Entrepreneurial Small Business, Essay Example

Three

The observations that were made are that the business is that Mantex is achieving a surplus on a monthly and quarterly basis by the administration of the accounts payables and the accounts receivables. This is significant due to the commerce’s finance being an integral part of any concern. The ability of being able to manage the business’ finance is essential to the success of the organization. In the event that the entrepreneur does not properly maintain their business’ financial administration, problems may develop. The financial management of an enterprise is a topic that with which business administrators must be well acquainted (Garrison, Noreen & Brewer 2003; Katz & Green 2007) .

Four

An important component of business management is establishing the correct cash flow. In an enterprise, the accounts receivable and the accounts payable must be clearly delineated. The administrators of the business must have the capacity of maintaining a balanced and consistent cash flow during all times. The establishing of the consistent and balanced cash flow implies that the accounts payables must not exceed the accounts receivables in any month or interval.  Furthermore, the business administrator must also be able to manage their debt obligations. The administrator must also manage the obligations to creditors. The obligations to creditors should never reach a pointy of being unmanageable. The payment schedules should be kept meticulously in order to ensure that there are no unfulfilled obligations (Garrison, Noreen & Brewer 2003; Katz & Green 2007).

The maintenance of transparent and concise documentation is integral to maintaining the administration of business finance. The administrator should contract a professional or apply specific accounting software in order to keep precise accounting records. It is of the utmost importance for the business administrator to maintain a commercial budget. The commercial budget will enable the business owner to administrate the cash inflows and outflows of the enterprise. The observance of the cash inflows and cash outflows is an excellent method for the avoidance of the accrual of too many debt obligations (Garrison, Noreen & Brewer 2003; Katz & Green 2007).

Five

The precise documentation of records can facilitate the business administrators in acquiring a loan. The lending institutions provide preference to borrowers who have accounting records with regards to making a decision regarding business financing. Enterprises are perceived to be a risk for lenders with respect to making loans. This is attributed to the premise that numerous businesses fail. The cash flow statement demonstrates the financial health of the enterprise. The cash flow statement can demonstrate that the enterprise is in good financial health. In addition, the cash flow statement enables the prediction of the production of the business. This is the reason why it is important to keep accurate records in a business enterprise (Garrison, Noreen & Brewer 2003; Katz & Green 2007).

The majority of people do not consider business finance when starting a commercial enterprise. This is another reason why numerous businesses fail. In the circumstance of a start-up business, the lending institutions prefer to view an appropriate business plan.  These components demonstrate that the business owner has the cognitive experience in order to make the enterprise effective (Garrison, Noreen & Brewer 2003; Katz & Green 2007).

The finances of the enterprise should be the constant consideration of the business owner. Financial success is the most obvious indicator of effectiveness in an enterprise. The inflows and the outflows of the enterprise should be constantly documented and updated by the business person. In this way, all of the debts that are owed and all of the financial transactions can be recorded. The recommendations for the business owner would be to hire an accountant or to maintain the schedule with a specified accounting software program (Garrison, Noreen & Brewer 2003; Katz & Green 2007).

Six

The cash budget is applied in order to demonstrate the actual profits that are realized by a business. The cash budget documents the inflows and outflows of the business. The earnings of an enterprise can be manipulated. The statement of cash flows demonstrates the funds that are applied in order to pay for operating expenses and products. The cash budget enables the capacity of being able to create cash. The cash budget is effective for the future forecast of an organization’s performance. In addition, the cash budget and the information derived can be applied in order to make a comparison of different firms and distinct accounting treatments (Garrison, Noreen & Brewer 2003; Katz & Green 2007).

The cash budget enables the verification of an organization’s financial performance in addition to the schedule of cash generation.  The advantages of the cash budget are that the modifications in net assets are reflected. In addition, the economic structure of the organization is manifested. The other important use of the cash budget is the forecasting of dividends that are derived from the business operation. The statement of cash flows documents those financial actions of the organization. In addition, the statement of cash flows reports the investment activities of the organization. Furthermore, the operating activities of the organization are documented by the statement of cash flows (Garrison, Noreen & Brewer 2003; Katz & Green 2007).

The items that are applied in a cash budget are the cash that is available in banking accounts, the value of the liquid cash equivalents and the equity investments.  Funds which are derived from a loan are usually classified as bank borrowings.  Overdrafts which are extended by the banking institution create important components of the organization’s cash administration plan. The cash budget is an important assessment of the business’ capacity to engage in new investments with or without external financing.  In addition the stamen of cash flows demonstrates the ability of being able to remit dividends. The statement of cash flow also demonstrates the enterprise’s ability of maintaining itself in a viable state (Garrison, Noreen & Brewer 2003; Katz & Green 2007).

Cash inflows in a cash budget may be derived from the vending of services and goods. In addition, the cash inflows may be the outcome of dividends and royalties. The commissions which are received and remitted to the sales staff are demonstrated in the cash budget. The cash outflows which are emitted from an organization can be the outcome of cash remissions to suppliers. The cash outflows may also originate from the payment of employees’ salaries. The cash outflows in the cash budget may be the outcome of the payment of services. In addition, there are outflows which include revenue taxes (Garrison, Noreen & Brewer 2003; Katz & Green 2007).

Accounting methods include the indirect and the direct method. The direct method provides an assessment of the gross revenues and the gross cash inflows. The indirect method is demonstrated to show the net profit prior to taxation. There may be other profits and loss items which include the items of a non cash category. These items of a non cash category may include losses or discounts which are incurred. In addition, the financing activities of the business are shown on the cash budget. The direct method demonstrates the cash derived from operating activities. The sales may be adjusted. In addition, the cash budget shows the modifications in inventories which take place during the cycle which is being shown by the cash budgets (Garrison, Noreen & Brewer 2003; Katz & Green 2007).

The cash flows that are demonstrated in the cash budget can be payments received from futures contracts, option contracts and exchange contracts. The cash budget also details the cash flows derived from economic activities. These economic activities may include the actions that have the outcome of modifying the dimension and the composition of the equity that is borrowed by a business. The cash inflows may also be derived from the issuance of stock, the receipt of loans, the proceeds of bonds and notes which include mortgages. The cash outflows are the actions that have the outcome of making redemption to the shares held by an organization. The tax expense which is owed by the business can also be ascertained from the cash budget (Garrison, Noreen & Brewer 2003; Katz & Green 2007).

 Conclusion

The outcomes from the formulation of the cash flow budget for the Mantex organization demonstrate that the business is applying shrewd use of the accounts payable and the accounts receivables. The recommendations that would be given to the administrator of the Mantex organization are not to allow the accounts payable to increase in size. It would also be advisable that the Mantex organization increase the size of the cash receivables. The administrators of the Mantex organization should consider contracting a full time accountant in order to administrate the funds. An additional consideration would be the application of specialized software in order to document each of the transactions on the cash budget.

Bibliography

Garrison, RH, Noreen, EW, & Brewer, PC 2003, Managerial accounting, New York, McGraw-Hill/Irwin.

Katz, JA & Green, RP 2007, Entrepreneurial small business (Vol. 200), McGraw – Hill / Irwin.