UNIT 2: BUSINESS PLAN IMPLEMENTATION

UNIT 2: LESSON 1: STARTING AND OPERATING SIMPLE

BUSINESS

 Implement the business plan

 Operate the business
 Sell the product/service to potential customers
 Identify the reasons for keeping business records
 Perform key bookkeeping tasks
 Interpret financial statements (balance sheet, income statement,
cash flow projections, and summary of sales and cash receipts)
 Prepare an income statement and a balance sheet
 Identify where there is a profit or loss for a business
 Generate an overall report on the activity

INTRODUCTION
Even the most well-thought out business plan is just a piece of paper if it isn’t doesn’t
have a plan for implementation. This is the portion of the business plan where objectives are
clarified, tasks are assigned with deadlines, and program is charted to reach goals and
milestones.

Guidelines for successful business plan implementation

1. Objectives
The objectives should be crystal clear and specifically spelled out, since it will be used as a
building block for the rest of the implementation plan.
For example, assume the start-up is a small consulting firm. The objective should
be tough but reachable and could read something Iike this.

1.1 Secure office space and be open for business in three months.
1.2. Sign three clients within first three months of operations,
1.3. Sign 10 clients within the first year
2. Tasks

This part details what must be accomplished to achieve the objectives. Include a task
manager for each step, so that roles are clearly defined and there is accountability.
Enumerate tasks and assignments, with descriptions specifically plainly and generally stated;
without getting into a step-by-step, micromanaged explanation of how the tasks will be
carried out. Emphasize the expected results associated with these tasks.
Continuing with the above example, the tasks section might read like this:

2.1. Secure office space real estate agent

2.2. Obtain licenses and permits-you
2.3. Set up office phones and computers office manager
2.4. Begin recruiting client’s sales manager
2.5. Create marketing collateral marketing manager
2.6 Solicit referrals from client’s relationship manager

3. Time allocation
Each task should be paired with an appropriate time frame tor completion. The time allocation
should be aggressive but reasonable to ensure not just completion but competent work. For
assistance in framing this timescale, use a program such as Microsoft Project, or just create
your own Gantt chart a helpful tool that shows how long it will take to complete different tasks
and in what order the tasks should be finished

4. Progress
The overall management team leader needs to oversee monitoring each task's progress and
the completion percentage of each objective. When delays occur, try to get to the root of the
problem. Did the person responsible drop the ball? Did he or she have to0 many
responsibilities to handle? Did a third party, such as a supplier or the bank,
fail to hold up its end of a deal? Adjust the Gantt chart appropriately to account for the delay,
and make a note of the previous deadline and the reason it was missed.
While the above steps may seem like overkill, the early days of a startup are critically
important. It's a time when good management patterns are set and also probably a lean era
when revenue has yet to start rolling in
The more efficient the start of an implementation of the business plan is, the more likely it will
survive in the early period.
Operating A Business
Before starting a business, aspiring entrepreneurs should seek professional advice from
small enterprise advisors, accountants, or consultants on what is the best type of enterprise
to establish, as this varies according to the legal framework and economic structures
prevailing at a given time.
The form that a business takes is influenced by both the wishes or needs of the owner and
also by the types of product that are to be made. It is usually simpler and cheaper to register
either as a personal business with a single owner/director. However, this may not be
appropriate if additional partners are required to contribute capital or specific skills.
Other types of business that can therefore be considered include a partnership or if the
proposed enterprise has a larger number of interested investors, the form of the business
could be a cooperative association, a not-for-profit organization, or a corporation.

Business Registration Requirements

Once the form of the business has been decided, there are several registration procedures
that need to be taken before trading begins. Again, these vary in both the number of steps
and the degrees of complexity and bureaucracy in the registration procedures. Professional
advice is needed to guide the entrepreneur through each stage, from consultant and an
accountant who are experienced in these processes.

The following are the basic requirements to start commencing a business in the
Philippines:

1. SEC registration for partnership or corporation

2. DTI registration for registering your business trade name (BIR)
3. Mayor s business permit for getting the license to operate in the City or
municipality and payment of your local business taxes.
4. BIR registration- for getting TIN, official receipts, and invoices, registering your books of
accounts, and paying your national internal revenue taxes (Income tax, VAT or Percentage
Tax, Withholding Taxes, etc.,).
5. SSS, PhilHealth, and Pag-ibig Fund registration for registering yourself or company as an
employer and for remitting your employees contribution together with your employer's share.
Usually, the BIR and the City/Municipality Office require the certificates of registration with the
SEC or DTI before a business can be registered to these agencies. Thus, there is a need to
register through these offices to start the business.
A one-stop shop is available for entrepreneurs who need to register with the various
government agencies, such as the DTI, SEC, BIR, SSS, Pag-ibig Fund and Philhealth.
However, this service is only available to a few cities in Metro Manila and is not yet available
nationwide.

