FUNDAMENTALS OF PRODUCT
DEVELOPMENT
 Before commercializing a new product or service,
the entrepreneur must focus first on refining the
product or service and validate its market
acceptability. This new product does not have to
be a totally new product. It can be a new product
line from the existing business of the entrepreneur,
a product line extension, an enhancement, or a
repositioning of an existing product.
 Product development is the creation of a new or
different product that offers new benefits to the
customers. This includes both the creation of an
entirely new product and modifications to an
existing product.
 It is composed of four steps: (1) developing a
product/ service description, (2) creating a
prototype, (3) testing the prototype, and (4)
validating the market.
PRODUCT OR SERVICE DESCRIPTION
 A product or service description simply describes
how a product or service works and how it benefits
the customers. Having said so, it is a structured
format of presenting information about a good/
service to convey durability, craftsmanship,
superiority, etc.
 For example, consumer goods, such as food,
usually present their description at the back of the
packaging. Other brands also opt to include a table
for nutrition facts, list of ingredients, and cooking
instructions. For services, its description is
presented in a way that customers or clients of
salons, spa, clinics, schools, hotels, transportation,
and other servicing businesses get a glimpse of the
service that they would be availing. Service
description provides customers and clients what to
anticipate/ expect/ look forward from the said
provider. Consider the body essential product you
have brought from our activity. Were you able to
look into its product description? Nice one! You
may also look at the examples mentioned earlier.
 Product or service description is indeed another
tool for the entrepreneur to look into. By
conveying comprehensively, the entrepreneur’s
product or service description, it is a way to know
if indeed his or her product or service is superior to
the competitors. Let’s move forward boss, shall
we?
The entrepreneur has to take note of the following
regarding product/ service description:
 It should directly address the primary target market
in a personal manner using everyday language. –
Meaning to say, the entrepreneur must put himself/
herself in the customer’s shoes, where the product/
service description will be addressed so that the
said product/ service description can connect
effectively to the customer. Let your personality
shine through your content and add a dash of
humor.
 It should highlight the features that will cater to the
customer’s needs or cater to the customer’s
problems. – A customer is more interested in what
a product does for him/her than what the product
is. Entrepreneurs must communicate the benefits
one can get from the said product/ service.
 Realistic superlatives should be used for the
product/ service description. The product/ service
description must be factual. Make sure to use
appropriate adjectives to describe your product/
service. After all you don’t want to mislead/
disappoint your target market.
CREATING A PROTOTYPE OF THE
PRODUCT/SERVICE
 We now proceed to the stage of product or service
development with possibly the greatest learning:
the creation of a prototype. In this step, the
entrepreneur will be able to see that his/ her ideas
will soon become a tangible reality. The
entrepreneur will bring his ideas to life. A
prototype is a preliminary model or sample of a
new product or service that is created to test a
product concept or service process. It is an early
sample, model, or release of a product built to test
a concept or process.
 This stage in the inventing process is possibly the
period of greatest learning. This is the stage where
the entrepreneur can experiment, develop, and
make improvements in the potential product or
service. For goods, the entrepreneur will decide as
to the number and type of materials to be used in
coming up with the product ranging from metals to
plastics, to chemicals, to textiles. The entrepreneur
will also scrutinize the parts and functions, as well
as the design and other attributes. For services, it
can be performed by individuals who may later
become a part of the entrepreneurial line-up. The
entrepreneur will take note strengths and
weaknesses of the said service. The goal is to
come up with an acceptable and standard service.
Here are the advantages of creating a prototype:
  Creating a prototype enables the entrepreneur
to engage in trial-and-error, provides room for
improvements, and refines the functionality of
the product design or service process. It would
be very costly and risky to commercialize a
product without creating a prototype. With a
prototype, you are able to test and improve the
product design or service process.
 Creating a prototype provides the entrepreneur
a window to test the performance and
specifications of various materials and service
processes. Every detail/ part of the product or
service should be evaluated carefully and
repeatedly such that no flaw/ loophole is
existent before commercialization.
 A prototype helps an entrepreneur effectively
describe the product or service to the product
team. Since a prototype is a preliminary
sample, it provides members of the marketing,
operations, legal, and human resources
department as well as professional prototype
developers, engineers, designers, handyman,
machinist, or industrial design students, the
information needed for them to create the right
product or service as planned. With the
prototype, as the entrepreneur, you can
communicate to these people the aspect/s or
part/s you want to add or remove. Members
will also give their comments to upgrade the
prototype prior market release. The
prototyping stage is a great time to use all your
untapped creative ability and to explore all
possibilities that are on the market.
 Creating a prototype elicits respect from
stakeholders and customers. At the same time,
a prototype gives credibility to the
entrepreneur. Try it to believe it, my dear
GENtrepreneurZ. Stakeholders and customers
are not convinced by mere ideas. As the
entrepreneur, you have to show them a
tangible output (prototype) so that they will
believe you. And when your prototype
impresses them to say the least, you will earn
their respect. That will make you a promising
entrepreneur who absolutely gets it done!
TESTING THE PRODUCT PROTOTYPE
 This is a crucial process before an actual product
or service is launched in the market. Testing the
prototype will uncover the final loopholes that
need to be addressed before commercialization.
 It gives the entrepreneur a leeway to examine and
scrutinize the prototype and provide feedback as to
what can be improved before the launch. For a
prototype that has already been refined, testing it
for the last time after the changes have been made
will validate its readiness for commercialization.
The following testing methods are applied by the
entrepreneur:
 Focus Group Discussion (FGD)
o
Can you still recall this topic last midterm, boss?
To refresh you, the participants will provide
relevant insights about the new product or
service. The objective of the FGD is to identify
errors, deficiencies, and issues that may impede
the success of the product or service. The
entrepreneur must also elicit the participants’
suggestions and practical solutions to these
problems.
 Legality and ethical test
o The entrepreneur must ensure that the product or
service complies with all relevant laws and
policies. The entrepreneur must also secure
necessary license/s and/or permit/s. For the food
and pharmaceutical industry, entrepreneurs must
be cleared first with the Food and Drug
Administration (FDA). Manufacturers of your
COVID-19 vaccines such as Pfizer-BioNTech,
Moderna, AstraZeneca, and Sinovac needs
clearance from the said institution prior
inoculating people of their respective vaccines.
Television series and films are being reviewed
first by the Movie and Television Regulatory and
Classification Board prior airing to be able to put
a “grade” to properly guide its audience
especially the young ones. Restaurants and hotels
must have their health permit and sanitary permit
to operate, respectively. Boarding houses,
dormitories, and apartments must possess their
fire safety permit.  The product or service must
not generate ethical issues such as threats to
health, safety, and environment.
 Safety test
 This test ascertains that the product is safe to use
(flat iron, light bulb, electric fan), safe to be
consumed (food, beverages, medicines) and safe to
be applied (cosmetics). In no way that the product
or service may harm the customer in terms of
health and safety. Appliances such as flat iron,
light bulb, and electric fan must be certified and it
must not possess faulty wiring connections. Be
careful with your Christmas lights! The shelf life
of goods like food, beverages, and medicines are
also considered, so check the tag or label as to the
item’s expiration date. The effects of cosmetics to
our bodies are also taken into account. Statements
like “hypoallergenic”, “noncomedogenic”, and
“mild and gentle on skin” are stated to properly
inform us, buyers.
 Product costing test
o The entrepreneur examines the expected costs
versus the allocated budget in every stage of the
production process. This is to match whether the
cost of production would be greater than, lesser
than, or equal to the allocated budget.
 Component test
 o Each component, part, or detail of the good or  Collect all the data, analyze them, and prepare a
service must be tested independently to identify summative report that answers the aforementioned
component failures. The questionnaire is questions.
systematic/ organized. Any failure identified
from a component or part or detail must be
solved and tested again until proven fully
functional.
 Competitors’ product or service test
o The entrepreneur must test a similar line of
products or services from competitors to compare
and get the best practices to be applied to a new
product or service.
Testing the product prototype is MANDATORY to
ensure that the product or service will not fail the
customers and will deliver its definitive purpose. This
will elicit customer satisfaction and eventually,
customer loyalty and retention. This is the time to
prove that the concept formulated by the entrepreneur
will work and is feasible in real life. All the mistakes
accounted for and the improvements to be applied
should be performed prior commercialization of the
good or service.

