement- Continuous improvement steers an organisation towards creativity to find more ways and become more competitive and meet the stakeholder expectation.

• Total Employee Involvement- All employees are committed to performing and accomplishing common goals when an appropriate environment is provided for them.

• Process-Centric- The processes are well defined in this approach and are continuously monitored to find variations.

• Systematic and Strategic Approach- A systematic and strategic approach is involved to accomplish the mission, vision and goals set by the organisation.

• Decision Making-  Data collection and analysis play an integral part in performance evaluation and decision making.

Crisis Management

A crisis is any situation that poses a threat to an organisation or its stakeholders. Such situations are something that cannot be predicted or prevented. However, what organisations can control is how they respond to the crisis. Crises can be grouped as follows:

1. Natural Disasters

2. Confrontational Crisis

3. Rumours

4. Technological Crisis

5. Workplace Violence

6. Organisational Misdeeds

7. Malevolence

8. Man-made Disaster

Risk Management

A risk is an uncertain event happening in an organisation that may lead to a positive or negative result. It is a future event that has not occurred. A risk that has already taken place is considered an issue.

Risk Management is a  process of identifying, assessing and prioritising risks followed by the application of resources to minimise or control or monitor the impact of negative future events or to take maximum advantage of positive risks.

Change Management

Change is to modify or make something different from the previous state of a thing or a condition. Change management is a process in which the organisation implements change by preparing and supporting the employees, taking necessary steps for change, etc. Monitoring the activities before and after the change is implemented to ensure its success.

Change often includes many different entities in an organisation. A systematic approach is to be followed to bring in the transition and alleviate disruption. There can be resistance to change by people or processes or systems that are outdated.

Globalisation

Due to globalisation, various global business practises have emerged. Global management refers to practises followed to manage the international business.

When a business runs in different countries, its managers face challenges in such global scenarios. There is a need to have proper planning, decision making, controlling and organising because of the differences in time zones, distances and cultural factors. Communication is the key to leading the employees across borders.

Global managers must have a thorough understanding of environmental and competitive issues.

Apart from the generic trends, there are specific trends related to operations, human resources and marketing management. A few are mentioned below.

Recent Trends in Operations Management

• Supply Chain Management- Supply chain managers have the responsibility to fulfil the end-user needs at a quick pace because of shorter product life cycles, demanding customers and technology expansions. Supply chains are now revamped to incorporate digitalization along with traditional physical operations to create improvement in business outcomes.

• Shrinking Product Life Cycle- In contrast to the earlier years where a product developed would stay in the market for a longer period, the need to rapidly change in a short period due to the fast-expanding technologies can be seen nowadays.

Organisations are forced to bring in the rapid development of products to be more competitive and innovative, thus a product gets replaced by a new one quickly.

Recent Trends in Marketing Management

• Customer Relationship Management- This plays a very important role in retaining customers by maintaining a good relationship with them by addressing their grievances on time and offering them desired products and services.

• Emphasis on Quality, Customer Satisfaction, and Retention- Marketers emphasise providing the best quality to customers and also intend to “offer more for less” to give utmost satisfaction to their customers. This helps in retaining their customers for the long term.

Recent Trends in Human Resource Management

Workforce diversity is the inclusion of people in an organisation based on various aspects such as age, gender, cultural background, physical abilities, and disabilities, etc.

Organisations that embrace workforce diversity will have a wide pool of applicants to choose from as their employees. When people from different backgrounds collaborate, they bring in innovation and new ideas to solve organisational problems and promote business growth. A problem will be dealt with in different perspectives from different people in contrast to a homogeneous group or an individual’s perception which may be limited. 

Different people think differently because of the experiences they come from, different backgrounds and having solved problems in different manners in the past. It also attracts diverse customers.

Trends in Leadership Management

As a leader one needs to interact with numerous people. They are experts in different areas and they have different technical skill sets. Soft skills play a vital role in communicating with all these people. Soft skills include time management, interactive skills, communication skills, cultural intelligence, etc. Technical skills also referred to as ‘hot skills’ are specific to a role but soft skills are learnt over time and experience. Soft skills enable satisfaction in the workplace, improve the performance of employees, build a positive work environment, increase leadership potential. Hence firms are investing in soft skills training courses for their employees.

