Invoicing Customers for Employees Travel Expenses

							 Chapter 2

             Business Fundamentals




California State University, Fullerton
                                         1
The Nature of Business
   The purpose of a business is to provide
    – products and/or services – to its
    customers.
   Money, or value, received from
    customers for its products and/or
    services is revenue.
   To provide its products and/or, the
    business incurs expenses.

California State University, Fullerton
                                              2
The Nature of Business
(cont’d.)
   Profit or Loss is the difference between
    the firm’s revenues and it’s
    expenditures.

   Profit/Loss = Revenues-Expenses



California State University, Fullerton
                                               3
Business Environment
   The business environment includes
        Economic
        Socio/Cultural
        Political/Legal
        Technological
        and Industry factors.
             Competition, Suppliers, Customers, & others


California State University, Fullerton
                                                            4
     Business Environment




California State University, Fullerton
                                         5
Economic               Technological            Political-Legal         Sociocultural
GDP trends             Total government         Antitrust regulations   Lifestyle changes
Interest rates         spending for R&D         Environmental           Career expectations
Money supply           Total industry           protection laws         Consumer activism
Inflation rates        spending for R&D         Tax laws                Rate of family
Unemployment           Focus of technological   Special incentives      formation
   levels              efforts                  Foreign trade           Growth rate of
Wage/price controls    Patent protection        regulations             population
Devaluation/           New products             Attitudes toward        Age distribution of
  revaluation          New developments in      foreign companies       population
Energy availability    technology transfer      Laws on hiring and      Regional shifts in
and cost               from lab to              promotion               population
Disposable and         marketplace              Stability of            Life expectancies
discretionary income   Productivity             government              Birth rates
                       improvements through
                       automation




                              Societal Environment
        California State University, Fullerton
                                                                                              6
                    Industry Analysis
California State University, Fullerton
                                         7
Types of Businesses
   Most business are “for profit”.
   Some businesses are “not-for-profit”.




California State University, Fullerton
                                            8
Types of Businesses (cont’d.)
   Some businesses sell to other
    Consumers or end-users (B-to C)
   Some businesses sell to other
    businesses (B-to-B)




California State University, Fullerton
                                         9
Types of Businesses (cont’d.)
   Some businesses manufacture
    Product(s) for their customers.
        Tire manufacturers
        Automobile manufacturers




California State University, Fullerton
                                         10
Types of Businesses (cont’d.)
   Some businesses provide Service(s) to their
    customers.
        Wholesalers (or Distributor)
        Retailers
        Brokers
        Banks
        Insurance companies
        Travel Agents
        Air lines

California State University, Fullerton
                                                  11
Types of Businesses (cont’d.)
   Others Provide both Product(s) and
    provide Service(s) to their customers.
        Direct Marketers




California State University, Fullerton
                                             12
Business Trends
   Globalization of businesses
   Consolidation of businesses
   Shift away from manufacturing towards
    service businesses




California State University, Fullerton
                                         13
Business Functions
   Accounting
   Finance
   Marketing
   Production
   Human Resource Management
   Other functions
        Research and Development
        Information Services

California State University, Fullerton
                                         14
The Organization of a
Business
   Employees often (but not always)
    grouped by general functions.
        Departments
        Workgroups
   Organization Chart diagrams the
    arrangement of employees.
        Functional
        Divisional

California State University, Fullerton
                                         15
           Basic Organizational Structures:
                Simple and Functional
                           I. Simple Structure

                             Owner-Manager



                                 Workers


                         II. Functional Structure

                            Top Management




        Manufacturing       Sales          Finance   Personnel



California State University, Fullerton
                                                                 16
                 Basic Structures of Corporations:
                             Divisional
                                          III. Divisional Structure*

                                              Top Management




                Product Division A                                       Product Division B




Manufacturing                Finance                         Manufacturing           Finance


                  Sales                 Personnel                            Sales             Personnel

 *Conglomerate structure is a variant of the division structure.



   California State University, Fullerton
                                                                                                           17
The Organization of a
Business
   Information flow within a business may
    be within or between workgroups,
    departments, or within or outside the
    business.




California State University, Fullerton
                                         18
Information and Business
Management
   Management of a business refers to all the activities
    related to deciding how a business functions.
        Planning
        Organizing
        Stafing
        Control
   A decision is a selection among different courses of
    action.
   Management decisions are of three types:
        Strategic decisions
             Usually made at the highest level
             Generally long-term decisions
California State University, Fullerton
                                                            19
Information and Business
Management (cont’d.)
        Tactical decisions
             Usually made at the department or workgroup
              level
             Generally short to medium term in nature
        Operational decisions
             Usually made by individuals at the “front line”
             Generally short term in nature
   Information systems support managerial
    decision making.
California State University, Fullerton
                                                                20
Information and Business
Operations
   Business operations are those activities
    that provide products/services and
    ensure the business makes a profit.
   Information systems also support
    business operations.