VALIDATION OF MARKET ACCEPTABILITY

Validation of market acceptability is the process of
finding out if the intended primary target market will
be buying the good or availing the service. This
process either validates or invalidates the
entrepreneur’s perception about the suitability/
appropriateness of the chosen primary target market.
This is also the time to deeply understand the value
that the product or service brings to the customer and
their prospective purchase behavior. This process is
the last step before the product or service can be
introduced to the market. The following questions are
likely to be answered in the validation of market
acceptability: “Will the primary target market like the
product or service?” and “Will the primary target
market buy the product or service when it is already in
the market?”
Said questions can be answered easily by the primary
target market segment by these activities carried out by
the entrepreneur:
 Use the most strategic marketing research tool.
Decide whether you are to apply FGD, survey,
interview, observation, online survey, e-mail,
questionnaires, or a combination of these tools.
 Prepare relevant and concise questions. Do not go
around the bush. Include necessary questions only
that will give you definite answers for the
questions stated earlier.
 Consult the experts. Consider tapping the
knowledge of market experts who can provide you
meaningful information for you to enhance your
good or service.

Every profit or service organization pays attention to
many factors such as:
1. Aspiring entrepreneurs must possess the skills,
patience, and passion for the business, as well as the
courage to face reasonable risks.
2. Each employee must be qualified to perform his or
her job
3. Proper machines and equipment should be installed
to facilitate operations.
4. Raw materials should be readily available.
5. The methods or technology used by the organization
must give it a competitive edge over its
 First-timers in business must familiarize
themselves with the 4 Ms of operations. These will
help them seize business opportunities quickly.
Individuals who believe in the adage that “success
knocks but once” will be able to create pioneering
businesses that can help them attain their business
goals.
 The operations plan is an important part of the
business plan because it provides the details in
operating the business. Operations management,
on the other hand, controls the implementation of
the business plan.
 A strong operations plan should have the four
operational aspects—called the 4 Ms of
operations: the methods, or the processes to be
followed in effectively manufacturing or
delivering a product or service; the manpower, or
the right human resources who will handle certain
business operations; the machines, or the
technology used in efficiently operating the
business; and the materials to be used in creating a
product or performing a service, which includes
supply chain management.
 The 4 Ms are applicable to business opportunities
since business is in essence tied to manufacturing
as well. When putting up a business, manpower is
critical as well as the other elements. The
businessman must take all of those into account.
 Running a business is a complex process and all of
these elements interplay. It is not just one machine,
for example, but many. Manpower issues could
also arise, which would challenge the method that
has been set up. It is up to the businessman to
identify and solve these issues.
 Identifying the resource needs is generally
considered in business; it is a task for those in
management. Failure to supply the resources
required by a business often results in
organizational failure.
 The methods aspect represents the day-to-day
operations of a business. It describes how an
entrepreneur will run the business from all facets
of the business such as the manufacturing of
goods, service delivery process, distribution of
goods and services, logistics for delivery of goods,
and inventory management, to name a few.
 The entrepreneur has to be very detailed in
formulating these processes and must ensure that
the customer experience will be pleasant and
seamless. Internally, the processes must also abide
with industry standards and policies where the
business belongs (e.g., ISO certification).
 The entrepreneur must also set standard operating
procedures (SOPs) both in manufacturing goods
and rendering of services. These SOPs must be
monitored to validate compliance. The
entrepreneur must also critically consider the
effects of these processes to the environment and
to the public
 The use of superior technology or methods in
processing or producing goods can give an
enterprise a competitive edge, as it can help ensure
customer satisfaction.
 Methods refer to the system and the step-by-step
process in the business. Without a scalable
process, it would be difficult to stabilize or expand
the business. For a business which had expanded,
this means that the methods used in one branch
must be documented and must be replicated as
well in ther branches. If it is difficult to implement
at another site, find what needs to be improved.
 The entrepreneur who will engage in producing his
or her own products will have to consider the basic
guidelines and principles in manufacturing.
Manufacturing is the process of translating raw
materials into finished goods that are acceptable to
 the customer's standards. It consists of three
elements:
1. Inputs
 These are the materials or ingredients to be used in
creating the product.
2. Process
 It is the transformation phase where inputs are
processed by manpower and machines to come up
with the final product.
3. Output
 It is the final product of the process stage, which is
intended to be sold to target customer.
The entrepreneur must also consider the most efficient
manufacturing site in which the manufacturing process
will take place. Depending on the entrepreneur’s
objective and financial capacity, he or she can opt to
have any of the following manufacturing sites:
 Home-based
 Most start-up do not have financial capacity to
establish a manufacturing site. Thus, their only
option is to manufacture goods at home. This
option is the cheapest and highly flexible. The
entrepreneur can start with products that are
usually manageable to be processed at home such
as food products and customized clothes.
 Commercial space for rent
 This is advisable if the business really requires a
commercial space for the processing of goods and
if the home option is not viable anymore. A
commercial space gives the entrepreneur a more
specialized and suited manufacturing site than
manufacturing at home. However, this is more
expensive than manufacturing at home and
requires long-term commitment because the
entrepreneur will need to sign a lease agreement.
 Commercial space purchase
 This option requires the biggest amount of capital
expenditure; but it also provides the entrepreneur
substantial freedom and flexibility to design and
run the commercial space. Compared with renting,
purchasing a commercial space is considered more
of an investment than an expense.
 A service delivery process is a process enabling
the delivery of a service. It requires a coupling
between a provider and consumer, and sometimes
necessitates means. For you to further understand
the concept of service delivery processing, let us
continue with our discussion.
 The entrepreneur who will engage in a service
business must be more meticulous when it comes
to the service delivery process. This is because
services are intangible, and the only way the
customer can appreciate the service is by
remembering how pleasant his or her experience
was.
 Service entrepreneurs must prepare a detailed
flowchart of the service business, which is also
called a service blueprint. Every process in the
blueprint must be relevant to the service business
to minimize wastage.
 The service bottlenecks must be addressed
immediately to avoid customer complaints.
Bottleneck is a part of the process where there is
an apparent inefficiency and where the customer
waits longer. The service entrepreneur must
develop scripts that the service provider will
follow to serve the customers better and to
establish standard processes.
 In terms of the floor plan, the service entrepreneur
must design it according to the most efficient way
in performing the service, which can be based on
the internal structure of the service business,
service delivery requirements, or customer
requirements. For example, a barber shop should
place the receptionist in front so that customers
can easily inquire of the service that they will
avail.
 Distribution is the process of bringing the products
or services to customers. In selling physical goods,
the entrepreneur must plan the location, the
processes, and the distribution of the products to
the customers.
 The entrepreneur may also buy the finished goods
from the manufacturers and plan how to distribute
them efficiently to target distribution centers or the
customers.
 Distribution is not a straight process from the
entrepreneur to customers; thus, the term supply
chain or distribution channel was coined. The
manufacturer will deliver the products to the
distributors, to the wholesalers, to the retailers, and
then finally to customers.
 Each member in the supply chain will have a fair
share in the profits, which may be squeezed if the
supply chain grows longer. This is why there is a
tendency to impose higher markups on the product
price. It is now up to the entrepreneur on what
distribution channel strategies he or she will
employ depending on the product or service he or
she will offer.
 According to Will Kenton, “A supply chain is a
network between a company and its suppliers to
produce and distribute a specific product to the
final buyer. This network includes different
 activities, people, entities, information, and
resources. The supply chain also represents the
steps it takes to get the product or service from its
original state to the customer.”

