Business Policies: Structure and Guidelines

Chapter 1

• Business policies provide structure, consistency, and discipline for employee behavior and decision-making.
• Policies offer guidance on holiday entitlements, training for equipment replacement, and uniformity of approach.
• They ensure compliance with legal and health & safety requirements, maintain operating standards for customer complaints, and promote efficiency and security.
• A policy manual helps personnel follow best practices and ensures effective control over transactions
• Business policies provide a major guideline towards the production of goods and services
• Advantages of business policy includes the creation of rules and regulations for all employees, managing uncertain conditions, and deciding codes, ethics, and needs of the working environment.
• Disadvantages of business policies are needing resources to create and implement policies can be costly and it can restrict business activities.
• Business policies benefit everyone in the organization, including management, employees, investors, customers, and regulatory authorities.
• Batch processing groups transactions for processing at regular intervals (daily, weekly, monthly). Which can result in the system not always being up-to-date.

Batch Processing Advantages

• More efficiency because processing tasks in batches reduces overhead from repeatedly starting and stopping processes.
• Better resources utilization as batch processing utilizes system resources during off-peak times.
• Consistency in handling data in batches leads to uniform results, since tasks are processed under the same conditions.

Batch Processing Disadvantages

• Accumulating tasks before processing can cause delays between data collection and output generation.
• Error Handling difficulty as issues may not be detected until an entire batch is processed.
• There can be downtime between batches, especially if the product is constantly changing.

Organization Charts

• Organization charts show: the distribution and division of the organization and whom to communicate with, reporting channels, authority, and responsibility.
• Organization charts depict roles, relationships, units, formal communication, structure of authority, and responsibility.
• Organization charts may highlight communication problems, lack of coordination, or unclear authority.

Centralization

• Centralized structure relies on individual for decisions and direction. Commonly seen in small businesses where the owner is responsible.
• Centralized organization is efficient in decision-making, where mission, vision, and objectives are set for managers and employees and are easier to coordinate.
• Centralization provides better security/control, easier enforcement of standards, and benefits the organization as a whole.
• Crisis decisions get taken quickly, economies of scale may be available, administration staff at a central location, and standardization of policies/procedures and documentation.

Centralization Disadvantages

• Centralized organizations may have negative effects from bureaucracy, multiple management layers, and longer task completion times.
• Decisions may be misunderstood down the hierarchy, imbalances in attentiveness and support for departments or regions, inefficiencies from work information delays and discrepancies from economic/information resource.

Decentralization

• Decentralized structures involve multiple individuals responsible for making business decisions and rely on team environment.
• Decentralized organizations use individuals with variety of expertise and knowledge to handle types of business situations, which creates response to local market functions.
• Empowered employees, increased motivation, job satisfaction, innovation, and leadership development for mid-level managers are a product of decentralization.
• Decentralized organizations face struggles from individuals who have varying opinions, inconsistent policies, resource duplication, and are more challenging for coordination.

Departmentation

• Departmentations in an organizational chart include functional, geographical, and product/brand.

More on Departmentations

• Functional departmentation sets up departments for people who do similar jobs, based on activities or functions.
• Geographical departmentation structures the organization according to geographic area, organizing based on regional locations to address their operation needs.
• Product/brand departmentation groups activities according to product lines, allowing focus on specific product development and marketing strategies.

Computerized Accounting System

• A computerized accounting system allows for quicker and more accurate entries to the accounting system. Advantages include efficiency, speed, accuracy, monitoring, storage, security, scalability, and intergration.
• Automating accounting processes reduces manual data entry, faster transaction processing, and financial reporting.
• Computerized systems minimize human errors, up-to-date financial data for timely decision-making, easy storage of information, protects sensitive data from unauthorized access.
• Computerized accounting systems can adapt to increased transaction volumes and integration with business applications (i.e. inventory or payroll).

Manual Accounting

• Uses physical registers and account books to keep financial records.
• Recording is possible through ledger books.
• Data duplication exists, calculation is preformed manually and if there is an error there is a need to make adjustments.
• In this system data backup is not possible, trial balance must be prepared, and financial statement assumes the availability of trial balance.

Computerized Accounting

• Uses accounting software for recording data electronically.
• Data is recorded in a customized database.
• Only data input is required, no data duplication, calculations are preformed automatically, no need for adjusting entries, and the entries of transactions can be saved.
• Integrated system provides real time trial balance and independent financial statements.

Accounting Equation

• Assets = Liabilities + Equity

Interlocking System (Non-Integrated)

• Separate ledgers and accounts for costing and financial accounting purposes. One financial ledger and one cost ledger.

Integrated System (Use of Software)

• Costing and financial accounting information are combined into one set of ledger accounts.

Chapter 2

• Internal info is sales, purchase ledger, payroll system, production, sales & marketing, and NCA Records.
• External info is suppliers, newspaper, government, statistics & economic indicators, information bureaux, EDI, "trading partners", customers, and websites.
• Data is facts, figures, measurements, and the raw material for data processing.
• Information is processed data that has a meaning to the receiver which that person may use to improve the quality of decision-making.
• Information is anything that is being communicated.

Qualities of Good Information

• ACCURATE:
  • Accurate = numbers add up with no mistakes.
  • Complete = includes all relevant information.
  • Cost-beneficial = should not cost more to obtain vs the benefit.
  • User-targeted = needs of the user.
  • Relevant = be information that is not relevant.
  • Authoritative = source reliable.
  • Timely = available when needed.
  • Easy to use = clearly presented (e-mail/telephone, etc).

Financial Accounting vs Cost Accounting vs Management Accounting

• Financial accounting offers external parties (such as shareholders and customers) accurate financial information for company accounts and external reporting.
• It complies with accounting standards, is concerned with the past, includes only financial information, and details results over a defined period.
• Cost accounting (part of management accounting) applies principles, methods, and techniques to determine and analyze costs within the separate units of a business. Management Accounting
• Management accounting involves professional knowledge and skill in preparation, presentation of information to all levels of management.
• Aids for planning, control, and decision making.
• No external rules governing the format or content of management information. Looks at past and future data. Includes financial and non-financial information. Distinction between financial accounts (FA) and management accounts (MA).
• FA is for external individuals, MA is for internal managers.

More on Financial Accounts and Management Accounts

• Financial performance details a set period and follows legal requirements to prepare FA. Format is determined by law and standard, includes business as a whole, gives a historic view of past operations.
• Management Accounts assists in recording and planning, can focus more on specific areas of an organizations activities, can incorporate non-monetary measures and provide an historic record and a future planning tool.