California State University, Fullerton
                                               21
Basic Business Information
Processing
     Nine tipical (basic) information processing
      activities
     1.   Accepting & Entering customer orders
     2.   Shipping products
     3.   Billing (invoicing) customers
     4.   Collecting customer payments
     5.   Keeping track of inventory
     6.   Purchasing stock and materials
     7.   Paying bills
     8.   Paying employees
     9.   Reporting financial information
California State University, Fullerton
                                                    22
Entering Customer Orders
   Customer order acceptance and
    preparation of a sales order in a form
    the business can use.
   Usually part of the marketing function
    and performed in the Sales Department.
        Sales Department determines if there is
         sufficient inventory on hand and the
         creditworthiness of the customer.
California State University, Fullerton
                                                   23
Entering Customer Orders
(cont’d.)
   Inputs
        Customer orders
             May be received by mail, phone, fax, email,
              and other methods
   Outputs
        Sales order



California State University, Fullerton
                                                            24
Shipping
   Shipping Department uses the sales
    order to determine what items should
    be shipped to the customer and
    produces the shipping notice.
   Shipping may be a part of productions
    and operations department of the
    company.

California State University, Fullerton
                                            25
Shipping
   Inputs
        Sales order


   Outputs
        Shipping notice




California State University, Fullerton
                                         26
Billing Customers
   Billing Department uses the sales order
    and the shipping notice to prepares the
    customer’s bill (invoice) for those goods
    shipped by the Shipping Department.
   Billing department may be part of the
    accounting or marketing function.


California State University, Fullerton
                                            27
Billing Customers (cont’d.)
   Inputs
        Sales order
        Shipping notice
   Outputs
        Invoice (bill)




California State University, Fullerton
                                         28
Collecting Customer Payments
   The Accounts Receivable Department
    uses a copy of the invoice produced by
    the Billing Department to keep track of
    the amount a customer owes the
    business.




California State University, Fullerton
                                              29
Collecting Customer Payments
(cont’d.)
   Inputs
        Invoice
        Customer payments
   Outputs
        Customer statements
        Overdue notices
        Accounts receivable reports

California State University, Fullerton
                                         30
Keeping Track of Inventory
   A business must keep track of its
    inventory and report when inventory is
    low so it can reorder more stock.
   Can be a part of the production or
    operations function.
   Can be a part of the marketing or
    accounting function.

California State University, Fullerton
                                             31
Keeping Track of Inventory
(cont’d.)
   Types of inventory
        Raw Materials
        Work-in-Process
        Finished goods




California State University, Fullerton
                                         32
Keeping Track of Inventory
(cont’d.)
   Inputs
        Receiving notices
        Shipping notices
   Outputs
        Inventory reorder report
        Inventory value report



California State University, Fullerton
                                         33
Purchasing Stock and
Materials (Purchasing)
   Determine the best suppliers and
    prepare purchase orders which indicate
    to the suppliers what items the business
    wants to purchase.
   Can be a part of the production or
    operations function.
   Can be a part of the accounting
    function.

California State University, Fullerton
                                           34
Purchasing Stock and
Materials (cont’d.)
   Inputs
        Inventory reorder report
   Outputs
        Purchase order




California State University, Fullerton
                                         35
Paying Bills (Accounts payable)
   Accounts Payable Department uses the
    purchase order, receiving notices, and
    supplier invoices to keep track of
    money owed by the business for
    purchases, called accounts payable.
   Part of the accounting function.


California State University, Fullerton
                                             36
Paying Bills (cont’d.)
   Inputs
        Purchase order
        Receiving notice
        Invoice from supplier
   Outputs
        Checks payable to suppliers
        Accounts payable report

California State University, Fullerton
                                         37
Paying Employees (Payroll)
   Involves paying employees wages or
    salaries and providing reports to other
    business functions.
   Usually part of the accounting function,
    but may be part of the human
    resources management function.


California State University, Fullerton
                                           38
Paying Employees (cont’d.)
   Inputs
        Employee work report (time sheet)
   Outputs
        Paychecks to employees
        Payroll report




California State University, Fullerton
                                             39
Reporting Financial Information
   Provides reports of financial information
    for the management and owners of the
    business.
   Usually a part of the accounting
    department.



California State University, Fullerton
                                            40
Reporting Financial
Information (cont’d.)
   Categories of “accounts”
        Assets – what the business “owns”
        Liabilities – what the business “owes”
        Stockholder’s Equity – what the business is
         “worth”
        Revenues – the income of the business
        Expenses – the costs incurred to produce
         the revenues of the business
California State University, Fullerton
                                                   41
Reporting Financial
Information (cont’d.)
   Inputs
        The transactions of the business
   Outputs
        Balance Sheet
        Income Statement




California State University, Fullerton
                                            42