Special Requirements
Aside from the basic requirements, there are also special licenses or registrations that must
be obtained by a business to start its operation. For example, banks, financing company,
ending company, pawnshops, money changers, money remittance business and other
financing institutions are required to be registered with the Bangko Sentral ng Pilipinas (BSP).
If you are manufacturing and selling products related to food and drugs. you also have to
register with Bureau of Food and Drugs (BFAD) For schools and entities involved providing
education, they should register with the Commission on Higher Education (CHED) and
Department of Education (DepEd).

Other Steps to Follow Before Operating a Business

1. Set up an accounting system or hire an accountant. Knowing how the business is doing
financially is important for planning and survival. Using an accounting software package Will
make tracking business transactions easier.
2. Advertise the business. No one will buy the products or services if the Customers do not
know that the company exists. Create a website and advertise in different media, such as
newspapers and radio. Ask customers for referrals. Network with other business owners
which will help in the recognition and gain referrals for the new business.
3. Secure insurance for the business. Liability insurance protects the business in the event of
litigation. Consider life and disability insurance, health insurance, insurance if you are leasing
an office or storefront.

Selling the Product

Selling a product doesn't have to be complicated. At its most basic level, a sale program is
defined principally by what to sell, who to sell it to and how to sell it. Beyond that, sales
invoice remains focused on the details of the product and customers. As a sales program
continues, there will be a need to keep paying attention to changing trends and the needs or
desires of the customers. By observing these changes, you will be able to adjust the program
and keep the sales strong.

Method 1-Showing Enthusiasm for the Product

1. Study the Product

To convey knowledge about the product and to answer customers questions about the
product, will project complete understanding of the product. It is absolutely vital to know the
product inside out. If a customer asks something that cannot be answered right away, it is
better to say that the exact answer will be looked into and feedback will be given right away

2. Emphasize the perks of the product to customers.

It is important to translate the product's features into benefits as well as giving good product
information to the right people. This makes it easier for the customer to see why they should
purchase the product. Think about things like:

2.1. Will the product make the customer's life easier?

2.2. Will the product create a sense of luxury?
2.3. Is the product something that can be enjoyed by many people
2.4. Is the product something that can be used for a long time?

3. Ensure that the product has been adequately explained.

In person-to-person sales there is a need to ensure that good product information is supplied
via retail packaging, point-of-purchase displays, and any marketing materials. Even in selling
the products directly or making a pitch, having good product information on display will help
convince customers.
Make sure that all product information is informative, true, and complete. Make sure too, that
the language on product packaging and marketing materials is clear, direct, and easy to read.
Invest time and money to ensure that the product, packaging, and marketing materials look
good-with high- quality photos, vivid colors, etc.
Method 2-Connecting with the Buyer

1. Share your love of the product.

A good salesperson believes in the product that is being sold, and transfers this enthusiasm
to the customer. There are numerous ways to show the love of a product. Do not neglect
body language and tone. Convey energy and enthusiasm in speaking clearly about a product
and show expression when discussing it. Be prepared to discuss how to use the
product, or how other satisfied customers have used it. Specific stories about the product
make it reliable to customers.

2. Anticipate the customers motivations.

To be able to answer any questions that customers may have about a product, it is important
to anticipate those questions. This will show understanding of customer needs. Make sure to
connect emotionally with customers by addressing those needs. Think about the typical
customers. What motivates them? What needs do they have? Are they young? Single?
Wealthy? Do they have families?

3. Practice breaking the ice with customers.

If working in direct sales, the way to connect with people is critical. Instead of asking the
close-ended question, ask the more positive, open-ended questions. In addition, make
remarks about the product that will interest customers and start deeper conversations.

4. Convert the customer’s motivations into the product's characteristics.

In marketing, this is known as "positioning, and it consists of equating the produce with the
customer's hopes and desires. Several factors are important when positioning a product.
Position the product in the best spectrum of the market possible. Don't pitch the product too
high or too low in terms of affordability and luxury.
Position the facts about the product according to customers to whom you are selling
the products. Avoid fudging facts or lying outright. Product positioning is about perception, not
deception.