Nowadays women are seen in leadership roles and they are very successful. In the workspace, gender equality is seen, it leads to professional growth and overall development. Many female managers have set an example for successful leadership Programs.it improves the economic growth of the country. It increases performance and enhances the reputation of the organisation. It helps in talent recognition and retaining employees. Many companies are trying to reach gender equality.

Post pandemic, the entire world shifted to remote working and It is very flexible. Before the pandemic, people used to work remotely for various reasons like health, child care, etc. The latest technologies smoothen the process of remote work. work-life balance is achieved. It helps in recruiting people from different countries, backgrounds and also helps in having a pool of talent that promotes the growth of the business.

Flat organisational structures enhance the communication between the employees, morality, and help in decision making. It enhances the responsibility of employees and improves job satisfaction.

As the world is progressing with the latest technologies, competition increases. So there is a need to update yourself. At every stage of your career path, master your role and don’t be outdated.

When leaders accept that they don’t know about these specific topics, then consultants from outside are given an opportunity. They can share their experiences and knowledge. They can facilitate communication skills, leadership skills, interactive skills, time management and other technical skills.

Every year, millions of products are manufactured for consumption. These products vary from daily consumption items to high priced purchases. The selling of goods to the final consumer is termed Retail Trading. Retail trade is usually the final step that takes place in a distribution channel. After a product is manufactured, wholesalers buy bulk quantities of these products. Next, the retail traders buy from these wholesalers or sometimes directly from the manufacturers depending on the scale of the enterprise.

Retail trading is a business activity that involves the sale of finished goods and products to consumers. Traders involved in a retail business, buy the required goods from wholesalers who, in turn, collect from the factories. They can also buy the products directly from the manufacturers, thus, acting as a link between manufacturers or wholesalers and customers.

In the retail business, traders generally buy products in bulk quantities and sell them to the customers at relatively higher prices than when they were bought. Thus, the profit margin is also maintained by the retail trader. In this article, categories and importance of retail trading for wholesalers and manufacturers as well as the services provided by the traders will be discussed ahead.

Classification

Retail business/trade means purchasing the goods from the wholesalers/manufacturers and selling them to the final consumers for a profit. Usually, retail businesses buy bulk quantities at a lower price and then sell them to the customers at a higher price to make profits. Generally, retail traders are classified into two categories:

1. Itinerant Traders: The selling point, in this case, is not fixed. Itinerant traders move to different places to sell their products. For example, the vegetable vendors, weekly markets, peddlers and hawkers. Generally, in this case, traders come to consumers and make their sales. These traders sell usually lower-priced products and products of daily use like vegetables etc. These kinds of traders cannot set a fixed price of the commodity and will sell the same product at different prices at different places. For example, vegetable vendors who sell door to door will sell at higher prices than the vendors at a market. Usually, these are low price items and readily consumable.

2. Fixed Shop Traders: Shops are set up in designated places for carrying out the trading of goods and products. Shops are usually set up near residential areas for attracting customers easily or in marketplaces. These kinds of retail traders have an additional benefit of providing customer satisfaction by various means of services such as giving them guarantees, discounts, etc. Grocery stores, clothing retailers, departmental stores, supermarkets are typical examples of such trading places. This is the more common type of retail trading where traders set up shop in a marketplace or near residential areas. Consumers can come up to these retail traders or shops as they are commonly mentioned and purchase the goods they need. For example, Supermarkets, Departmental stores, General stores, Speciality stores, malls etc. These traders provide more services to the customer. Customers also prefer to buy products from these traders as they are more reliable than itinerant traders and they build a relationship with them. These retail traders give customer satisfaction by giving them guarantees, repairs, discounts and credit facilities to their customers.

 

Importance for Manufacturers/Wholesalers

• Distribution of Goods – Manufacturers need not worry about distributing their products in the country themselves. They can set up plants in a particular place and the retail traders and wholesalers will take care of selling their products to the final consumer.