 Manufacturer
 The manufacturer handles the invention,
development, and production of the product or
service. Entrepreneurs can be manufacturers of a
product or service. Manufacturers take charge of
acquiring materials, production and delivery
schedules, product quality, and inventory or safety
management. Manufacturers also handle product
delivery, marketing, and selling.
 Distributors
 These are entrepreneurs who often buy products or
services from the manufacturers and sell them at a
mark-up price to either wholesalers or retailers.
Distributors buy the products in bulk for a
discounted price. The bought products or services
are now owned by the distributors, so any damage,
spoilage, or other liabilities to the product will be
their sole responsibility. Distributors become
wholesalers when they sell the product to another
distributor
 Agents
 Agents, on the other hand, don't own the products
or services because they do not buy these from the
manufacturer. Instead, they negotiate with buyers
as to how much or how many are to be sold, so the
manufacturer will be able to deliver the goods
directly to the buyer. Agents get the commission
for every product sold.

 The entrepreneur must also establish a seamless

payment process. Generally, there are no problems
if the customers pay in cash. But there are
instances when they do not want to pay in cash and
are usually attracted by flexible and customer-
friendly payment terms such as credit cards,
installment plans, or a simple accounts payable or
“pautang”.
 The entrepreneur must ensure that credit payments
are seamless and that the customers are aware of
the terms and conditions of the credit.
 At the beginning of the entrepreneur’s business, he
or she usually maximizes himself or herself, his or
her partner, or his or her family members to handle
all the aspects of the business. But as it grows, the
entrepreneur will need the expertise of qualified
employees that can handle operational functions,
so that he or she will be free from daily activities
and can thus focus on the strategic and
management functions of the business. The
entrepreneur needs to plot a table of organization
based on his business objectives. Each position has
to be relevant. To verify if a position is really
necessary, the entrepreneur must devise a detailed
job description whether to hire an employee or not.
The entrepreneur must be very keen in selecting
and hiring an employee. He or she must ensure
that due diligence is performed to check the
background of the applicant. Manpower is one of
the highest costs of operating a business but is also
the most instrumental to its success. Having the
right people encompasses a myriad of advantages.
 Staff plays a pivotal role in any business venture.
Without adequate and supportive manpower, a
business cannot be successful. The staff should be
well skilled and should be able to take on
responsibilities with a lot of expertise. Managers
run the show. Entrepreneurs delegate work to them
and expect them to act on their behalf.
 In the Philippines, manpower services are a
vital part of successful companies and
corporations. Their operations will not be
running smoothly and efficiently without
them. In fact, they are highly dependent of the
work their manpower produces in order to
provide their products and services to their
customers and clienteles. However, their
importance goes beyond that – which is why
they are being considered as a business’ secret
ingredient to become a success.
Here are a few reasons why they are significant:
 Accountability
 In most cases, companies and their employers
have more power compared to their employees
here in the Philippines. Unfortunately, some of
them will end up abusing it, which will
eventually lead to the unfair treatment of their
workforce.
 It is a good thing though that manpower has
the ability to hold these employers and their
companies accountable for their (irresponsible)
actions towards them. They could band
together and lobby for a fairer system that will
work for their welfare. Their managers would
not be able to ignore their pleas for they are
large in numbers. Plus, they would not want
their branding to be affected by these
complaints.
 Customer Relations and Financial Growth
 Good relationship between companies and
customers is achieved through a good
workforce/manpower. Manpower enables
companies to deliver on their promise of good
quality products that are going to be produced
in a timely fashion, which could lead them to
evade any fines or penalties. Once a company
establishes excellent relations with their
clienteles, they can entice more customers to
get their products and services – resulting to
growth in profit.
 Operation and Innovation
 A business that has more manpower can have
more options on how it can run its operations.
It can assign certain people to cover particular
shifts; this task is easier to do if a business has
several individuals to fill them up. As a result,
it would have numerous teams with a large
pool of people that can resolve various
company issues.
 Furthermore, if these individuals are well
educated and well trained, there is higher
chances that they will be able to provide their
company with innovations that will maintain
its relevance in the market.
 Health and Safety
 A company which has sufficient manpower has a
tendency to deal with less lawsuit and
compensation claims. This is because there are
more workers available to do several tasks and
work what they are required of. This means that
they do not have to subject themselves with
several overtime hours in order to accomplish their
work and responsibilities. They are going to be
less stressed and burned out – allowing them to be
more alert and rested, which is really helpful
especially if they are going to do some physical
and challenging activities.
 Productivity
 Manpower is essential in businesses particularly
because they cannot maintain operations without
it. A company which has more
manpower/workforce will be able to accomplish
 more tasks and take on more projects. Those
companies with barely enough manpower are
hardly going to get any work done. It would do
them good to remember that manpower is directly
proportional to their productivity.

