Business - Sources of Information.

Sources of Information

Everyday life is full of planning processes. To put these plans into action depends mainly on the past and current situations.

E.g. If I decide to go shopping, before leaving, I check what I can afford to buy “is it a pair of Prada shoes or just a common pair from any shop”. When decided on the cost, I can visit the shops by setting another plan “would I go to all the shoe shops or have some shops in the past treated me badly?” When in a specific shop and I find a pair I like I have to check whether that style is out of fashion or if it matches with a specific out fit, or if I have a similar pair at home.

As you can see everybody at anytime and anyplace refers to various sources of information – be it internal or external.

When a company plans the future for its well being, the most important factor to take into consideration are the different sources of information, which include the internal and also the external sources of information.

When a business takes into consideration these two factors, then the planning of the business’s future objectives are slightly more accurate and improves the business’s performance and profitability.

The internal and external sources of information are used to analyse and compare our business to that of other businesses alike. Thus gathering the advantages they have achieved and applying them to our business and not falling into the same trap (disadvantages) that our competitors have gone through. i.e. “Learning from our and other people’s mistakes”

Both internal and external sources of information have their past information, their present/current information and also their future information

Internal sources of information are obtained from within the business e.g.

Past information - Last year’s sales

Advertising costs

Rates of pay

Present information - Size & value of premises

Number of employees

Quality of goods

Contracts in hand

Future information - Investment plans

Expansion into new market

Proposed new product

External sources of information are obtained from outside the business, and have to do with competitor’s information, but there is also other information that can affect the business, such as:

Past information - Competitors sales for last year

Competitors advertising costs

Competitors rates of pay

Present information - Competitors premises

Competitors employees

Competitors quality ratings

Competitors contracts

Future information - Raw material prices

Economic forecasts

Foreign currency exchange rates

External Information

When the external sources of information are compared to the internal information, we can say that the external sources are more important to gather and contrast – this is because a business in the market must take into consideration what plans and actions are being taken by its competitors, this is because these plans and actions may affect the future plans of its business.

With having various information regarding ...

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Competitors rates of pay

Present information - Competitors premises

Competitors employees

Competitors quality ratings

Competitors contracts

Future information - Raw material prices

Economic forecasts

Foreign currency exchange rates

External Information

With having various information regarding the external market, it is important to view what is happening around the business and what will affect your business or not.

A business may be affected if there are any changes in:

The latest technological developments

New machinery might save the business running costs, repair costs and it can also give more production in a smaller time frame. But my business would have to plan, how to acquire further cash.

Legislations issued by the government.

The company must be aware of a new legislation. A legislation could be an advantage and also a disadvantage to the business. E.g. if the government sets legislations regarding health and safety then the business must abide with these rules although it might cost the business a lot of expenses. But if the government decides to remove taxation on specific raw materials then this will cost as an advantage if those raw materials are the ones your business imports.

Customers preferences and needs

A business must always be aware of what are the customer’s needs and wants and what a specific market is asking for. In this way the business would not end up with stock it cannot sell because customers do not want that type of stock.

Prices of stock and its quality.

Comparing your business to that of competitors, and you will notice that your competitors have less expenses and are able to sell at lower prices or they have a higher profit at the end of the month, then the reason might be that they are buying their goods at a cheaper price but of poorer quality.

Financial situation of customers.

In the external market, when aiming to sell a product or service it is important to see that the customers’ wants and needs match that type of product or service and are in financial situations to acquire this product or service.

Prices from different suppliers.

It is important to check what type of prices are competitors offering. If your business is importing stock from one supplier then it may be possible to find another supplier, who is offering the same stock but at cheaper prices and offering more discounts. When this happens a business must not only take into consideration that one supplier is cheaper than the other but also what type of quality is the stock/raw material made out of.

Which competitor has a larger share in the market?

In the external market the most important factor to take into consideration are the competitors. This is because what is a strength for our competitors counts as a weakness to our business and vice versa. When observing the do’s and don’ts of other businesses you can learn that these may not or do apply for our business alike.

Credit limits offered by suppliers.

It is important to see what is the amount of credit limit you can obtain, by checking the prices of raw materials and the quality from various suppliers. During a difficult period one can buy stock on credit.

What training are competitors offering?

Through information that you can obtain from our competitors we can find out whether their employees are being given training or not. If employees are being given training this may result in an increase in sales because the employees would be trained in sales techniques thus knowing how to approach and convince customer to buy in a professional way.

What type of promotional campaign competitors are offering?

Advertising also affects the way the business obtains its sales. Prospective customers must be aware of our product rather than our competitors. There are various means of advertising e.g. catalogues, magazines, TV, radio, press and also receiving advertising door-to-door is more effective. The advertising may also include the prices of the products for the right market to be attracted to the business.