5. Be honest about the product.

This means being transparent in the delivery of product information. Avoid being afraid of
honesty, it builds trust. Even if sale will not happen today, the honesty and generosity will be
remembered, and can translate into future sales.

6. Close the sale.

There are many styles and methods of closing a sale, but one of the most effective has the
mnemonic, ABC: "Always Be Closing”. Confirm the prospective buyer's interest in the product
by meeting the needs

7. Give customers time to consider.

Appearing overly pushy is a turn-off 1or many buyers. Customers may want to go home and
do a quick online search to more information. Allow customers to do so with the company s
enthusiastic and supportive pitch in mind. Being truthful, helpful, considerate, and
enthusiastic. Take note that information you give matches with what they read online.
Sometimes, it pays to let the customers take the lead. Give customers time to consider.

Method 3-Selling Product as an Owner Salesperson

1. Familiarize yourself with all aspects of the product. This will feed into the end sale of a
product. Owner, as salesperson, has the ability to affect more than just the interaction with
buyers. Advertising, merchandising, and marketing are support functions for sales. Selling is
the goal of these support functions and good owner salesperson needs to have a decent
understanding of each of these.

2. Market the product. It is important to make the product information available through as
many channels as possible. Today, the range of potential placements has increased a great
deal. This is through the advances in communications and ways, such as: word-of-mouth,
advertising (radio, TV, print, email, social media, online ads, etc.), sales representatives,
trade shows, conferences, cold call sales, product placement in movies, sports, etc., local
community events (for instance, donating a product to a local benefit auction will draw
attention to the product and serve a good cause)

3. Review the sales performance. Analyze the sales at regular intervals. Is the product selling
well? ls stock low or high? Is there a profit? How are the competitors performing? Being able
to answer these questions will help maximize sales and keep sales growth steady.

4 Troubleshoot sales, if necessary, if not selling well, there will be a need to enter into a
problem-solving mode Improving the sales Will involve reassessing the product, customer
base, and marketing. Change the tactics periodically. If customers hear the same sales
routine over and over again, or see the same display month in and month out, the product
might start to seem irrelevant. Consider deleting a product from the line if it is not selling well.
Stock can be sold at discounted prices to liquidate it. Review the target market and sales
focus. The buyers might be changing, and it's better to keep up than find a new market. Re-
evaluate the product design, distribution, packaging, etc. Tweaking the product with the
target market and sales strategy in mind can improve the sales. Change the price of the
product. By studying the sales data and competitors' performance, you will know if the
product is charging too much or too little. Make the product exclusive or available for a limited
time only. Sometimes controlling supply in this way will increase demand and sales.

Keeping Business Records

Good record keeping can help protect the business, measure the performance and
maximize profits. Records are the source documents, both physical and electronic, that
specify transaction dates and amounts, legal agreements, and private customer and business
details.

Developing a system to log, store and dispose of records can benefit the business a
systematic recorded allowing you to:

 plan and work more efficiently,

 meet legal and tax requirements,
 measure profit and performance,
 generate meaningful reports,
 protect your rights, and
 manage potential risks

Most businesses use an electronic record keeping system to make it easier to capture
information, generate reports, and meet tax and legal reporting requirements.
Best Practice and Record Keeping
Depending on the industry, keeping the following records may be a legal requirement, but it is
best practice to keep them for 5-7 years:
1. Employees accreditation certificates and licenses -copies of permits, registrations,
and licenses of employees who need to do their jobs
2. Employees resumes and job applications
3. Performance reviews include assessments of staff performance and agreements
between you and your employees
4. Position statements and job advertisements
5. Customer records personal details, products purchased and product inquiries
that are useful for finding new customers
6. Customer complaints details of complaints about products, service staff or
anything else, and steps taken to resolve them
7. Details of any disputes with other businesses including how you went about resolving
disputes
8. Quotes given and won specifics of jobs and time spent on them to help win future
quoting
9. Details of advertising campaigns and success to make it easier to repeat
advertisements and plan future advertising campaigns
10. Insurance policies - a regular review and update of your business insurance
especially when your business grows or changes

Key Bookkeeping Tasks

Staying on top of the bookkeeping can be overwhelming and oftentimes gets pushed to the
bottom of to-do list, or Just completely ignored. It's understandable considering a million
things to get done when running a business. However, it is critical to the success of the
business, so it needs to get done promptly and correctly. Dividing up many bookkeeping
tasks into daily, weekly, monthly, quarterly, and yearly checklists and being consistent about
completing each task makes bookkeeping simple and rewarding
Daily Tasks