 Purpose of Job Description

 Job Analysis is a primary tool to collect job-related
data. The process results in collecting and
recording two data sets including job description
and job specification. Any job vacancy cannot be
filled until and unless the HR manager or the
entrepreneur has these two sets of data. It is
necessary to define them accurately in order to fit
the right person at the right place and at the right
time. This helps both employer/entrepreneur and
employee understand what exactly needs to be
delivered and how.
 Both job description and job specification are
essential parts of job analysis information. Writing
them clearly and accurately helps
organization/business and workers cope with many
challenges while onboard.
 The main purpose of job description is to collect
job-related data in order to advertise for a
particular job. It helps in attracting, targeting,
recruiting and selecting the right candidate for
the right job.
 It is done to determine what needs to be
delivered in a particular job. It clarifies what
employees are supposed to do if selected for that
particular job opening.
 It gives recruiting staff a clear view what kind of
candidate is required by a particular department
or division to perform a specific task or job.
 It also clarifies who will report to whom.
 What must be contained in the Job Description?
 Job Title
 This is the heading of a job description. It presents
the summary of what the employee will do. The
entrepreneur should devise a respectable and
decent job title because the title boosts the self-
confidence of the employee.
 Compensation and benefit range
 This is next to the job title which details the
potential salary and benefits that the employee will
get.
 Duties
 These are usually high-level descriptions only.
 Responsibilities and accountabilities
 These must be communicated well to the
employees so that he or she knows what to expect
with the job.
Key Differences Between Duty and Responsibility

Basis for Duty Responsibility

Comparison
What is it? Binding force Authority
Reflects Respect or Accountability for
obedience, for the the performance or
work, rules, non-performance of
superiors or elders. something
Demands Sacrifice of self- Trustworthiness
interest and loyalty
How they Imputed Shouldered
 arise?
 Work schedules
 Work hours must also be included here. It must
also be clearly indicated in the job description. The
specific days and working hours must be written
so that the employee will be able to align the work
schedule with his or her personal schedule. Work
schedules are highly driven by business
requirements (e.g., a security agency business will
need to indicate the work schedules of the security
guards it will hire).
 Purpose of Job Specification
 Described on the basis of job description, job
specification helps candidates analyze whether
they are eligible to apply for a particular job
vacancy or not.
 It helps the recruiting team of an organization
understand what level of qualifications,
qualities and set of characteristics should be
present in a candidate to make him or her
eligible for the job opening.
 Job specification gives detailed information
about any job including job responsibilities,
desired technical and physical skills,
conversational ability and much more.
 It helps in selecting the most appropriate
candidate for a particular job.
 What must be contained in a Job specification?
 Employee Qualification
 In hiring suitable employees for the job needed,
entrepreneurs will have to look for the following
criteria:
 Educational background
 This gives the entrepreneur an idea on the degree
of the candidate’s knowledge of basic things.
However, it is not the sole factor in selecting a
candidate.
 Work experience
 This will tell him or her what to expect from the
applicant and what he or she can
potentially contribute to the business based
on his or her past positions and experiences.
This will also establish the training needs of
the candidate.
 Specific skill or knowledge
 This one is important especially on technical jobs
that require high proficiency. It will be easy for
entrepreneurs to place highly skilled people into
specialized jobs because they can help right away.
This is also less expensive because entrepreneurs
don’t have to train them thoroughly to acquire
such skills. Examples of potential candidates that
have specific skills or knowledge are engineers,
architects, scientist, accountants and information
technology specialists.
 Work attitude
 This deals with the worker’s integrity and how he
or she deals with his or her coworkers, bosses, and
customers. Entrepreneurs also need people with
relationship skills because communication is
important in applying their expertise. A good work
attitude involves being punctual, having good
leadership and communication skills, being a team
player, making ethical decisions, obeying
superiors, and being passionate and dedicated to
the company. Entrepreneurs however, will decide
what they are looking for in selecting the best
candidate.
Example of a job description and employee
qualification for an Accountant:
 Job Brief
 We are looking for an Accountant to manage
all financial transactions, from fixed payments
and variable expenses to bank deposits and
budgets.
 Accountant responsibilities include auditing
financial documents and procedures,
reconciling bank statements and calculating tax
payments and returns. To be successful in this
role, you should have previous experience with
bookkeeping and a flair for spotting numerical
mistakes.
 Ultimately, you will provide us with accurate
quantitative information on financial position,
liquidity and cash flows of our business, while
ensuring we’re compliant with all tax
regulations.
 Duties and Responsibilities
 Manage all accounting transactions
 Prepare budget forecasts
 Publish financial statements in time
 Handle monthly, quarterly and annual closings
 Reconcile accounts payable and receivable
 Ensure timely bank payments
 Compute taxes and prepare tax returns
Manage balance sheets and profit/loss
statements
 Report on the company’s financial health and
liquidity
 Audit financial transactions and documents
 Reinforce financial data confidentiality and
conduct database backups when necessary
 Comply with financial policies and regulations
 Requirements
 Work experience as an Accountant
 Excellent knowledge of accounting regulations
and procedures, including the Generally
Accepted Accounting Principles (GAAP)
 Hands-on experience with accounting software
like FreshBooks and QuickBooks
 Advanced MS Excel skills including Vlookups
and pivot tables
 Experience with general ledger functions
 Strong attention to detail and good analytical
skills
 BSc in Accounting, Finance or relevant degree
 Additional certification (CPA or CMA) is a
plus
Note: There is no standard format for posting job
description and job specifications. Content and
style may vary from one company to another.    Another move is to look for his or her business
 Once the job description and job specification are
finalized by the entrepreneur, he or she now
preselects a set of candidates for the positions
required. When the business is already sizeable,
entrepreneurs usually establish a Human Resource
(HR) department that will handle the selection and
recruitment of candidates. The entrepreneur can
initially choose from his or her personal list of
trustworthy people whom he or she thinks can
contribute to the business venture. If this list does
not exist, he or she can turn to employment
agencies or manpower agencies that can do the
job.
 Headhunters
 They help companies find a set of people suited for
their requirements. They usually charge a finder’s
fee once the entrepreneur has decided to accept an
applicant.
 Manpower agencies
 They recruit temporary employees under a short
contract, usually on a six-month period.
 Print Advertisement
 The entrepreneur can also opt to advertise job
vacancies via print advertisements such as general
circulation newspapers, or other publications if the
intention is to promptly get a candidate from the
public. If the intention is to hire candidates with
specific knowledge or skills, the entrepreneur must
turn to magazines or publications of the specific
industry where the prospect belongs (e.g., The
magazine BluPrint if the entrepreneur wants to hire
architects).
 Recommendations and referrals
 one viable option is to consider recommendations
and referrals from friends, relatives, or business
partners with an untainted reputation.
Recommendations from those with doubtful
characters should of course not be considered by
the entrepreneur.
 Business networks
networks, or the people whom the entrepreneur
has worked with in the past. This is a better way of
preselecting the employee than the traditional way
(interviews) because the entrepreneur already
knows the work ethics and qualifications of the
potential employee.
 Digital media
 One revolutionary ways of preselecting potential
employees is through digital media. With the
power of the Internet, an entrepreneur can easily
post job vacancies through his or her Web site,
social media accounts, e-mails, online affiliates,
search engines, podcasts, or blogs. He or she can
also choose to advertise via mobile through either
short message service (SMS) or mobile
application, or simply mobile apps.
 Once the potential candidates are pooled, the
entrepreneur must now do the difficult task of  Physically fit,
screening them and picking the most qualified and efficient, and fast
most suited for the job. Preliminary screening can worker.
easily be done because the entrepreneur will just Operation  Preferably has a Worked as a
need to refer to the required qualifications and s Manager degree in Business member of
eliminate those who did not qualify. The for a Administration operations staff
Retail major in Operations or as an
entrepreneur or the HR department can now
Store Management; operations
conduct a series of interviews for the shortlisted
having a Master’s manager in any
candidates with the objective of getting the most industry.
Degree in Business
qualified candidate for the job. Administration is a
 Some established businesses even conduct plus.
qualifying examinations in Math, English, and  Knowledgeable in
Logic before they hire an employee. Some may MS Office
give qualitative examinations or psychology tests applications and six
that require the candidates to answer in essay form sigma (a disciplined
or in multiple choice. Here are some common approach for
questions being asked in an interview. However, it eliminating
will be up to the entrepreneur or the HR personnel operational defect),
to ask relevant questions to the interviewee. and has good
leadership.
What are your strengths that you can contribute to
our organization?
Fast Food  High school Worked with a
What are your weaknesses that can prevent you
Crew graduate fast food chain
from working effectively in our organization? or restaurant;
 Physically fit,
What were your significant milestones in your pleasing those without
previous job(s), and why do you consider them as personality, experience are
such? customer-service still qualified
What are your career plans for the next five years oriented. because
if given the chance to work with our organization? training will be
Can you describe your work ethic? How do you provided.
work with a team and with your superior?