• Personal Selling – Some products require selling them to the customers personally. For example, garments are something the customers need help with. So the retail traders bring in their expertise of selling them to the customers.

• Enabling Large Scale Operations – Retail traders take their place in the market by acting as a middle man between the manufacturers and their customers thus enabling the manufacturers to produce large quantities.

• Market Information and Feedback – Retail traders also play an important role in the feedback mechanism. Retail traders are usually the point of contact with the customers. So any defect or improvement that can be brought upon the product can be conveyed by the retail traders to the manufacturers.

• Promotional Activities – Sellers also definitely help in promoting any product. How they arrange their products in their showcase is very important for manufacturers. Product placement is given utmost importance in any supermarket for this reason as part of their promotional activity for a product of some brand.

 

Services Provided to Consumers

• Availability – The need for a particular product may arise anytime. So to fulfil that need, products are available with the retail traders. Whenever the consumer needs something, he can go to his local store and purchase that product.

• New Products – Retail traders can help the customers also by telling them about newer available products which could be more suitable to the consumer needs. Here, this is subject to the sellers’ desire to sell a particular product because it is more suitable or maybe because his profit margin on that product is higher.

• Convenience in Buying – As a consumer, there is a limit to how much we can store at our houses and even then we might need something urgently or at an odd hour. Retail traders give the consumer convenient buying time so that the consumer can purchase what he needs when he needs it.

• A Wide Selection of Goods – The options available at retail traders are wide-ranging giving the customer the freedom to purchase a product of whatever brand or quantity he wishes to.

• Services – In addition to these, consumers can also avail themselves of services like repairs or credit facilities if you are a regular customer at retail traders.

Importance of Retail Trading

Retail traders play a significant role in the channelling of the distribution of goods from manufacturers to consumers. 

Manufacturers only think about the production process and manufacturing of useful goods, distribution of those products are handled by the retailers. Products are collected from the factories and distributed in different places before finally selling to the customers.

Some products such as garments may need to be marketed to the customers properly for selling the product. This is also taken care of by the retail traders. 

Retail traders come in direct contact with the customers, therefore, they act as the feedback mechanism for the manufacturers and also act as advertisers to the customers on behalf of the manufacturers. They desirably help present products to the customers so that they are noticed.

In grocery stores and departmental stores, products for daily use are always available for customers to be worry-free, as well as new or updated products are also available for the customers to try out. Also, when customers are out to buy, they buy in small quantities and often take much time as per convenience which is provided by the retailers, they also undertake the needs of the customers and provide them with better products that may bring customer satisfaction and also result in higher profit margin for the traders. Since retailers keep a wide variety of products, customers can shop according to their needs based on the choice of quantity, brand, flavours, etc. Retail traders also give them the benefit of repairs, credit, guarantees and other services that bring customer satisfaction.

Small businesses play a vital role in the economy. Think of the luxurious car that you see on the roads daily. The final product is the outcome of many small businesses that are integral parts that help the engine to run. It is these millions of small industries that get you the dream car. It has been seen that 65-75% of the innovation comes from small business industries. Here you will learn about the major role played by the small business and all the issues that are faced by them.

Role of Small Business in India

1. Industrial Units: In an economy like India, the majority of the industrial units are because of small business. This today accounts for more than 95% of the units. Almost 40% of the total industrial units are contributed because of the small industries. The small businesses are bagging around 45% of the total exports that happen from India.

2. Labor – Oriented: Small businesses generate a lot of labor. They give many employment opportunities to those living in rural and semi-urban areas. The small businesses help to lift the weight of unemployment in any economy. This is a significant role that they play predominantly in a country like India. India has a large labor force and the Indian government also encourages small industries that employ and utilize labor. The government encourages small businesses by drafting various policies and offering low-interest rates.

3. Human Resource: The small businesses rank next to agriculture to employ in the Indian economy. As compared to many big companies, the small businesses are capable of generating the maximum employment opportunities for each unit of capital that is invested. This makes the small business the second largest employment generator in the economy.