External information will provide you with:

Competitors financial statements (to check how the company is getting on profitably)
Other financial information about competitors (can e very difficult to get if they are not exposed to the public)
Competitors catalogues & Price list (to compare our prices and see if they lowered the prices (maybe that’s why they have more sales))
Official statistics
Trade journals
Market research reports (to see what is happening in the market you are catering in)
The financial press (to check how company’s are getting along)

Internal Information

The internal sources of information are all obtained from within the business, through records kept and performances observed.

Through out the years the business should keep:

Detailed records of all transactions being made.
Plans and budgets.
Comparisons.
Decisions for opportunities must be taken.
Each department must have its own information recorded.

Such Internal sources of information will be obtained from various departments and records, a few of these are:

Financial statements (which include: Profit & Loss a/c, Balance sheet, Cash flow statement)
Fixed asset register (a list of all the fixed assets owned by the business and giving information about each item e.g. Price, purchase date, etc.)
Management reports (getting information from various reports among the different departments in the business – by breaking down the accounts)
Other management reports (which may include stock values, payroll, etc)

Internal sources of information, will be obtained from historical records or from current records, that would be or would have had been on-going within the business. The future plans would be set when evaluating the current and past records.

A few future plans are mentioned below:

Future orders & controls

Insetting controls and planning future orders, the business must take into consideration the past orders and controls to see what is happening and also to check if such an order or control has already been set or declined.
When setting future orders and controls the present situation of the business must also be taken into consideration, research must also be done to check if the business has enough cash to make new orders, and also if the business makes such an order, would the order effect the business badly or to an advantage.

Levels of stock, usage and value.

From past information gathered, it is possible to determine the level of stock to be ordered, how much usage is the business going to get out of it? And what is the value at the beginning and the end of the process? This information helps, the business not to buy extra and surplus stock
To get this precise information their must be co-ordination between the department in the business example purchases and sales.

Credit levels offered by suppliers and allowed to customers.

A credit level is the amount of money we borrow or is borrowed and to this there is a limit of how much can be borrowed. It is important to have a credit level this is because some customers may take advantage of this and buy a lot on credit without having any intentions of paying back.
This also counts for our business when buying on credit from suppliers.

Complaints and bad debts.

Through previous research done, and past complaints received. A business can determine in which department is the department having problems, thus taking immediate action, so that the same problem does not occur once again.
A record of past bad debts is also recorded this is so a business does not re-sell to the same company and increases more bad debts. When a business notices that the amount of bad debts is always increasing then the business must control the sales made on credit.

Payroll costs and labour training

A business must check its past payroll and labour training costs, to be able to set away an amount of cash for the years to come.
From these records you can compare the external records and check if your payroll costs and labour training costs are more expensive then those of competitors.

Maintenance expenses

These records are kept so every time anything in the business is in-need of maintenance there is a record to which any person may refer to.
When analyzing the maintenance expenses, a business may conclude that a particular machine is too expensive to up-bring and it would e cheaper to buy a new machine alike which will have less maintenance costs.

Health and safety regulations

Taking into consideration this regulation is very important. Although it might be as, expensive for a business to stock its company with all the health and safety equipment, it will surely be a happier and safer environment for the businesses employees. Thus if an employee gets hurt whilst on his/her job, then the business would not suffer any fines or would have to be close down because it is not safe enough for its workers to work.

Targets, projected sales, and actual sales

Every business should have its own targets, projected sales and its actual sales. If a business has no targets, then what is the point for the business to remain open? A target is the aim of the business. For example: more profits, new contracts, enlargement of premises, etc.
The projected sales are obtained from its actual sales, projected sales is an idea of how much the business would be making, this is so, if there are too many costs/expensive the company should decrease them to obtain more profits.

Suggestions for new products or other changes

Suggestions should always be mentioned in meetings and discussed with the managerial bodies of the business.
When a business suggests something new, then the internal and external sources of information come into use to check if the business would be making a right move or should it postpone the suggestions.

Delivery periods by suppliers and to customers.

In a business it is very important to keep all types of records, especially when dealing with customers or suppliers.
When signing a contract with suppliers it is important to check how often is the delivery period and what stick is ordered and not. After the stock arrives an invoice is given informing you on what stock has arrived.
These invoices must be kept for reference and also for the company’s accounts. Delivery periods to customers must be of very high standard and employees should try and not disappoint customers because disappointing one customer’s is like disappointing another ten.

Conclusion:

Dear Mr. Mallia

Borg and Bugeja Accountants hope that you have understood the concept of how and why is it an asset to keep financial information available concerning your business and that of the market sector.

We encourage you to start keeping your accounts up-to-date, as you can see they are not as difficult as they seem.

If you require any further information or help when dealing with the accounts please do not hesitate to ask.

Yours sincerely