Position Educational Work

Background, Experience
Specific Skills or
Knowledge
Nursing  Has a bachelor’s Has some
Assistant degree. previous work-
 Service oriented, related skill,
active listener, has knowledge, or
good oral experience is
comprehension and usually needed.
possesses problem
sensitivity.
 A job contract is prepared once the entrepreneur or
English  Has an Education Worked as an
the hiring manager has been convinced already of
Teacher degree in English English teacher
for in a university the credentials and the interview answers of the
or language.
Foreigner or worked in a candidate. A job contract generally summarizes the
 Eloquent speaker
s and a good listener, call center as a terms and conditions of the candidate’s
patient with trainer. employment with the business. It usually includes
students, adaptive the following:
to foreign cultures.  rank or position of the candidate;
Baker  At least a high Worked as a  a list of responsibilities or deliverables and its
school graduate and baker before. scope and limitations;
with TESDA  the salary and benefits including vacation and sick
certification. leaves;
 work schedule;
 probationary period, if any, and qualifications to
become a regular employee
 the duration of the contract; and
 resignation procedure (e.g., 30-day notice or leave
immediately).
 Training people is one of the biggest investments
of an entrepreneur or a businessman. Therefore, he
or she must devise strategies on how to keep
employees satisfied working in the company.
 Employee orientation
 Training starts with employee orientation. It is
usually a one-to two-day session that summarizes
the history of the business, its vision and mission,
policies and procedures, cultures, and norms of the
business. This also includes introduction to the co-
employees and superiors, the tour of the work
place, and the discussion of daily responsibilities
and accountabilities including Key Performance
Indicators (KPI) and Key Result Areas (KRA) of
the employee. KPIs and KRAs are the bases of the
entrepreneur for rating the performance of the
employee - if the employee is exceeding
expectations, meeting expectations, or seldom
meeting expectations
 On-the-job training
 For startup entrepreneurs whose budgets are really
tight, they usually conduct OJT as the most
practical tool in training the employee under a
supervision of a team leader or manager. There
should be a check and balance especially during
the first few days of the OJT. Constructive
feedback should be given by the supervisor to the
employee, and all errors committed should be
rectified immediately to prevent recurrence.
 Buddy system
 This is a training program wherein an expert team
member is assigned to assist a new employee in his
or her function. The objective of the expert
employee is to train the new employee until he or
she masters the job.
 Mentor-mentee program
 This is a training program for supervisors, wherein
they will be mentored by a senior executive or
senior officer of the business. The objective is to
train the supervisor to handle key decisions and
strategic tasks that will eventually become part of
his or her job once he or she climbs the
organizational ladder. A succession plan must be
prepared by the entrepreneur to ensure business
operations still continue even in their absence or
the absence of key employees, or when they
decide to resign or retire.
 Online learning programs or Webinars (seminar
on the Web)
 A webinar is a practical way of learning because
the entrepreneur or the employee does not need to
go abroad or out of town just to get the necessary
training. It is also very flexible because the
entrepreneur or employee can learn at his or her
convenient time or place. The employee can also
expand his or her horizons and be rotated in
different areas of the business (e.g., from
marketing to operations or vice versa).
 Internal training programs
 This can also be conducted by the entrepreneur
and shall be led by competent subject matter
experts to discuss the intricacies of each
department to the newly hired employees.
 Employee training and development is a major
thrust of every entrepreneur because employees
are the best assets of a business enterprise. For
one, this human resource aspect helps the business
reduce costs; remember that whenever employees
commit errors as a result of lack of training, the
business incurs unnecessary cost. As a result of
employee training, productivity also increases
because as the employee learns his or her job every
day, he or she becomes more and more productive.
Another upside of training is that employees build
camaraderie when put together in one training
session. This elicits smooth working relationships
with one another, especially if the role of one
employee coincides with another employee.
 The greatest challenges for all entrepreneurs is
constantly motivating and keeping high-
performing employees. Because of their track
record and achievements, they can easily transfer
to other competitors, which means all training
investments to high-performing employees will be
gone, higher costs for training new employees,
us in the overall operations and management of
potential decrease in productivity, and customers
our business. It is true that no man is an island, we
transferring to competitors as well. Therefore,
can’t operate efficiently and effectively without
entrepreneurs and the HR department must devise
other people’s help. The success of the whole
an effective talent management program to gain
business is not only the success of the entrepreneur
the employee’s loyalty. Here are several strategies
himself or herself, but the success of everyone that
for talent management:
worked hard and gave their very best for the
Providing employees with a very competitive
business to prosper. Gratitude fosters optimism
salary package that includes guaranteed bonuses,
and aids in the development of a more optimistic
performance bonuses, commissions, and other
mindset.
monetary incentives.
Nonmonetary benefits such as medical coverage,  A simple tap on their shoulder together with the
different types of leaves (vacation leave, sick words “Good Job! You are doing great!” or other
leave, emergency leave, birthday leave, maternity words of affirmation may do. Anyone who worked
or paternity leave, study leave), decent and notable hard to aid us would be grateful for this modest yet
job titles, flexibility in work schedule, awards and comforting act. A small gift might suffice. Taking
recognition for excellent performance, them out for lunch or a coffee break is also a good
inspirational leaders, transparency and fairness in idea. Make an effort to speak with each employee
employee performance evaluation, and channels to in person, discuss issues that interest them and get
which employees can provide constructive everyone involved in the discussion. You will not
feedback without the risk of being fired. only discover more about your valued employees,
Additional (optional) benefits such as annual trips but you will also provide everyone with an equal
(international or local), work-from-home opportunity to create deeper relationships through
opportunities, scholarships, transportation and effective team cooperation. A pay increase could
communication allowances, free meals and drinks, also be an option. Remember, as future CEOs, to
fitness programs, sports programs, and other work- take every opportunity to show employees how
life balance programs. important they are, and to never let your workplace
 Entrepreneurs must be able to be objective when productivity fall behind.
evaluating the performance of employees. They
must be focused on the business objectives and if
the employees are able to meet these objectives.
They must do all possible strategies to save high-
performing employees because losing them
outweighs the salaries and benefits that you will
spend on them. On the other hand, nonperforming
employees must be motivated by the entrepreneur
to make them more productive, unless replacing
them is necessary or when these employees find
better career options. Nonperforming employees
are a liability to the company.

