Business and Accounting Guide

Information for management is likely to be used for planning, control and decision making.

An organization should never be surprised by developments which occur gradually over an extended period of time because the organization should have implemented a planning process. Planning involves the following:

· Establishing objectives
· Selecting appropriate strategies to achieve those objectives

Planning therefore forces management to think ahead systemically in both the short term and long term.

Objectives of organizations

An objective is the aim or goal of an organization (or an individual). Note that in practice, the terms objective, goal and aim are often used interchangeably. A strategy is a possible course of action that might enable an organization (or an individual) to achieve its objectives.

The two main types of organization that you are likely to come across in practice are as follows,

· Profit making
· Non-profit making

The main objective of profit making organizations is to maximize profits. A secondary objective of profit making organizations might be to increase output of its goods/services.

The main objective of non-profit seeking organizations is usually to provide goods and services. A secondary objective of non-profit seeking organizations might be to minimize the costs involved in providing the goods/services.

In inclusion the objectives of an organization might include one or more of the following.

· Maximize profits
· Maximize shareholder value
· Minimize costs
· Maximize revenue
· Increase market share

Remember that the type of organization concerned will have an impact on its objectives.

Strategy and organizational structure

There are two schools of thought on the link between strategy and organizational structure.

· Structure follows strategy
· Strategy follows structure

Let’s consider the first idea that structure follows strategy. What this means is that organizations develop a structure in order to implement a strategy. Or do they?

The second school of thought suggests that strategy follows structure. This side of the argument suggests that the strategy of an organization is determined or influenced by the structure of the organization. The structure of the organization therefore limits the number of strategies available. You really just need to be aware that there is a link between strategy and the structure of an organization.

Long-term strategic planning

Long-term strategic planning also known as corporate planning, involves selecting appropriate strategies so as to prepare a long-term plan to attain the objectives.

The time span covered by a long-term plan depends on the organization, the industry in which it operates and the particular environment involved. Typical periods are 2,5,7 or 10 years although longer periods are frequently encountered.

Long-term strategic planning is a detailed, lengthy process, essentially incorporating three stages and ending with a corporate plan. The diagram on the next page provides an overview of the process and shows the link between short-term and long-term planning.

Short-term tactical planning

The long-term corporate plan serves as the long-term framework for the organization as a whole but for operational purposes it is necessary to convert the corporate plan into a series of short-term plans, usually converting one year, which relate to section, function or departments. The annual process of short-term planning should be seen as stages in the progressive fulfilment of the corporate plan as each short-term plan steers the organization towards its long-term objectives. It is therefore vital that, to obtain the maximum advantage from short-term planning, some sort of long term plan exist.

The planning process

The definitive guide of business planning

By AcoustivWave Friday, August 12, 2016

Business Information

Data is the raw material for data processing. Data relate to facts, events and transaction and so forth.
Information is data has been processed in such a way as to be meaningful to person who receives it. Information is anything that is communicated.

Qualities of good information

Good information should be relevant, complete, accurate, clear, it should inspire confidence, it should be appropriately communicated, its volume should be manageable, it should be timely and its cost should be less than the benefits it provides.

Lets look at those qualities in more details.

Relevance: Information must be relevant to the purpose for which a manager wants to use it. In practice, far too many reports fail to 'keep to the point' and contain irrelevant paragraphs which only annoy the managers reading them.
completeness: An information user should have all the information he or she needs to do their job properly. If he or she does not have a complete picture of the situation, they might well make bad decisions
Accuracy: Information should obviously be accurate because using incorrect information could have serious and damaging consequences. However, information should only be accurate enough for its purpose and there is no need to go into unnecessary detail for pointless accuracy.
Clarity: Information must be clear to the user. If the users does not understand it properly they cannot use it properly. Lack of clarity is one of the causes of a breakdown in communication. It is therefore important to choose the most appropriate presentation medium or channel of communication.
Confidence: Information must be trusted by the managers who are expected to use it. However not all information is certain. some information has to be certain, especially operating information, for example, related to a production process. Strategic information, especially relating to the environment, is uncertain. However, if the assumptions underlying it are clearly stated, this might enhance the confidence with which the information is perceived.
Communication: Within any organisation, individuals are given the authority to do certain tasks, and they must be given the information they need to do them. An office manager might be made responsible for controlling expenditures in the office, and given a budget limit for the year. As the year progresses, the manager might try to keep expenditure in check but unless they are told throughout the year what is the current total expenditure to date, they will find it difficult to judge whether they are keeping within budget or not.
Volume: There are physical and mental limitations to what a person can read, absorb and understand properly before taking action. An enormous mountain of information, even if it is all relevant, cannot be handled. Reports to management must therefore be clear and concise and in many systems, control action works basically on the 'exception' principle.
Timing: Information which is not available until after a decision is made will be useful only for comparisons and longer-term control, and may serve no purpose even then. Information prepared too frequently can be a serious disadvantage. If, for example, a decision is taken at a monthly meeting about a certain aspect of a company's operations, information to make the decision is only required once a month, and weekly reports would be a time-consuming waste of effort.
Channel of communication: There are occasions when using one particular method of communication will be better than others. For example, job vacancies should be announced in a medium where they will be brought to the attention of the people most likely to be interested. The channel of communication will be brought to the attention of the people most likely to be interested. The channel of communication might be the company's in-house journal, a national or local newspaper, a professional magazine, a job center or school careers office. Some internal memoranda may be better sent by 'electronic mail'. Some information is best communicated informally by telephone or word-of-mouth, whereas other information ought to be formally communicated in writing or figures.
Cost: Information should have some value, otherwise it would not be worth the cost of collecting and filing it. The benefits obtainable from the information must also exceed the cost of acquiring it. and enever management is trying to decide whether or not to prodcue information for a particular purpose (for example wehter to computerise an operation or to build a financial planning model) a cost/benefit study ought to be made.