Business Functions PDF

# Business Functions ## Business Operations Paper 1 ### 4.3 **The Differences Between Data and Information** | **Data** | **Information** | | :--------------- | :--------------------------------...

# Business Functions ## Business Operations Paper 1 ### 4.3 **The Differences Between Data and Information** | **Data** | **Information** | | :--------------- | :-------------------------------------------------------------------------------------------------------- | | Raw/unprocessed facts found in stats, graphs, tables | Processed/analysed data that gives specific knowledge to managers to make decisions | | Collected from other business functions within the same business | Can be stored manually in files, boxes, shelves, computers, etc. | | Needs to be processed before it can be used as information | It's important to have a backup for data stored on computers or other electronic devices in case they are damaged | | Processed manually or using technology such as computers | Most businesses use electronic devices such as memory sticks and CDs to store information | ***NOTE:** The action verb "**Differentiate/Distinguish**" means that the difference/distinction does not have to link but they must be clear. ### 5 **Financial Function** ### 5.1 **Importance/Purpose of the Financial Function** * Determines how much capital the business needs * Establishes the sources for acquiring capital * Decides how to invest/allocate capital funds in the business * Ensures the business can generate enough income to cover the cost of raising capital * Prepares financial statements that can be presented to the bank/investors in order to convince them that the business is financially healthy ### 5.2 **Sources of Financing** * **Bank Loans:** * Money borrowed from the bank and will be repaid over a period of time * Repaid with interest * Entrepreneur must attach a fixed asset as surety to the value of the loan * Usually used for long-term financing * **Bank Overdraft:** * Short-term loan added onto the account of the entrepreneur * Also repaid with an interest over a set period of time * **Asset-Based Loan:** * Money lent to successful businesses that want to expand further * Loan is used to purchase an asset, and that asset belongs to the lender until it is fully paid off * If the money is not paid back, the lender will take that asset. * **Grants:** * Money provided by the government to small businesses that are developing * Money does not have to be paid back if it benefits the community * The government wants to see small developing businesses benefiting the community and the environment in some way * **Receivable Finance:** * Loan provided to businesses while waiting for payment of the goods/services provided to avoid a cash flow shortage * The loan is equal to the outstanding invoices that are due * **Angel Funding:** * Money offered by wealthy entrepreneurs to other businesses for a share in that business * Usually used at the start of a business and carries a high risk for the investor * **Venture Capital:** * Money offered by individuals or organizations to start up or expand the business * Done in exchange for a share in the business * Investor usually requires a management position or to be a board member in the business ***NOTE:** You must be able to identify the sources of financing from given scenarios. ### 5.3 **Types of Capital** * **Fixed Capital:** * Money pays fixed assets like land and buildings * Financed through long-term capital needs of the business * Examples: capital market, selling shares, mortgage bonds, etc. * **Working Capital:** * Money pays for day-to-day activity like trading stock, raw materials, etc. * Financed through short-term capital needs of the business * Examples: money market, credit allowed by suppliers, short-term loans, etc. * **Own Capital:** * Owner provides capital * Permanent capital as the company is not under obligation to repay the amount * It is not a liability for the business * Return on capital is on profits * **Borrowed Capital:** * Obtained from financial institutions * Temporary capital, as it is to be repaid after a fixed period * It is a liability for the company * Return on capital is paid in the form of interest ### 6 **Purchasing Function** ### 6.1 ** Importance/Purpose of the Purchasing Function** * Manages stock to ensure sufficient levels are available to carry out business operations * Continuously looking for the best and reputable suppliers * Makes regular contact with other business departments to determine their needs * Sends damaged goods back to the supplier and ensures they are replaced * Receives confirmation that all goods were according to specifications and the price invoiced was the quoted price * Negotiates the best possible term of payment with suppliers ### 6.2 **Activities of the Purchasing Function** * Purchasers should have expert knowledge of the product they need to buy and about that market in which they operate * Find out the needs of the other business departments * Look for suitable, new, and better suppliers * Ensure there is enough stock available for continuous production and sales * Place orders with suppliers and follow up on them * Ensure that ordered products are delivered on time * Send damaged products back to the suppliers and ensure they are replaced * Buy the right amount of stock/quantity so that the business does not run out of stock * Buy goods from the best supplier who supplies goods at the right time and place * Get the best price for the quality that the purchasing function requires * Keep the correct stock levels of stock on hand * Record the cost prices and selling prices of stock ### 6.3 **Purchasing