4. Utilization of Local Resources: The local community needs and demands let the small businesses to emerge in the semi-urban and the rural areas. The small businesses are community-based, and these are focused to work for and generate employment in a few areas. This lets any business utilize local resources like talent, raw materials, demographic opportunities and labor. When there is ample mobilization and utilization of any local resources, this helps to improve the economic condition of a particular area.

5. Flexible and Adaptable: Any new business opportunity gets captured at the correct time. Small businesses get an edge when it comes to adapting and growing in the light of any upcoming changes. The small business usually is the manufactures and the distributors, and they are thus capable of generating a personal touch with the business and with their clients as well. There is also no government intervention in the case of small businesses as these are limited in finance and size.

6. Promotes Development & Growth: Development of the region plays an important role in contributing to the country’s development. The establishment of small businesses in any region or area helps to uplift the lifestyle, earning of the people residing. Businesses bring in more exposure to foreign markets, production scale and the overall evolution of state as well as workers. 

7. Increased Tax Revenue: The industries need to pay the required amount of tax to government bodies, which is in turn used for the development of rural regions and to fulfill the demands of cities. When businesses operate, they do look for profits. And when more profits come in, more taxes are devoted to the government of the country. The taxes therefore generated are contributed to upliftment services such as healthcare, education, defense field and many more. 

 

There are however many challenges of small enterprises along with the opportunities that are faced by them. 

 

Problems of Small Businesses

These are the problems faced by small businesses.

1. Finance

The major small business problems faced is the inadequacy of funds to funnel in the operations. This hinders the business from developing. The small business does not have enough creditworthiness that is important in the capital market, and thus there are financial problems faced by small businesses. The industrial investors or the banks ask for collateral as security. The small businesses operate in the semi-urban and rural areas, and this makes it difficult for them to get their finances.

2. Raw Material

Businesses need raw materials for production. They need some input to generate output. The raw material quality is the challenges faced by small businesses as it depends on what is inputted into it. However, it is possible that because the small business is tight on the budget, they are not able to get raw materials of good quality. Also, because these industries purchase in small lots, they do not have a lot of bargaining power. The storage facility is also an issue here. This is why the small business needs to be quick to produce and to sell the goods. This is among the major problems of small scale business because they cannot hold on to their inventories for long.

3. Managerial Skills

The small business operations are done by limited employees. In most cases, a single person only will manage all the operations. The manager has a lot of pressure to meet production demands. Also, it is possible since the small business cannot hire well-read managers. The managers may lack the basic managerial skills that are needed to operate any unit. These are the challenges of small business.

4. Skilled Labor

Skilled labor is among the problems of small scale enterprises. Small businesses have a fund shortage because of which they are not able to employ skilled labor to do the job, which is one of the challenges of small scale business. They cannot pay very high wages to their employees, and thus they have to make do with a low skill level. This results in a productivity drop, and the labor rates are high. This again is a major concern in the production operations.

5. Marketing

Here are the small business marketing problems. The small business needs to sell the product to make profits, and for this, they need a marketing channel. The business needs a marketing channel that can help it achieve its sales goals. Because of the lack of infrastructure, direct marketing is not possible for these companies and is one of the problems of small entrepreneurs. The lack of funds hinders the small business to hire a middle man to make the sales. These middlemen exploit these companies by paying a low price and delaying payments. This is another of the challenges facing small business enterprises. 

 

The small business plays a key role in the economy of the country. There are many problems with small enterprises. However, if the country has to fulfill its aim of becoming a global hub of manufacturing, then it does need small business in its country. As is rightly said by Amarendra Sinha, Special Secretary and Development Commissioner at India’s Ministry of Micro, Small and Medium Enterprises, it is the small business that can lead the charge of manufacturing.

Some Suggested Solutions to Overcome The Problem

In the early stages, let that business be small or big, problems do come. But all it depends on how one overcomes and tackles different situations that appear no way. These are some suggested solutions that one can adopt:

• Using online tools to keep a record for inventory, sales receipts or any other important reports. This would help managers to keep close attention to all the happenings in the business. 

