Management of Coffeeville Pty Ltd - Case Study Example

INTRODUCTION This report makes a review, evaluation, and also finds the means of transforming to the betterment of the processes of finance within “Coffeeville Pty Ltd”. In this report you will find a concise description of the results of performance, the skills and know-how required to go about the management of financial resources within a team work in Coffeeville. This will entail the planning and implementation of the approaches in financial management, scrutinizing and directing finances, supporting the team members whose roles includes features of operating financial resources, and the review and evaluation of the effectiveness of the processes of managing financial resources corresponding with financial objective of both the work group and the company (Khan and Jain, 2007). Accessibility of the budget and financial plans of the work team There are several ways of accessing the budget and the financial plans of the work team. This will entail; The feedback coming from the in store response forms The surveys carried out from the local customers The budget is also accessed through the reporting of the income and expenditure of the work team in relation to marketing expenses and the increment in income as a result of incurring that expense and also in the periodic financial statements. The same information can also be accessed through “intranet-based information” within the organization. Evaluation of the present budget and plans The marketing expense budget of this year (2011) will be 21,000 that is, an increment of 1,000 from the budget of previous year 2010. This is currently attainable since the organization has realized a net profit before tax of $ 140, 680 from which the additional marketing expense of $ 1,000 can be charged. Coffeeville has also indicated a ‘net increase in cash and cash equivalents’ of $ 66,726 in 2009/2010 performance year from which immediate and petty marketing expenses can be settled. The forecasting of current sales will require the involvement of ‘Action Marketing’ whose principal responsibility is to offer advise on matters pertaining to the function of marketing which Coffeeville will be involved in. They will regularly make an examination and validation of marketing costs that correspond to the industry benchmark as they will be allowed access to the cost data relating to marketing expenses. This will be attainable since Coffeeville will continue to patronize the cafes from local to sustain competitive analysis thus availing Coffeeville with accurate information with respect to the services offered by other cafes. Furthermore, Coffeeville has recently enrolled as a of ‘café association’ whose publications will provide access to the current market research. Coffeeville estimates to realize a ‘minimum return on investment’ (RoI) of double the existing rate which may not be attained as it also plans to expand its operations to another locality. This will consume most of the resources and the company may not realize a high RoI in the short run due to the huge expenditure. Negotiation of the budget Any proposed changes in the budget or plan in a work team has to go in line with the overall financial objectives of the organization. This means that the team’s budget has to be negotiated with the personnel in charge within the company such as the finance officer, accounting clerk and the marketing manager. Salesperson, barrister, chef and also the owners of the company should also be consulted. This provides an opportunity to make a clarification of the budget and financial plans of a work team with the relevant personnel in the organization hence ensuring that the forecasted outcomes are specific, measurable, attainable, realistic, accurate, comprehensible and within the time frames. In the event that these budgets and plans may not be achievable and thus calling for some slight variations other contingency plans may be made with the relevant personnel to ensure that the desired results are realized. The review of contingency plans Coffeeville has put several measures in place in case of any eventuality that could not be possibly foreseen in the near future. Note that some of these events are not bound to happen but the uncertainty holds with regard to when they may happen and the devastating effects they may cause to the smooth running of the business. Therefore there is every need to plan in advance of these occurrences. Some of these contingencies mainly include; Visibility problems During the year there are seasons for instance, winter when it is so misty that there arises difficulties and the associated risks in generating visibility. This becomes a serious issue especially considering that Coffeeville is engaged in the business of outside catering and hence locating these places can be more of a problem. Stiff competition Coffeeville is in business with other firms that trades in the same line of business for example, local cafes that offers equally the same quality of products and other services as Coffeeville. These cafes may employ excessively aggressive and devastating actions which might bring Coffeeville out of business if not checked. This means that the organization must keep monitoring each and every move made by its competitors for it to continue commanding the market share. Note that any laxity on the part of Coffeeville might drive it out of the market since their customers might switch to the brand of their competitors and once the clients have switched you cannot be sure of them coming back for your products or services. Maintaining a steady regular clients where ‘competitive advantage’ of superior ‘coffee and gourmet’ foods can easily be replicated. Each café that is in the same line of business with Coffeeville has to maintain its competitive advantage by doing everything possible to outsmart its competitors. They will achieve this by offering unique and high quality products and services compared to the other service providers. At the same time they have to maintain a closer check on the advances of its competitors that might leave them to a disadvantaged position. As such there is high risk of duplication of level of quality of products that are provided by the firms. This may not go well with the business of Coffeeville as some of its customers may change to its respective provider since they can get access to the same quality of food and