 As entrepreneurs, we should always be grateful to

our employees and also to other people that helps

 Machines can be described as the “best friend” of
manpower in producing goods and offering
services. Why do we say so? Because both the
manpower and machine work hand-in-hand to
deliver quality products and/or services,
respectively. It has become one of the 4Ms
because it is a very important aspect in goods and
services production. Undeniably, this equipment
has changed the way entrepreneurs conduct
business. Read on to know more about these.
 For manufacturing equipment that is complicated
to operate, the entrepreneur must ensure that
employees went through rigorous training or
certification to run them smoothly. For other
facilities such as the storage of equipment and
parking of delivery vehicles, the entrepreneur must
ensure that the needed space is allotted.
Without the needed raw materials or supplies,
service companies cannot deliver expected results.
With the restriction of moving from one place to
another due to community quarantine, what option in
materials requisitioning is the most effective and at the
same time, the most practical? Why?
For logistics, warehousing, transportation and
inventory are significant areas to oversee.
 Warehousing is the storing of finished goods
manufactured in a facility until they are distributed
to end users. Warehouses needs to b secured from
natural calamities or theft or any untoward human-
inducing incidents.
 Transportation is the process of efficiently
transferring the products to the retailers or
consumers. Transport vehicles must guarantee that
these goods, especially the perishables, are
delivered to the customers timely and safely.
 Inventory should be tracked religiously by the
entrepreneur or manufacturer. The law of demand
and supply must be taken into account. This is to
ensure that the entrepreneurs or manufacturers
meet their customer's needs and wants and that
overproduction would not happen.

 A business' high-tech devices are considered an

asset, specifically an investment. Even if acquiring
these high-tech devices initially costs a lot of
money, the company will utilize them for more
than a year, and an inflow of future economic
benefits can be expected if they are used
continuously.

 You are now dealing with the last M of operations,

Materials.
 Raw materials are materials or substances used in
the primary production or manufacturing of goods.
 Whether the entrepreneur will offer products or
cater services, he or she has to pinpoint a number
of dependable suppliers of quality raw materials or
supplies. Why is this necessary? Without quality
raw materials or supplies, manufacturers
eventually cannot come up with quality goods.
FINANCIAL PLAN
 One of the most difficult parts of the business plan
is the financial plan. Not all entrepreneurs are
adept with accounting procedures, rules, and
reporting policies. However, there is no choice for
the entrepreneur but to be familiar with numbers.
 The sustainability of a business depends on
meticulous monitoring of finances. This is the
portion of the business plan that speaks of the
product or service performance. It also provides
the entrepreneur financial data such as liquidity,
cash flow, and financial standing of the business.
The financial plan also gives the entrepreneur the
basis for his or her decisions on financial matters
such as offering credit terms to customers,
applying for a bank loan, expanding, or selling the
business. Without proper accounting of business
activities and transactions, the entrepreneur will be
at a loss on where his or her business is leading
him or her.
When an entrepreneur begins to raise funds for his or
her company, financial management begins.
 Capital is the money that must be allocated by the
entrepreneur to establish a business; it shouldn’t be
mixed with the personal money of the
entrepreneur.
o A number of entrepreneurs produce capital out of
their personal savings. This money came from a
disciplined habit of consistently saving when the
entrepreneur used to be an employee. Some of
the budding entrepreneurs borrow money from
families or friends, whereas some look for
interested investors or stakeholders.
o Entrepreneurs can also seek cash from banks or
financial organizations, although they normally
need collateral and base their lending decisions
on the performance of the business (i.e., the net
income of the business). Some start-ups may find
it difficult to secure a loan from banks because of
the performance angle as one of the
qualifications.
 Collateral refers to a high asset that is submitted
by the business to the bank applying for a loan and
will be subject for repossession if the business
defaults. Regardless if the capital was sourced,
putting this capital at risk is one of the major
reasons that most entrepreneurs are afraid to
engage in a business venture. But those who take
the risks also gain the experience and use this
experience to succeed.
o Not all entrepreneurs became successful the
first time they ventured into business, they first
experienced failures and used these failures to
their advantage.
Factors Affecting Estimation of Revenue
Business opportunity can only be considered a real one
when the entrepreneur recognizes that the opportunity
may bring him or her revenue.
 Revenue
o It is the output of a sale wherein the sales price
exceeds the cost to produce the product or
render the service.
o It is considered earned when the product is
already sold or service has been rendered
regardless if the business is paid in cash or
credit.
o It is considered deferred when the product or
service has not yet been delivered or sold but
the customer already paid in advance.
After ensuring that the business opportunity will
generate money, the next step is to calculate how much
revenue will be generated annually. This will provide
an indication of where the entrepreneur's hard-earned
money will be spent.
It is not easy to estimate potential revenue, as it
requires a thorough analysis of external and internal
factors that can affect the business. All of these
external and internal factors must be incorporated in
the projection computation so that it will appear
realistic and will not mislead the entrepreneur.
1.The economy and the external primary target market
 Similar to finding business opportunities,
estimating revenue is greatly affected by the entire
economy and the behavior of the primary target
market. The entrepreneur must be able to
incorporate the overall health of the economy in its
estimation of projected revenue. He or she needs to
know if the economy is either booming, stable, or
slowing down. However, there will be times when
the overall economy is not a reflection of what the
entrepreneur's primary target market is
experiencing. Therefore, the entrepreneur must
also do separate revenue estimation for the primary
target market as to whether it is booming, stable,
or slowing down.
 For example, the overall Philippine economy is
growing, but the target of entrepreneur A is the
class D, and the economic condition of the
 members of this socioeconomic class is still
worsening. He or she must be able to reconcile
these and come up with realistic estimates.
2.The external competitors
 The entrepreneur must devise a comprehensive
competitive profile matrix which is a chart that
details the relevant data of both direct and indirect
competitors and how these factors affect
profitability.
o Direct competitors are those that offer exactly
the same product/product lines or services as
the entrepreneur.
o Indirect competitors are those that do not offer
exactly the same products or services but
influence or affect the entrepreneur's market
share (e.g., if the entrepreneur sells soft drinks,
his or her market share will be affected by
those who sell other beverage products such as
mineral water, iced tea, juices, or alcoholic
drinks).
 When entering a market dominated by stronger
and larger competitors, the challenge for the
entrepreneur is to come up with a highly
differentiated product or service with a very strong
unique selling proposition. Otherwise, he or she
will be "eaten alive" by these large players. What
these large players will do to beat a newbie in the
market is reduce their prices, leveraging on
economies of scale and still earn profit. To
compete, there is no choice for the new
entrepreneur but to also reduce price, thereby
greatly affecting profitability.
 The entrepreneur can also enter a market with no
competitors. This rarely happens though; these
days, there are virtually no unique products or
services, or there are only few entrepreneurs who
want to venture in an entirely different market that
no one has tried yet.
o An example of this is venturing in a war-
stricken area where the risk is very high but
the opportunity is also very high because the
entrepreneur has no competitors to share his or
her market with.
 Aside from the basic financial data, the
entrepreneur must also be vigilant in reviewing
and assessing the business and marketing
strategies of the competitors. Those that were
proven effective strategies of the competitors must
be emulated and altered a bit by the entrepreneur,
and those that were certified as ineffective must
not be repeated to avoid unnecessary losses.
3.The internal business
 To assess potential revenue, the entrepreneur must
also devise his or her own marketing strategies
based on external and internal scan and from the
competitive profile matrix. With these data, the
entrepreneur can now craft effective strategies that
can outweigh those of the competitors. However,
the entrepreneur must always be on the lookout
because competitors do not just sit and wait to be
beaten. They will always react to what their
competitors are doing. They can always resort to
cut prices, improve features and benefits of their
product or service that can differentiate them from
the rest, or implement more strategic and effective
marketing tactics. Each of the players in the
market is thinking ahead and monitors the moves
of the others. To keep at pace, the entrepreneur
must always be alert and reactive to all kinds of
contingencies, or else the revenue will suffer.
How can you manage your funds as a student in a way
that is similar to how a business sets a financial plan?
 Young individuals may find it difficult to manage
their finances. Learning how to handle your
finances as a student is a vital component and will
set you on the path to a secure financial future. Set
realistic financial goals so you have something to
strive for and a clear path to take in terms of your
financial goals. Create a budget after that You
must constantly keep to your set budget and avoid
buying purchases that you cannot afford or that are
outside of your budget. Because you are still a
student, your primary source of income or funds
will be your allowance. If you keep to your budget
and don't spend money on things you don't need,
you may find that you have money left over to
save. Even if it is a small amount of money saved,
it is still progress. This will save you from
spending your extra funds on frivolous items that
will obstruct your ability to reach your financial
goals.
The early bird gets the worm, so start
planning your financial resources while you're still
a student. Financial planning is not something you
can do in one night; it takes a lot of trial and error
to improve or achieve the level of financial
security you desire.