• Time Management needs to be well planned before, especially for small businesses. The reporting managers or staff must closely look up timesheets of employees and prepare some strategy for quick responses and work on time. 

• If possible, make one online store to mark digital visibility. Nowadays, being digital is one of the most important aspects. As everyone searches through online search engines before buying or visiting any shop. 

• Any business comes with plenty of risks. And sometimes they are just more frequent than needed. So, insurances play an effective role in managing the accidental damages caused to any of the parts of the business. Insurance promises safety for employees, staff, businesses, investors and for customers too. Good coverage is always a good friend for investors. 

Do’s & Don’t Before Starting any Business 

Do’s:

1. DO consider the business name descriptive and Compellent enough to the target audience. 

2. DO plan business meetings periodically to keep a check on milestones achieved and future tasks. 

3. DO host some business greetings for inter-company relations tHis will help employees and the company to compare with the outside world and match up with their accuracy. 

4. DO well plan your finances beforehand. Also, it is always advisable to keep a good accountant that will help your business to very less go into debt and maintain good financial records over the years. 

5. DO get associated with some lawyers and professional experts to get help for all the official documentary work needed to start a business.

6. DO take thoughtful risks. As even a single wrong step would pull you back 6 months or more in the business era. 

7. DO acknowledge the strengths and weaknesses. It will help the company to make strong fundamental decisions and ill in turn help to grow the business. 

Don’ts:

1. DON’T over project the sales. Being optimistic is good, but anything but being ‘over’ has never helped anyone. 

2. DON’T ignore or misjudge your competitors. Any business should never underestimate anyone in the industry and should be considered as an equal opponent irrespective of the factors associated. 

3. DON’T ignore the future. Whenever you start the business, do consider the future scope of that business. Chart out some five to ten-year plans along with the goals and missions to be accomplished. 

4. DON’T do everything yourself. Because ‘teamwork makes the dream work’. Businesses require a lot of energy, time, dedication and patience consistently. Hence a good team will always help you to get some good sales. 

5. DON’T ignore social media. More than 70% of businesses are now investing in social media and there’s definitely a good reason attached to it. Social media will help early budding businesses to grow and gain brand visibility.  

The Industrial Revolution in Europe gave rise to the modern version of Cost Accounting. In simple words, keeping track of all costs for an industrial organization is known as Cost Accounting. It is the role of a cost accountant to see that all types of costs are included properly during the accounting process. There are multiple scopes and functions of cost accounting that you should know properly. Here, you can find all the details. There is a big role of cost accounting in decision making for an organization. The large organizations hire experienced cost accountants who can be the support system. 

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Scope of Cost Accounting

The leading scores of cost accounting are discussed here briefly. It is the function of the cost accounting department of an organization to work according to the scope.

1. Controlling Cost

For any business organization, cost control is one of the vital acts to execute as it affects the level of profit. Cost accounting reports give the organization a chance to sort out where cost control can be done without hampering the level of production. 

A business entity can make the new budget according to the reduced cost and follow it for a period to check if it works.

2. Ascertainment of Cost

Cost accounting is done mainly to keep the data and design a business structure that can run on a specific cost. The business entities tend to follow this specific cost when implementing on production. This is known as the Ascertainment of cost. 

Much of the process is done depending on the analysis. The proper analysis helps in ascertaining the right cost for the organization’s production. Different parameters of cost are included when the ascertainment analysis takes place. Some types of cost are actual costs, historical cost, marginal cost, etc. 

3. Theoretical Needs

Cost accounting has its own theoretical value. It is statistically done and acts as the data to the company. Many entities go for cost accounting on a yearly basis as they can keep the records of the cost. Furthermore, the theoretical form of cost accounting helps the organization to make decisions regarding their business. 

Cost Accounting Functions

There are multiple functions of cost accounting that an organization has to provide keenness. Only then can it run properly. The key functions of cost accounting are factually mentioned here:

• Cost accounting is the process that exposes all the cost-related data for every department. This increases the transparency of every department. It assures the managerial board of the business entity for its proper functioning. 

• Ascertaining the cost for every unit of product that a business entity manufactures. It helps the organization to set the selling price.