Procedure** * **Determine the need for the product/requisition:** * Liaise with the financial department to establish the budget for purchasing goods and services * Determine the product/material/resource needs of the businesses * Find the right quality/quantity of goods and services at the right price at the right time. * **Determine the price of the product:** * Find the best price by obtaining quotes/tenders or making enquiries * **Select/choose a suitable supplier:** * The purchasing department should choose reliable suppliers for its raw materials/products * Evaluation criteria should be based on quality of raw material/prices/delivery time * The purchasing department should conduct a thorough investigation about potential suppliers/their reputation and reliability * **Place an order:** * The purchasing function should place an order in writing so that goods delivered can be compared with the order * Confirm the prices of the products on order to avoid unexpected surprises when payments are made. * **Collect or receive the order:** * Ensure that the correct orders are received and recorded * The quality and quantity of stock received should be checked against the order * The purchasing department should keep a copy of a delivery note for records-keeping purposes * **Pay the supplier:** * The purchasing department instructs the financial department to pay the supplier after delivery of the order * The supplier must provide copies of the requisition form to the purchasing department * The purchasing departments must provide a delivery note to the financial department * The supplier sends the invoice to the financial department for final payment after satisfactory delivery * **Distribute stock:** * The purchasing department should ensure proper distribution of stock/raw materials to all relevant departments * Distribution of stock should be in line with pre-requisite orders from each department to avoid stock loss. * **Complete the order:** * Ensure that all the correct documentation is in place and filed for future reference. ### 6.4 **Importance of Stock Control** * Enables businesses to determine the amount/value of stock * Businesses can check the cost and selling price of products * Ensures that there is enough stock to meet the normal demand of customers * Keep the correct levels of stock on hand * Record the cost prices and selling prices of stock * Identify theft in the business when physical stock count is compared with the electronic stock control system. ### 6.5 **Differences cash and credit payment** | **Cash Payment** | **Credit Payment** | | :--------------------------------------------------- | :------------------------------------------------------------------------------------ | | Cash payment refers to all payments made by cash/cheque for business purchases | Credit payment refers to all payments made by means of credit cards/on a future date for business purchases | | Enables businesses to budget for stock purchases and avoid unnecessary delays | Allows businesses to buy stock and pay on a future date. | | Cash payers can qualify for cash discounts. | The credit payer can pay more for goods due to interest added on credit purchases. | ## 7 **National Credit Act/NCA** ### 7.1 **Definition of the NCA** * Introduced to provide both credit providers and credit applicants with clear guidelines regarding their rights and responsibilities * Applies to all businesses that sell on credit. ### 7.2 **Purpose of the NCA** * Promote the development of a credit market accessible to all South Africans * Encourage responsible buying * Address and correct imbalances in negotiating power between consumers and credit providers * Discourage reckless credit granting by credit providers * Educate consumers on making the right choice when applying for credit * It gives guidelines within which different kinds of credit transactions must take place in South Africa ### 7.3 **Consumer Rights outlined in the NCA** Consumers have a right to: * Apply for credit * Receive information in one's official language * Be protected from unfair discrimination in granting credit * Be given reasons why an application for credit is refused * Be informed about the interest rate and any other cost of the proposed credit transaction * Receive a copy of a credit contract and a replacement copy when the consumer asks for one * Apply for debt counseling if a customer has too much debt. ### 7.4 **Responsibilities of Credit Providers** * Credit providers should conduct a credit assessment on the consumer's affordability. * Check the most recent pay slip or bank statement to ensure the consumer has an income * Check the consumer's monthly debt-repayment obligations in terms of credit agreements. * Take into account other expenses of the consumers. * Consider the consumer's debt-repayment history ### 7.5 **Remedies of the NCA** * **The Consumer Tribunal** * **The National Credit Regulator (NCR)**: Responsible for reviewing decisions made by the National Credit Regulator (NCR), the National Consumer Commission (NCC). * **National Consumer Commission** * **Ombudsman** ### 7.6 **The Impact of the National Credit Act on Businesses** * **Positives/Advantages:** * Lower bad debts resulting in better cash flow * Protects business against non-paying consumers * Increases cash sales as credit can only be granted to qualifying customers * Prevents reckless lending by financial institutions * Ensures that businesses settle their debts on time so that they can obtain good credit scores * Ensures that credit processes are transparent e.g. both businesses and customers know their responsibilities. * **Negatives/Disadvantages:** * Businesses are forced to budget