1. Review Available Cash

The first thing that should be done every day is to check how much cash is available.
Unexpected expenses can pop up on a daily basis and guess when it comes to available
cash. Instead, take a few minutes at the beginning of the day to make sure that what is
exactly on hand is known

2. Monitor incoming and Outgoing Payments

Ask the employees and partners every morning for any expenses coming up that day
to prepare for the incoming and outgoing payments tor that day. Also provide a good picture
of the cash position for the next day

Weekly Tasks

1. Record and reconcile transactions.

Each financial transaction of the business must be recorded and reconciled. If it is a
bookkeeping software that uploads the bank feed, like QuickBooks Online, then most if not all
of the transactions will upload automatically into the software. Once uploaded, make sure to
categorize it correctly and reconcile it immediately. If for some reason there is a need to
record the transaction separately, do so, and then categorize and reconcile it. Recording and
reconciling the transactions are fundamental to proper bookkeeping on a weekly basis.

2. File and upload receipts.

Keep copies of ail the invoices, receipts and payments as well as the files of all the
vendors, payroll and bank statements. Keep all of these files and receipts in paper form but it
will be better to move the files online. Programs like Google Drive or Hubdoc are safer and
will allow access to the files from any location. Also scanning and uploading the
corresponding document of all the transactions from the accounting software as back up files.
For example, when reconciling the payment transactions, upload the receipts and attach it to
the correct transaction.
3. Enter unpaid bills from vendors
Keep track of each of the vendors information, like billing dates, amounts due and
payment due dates. If vendors offer discounts for early payment, check to see if cash is
available and try to take advantage of that. Accounting software, like QuickBooks Online, can
automate this process to help keep better track of all the bills. This is to save time and money
by taking advantage of these programs.

4. Pay vendors.
Once the bills are entered into the accounting software, tracking payment due dates will be
very simple. Make sure to have funds set aside tor the bills and process payments well
before the due date, whether making payments online, by mail or in person, upload copies of
the invoices sent and received unto the accounting software and the document storage
account, like Google Drive.

5. Prepare and send invoices.

Remember, the sooner invoices are mailed it will get paid. Stay on top of sending
invoices and try to send them the same on exact day the client expected to receive it.
Simplify your life and save time by using the accounting software to complete this task.
Create your invoices and choose when you want them sent. Save the template f it is a
recurring invoice.

6. Review projected cash flow.

Staying on top of your cash flow, in and out of the practice, is incredibly important.
Forecast how much cash you will need in the coming weeks/months to pay your bills,
employees, and suppliers. Knowing your projected cash flow is also critical to making
informed business decisions.

Preparation of the Financial Statements

Financial statements will help determine the business financial position at a specific
point in time and over a period of time. Information from the accounting journal and the
general ledger is used in the preparation of your business's financial statements: the income
statement, the statement of retained earnings, the balance sheet, and the statement of cash
flows. Information from the previous statement is used to develop the next.

Income Statement
The income statement, also called a profit and loss statement, is almost uniquely important
because it shows the overall profitability of your company for the time period in question.
Information on sales revenue and expenses from both the accounting journals and the
general ledger are used to prepare the income statement. It shows revenue from primary
income sources, such as sales of the company's products. The income statement also shows
any revenue during the time period in question from assets, such as gains on sales of
equipment or interest income.
The income statement also shows the business's expenses for the time period, including its
primary expenses, expenses from secondary activities and, finally, tosses from any activity,
including current depreciation.
The bottom line of the income statement is net income or profit. Net income is either retained
by the firm for growth or paid out as dividends to the firms owners and investors, depending
on the company's dividend policy

Statement of Retained Earnings

The statement of retained earnings is the second financial statement to be prepared in the
accounting cycle. Net profit or loss must be calculated before the statement of retained
earnings can be prepared. After computing the profit or loss figure from the income
statement, you can see what the total retained earnings to dale are and how much will be
paid out to the investors in dividends, if any. This statement shows the distribution of profits
that are retained by the company and which are distributed as dividends. As the name
suggests, the amount of retained earnings is the profit retained by the firm for growth, as
distinguished from earnings that are not retained but are distributed to shareholders as
dividends or to other investors as the distributed share of profits.