• Cost wastage is a potential danger for any business entity, and timely cost accounting helps to restrict it prominently. The managers can spot the fields where wastages are occurring and they can work on minimizing it.

• After a successful cost accounting session, the managerial board can make an overall budget for an organization. Apart from the budget, the reports of cost accounting can help the executive board to activate plans for wagers and employees. 

Cost accounting reports can be the best way to understand the spheres of the entity where no cost would be needed anymore. A business entity can discontinue that entity in such cases. 

Roles of a Cost Accountant

The roles of cost accountant  are given below in brief:

• The primary role of a cost accountant is to set up proper communication with the heads of different departments and take all the cost-related records in a financial year.

• Analyzing all the costs of different departments and working in sync with the other cost accountants in the team. 

• Getting access to the total value of the inventories and noting down the worth.

• Work as a team to clear the month-end close and record all the cost-related information in the database. 

• Observing the inventory of an organization at the end of a financial year and recording it correctly.

Each business needs to confront fierce opposition under vulnerability conditions or circumstances. In addition, hazards implied in running of a specialty unit are likewise expanded because of speedy changes made in a friendly, political and monetary climate. These progressions make both positive and troublesome effects on the business. In this manner, every specialty unit ought to change or change its arrangements based on the circumstance prerequisites. Thus, a cutting edge business turns out to be increasingly more mind boggling in nature.

In former times, the size of the specialty unit was tiny and no sharp contest. Subsequently, there is no need for change in business strategies because of changes made in the friendly, affordable and world of politics. Also, the finance manager has close contact with every one of the representatives, providers and clients. Thus, he knows it all.

In any case, these days, the business is large in size and complex in character and is working under merciless competition. Hence, the money manager requires all sorts of data exhaustively to get ready proper business strategy. Just based on itemized data, a financial specialist can make quality choices and achieve success.

The customary monetary book-keeping neglects to outfit a wide range of data that are fundamental for successful working of business. Consequently, another bookkeeping framework arose and was created for example Cost Accounting as a part of Financial Accounting. This part of bookkeeping has been quickly extended with its creating strategies and methods in the field of its application.

Just monetary outcomes and monetary place of a business for a given timeframe and on the last date of such a given period separately are given by the Financial Accounting System.

A financial specialist can’t be ready to control and direct the business adequately with the assistance of such data. Henceforth, the Cost Accounting assumes the liability of producing the data that are profoundly helpful for controlling the tasks with the end goal of expanding productivity and decreasing the costs and subsequently incrementing benefit.

Cost Accounting standards were found in application as soon as the fourteenth century. Simultaneously, the current expense bookkeeping technique was set up toward the end of the nineteenth century. Be that as it may, the expense bookkeeping standards got significant and grew not long before the finish of the Second World War. Logical Management gives a premise to the advancement of standard costing.

Targets of Cost Accounting

The following are the targets of cost bookkeeping.

1. Knowing about Cost

The primary reason for cost bookkeeping is investigating the costs with the end goal of knowing about the cost of the unit of result, of a task, of an interaction or of an activity. It includes the designation of consumption.

2. Practice Control over Cost

Principles are set and real are contrasted and guidelines. Assuming that there are any distinctions which must be brought before the administration for appropriate activity. The expenses of various periods are gathered with the end goal of cost control.

3. Forming Policies

Cost Accounting records supply essential and sufficient data to the administration with the goal that the administration can outline sound strategies on promoting, money, faculty and so forth.

For instance, how much expanded benefit by presenting another item is delineated with the assistance of cost data.

4. Fixing the Selling Price

A selling cost can’t be fixed without knowing the all out cost of the predetermined item. The selling cost is fixed by adding a specific sum or level of benefit to the cost. Accordingly, the costing records supply the data like absolute expense, fixed expense and variable expense. This data is important for fixing the selling cost.

5. Augment Output and Profit

By utilizing the expense bookkeeping procedures, the administration can build the degree of result and benefit moreover. The expense bookkeeping records might call attention to the flimsy parts of an association. In this way, the administration can make a proper move to build the result and benefit.