beverages from the competitor. This will adversely affect its command in the market. Other extremely risky instances that may occur include; Appearance of a very strong competitor within the proximity of Coffeeville operational area If a competitor emerged within the CBD it will mean a drastic decline in profitability of Coffeeville. This is so because the sales volume will decrease since the two competitors will draw their clientele from the same locality. That is, they will compete against the same number of customers. More still, Coffeeville will have to use extra resources in fighting the competition. Risk of foodstuff poisoning to clients This is the worst risk that can ever happen to Coffeeville as it will mean immediate closure of the business and the subsequent legal process. This may happen as a result of many factors such food being contaminated with aflatoxin, poison put deliberately in food by an ill motive person. All these will entitle a client to sue in a court of law. Therefore, it must put up extreme measures to avoid such a misfortune. The contingency plans that Coffeeville has undertaken include; i. Outsourcing /Contracting out human power and any other functions/ tasks. This will help to boost the current personnel during the high seasons such that none of the potential customers will be left unattended. ii. Diversifying the results. Since the advertising budget for Coffeeville is so limited and hence a simple advertising program is used, the company will insert articles in mX, a CBD daily newspaper, which is likely to give the desired outcomes in the marketing campaigns. This has also been a success for similar organizations that have placed their adverts with mX. iii. Finding low-priced raw materials. Cheaper consumables and raw materials will help in cutting down the price of the products offered by Coffeeville (Brigham and Ehrhardt, 2010). iv. Increasing the sales volume or production. This will help the business to realize high sales revenue that will help in decreasing the fixed costs per unit of production. v. Hire purchase, rental or other alternative ways of procuring the raw materials required, stock and equipment. This will assist in reducing the initial costs of establishing your own business premises and the costs of maintaining them. It might also help in acquiring the resources cheaply. vi. Reorganization of the company in order to realize a decline in costs related to labor. This will be the case due to the full utilization of the assets of the business. vii. Identification of risks, its assessment and the management processes. This will aid in putting up good measures prior to the undesired event thus cushioning themselves against such. viii. Seeking for some further funding. There is need for expansion and growth of the company and this will depend on obtaining a large business premise or another outlet. Coffeeville can also duplicate its operations in another CBD which is far from its present location. Either of these options will require huge amount of cash outlay that are not currently available to the company. The option left will be to seek for some further funding from the owners. ix. Putting up some mechanism to reduce the costs and wastages. A precise estimation of the daily consumables can help reduce food wastages and stock. This will then decline the costs. x. Succession-planning. The management of the organization should only be handed over to personnel who have had an earlier experience with Coffeeville. Communication review In order to realize the forecasted budget and financial plans there has to be clear communication of the material facts to Coffeeville’s staff. This is guaranteed through; i. The key details of the consented budget and financial plans are disseminated to all the staffs within the organization. ii. Provision of the necessary support to have an assurance that the Coffeeville staffs are capacitated to perform the financial management roles with minimal supervision and without error. iii. Making a determination and providing the required resources and the systems for executing financial management roles by the staff. Provision of necessary support Coffeeville has taken all the essential steps to suffice itself that its staff gets all the support it requires in order to carry on their roles with regard to financial management more effectively. Generally the support includes; Contracting a finance expert who offers specialist advice Provision of financial management procedures in a manuscript that can be easily understood and comprehended by the staff. Availability of a help desk within Coffeeville from where its staffs can always seek for more clarification and guidelines from identified experts. Information conferences or briefings. There is usually a session from where an expert gives a general briefing on the conduct required of the staffs whose roles entail an aspect of management of finance. Provision of ‘intranet based information’. Coffeeville has developed a web page from which information about the company can be accessed from within. The Coffeeville’s staffs are taken through a rigorous training program which includes coaching, shadowing and mentoring. However, this support has not been effective as the cost of hiring a specialist is too high hence the organization does not provide this service more often. Moreover some of the staffs are not well versed with the use of ‘intranet-based information’ and hence do not benefit from its usefulness. There is also lack of determination to learn from some staffs. Resources required In order to undertake this plan more economically and effectively some resources will be required. These resources may include; Hardware and the software which are essential in the provision of the ‘intranet based information’ Human, financial and some other physical resources to ensure a successful training program Other systems for record keeping purposes – both paper and electronic-based An expert to offer specialist advice Evaluation of the internal control procedures Coffeeville has very strict ‘internal control procedures’ that are followed to the letter. This is done to ensure effective monitoring and control of finances. This involves; Implementation of processes to keep monitoring the exact expenditure of the organization and also to control the costs across a work team. Monitoring of expenditure and the costs on a periodic basis so as to identify the