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Table of Contents
- Financial Management for a New Business............................................................................................
- Precisely Managing the Flow of Cash.................................................................................................
- Know the Trend...................................................................................................................................
- Be Loyal to Customers........................................................................................................................
- Having a Back-up Plan........................................................................................................................
- Planning with Sustainability................................................................................................................
- Estimating the Cost Value....................................................................................................................
- Splitting Personal and Professional Expenses.....................................................................................
- Optimizing the Cost Value...................................................................................................................
- Managing Loans According to Risk Level..........................................................................................
- Converting Cost into Profit..................................................................................................................
- Conclusion...............................................................................................................................................
- References................................................................................................................................................
- Optimize the cost value of the product.
- Manage the loans efficiently.
- Learn to convert cost into profit.
Precisely Managing the Flow of Cash
In order to control every aspect of the business precision is required on every step especially on the financial side of the business. The precision is required on each and every flow of cash that happens in the business. It is rather very difficult task to optimize the cash flow on every step but this is the most important step for survival. The cost to profit ratio should be estimated on every step of the business that runs on. The possibility always remains that the fiasco from one venture may overshadow the profits from ten ventures. For example, if a movie costs $5M in making and earns $6M, then the Production House will make $1M in profit, suppose the next movie costs $4M and earns only $2M, then, the production house will lose $2M. Hence, the production house will lose the profit from the previous hit movie too. In the same way suppose an organization is focusing on cutting the expenses of the company and is strictly ordering the employees to use the resources in limit, the employees are using the electricity in a specified limit to cut the expenses on electricity bills but are not limiting the use on water usage but are rather exceeding the previous amount of usage to cover the limit of electricity usage. Hence, the money saved on electricity bills would be spent on the exceeded water bills. Thus, the company will fail to optimize the expenses. Thus, every limit on expenses should be set in keeping the overall profit of the company and the future investment in focus.
Know the Trend
Staying updated to the ongoing trends in the business world is the main requirement to survive in the ever changing era we are living in. The rise of technology has now made possible for a man to do innovations in a lot less time than ever before. Therefore, the R&D Department in the present era is the highly paid field in modern era. In the scope of financial management, the updated trends and their knowledge becomes the backbone of every step of the plan made for a new venture by an organization. For example, in order to make any movie, the R&D Department of a Production House closely studies the ongoing trend and predict the trend that would be present at the time of the release of the movie. Many tools, surveys and facts on psychology are used in researching the behaviour of the audience and in determining that what an audience wants and what they do not want in a movie. The report
given by the R&D Department then determines the idea that is made to make a movie. The chances of failing are also determined according to the report given by the R&D Department. Thus, the expenses for any new venture are determined by the idea behind the venture and the idea is determined by the present trend and the prediction of future of trends. For example, even without a team one can do a quick research for the highly rated movies on IMDB or Rotten Tomatoes and can find the pattern on which the movies are rated, suppose the rating shows that the movies that have more plot twists in them are rated higher but earn less money. Whereas, the movies that have more special effects in them, earn more money but are rated lower. This research shows that in order to make a movie that has high ratings and also it earns high amount of money should has clever story with plot twists along with the special effects in the screenplay.
Be Loyal to Customers
“Customer comes first” is the phrase that is used in the business world from centuries. The essence of such idea is that in order to make progress in the business the requirements and needs of the customer should always be the priority for an organization and the personal gains and all the problems related to it should be a second priority. This idea is the extension of being updated but it follows the step to be taken when the R&D Dept. fails to study the customer’s requirements and by the report based on it makes the wrong idea which leads to failure, the step ahead should be to re-study the requirements rather than relying on the previous report and going with the flow.
“Insanity: Doing the same thing over and over again and expecting different results.”
Having a Back-up Plan
We live in a world in which infinite possibilities exists. The concept for parallel universes tell us that on every action made one chooses a possibility from an infinite range of possibilities available. The process of determining and calculating all the possible outcomes against an action has the field of its own with specified formulae and skills required. The R&D Dept. determines all the possible outcomes from every step that the company takes in a venture and against every outcome a back-up plan should be devised to stay relevant. All the expenses should also be managed according to the plans, sub-plans and the back-up plans.
Planning with Sustainability
The amount of loans taken from the bank should be determined precisely and effectively and the amount should be decided based on the company’s graph of progress and future gains and investments.
Converting Cost into Profit
The conversion of cost into profit is the essence of any business. The whole game of the business world is the skill to get some by giving some or to give one and get two policy. The prediction or anticipation that an investment will make a profit is the phenomena on which the stock market runs on and the economy of the world relies on. The additional methods involving pattern finding, human psychology and many other are used by the merchants and businessmen to put their investment at stake. The skill of predicting the future of ones investment is what makes a businessman.
Conclusion
In order to start a business, an entrepreneur needs an idea and the finance that supports the implementation of that idea. Precise planning should be made at the business start-up as the first few steps decide the fate of the business. Back-up plans should be made for any possible outcome. Research and analysis should be done before any step taken and the risk level of any project should be precisely calculated, the loans taken from the bank should be managed properly. In short, analysing, planning and precise implementation are required to make progress in a business.
References
Lohrey, J. (2009). The Cost to Profit of a Brewery. Retrieved from: https:// yourbusiness.azcentral.com/cost-profit-brewery-29376.html
Peavler, R. (2018). How to Apply for a Small Business Loan. Retrieved from: https:// www.thebalancesmb.com/how-to-apply-for-a-small-business-loan-
Rivera, A. (2018). How to Start a Business: A Step by Step Guide. Retrieved from: https:// www.businessnewsdaily.com/4686-how-to-start-a-business.html
