TOPIC: managing finance, information and knowledge
Through this assignment, I am here
to forecast cash flow of newly established consultation firm. Importance of
working capital, the contribution of the information technology to the
environmental scanning and benchmarking will be discussed critically. Here, the
relation between organisational & competitive advantage will be critically
analyzed.
Task-1
1. a
cash-flow forecast for three years ending 2015 based on the forecast data
provided below, you must also calculate the start-up funding required if the
business is to avoid having an overdraft during these three years
Forecast
data for the new consultancy business:
2013
|
2014
|
2015
|
|
Number of administrative staff
|
5
|
7
|
10
|
Number of consultants
|
12
|
20
|
32
|
Fee (income) £’000s
|
750
|
1,500
|
2,250
|
Capital expenditure £’000s
|
1,375
|
25
|
625
|
Notes:
1.
Administrative staff costs are forecast at £27,500 per person in 2013.
2.
Consultant staff costs are forecast at £50,000 per person in 2013.
3.
Both of these staffing costs are expected to rise at the rate of 3% per annum
thereafter.
4.
Consultancy expenses are forecast as £25,000 in 2013. These expenses are semi-
variable with fixed costs of £20,000 per annum and the variable costs
increasing in proportion to the fee income per annum thereafter.
Title
|
2013
|
2014
|
2015
|
Start-up funding
|
00
|
(1397500)
|
(722425)
|
Cash inflows
|
750000
|
1500000
|
2250000
|
Cash outflows
|
(2147500)
|
(824925)
|
(1458023)
|
Net Flow
|
(1397500)
|
(675075)
|
791977
|
Cash at the end of the year
|
(1397500)
|
(722425)
|
69552
|
Notes:
· If
the consultancy firm wants to avoid the overdraft at the end of the first year
it will require minimum £ 1397500 start-up funding.
· If
the company wants to avoid overdraft at the end of the second year it will
require minimum £ 722425 start-up funding.
· If
the company wants to avoid overdraft at the end of the third year it will
require no start-up funding.
· But
if the sequence of 3 years is consider at whole it will not require any start
up funding as the end of 2015 shows positive balance in the forecast.
Task-2
2. The
importance of working capital management to the profitability of the business.
Consistent with ( Allen, 1977), The cash which
keep on hand for day to day purpose of a business is known as working capital. This
cash can be used to bottom usual and unforeseen expenses. Good working capital
management will protect a company’s fiscal height and assist to construct its
business. It is essential for growing income and creates it easier to get
business loans and attract probable investors.
Accordingly
(Stewart, 1996)) to bring stability in existing assets against liabilities is
the main aim of an operational capital management plan. This helps companies to
uphold its intended charges like salaries and short term financial debt. If a
company’s current liabilities are more than its current assets, it means a unconstructive
operational capital. Various techniques like hiring a good accounts manager who
knows and takes care of working capital management help business to run
efficiently.
Consistent
with ( Allen, 1977), By getting a short term loan the company can augment the operational
capital with proper management of exceptional revenues in case of shortage. By modifying
its investment tactics and by managing profit efficiently the company’s growth
rate can be augmented with cash .In order to make out the accurate time to renovate
the company’s current assets into cash having good working capital management
is significant. This is called the cash conversion period. A high working
capital put aside the company from awful circumstances involving creditors,
fixed assets cannot be sold in a short period of time. A good reputation in the
market is created for the ability to manage unforeseen expenses .Working
capital management always makes sure sufficient cash flow in a business.
This permits companies to pay
their liabilities without delay and more significantly defends them liquidation.
Companies have the benefit of a constructive working capital which permits them
to take on higher risks in business with a proficient working management. In order
to handle their working capital companies need to analyze their current assets
and liabilities on a regular basis.
A successful working capital management can face emergencies caused by
market changes and competitor activities. Good cash flow is always an asset to
a company’s growth and success.
3. Information
documents for prospective clients which detail:
Along
with (Armstrong, 2001), To comprehend the benefits of knowledge management it's
significant to understand accurately what knowledge management is really .This
term is now old enough, and consigns to the aptitude of comprehending and handling
knowledge within an organization.
Knowledge
typically refers to individual knowledge and that shared by a group, and knowledge
management is how that information is arrived at, shared and analyzed. Better
decisions, particularly, at the working level can be taken through careful
application of information & knowledge. It’s not just the sum total of the
day-to-day decisions made at the front lines of an organization but the strategies
that are made or break at the top of a
company.
By spending less time on information gathering
and more on the inventive procedure better decisions can be achieved. Decision
support systems are still driven by the ability to find relevant information
and help with the analysis.
Three
categories of knowledge management benefits:
If
information isn't seems at in this system, it's easier to visualize some of the
benefits versus the lost opportunities when one takes a good look at the
concept of managing knowledge within an organization. There are actually three
general categories of benefits that come with a good method of managing information:
knowledge, intermediate and organizational ( Allen, 1977).
§ Knowledge
benefits are basic and immediate benefits that a company can see, such as
better handling of information and a better understanding of how to use
knowledge within a company. This class also covers up the aptitude to find
information quickly and have a plan of what a particular portion of information
is good for.
§ When
employee efficiency is enhanced because of good knowledge partaking and management
Intermediate benefits cover the advantages a company gains. This also covers
how successful the sharing of knowledge is. Organizational benefits refer to
those benefits a company sees that are end results of good knowledge handling,
and the ways in which knowledge management can have an effect on the company's
bottom-line goals.
§ At
the most basic level of benefits, the knowledge benefits, and people within a
company will have fast access to shared knowledge and know how to find the
information they need because the knowledge has been pigeonholed and everyone
has been made conscious of the significant of information.