6. Cost Negotiation

The fundamental businesses might need to deal with issues of value exchange with the public authority specialists. The Cost Accounting System gives a premise to such an exchange.

7. Gauging

The administration can gauge the money position on a specific date with the assistance of a money financial plan. Moreover, it is plausible to anticipate expanded or changes in benefit with the assistance of changes in the business blend or item blend.

8. Arranging of Capital Expenditure and Capital Structure

The expense bookkeeping information connected with working expense, cost conduct at various degrees of exercises, speed of turnover, working capital necessities and such are exceptionally valuable for legitimate preparation of capital consumption and capital construction.

9. Confronting Depression

Cost decrease and cost control are essential during the discouragement period. The explanation is that the selling cost ought to be the most minimal. If not thus, the business can’t make due.

The least selling cost is fixed by diminishing the essential costs, keeping away from superfluous costs, choosing new item or item blend, looking through new deals regions, outlining new deals strategy, making cost cognizance, lessen the wastage, redirecting to new line of exercises and such. Thus, an association might confront the downturn for compelling work.

10. Wanting to Close Down

The last advance of an association is to close down the office. A Cost Accountant might suggest closing down a division in the wake of concentrating on the patterns of different conditions well ahead of time with the goal that much capital isn’t lost due to late shutting down.

11. Assists with taking Make or Buy Decision

The expense bookkeeping records supply the data connecting with the costs brought about to make an item. The expense of such an item is contrasted with the rate at which a similar item is accessible in the open market.

On the off chance that the market rate is low, the Cost Accountant suggests purchasing the item in the open market. If not thus, a similar item might be produced. Thus, the expense bookkeeping assists the administration with taking a choice of making or purchasing a predefined item.

Elements of Cost Accounting

A concise clarification of the elements of cost bookkeeping is introduced underneath.

1. Accounting

Accounting includes recording of cost by set up or foreordained order.

2. Cost Control

The expense control is practiced through cost assortment, cost investigation, cost show and cost translation.

3. Cost Analysis

Cost Analysis manages assurance of various connections among costs and different determinants of expenses.

4. Cost Comparison

The expense of elective items, exercises, strategies or regions is looked at in the field of creation or circulation.

5. Cost Planning

Cost arranging includes the bookkeeping of all expenses in the records in an appropriate way.

6. Cost Finding

Cost finding is the estimation or assessment of various items, offices or different fragments of the organization’s activities.

A sole proprietorship business venture is one of the most typical and easiest commercial forays not only in India but also across the world. Some of India’s largest existing enterprises, including Flipkart, started operating as solely-owned firms.

Globally, some of the most famous names in business started with a single owner. Familiar names like Coca-Cola, Amazon, the Walt Disney Corporation and toy-major Mattel are excellent sole proprietorship examples.

Historically, these are some of the oldest businesses that have been owned and operated by a lone individual, making them sole proprietorship ventures.

This chapter will help you understand what these types of businesses mean, what their characteristics are and some of the advantages and disadvantages of a sole proprietorship.

Defining Sole Proprietorship 

Such a firm is a one-person operation. “Sole” means only and “proprietor” refers to the owner. When any natural person, and not a ‘legal’ person or another entity, is in charge of an organization, it becomes a sole proprietorship enterprise. Both the owner and his/her business are the same.

They have no separate legal bearing.

A sole owner is automatically the custodian of all profits of the organization. However, he is also liable to suffer the most should the business nosedive in perilous economic times, making risk-taking a part of owning a business entity.

A one-person operation allows the owner to employ whoever he desires. Termination of employment is also his executive domain, provided the terms and conditions laid out during hiring are maintained. His authority and discretion are also final.

Of all the various types of business organizations, this is the simplest. A solely-owned entity need not always be registered or even incorporated. However, registering a business venture has certain advantages which have been mentioned later.

Most of the small-scale businesses we see around us in our day-to-day lives are businesses with single owners. These can range from spas and beauty parlors to a medicine outlet and any local grocery store.

For advanced commerce students: Walt Disney was a struggling artist before his Mickey Mouse line of animated characters took off, and his name became globally known. You can research his failures, how he dealt with them, and how he later developed a global reputation for himself and his company.