variations in costs and also the expenditure swarming Implementation, monitoring and the modification of the contingency plans the way they are required so as to maintain the financial objectives. While reporting on the budget and the expenditure of Coffeeville its staffs are required to adhere with the organizational protocols and the generally accepted financial reporting standards. Generally, the processes of monitoring the actual expenditure and the control of the costs will include the reporting of income, expenditure, assets, equipment, consumables, wastages and the stock. The review of the budget monitoring plans and financial plans The processes of monitoring the budget and the financial plans and the consequent control of the excessive costs in work team may entail the reporting of the expenditure against the income, the depreciation against the value of plants and equipments, wastages against stock and consumables. The report may use the information from receipts and invoices, bank statements, legers and journals, records from the petty cash book, financial reports and ‘credit card statements’. The bank statement records may indicate an overdraft implying that the organization has used so much of its liquid assets which means that the company may not be in a position to meet its short term obligations, for example, paying marketing expenses if required to be honored on cash basis. Records from the petty cash book may show a very low figure meaning that it needs to be reimbursed. Before reimbursement the relevant personnel must satisfy himself that the cash was employed for the purpose for which they were intended to accomplish. This is an effective way as the accounting personnel in charge will have a reasonable ground in not releasing in more cash towards the respective expenditure since their target has been reached. The receipts and invoices will assist in ascertaining the total sales revenue made by Coffeeville at a given point in time. This enables the company to asses the performance of the business while still in progress. Data from the journals and the ledger accounts will help the financial management staffs in correcting any anomaly that may be in the financial statements of the company. The use of the control accounts will help to keep check of fraudulent cases by the employees and hence helps in cutting down of these expenses. Coffeeville has visualized developing new products and services regularly that responds to changes in menu possibly after every three months. The plan used to test the product is by way of offering the new product as a free meal to the consistent customers, staffs and their family members. This is an effective way of introducing a new commodity in the market as Coffeeville will get immediate feedback from them. Furthermore, there is very little cost associated with this kind of product piloting and thus the overall cost of introducing a new product in the market is reduced. The response from the sample can help in making changes to the products for instance; they can be canned to ensure that only the tested and qualified products are included in Coffeeville’s menu list. Elma Belcastran (one of the owners) is solely responsible for monitoring all activities of marketing and any matter relating to the satisfaction of customers. This has proved to be effective as it has negated the need of outsourcing such services which are usually expensive. In addition, ‘Action Marketing’ has been appointed to offer marketing services such as monitoring market trends. They will utilize some outer resources for ‘graphic design work and marketing creativity. Overall evaluation and recommendation The evaluation and the recommendations made in this report is based only on information gathered about Coffeeville concerning the overall financial management in the work team. The report has shown that a wide array of appraisal methods should be employed to measure the handy skills and know how. This is propagated by the knowledge that in order to realize any improvement in the overall processes of financial management only the personnel with the necessary skills and knowledge should be up to the task (Besley and Brigham, 2007). This will be realized through; i. The consideration of any written report showing a broad knowledge and understanding of the management of budgets and the financial resources in an organization. ii. A good demonstration of the techniques of using software of ‘financial record keeping’. This will reduce too much paper work and enable the staff to access the records with ease. iii. The candidate should be questioned about his or her ‘on-the-job performance’ in relation to cases of substantiation concerning third party reports on the place of work iv. Establishing a face to face conversation with the potential staff aimed at assessing the knowledge and the understanding of the requirement for good record keeping together with the auditing in the organization. v. The overall review of the contingency plans. Measures should be put in place to respond to the uncertainty in the supply of coffee globally. The company should make orders for shipment of coffee from stable regions hence eliminating the risk of shortages and low grade coffee. This will help the company to maintain a competitive edge against its competitors. vi. There needs to be an evaluation of the records that report on budgets and the expenditure of a work team in the organization. vii. A review of the identification of the causes of variations in costs and the overlarge expenses of the organization. viii. There needs to be a review of the certification that did identify and recommended on overall improvement of financial processes. Conclusion Coffeeville has the potential of growth due to its location and also the fact that there is a considerable number of the targeted market that does not use Coffeeville products. The company can also increase in sales volume by the duplication of business in some other locality in Melbourne CBD. Moreover, the company has outstanding staff that is knowledgeable in making coffee and in food preparation. References Besley, S. and Brigham, E.F. (2007) Essentials of Managerial Finance. Farmington: Cengage Learning Brigham, E.F and Ehrhardt, M.C (2010) Financial Management Theory and Practice. Farmington: Cengage Learning Khan and Jain (2007) Financial Management. New Delhi: Tata McGraw-Hill Publishing Company Ltd. Read More