§ Employees
understand which information can help them at the time and they know how to
find it. People will better understand their responsibilities and the
responsibilities of others.
Information
Communication Technology (ICT): technologies that
provide access to information through telecommunications is known as ICT.
In
accordance with (Probst, Raub, and
Romhardt, 2000), It is similar to Information Technology (IT), but centres
primarily on communication technologies. This includes the Internet, wireless
networks, cell phones, and other communication mediums.
Environmental
scanning: Careful observation of an organization's internal
and external environments for sensing early
signs of opportunities and threats that
may control its current and future plans. In contrast, observation is restricted
to a precise objective or a narrow segment.
Benchmarking:
Along
with (Armstrong, 2001),Benchmarking is the procedure of recognizing "best
practice" in relative to both products (including) and the processes by
which those products are shaped and delivered. The search for "best
practice" can take place both inside a particular industry, and also in
other industries. The objective of benchmarking is to comprehend and assess the
current position of a business or organization in relative to "best
practice" and to identify areas and means of performance development.
Use
of Information Communication Technology:
 |
Figure:
The supporting process among ICT, Environmental Scanning & Benchmarking
Along
with (Armstrong, 2001),It is necessary to think for all the business
organization to consider all the sentimental factors within the environment in
which business works. On basis of the tendency the organizations set its
standard. But it is very critical for the organization to consider the factors.
The major factors for the limitation are the vast scope of the environment. But
there is no way to consider it properly. On the other hand, the present
globalization process all over the world has initiated the new and broad extent
for the business globally where the achievement is more than any other time. In
this situation, to be efficient in this throat cutting competition the
organization must gain the accurate information in shortest possible time. On
the basis of the information in this market oriented global arena, the business
organization will make a standard and set a plan to achieve the organizational
goal. The organization which will gather best and vast information will gain
the success. This whole process will be strong-minded efficient only when the
organization will be able to use the ICT. That means proper & efficient use
of environmental scanning will lead a strong benchmarking and planning to the
success of the organization.
In
line with (Dale, 1994),In the 21st century business landscape, firms must
compete in a complex and challenging context that is being altered by many
factors from globalization, recurrent and uncertain changes to the growing use
of information technologies. Therefore, achieving a competitive advantage is a
major pre- occupation of senior managers in the competitive and slow growth
markets, which describe many businesses today and the sources of competitive
advantage have been a major concern for scholars and practitioners for the last
two decades. The significance of competitive advantage and distinguishing
competencies as determinants of a firm’s success and growth has increased
tremendously in the last decade. This increase in importance is as a result of
the belief that fundamental basis of above-average performance in the long run
is sustainable competitive advantage. Theorists argue that in volatile
environments the ability to learn faster than competitors may be the only
sustainable competitive advantage. In keeping with (Porter, 1985),This study
proposed that, through organizational learning a firm can develop hard to
imitate knowledge resources and capabilities (human capital as well as
organizational capital) that create value which in turn lead to superior
performance. While there is little opposition to the premise that
organizational learning is a competence that all organizations including small
and medium-sized enterprises (SMEs) should develop in fast-changing and
competitive environments, most literature has not clearly linked organizational
learning with sustainable competitive advantage. The purpose of this study was,
therefore, to explore and examine the effect of interactive relationship
between organizational learning, intellectual capital elements, and SMEs’
outcomes or performance. Specifically, it dealt with how organizational
learning process can be used to develop knowledge resources and capabilities that
lead to superior performance of SMEs. The study targeted all SMEs in food and
beverage sub-sector with a total of 112 firms constituting of 21%of all firms
in the manufacturing sector. A two-stage sampling was carried out where the
firms were divided according to sub-sectors and then one sub-sector (food and
beverage) was randomly selected and all firms in the sub-sector were involved.
For inclusion in the sample, firms were required to have between 10 and 150
employees and be autonomous trading entities, but not branch plants of national
or multi-national organizations. The data for the study was collected from 48
firms that met the sampling criteria out of 53 firms that responded to the mail
survey. In keeping with (Porter, 1985),Since the study was concerned with the
relationships between observed and latent variables; structural equation modelling
and other multivariate statistical tools were used to analyze the data.
Although the research model argued for an almost complete mediation
relationship, which follows the theoretical argument of the resource-based
view, the results of the study indicate that organizational learning influences
SMEs performance both directly and indirectly. These results are consistent
with earlier empirical research on the relationship between organizational
learning and firm performance. Although the results of this study are quite
encouraging, lack of longitudinal data limit drawing of far-reaching
conclusions.
Conclusions:
Through
this assignment, I have forecast cash flow of a newly established consultation
firm. Importance of working capital, the contribution of the information
technology to the environmental scanning and benchmarking has been discussed
critically. Here, the relation between organisational & competitive
advantage has been critically analyzed.
1) Allen,
T. J., (1977). Managing the flow of technology: Technology transfer and the dissemination of
technological information within the R&D organization. Cambridge: MA:
MIT Press
2) Armstrong,
M., (2001). A Handbook of Human Resource Management and Practices.
London: Kogan Page.
3) Dale,
W., (1994). Learning Organizations in Managing Learning. London:
Routledge.
4) Porter,
M. E., (1985). Competitive Advantage; Creating and Sustaining Superior
Performance. New York: The Free Press.
5) Probst,
G., Raub, S., and Romhardt, K., (2000). Managing Knowledge: Building Blocks
for Success. New York: Wiley.
6) Stewart,
J., (1996). Managing Change through Training and Development. London:
Kogan Page.
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