BALANCE SHEET
 It is a core financial statement that describes the
financial position of the company. The Balance
Sheet reports the assets, liabilities, and capital of
the business.
 The entrepreneur must separate his or her personal
assets and liabilities and only account for what
assets and liabilities are attributable to the
business. The business should be a separate and
distinct personality.
For the succeeding explanations, it is best to always go
over the Balance Sheet presented above.
A balance sheet is composed of three elements: assets,
liabilities, and owner’s equity or capital.
Assets
 represent the resources of the business that are
expected to have future economic value. Assets are
divided into current assets, which are mostly the
liquid assets that can be exchanged to cash within
one year, and noncurrent assets, which are long-
term assets that can be converted to cash for more
than one year.
Accounts receivable is any amount of money owed or
not yet paid by customers for purchases made or
services delivered.
Inventory is the term used for goods available for sale
or raw materials used to produce goods available for
sale.
Equipment and fixtures include machines, furniture,
and fixtures that are expected to be used for more than
a year. These, however, are subject to depreciation.
Depreciation refers to the value reduction of the
noncurrent asset primarily due to natural wear and tear
and other value-reducing factors. The cost of the
property, manufacturing plant, and equipment is spread
over their anticipated life spans. Depreciation is
recorded in the balance sheet as a deduction to the fair
market value of the property, plant and equipment
(PPE), the result of which is their book value. Land, on
the other hand, does not depreciate; it actually
appreciates in value. Appreciation is an increase in the
value of an asset over time.
Which of these two assets is more important in a
business: human resources or non-human resources?
Why?
 There is no denying that a business’ human
resources are its most valuable asset. Human
resources differentiate an organization from its
competitors in today's dynamic and always
changing business world and it makes no
difference if the product is automobiles or
cosmetics because a business is only as good as the
people that work for it. It's past time for businesses
to grasp that valuing their staff as assets should be
a full-fledged reality. Employees, with their
knowledge, skills, abilities, skill sets, and
experience, are intangible assets that can help
secure the future. Consider what the entire
organization could accomplish if everyone in the
boat was rowing in the same direction. Employees
will eagerly compete in this race, overtaking
competitors, crossing the finish line first, and
standing with the company's name prominently
displayed on the medal stand. However, we should
not overlook a business' non-human resources;
they are critical in allowing a company to run more
smoothly and reach its goals and objectives in the
most efficient manner possible. The better it is for
the firm if both human and non-human resources
are given equal attention and value.
Liabilities
 are what the business owes to another person, a
financial institution, or any creditor.
Short-term or current liabilities are financial
obligations of a company that are due for one year or
less.
Accounts payable represents a company’s obligation
to pay off a short-term bet to its creditors or suppliers.

Notes payable are written agreements (promissory

notes) in which one party agrees to pay the other party  The Income Statement reports on a company’s
a certain amount of cash. income, expenses and profit(loss) over a period of
Utilities payable represents the amounts owed to time.
utility companies for electricity, gas, water, phone as
of the date of the balance sheet. Oftentimes, instead of
using a separate account for utilities payable, the
amounts owed are included in accounts payable.
Long-term or noncurrent liabilities are financial
obligations of a company that are due more than one
year in the future.

Owner’s equity or capital

 is the funds allocated by the entrepreneur to run

the business.
ASSETS= LIABILITIES + OWNER’S EQUITY
 An increase in the owner’s equity is a sign of good
health. It shows that the company is relying less on
debt to fund its operations. Conversely, a decrease
in the owner’s equity shows the opposite.
 Owner’s equity is essentially the owner’s or
entrepreneur’s right to the assets of the business.
It’s what’s left over for the owner after you’ve
subtracted all the liabilities from the assets. Try to
realize this by going over the balance sheet above
or by calibrating the accounting equation using the
figures in the balance sheet.
 It is important to note that in the Balance Sheet,
the total assets must always be “balanced” or of
the same amount with the total liabilities and
capital.
 It is ideal to prepare a balance sheet every year so
that the entrepreneur can analyze the financial
position or financial health of his or her business.
These figures will change every year, so the
entrepreneur or his or her accountant must be able
to determine the real balances of each account to
effectively make sound decisions for the company.
 The Income Statement above is an example of an
Income Statement for a merchandising business. I
hope you can still recall what a merchandising
business is. With this, we can say that an Income
Statement is also distinctly prepared for
manufacturing and servicing businesses,
respectively.
For the succeeding explanations, it is best to always go
over the Income Statement presented above.
Sales
(or revenue - term used for servicing businesses)
 is money earned from a company’s normal
business operations.
Expenses
 are the costs associated with earning the sales or
revenue. Here are the common business startup
costs:
 1)business registration fees to be paid to the
municipality or city hall;
 2) business name registration with the Department
of Trade and Industry;
 3) accountant or lawyer fees for their assistance in
establishing the business, in some cases;
 4) cost of machines/ equipment for manufacturing
business;
 5) factory or building rental fee or acquisition cost
of factory or building;
 6)overhaul cost of factory or building; and
 7)working capital that can last for a minimum of
three months. This money is allocated strictly for
 the business to avoid shortage of cash in the first order to better understand and arrive at a decision that
three months of operations. is beneficial to the business.