Statement of Financial Position (Balance Sheet)

The Statement of Financial Position (Balance Sheet) is the financial statement that illustrates
the firm's financial position at a given point in time - the last day of the accounting cycle. It’s a
statement showing what the business owns (assets) and what the business owes (liabilities
and equity). The assets must equal the liabilities plus the equity or owner's investment. The
business used the liabilities and equity to purchase the company's assets. The balance sheet
shows the firm’s financial position with regard to assets and liabilities/equity at a set point in
time.
Entries on a balance sheet come from the general ledger, and the format mirrors the
accounting equation. Assets, liabilities and owners’ equity on the last day of the accounting
cycle are stated.

Statement of Cash Flows

Even the company is turning a profit, it may be falling short because of inadequate cash flow,
So it is just as important to prepare a statement o cash flows as it is to prepare the income
statement and balance sheet. This statement compares two time periods of financial data
and shows how cash has changed in the revenue, expense, asset, liability and equity
accounts during these time periods.
The statement of cash flows must be prepared last because it takes information from all three
previously prepared financial statements. The statement divides the cash flows into operating
cash flows, investment cash flows, and financing cash flows. The final result is the net
change in cash flows for a particular time period and gives the owner a very comprehensive
picture of the cash position of the firm.
The statement of cash flows shows the firm's financial position on a cash basis
rather than an accrual basis. The cash basis provides a record of revenue actually
received from the firm’s customers in most cases. The accrual basis shows and records the
revenue when it was earned. If a firm has extended billing terms, Such as 30 days net, 60
days 1 percent, these two methods can produce substantially different results.

Interpretation of Financial Statements

It is important that users of financial statements can interpret the financial statements to be
able to draw valid conclusions. Typically, this involves the use of comparisons to prior years,
forecasts and competitors. Users can compare sales and expense figures, asset and liability
balances and cash flows to perform this analysis.
Ratio analysis is widely used to support this process of comparison. The ratios are
calculated using the figures already present in the financial statements. The raw data is
equally useful when performing analysis. Ratios are simply a tool to try and assist
understanding and comparison.

Users of Financial Statements

When interpreting financial statements, it is important to ascertain who the users of

accounts are and what information they need:

1. Shareholders and potential investors- primarily concerned with receiving an adequate

return on their investment, but also with the stability/liquidity of the business
2.Suppliers and lenders- concerned with the security of their debt or l0an
3. Management -concerned with the trend and level of profits, since this is the main measure
of their success

Other potential users include:

1. financial institutions,
2. employees,
3. professional advisors to investors, and
4. financial journalists and commentators

Ratio Analysis

Financial ratios are mathematical comparisons of financial statement accounts or categories.

These relationships between the financial statement accounts help investors, creditors, and
internal company management understand how well a business is performing and which
areas need of improvement.
Financial ratios are the most common and widespread tools used to analyze a business
financial standing. Ratios are easy to understand and simple to compute. They
can also be used to compare different companies in different industries. Since a ratio is
simply a mathematical comparison based on proportions, big and small companies can use
ratios to compare their financial information. In a sense, financial ratios do not take into
consideration the size of a company or the industry. Ratios are just a raw computation of
financial position and performance.
Ratios allow us to compare companies across industries, big and small, to identify
their strengths and weaknesses. Financial ratios are often divided up into seven main
categories: liquidity, solvency, efficiency, profitability, market prospect, investment leverage,
and coverage.
Ratios use simple calculations based upon the interactions in sets of data. For example,
changes in costs of sale are directly linked to changes in sales activity. Changes in sales
activity als0 influence wages and salaries, receivables, inventory levels, etc. Ratios allow us
to see those interactions in a simple, concise format

Ratios are of limited use on their own, thus, the following points should serve as a
Useful checklist if there is a need to analyze data and comment on it:

1. What does the ratio literally mean?

2. What does a change in the ratio mean?
3. What is the norm?
4. What are the limitations of the ratio?

Focus of Analysis
Traditionally financial statements analysis focuses on three Key areas.

1. profitability,
2. liquidity, and
3. efficiency.

Profitability ratios compare income statement accounts and categories to show a company’s
ability to generate profits from its operations. Profitability ratios focus on a
company s return on investment in inventory and other assets. These ratios basically
show how well companies can achieve profits from their operations.
Investors and creditors can use profitability ratios to judge a company’s return on investment
based on its relative level of resources and assets. In other word profitability ratios can be
used to judge whether companies are making enough operational profit from their assets. In
this sense, profitability ratios relate to efficiency ratios because they show how well
companies are using their assets to generate profits. Profitability is also important to the
concept of solvency.