to keep more cash/have enough cash on hand for stock purchases * Businesses can no longer take the risk of selling poor quality goods at high prices. * Businesses can no longer carry out credit marketing * Leads to loss of sales as many businesses may no longer qualify to buy on credit. * The Act complicates the purchasing process due to too much administration work in the credit providing process. * The purchasing department must know the terms and conditions of credit granting and the National Credit Act. * It may take longer to purchase goods and this could influence the overall efficiency of the business * The Act compels businesses to sell quality products or businesses may be forced to reimburse the consumer. ## 8 **The Consumer Protection Act/CPA** ### 8.1 **Definition:** * Introduced to prevent consumers from exploitation by businesses. * Ensures the full participation of previously disadvantaged individuals in the economy * Applies to all businesses which sell goods and services to consumers. ### 8.2 **Purpose of the Consumer Protection Act** * Promotes responsible consumer behavior * Strengthens a culture of consumer rights and responsibilities * Establishes national standards to protect consumers * Establishes a National Consumer Commission (NCC) * Ensures that consumers have access to information they need to make informed choices * Provides guidelines for better consumer information and to prohibit unfair business practices > It empowers consumers to take legal action if their rights are not upheld. * Promotes consumer safety by protecting them from hazardous products/services * Promotes fair/accessible and sustainable places for people to sell their products * Promotes consistent laws relating to consumer transactions and agreements * Promotes the rights and full participation of historically disadvantaged individuals as consumers. * Protects consumers against contracts that include unfair terms which limit the liability of suppliers. ### 8.3 **The Impact of the Consumer Protection Act on Businesses** * **Positives/Advantages:** * Businesses may be safeguarded from dishonest competitors * Businesses may be protected if they are regarded as consumers * Prevents larger businesses from undermining smaller ones * May gain consumer loyalty, if they comply with CPA * Enables businesses to resolve disputes fairly through the National Consumer Commission/Consumer Court/Industrial ombudsmen * Businesses may build a good image if they ensure they do not violate consumer rights. * **Negatives/Disadvantages:** * Confidential business information may become available to competitors. * Penalties for non-compliance may be very high * Businesses may feel unnecessarily burdened by legal processes. * They have to disclose more information about their products and processes/services * Staff need to be trained/Legal experts need to be consulted, which can increase costs. ## 9 **Public Relations** ### 9.2 **Importance of Public Relations** * Businesses get publicity for promotional events and information through media. * News conferences may be called to release information which will ensure the survival of the business. * Employees may volunteer to spend time with people in need at orphanage/hospitals/schools etc. * Businesses can sponsor community events. * Produce annual reports that review business activities and achievements. * Brochures can be used to distribute information. * Networking is a popular form of public relations direct contact with employees or telephonic communication. * Attend network events and talk about the business product * Use corporate social responsibility as a public relations activity involving communities to get positive exposure. ### 9.3 **Differences between external and internal Public Relations** | **External Public Relations** | **Internal Public Relations** | | :------------------------------------ | :-------------------------------------------------------------------------- | | Creates a good company image and awareness to those outside of the company | Creates a good company image and awareness to employees in the company. | ### 9.4 **Methods of Public Relations** * **Media:** * Businesses get publicity for promotional events and information through media * Includes advertising and the distribution of about the business * **Direct contact:** * Information about the business is passed on to the members of the public who have dealt with the business previously. * Direct contact with employees or telephonic communication is a popular form of public relations. * **Brochures:** * Excellent way of distributing information in a cost-effective way. * **Exhibitions:** * The business is introduced to the public and meet existing customers in shopping centres * **Social responsibility:** * The business uplifts the community as the community support the business by buying their product. * **Transit advertising:** * Advertising on vehicles such as taxis, buses, vans, etc * **Use of the telephone** * A potential customer phones the business to enquire about something, the person answering the telephone is perceived as the business. * If the potential customer is pleased with when information that was required, then that person can r to be the important customer ## 7 **Production Function** * Ensures that enough production takes place to meet the demand * Produce quality products * Buys quality raw materials * Ensures the safety of all factory workers by adhering to all safety procedures and regulations. * Selects a suitable production system for its product. * Performs quality control through regular inspections of products. * Maintain the equipment to avoid breakages and waste of production time.