Cost of goods sold (COGS) Operating expense

 also referred to as “Cost of sales”, pertains to the
costs directly related to the production of goods
sold by an entity. Can you still remember the food
product you wish to innovate earlier this semester?
All raw materials or ingredients directly used to
produce your food product will fall under your
COGS. COGS excludes indirect costs such as
overhead and sales and marketing.
Gross profit
 is the profit a company makes after deducting the
costs directly associated in the production of goods
from the sales. On the other hand, for a servicing
business, gross profit is the profit a company
makes after deducting the costs directly related
with the provision of service from the revenue.
 is an expense a business incurs through its normal
business operations. Now try to think of some
operating expenses. Do you have rent in your
mind? How about marketing expenses such as e-
load for social media posts, tarpaulins or flyers?
These two are examples.
Other expenses
 include administrative expenses, salaries, utilities
and taxes.
Net income
 is only realized when all expenses have been
already deducted from the gross revenue.

A business's net loss is something you want to avoid at

all costs. True, having a net loss is a bad thing, and it
Yes, even if you have lower sales and higher expenses. can also give the impression that the company isn't
this chance still exists. If your total sales in year one performing effectively Because you're just getting
are Php 500.000 and your total expenses are Php started and your market share isn't yet established. a
275.000. your net income will be Php 225.000. net loss is to be expected for a new business. Het loss.
Consider the fallowing scenario for year two: your on the other hand. may indicate poor and poor
total sales drop to Php 400.000. while your total performance in long-running businesses.
expenses rise to Ph 350.000. resulting in a net income
of Php 50,000. Take a look at these two situations.
They both result in a net income. but one is
indisputably bigger than the other. one is more
advantageous than the other. and one will have a
negative impact on the business's financial side
entirely. Year l's total sales are higher than Year 2's.
suggesting that the company did an excellent job
selling their product. Year 2's total expenses are
slightly higher than
Year 1. indicating an increase in cash outflow for
settling certain liabilities and incurring expenses.

The business has a decent financial performance after

making a net profit at the reporting date. however
relying just on net income as a performance indicator
may cause
some minor problems and misunderstandings. The
entrepreneur. in collaboration with his or her trusted
financial officer. who is in charge of prepering and
monitoring the income statement. must delve deeper
into the various components of the income statement in

 The Cash Flow Statement provides information
about the cash receipts and cash payments. It
shows the net increase or decrease in cash during
the period and cash balance at the end of the
period.
 Because cash is the most important asset of a
business, the entrepreneur must be vigilant in
monitoring its whereabouts. It may look as if the
business is earning enough as seen in the Income
Statement, but it doesn’t mean that the business
has no cash flow issues. One issue is that the
business could have many pieces of equipment but
doesn’t have enough cash to pay its creditors on
time. Another issue is that the business can be
selling on credit instead of cash; thus, not liquid
enough to pay its suppliers.
 If cash flow is not managed well, creditors and
suppliers will tag the entrepreneur’s business
negatively. As a result, the entrepreneur will not be
able to renew their loans or buy supplies or
materials on credit.
 The entrepreneur must allocate cash to pay
suppliers and creditors as well as its employees. If
the business runs out of cash, the entrepreneur
should have an option to borrow from the bank or
a financial institution (example: lending agency,
credit cooperative, etc) provided that the
entrepreneur has a good track record in paying his
or her obligations. This is the reason why some
individuals are denied of loans because of their
negative credit score.
 Simply, these individuals do not repay their loans
timely and consistently. Future boss, you better
watch out!
 It is prudent to estimate projected cash flow on a
monthly basis to ensure that the cash balance is
positive all the time. Sources of positive cash
flows include sales or service revenues, interest
income, and dividends from investments and
loans. Sources of negative cash flows include
operational expenses, investments, machine
purchases, and payments to suppliers, creditors,
and employees to name a few.
 Managing your personal finances is something
you should think about starting when you're a
student. Having a well-established personal
finance system will benefit you greatly. Some
personal finance information is learned in
school, while others can be obtained by
continual experience, and trial and error.
Because money affects practically every
aspect of our lives, it is only natural that we
learn how to properly handle our personal
finances. No one, however, can or should be
more concerned than you about your personal
finances. They will take control of you if you
do not take control of your finances. As a
result, you should be concerned and devote
time to reorganizing your money. If you take
the time to learn the principles of personal
finance and how to manage your money
effectively, you can save more and actually
improve your financial situation.
 We have no idea what will happen tomorrow
or in the future; events that may or may not
occur in the future are beyond our control. We
won't be able to do anything about it, but we
can plan ahead and be prepared. But
occasionally, what we've prepared isn't
relevant or applicable, right? So, we just go
with the flow and experience each day as if it
were our last. Each person's preference for a
planned or spontaneous activity may be
different. If you want to feel safe, you might
consider planning activities ahead of time.
You will have more influence over your daily
life if you plan beforehand. You don't need to
waste time on things that aren't required, and
planning ahead for your finances will help you
feel secure and prepared for the unforeseen
bills that will surely arise in your life.
However, if you prefer doing things on the
spur of the moment, you might want to
consider going with the flow. When we choose
to go with the flow, it's as if we're giving
permission for things to happen and unfold as
 they should. We can sometimes achieve
considerably better results this way. Going
with the flow can lead to the development of
certain habits and ways of thinking that help us
to be more open to allowing whatever comes
our way. With these, you'll always have the
option of planning ahead or just going with the
flow. Other variables should be considered as
well, as they will always have an impact on the
decision you make.

 The Income Statement, Balance Sheet, and

Statement of Cash Flow are basic financial
statements that should be prepared, monitored,
and analyzed by entrepreneurs no matter what
type of business they are in. These are tools
that help them direct their business decisions
to be strategic and effective. Entrepreneurs
should not leave all these tasks to their
accountant or a trusted officer. They have to
know their number by HEART!

 For the time being, let us ponder upon Fred

Adler's line "Happiness is a positive cash
flow”. We are all looking for things that will
make us truly happy. We try to avoid things
that make us upset as much as possible, we
constantly embrace joyful ideas, happy
memories, and happy things in general.
Because a positive outflow signifies a good
thing in connection to this week's lesson,
happiness is a positive cash flow because it
implies that we have reaped the benefits of our
sacrifices and efforts. Sacrifices and efforts
made in our own small ways can make others
happy, and we can also be made happy by
others. It's as though it's a never-ending cycle,
similar to cash flows. Cash receipts flow in
and when you're happy, you attract happy
vibes in. Cash payments flow out and you're
sending out happy vibes to make other people
happy. That is why you should constantly
choose happiness. If you choose happiness
over all else, nothing will go wrong.