 

Types of Sole Proprietorship Businesses

These are the existing types.

1. An Independent Contractor: A contractor is hired by business houses or other, more prominent contractors at predetermined income levels or profit-sharing margins. But this does not make an independent contractor an employee, for he has the freedom to say ‘no’ to an engagement.

2. Self-Employed Owner: Someone who acts both as the owner and an employee of his business is a self-employed owner. In this digital age, someone who sells goods on an E-commerce firm is self-employed. He owns an enterprise but also has to look after his day-to-day operations like an employee. Other examples can be a painter and a shopping assistant. 

3. Franchise: A franchise is also considered a form of a sole proprietorship. The owner decides to rent a franchise from a leading brand and pours in the requisite capital. Note that the franchisee has to pay royalties to the franchisor. This type of business is an excellent starting point for first-time business owners, as he does not have enough experience to run a full-fledged firm but can still bank on the reputation of his franchisor.

Features of Sole Proprietorship

A sole proprietorship does not have a separate regulation to govern it. And so there are not many special policies and rules to comply with. moreover, it does no longer require incorporation or registration of any kind. In reality, in maximum instances, we want only the license to perform the desired enterprise.

on the grounds that there is no separation among the proprietor and the enterprise, the private liability of the proprietor is likewise unlimited. So if the enterprise is unable to satisfy its very own debts or liabilities, it’ll fall upon the proprietor to pay them. As an example, he may additionally sell all of his private property (like his car, house, other properties and many others) to fulfill the money owed or liabilities of the enterprise.

The enterprise owner is the simplest threat bearer in a sole proprietorship. given that he’s the simplest one financially invested within the enterprise. As a result, he ought to additionally undergo all of the danger. In different words, if the enterprise fails or suffers losses he might be the one affected.

But, he also enjoys all the earnings from the business. He must not proportion his income with some other stakeholders in view that there are none. So he ought to endure the overall threat in trade for playing full profits.

In prison terms, the commercial enterprise and the proprietor are one and the same. No separate criminal identity will be bestowed upon the sole proprietorship. So the proprietor can be chargeable for all the sports and transactions of the commercial enterprise.

As seen above the commercial enterprise and the owner have one identity. So a sole proprietorship is totally dependent on its owner. The loss of life, retirement, bankruptcy. madness, imprisonment and so forth may have an impact on the sole proprietorship. In such conditions, the proprietorship will give up to exist and the enterprise will come to an end.

Advantages of Sole Proprietorship

• A proprietor will have the entire manager of the complete enterprise. consequently this could facilitate quick selections and freedom to do commercial enterprise

• law does not require a proprietorship to put up its economic debts or other such files to any members of the public. As a end result, there is sufficient confidentiality that is critical inside the commercial enterprise world

• The enterprise owner derives the maximum incentive from the business. because he should not share any of his earnings. So the work he puts into the business is absolutely reciprocated in incentives

• Being your very own boss is an extraordinary experience of pleasure and fulfillment. Furthermore, you’re answerable only to yourself. consequently it’s far a super improve to your self esteem as nicely

Negative aspects of Sole Proprietorship

• One among the largest limitations of a sole proprietorship is the limitless personal legal responsibility of the owner. If the enterprise fails it could wipe out the personal wealth of the owner as well as affect his future business possibilities too

• Every other problem is that a sole proprietor has to get entry to a confined capital. The cash he can borrow from his own private savings may not be sufficient to enlarge the enterprise. Moreover, banks and financial establishments are also wary of lending to proprietorships.

• The existence cycle of a sole proprietorship is not sure and connected to its proprietor. An incapacitated proprietor may have a terrible impact on the business, and it is able to even cause the closure of the enterprise. A sole proprietorship can’t keep on without its proprietor.

• A sole proprietor additionally has restrained managerial potential. He can not be a professional in all the fields of the business. Furthermore, limited resources may additionally mean that he can not hire able humans to help him out. As a result, the commercial enterprise might also suffer from mismanagement and bad selections.