PURCH A S I NG , I NV EN T O R Y

AND QUALIT Y C O N T R O L
Purchasing
determines the company’s needs and then finds, orders,
and assures delivery of those items.
Why Purchasing Is So Important ?
The cost of materials and other goods and services needed to produce a product is about
half the revenue received for it. This means all other costs, plus profit, almost equal the cost
of purchases. In many cases, the cost of purchases is as much as two-thirds of sales
revenues. While the price of purchases is important, other aspects can be just as critical.
For example, obtaining just-in-time (JIT) delivery—where the materials are delivered to the
user just at the time they are needed for production—can save on inventory costs.
Assign Responsibility for Purchasing to One Person
Those doing the purchasing should be aware of trends and
special situations that can affect operations and should call
situations such as the following to your attention:
Expected changes in price.
Buying later for expected decreases in price or buying
increased quantities for expected inflation in price can
result in savings. However, stockouts, which are sales lost
because an item is not in stock when customers want it,
and inventory costs that are too heavy should be guarded
against
Expected changes in demand.
Seasonal products and high fashion items fall into this category.
Orders for specialty goods.
The quantity ordered should match expected demand, so no material
is left over. Because demand for these items is usually unknown
Short supply of materials
 Selecting the Right Supplier
You will be more successful in purchasing if you can find
several acceptable sources of goods and services. Because
reliability in delivery and quality affects nearly all
operations, suppliers can be valuable sources of
information for various aspects of operations, and suppliers
can provide valuable service.
 EARLY WARNING SIGNS YOUR PRICING IS FAILING

The pricing of your product or service is a key element in determining

the profitability of your business. However it is not always easy to get
it right. How do you make sure that money ends up in your pocket
and you avoid those endless sleepless nights? If your price is too high
demand will reduce and you may price yourself out of the market. If
your price is too low, your sales volume may not generate enough
revenue to cover the costs associated with your business. Your
business could fail if you don't look out for these early warning signs:
1. DO YOUR PRICES COVER YOUR COSTS/EXPENSES?
2. ARE YOU JUST 'HOPING FOR THE BEST’?
3. HAVE YOU GOT TO GRIPS WITH THE BASICS?
4. DO YOU TAKE TOO MUCH NOTICE OF YOUR COMPETITORS?
5. DO YOU REALLY KNOW THE 'VALUE' OF YOUR PRODUCT?
Basic Financial Planning
WHAT IS PROFIT PLANNING?
IS A SERIES OF PRESCRIBED STEPS TO BE TAKEN TO ENSURE THAT
A PROFIT WILL BE MADE.
WHAT IS THE FINANCIAL STRUCTURE OF A BUSINESS?

DESCRIBES THE RELATIVE PROPORTIONS OF A FIRM’S ASSETS,

LIABILITIES, AND OWNERS’ EQUITY.
ASSETS

ARE THE THINGS A BUSINESS OWNS.

ACCOUNTS RECEIVABLE
ARE CURRENT ASSETS RESULTING FROM SELLING A PRODUCT ON
CREDIT.
LIABILITIES

ARE THE FINANCIAL OBLIGATIONS OF A BUSINESS

ACCOUNTS PAYABLE
ARE OBLIGATIONS TO PAY, RESULTING FROM PURCHASING GOODS
OR SERVICES
OWNERS’ EQUITY
IS THE OWNERS’ SHARE OF (OR NET WORTH IN) THE BUSINESS,
AFTER LIABILITIES ARE SUBTRACTED FROM ASSETS.
AN INCOME STATEMENT (PROFIT AND LOSS
STATEMENT)

PERIODICALLY SHOWS REVENUES, EXPENSES, AND PROFITS FROM

A FIRM’S OPERATIONS.
REVENUE (SALES INCOME)
IS THE VALUE RECEIVED BY A FIRM IN RETURN FOR A GOOD OR
SERVICE.
EXPENSES

ARE THE COSTS OF LABOR, GOODS, AND SERVICES.

COST OF GOODS SOLD
IS THE TOTAL COST IN TERMS OF RAW MATERIALS, LABOR, AND
OVERHEAD OF THE BUSINESS THAT CAN BE ALLOCATED TO
PRODUCTION.
PROFIT (INCOME)
IS THE DIFFERENCE BETWEEN REVENUE EARNED AND EXPENSES
INCURRED.
WHAT IS THE BREAK-EVEN POINT?
WHEN A BUSINESS REACHES THE BREAK-EVEN POINT, THE TOTAL
SALES EQUAL THE TOTAL EXPENSES. THAT MEANS YOU BRING IN
THE SAME AMOUNT OF MONEY THAT YOU NEED TO RUN YOUR
BUSINESS.
Risk Management, Insurance, and Crime
Prevention
 Types of Risk
There are two primary types of risk you will face as a small business owner
• Pure risk is the uncertainty that some unpredictable event will result in a
loss.
• Speculative risk is the uncertainty that a voluntarily undertaken risk will
result in a loss
 Ways of Coping with Risk
There are many ways you can cope with risk. The most common of these are:
• Risk avoidance. Is refusing to undertake an activity when the risk seems too
costly.
• Risk prevention, or loss control. is using various methods to reduce the
possibility of a loss occurring.
• Risk transfer is shifting a risk to someone outside your company.
• Risk assumption, or self-insurance is provided by another company that
agrees, for a fee, to reimburse your company for part of a loss
 AL P RO P ER T Y P RO T E CT I O N
INTE LL E CT U
EE D T O U N D ER S T A N D T H E
R S A N D B U SIN E S S O W N ERS N
ENTREPRENEU B E S T P R O T EC T T H E IR
A L P R OP E R TY (I P) LA W T O
BASICS OF INT EL LE C TU
U N F AIR C O M P E T IT IO N.
C R E A T IO N S A N D ID E A S F ROM
HARD-EARNED E IT E M S T H A T YOU
T Y IN C L UD ES D IS TIN C TI V
INTELLECT U A L P R O P E R
O U AN E C O N O M IC B E NE FIT
E AT ED A ND O N ES T HA T GIVE Y
HAVE CR
 TY P ES OF I P P R O T E C T I ON
FOUR
FOR B U S I N E S S E S
A patent grants property rights on an invention, allowing the
patent holder to exclude others from making, selling, or
using the invention. Inventions allow many businesses to be
successful because they develop new or better processes or
products that offer competitive advantage on the
marketplace.
Trademark
Is a word, phrase, symbol, and/or design that identifies and distinguishes the source of
the goods of one party from those of others. For example, The Coca-Cola mark is being
used as a trademark when it is used to sale beverages
Service mark
Is a word, phrase, symbol, and/or design that identifies and
distinguishes the source of a service. For example, when you go to a
Marriott hotel, the Marriott mark is being used as a service mark
related to the hotel services (e.g. providing hotel rooms for customers).

The term "Trademark" is often used generally to refer

collectively to both trademarks and service marks.
Copyright is a form of protection provided by U.S. law to
anyone who creates "original works of authorship."
Essentially, a copyright protects literary, musical, dramatic,
artistic and other qualifying creative works.
THANK
YOU ,,,