Aim of the research
Discuss regarding the issues faced by a start up company.
The current research proposal will discuss regarding the issues faced by a start up company. For the current research the NewZeland based start up company CHESTRO CHOCOLATES LIMITED had been taken into consideration. CHESTRO offers a range of products such as –milk chocolate, handmade chocolates, eclair’s chocolates and dark chocolate. The CHESTRO CHOCOLATES LTD. consists of a number of departments. However, it lacks experienced financial analysts which made accounting system difficult for the company. As a start up, it is crucial for the company to earn a higher return on investments. A high and positive return on investments (ROI) would help the company to propel forward. Hence, effective and efficient accounting system will be required. However, the company lacked an experienced base of financial analysts. Within a robust and dynamic business environment a company may be subjected to huge amount of internal and external environment fluctuations. Some of these may be have profound impact upon the functioning of the organization. The research proposal over here aims to discuss the different factors which may serve as potential threat to a business organization and the effect of the same over the performance of the business organization.
The research aims to highlight the different issues which can serve as a threat to the functioning of a business organization. Here, the impact of ineffective accounting systemon the overall performance of a business organization will be taken into consideration by the researcher.
There are a number of reasons guiding the failure of a start-up organization. Some of these will be discussed by the researcher in the context of the CHESTRO CHOCOLATES LTD. The most dominant issues which are generally faced by a start up business firms are – growing market problems, failure of business model, poor team management, running out of cash (financial challenges) and product problems. Though, the researcher has selected effective financial challenges; the researcher will also take into consideration failure of business model and diverse market issues and challenges. In order to increase valuation a company must focus upon the business model adopted. It focuses upon the scalable ways of acquiring a customer along with monetizing the customers at a significantly higher level than the acquisition cost. The rule however says that the cost of acquiring a customer must be less than lifetime value of a customer. As mentioned by Nagaria (2016), an organization needs to focus sufficiently upon effective marketing gimmicks and strategies for acquiring and developing a loyal base of customers.
Scope of the research
Background
The current research focuses upon the aspect of effective accounting system and monitoring for a start up business firm. In the lack of effective accounting system the organization may run out of cash, which may dampen the growth prospects of the company. CHESTRO CHOCOLATES LTD is a start-up organization. Hence, its needs to focus upon effective revenue generation in initial years. However, the organization complained of the lack of sufficient number of financial analysts. As mentioned by Wasserman (2017), every element of working capital needs to be tightly controlled. As supported by Wagemans, Witschge and Deuze (2016), capital management is also based upon the strengthening the internal resources of the organization. Additionally, market stakeholders can also affect the overall performance of a business organization. Hence, the organization needs to build an effective marketing and distributor’s channel.
As argued by Spigel (2017), putting sufficient dependence upon a particular distributors channel can be disadvantageous for the company. On the other hand, having more than one distributors channel can help CHESTRO attain diverse varieties of coffee beans at the best possible prices. As supported by Wasserman (2017), effective accounting system can help in risk planning ahead of time.
Accounting system for CHESTRO CHOCOLATES
Accounting system is one of the most important objectives for any business organization. As mentioned by Picken (2017), an effective accounting system can provide an organization with a competitive advantage over others. Some of the objectives of accounting system have been discussed over here such as – availability of sufficient funds for meeting day to day costs and expenses. As mentioned by Kasabov (2015), effective accounting system helps in redirecting the abundant cash flow towards making appropriate investments. It helps in selecting from amongst a number of investment proposals, which could be optimized for maximum success. The financial planning is executed through a number of steps such as forecasting sales, projection of the assets which are required to achieve sales, estimation of the funds which had been gathered by the organization as well as calculating the external funds which may be required to achieve the business processes (Wagemans, Witschge & Deuze, 2016). The accounting system could help in fixing the capital structure of the company (Kasabov, 2015).
The lack of accounting system can act a hindrance for the CHESTRO CHOCOLATES, as in the lack of effective management of finances it will be difficult for the organization to compare their ROIs with few of the market competitors. Additionally, as a start up the CHESTRO CHOCOLATES is poor with investment patterns; this might act a hindrance to the growth prospects of the company. As commented by Kasabov (2015), the aspects of an effective market expansion are based completely upon the returns on investment. Tactical pricing strategies can help in the generation of positive revenue per customer for CHESTRO CHOCOLATES. This is further based upon the cost of acquisition of the target customer groups. For example, when the customer flow is low the products will be sold at lower prices. On the other hand, when the customer flow is high the products could be offered at higher prices (Picken 2017). Hence, a significant part of the market development depends upon developing an effective bond with the customers. Hence, the CEHSTRO CHOCOLATES uses a significant part of the cash inflow on marketing strategies. The marketing strategies are used to build brand awareness of the CHESTRO products which could reduce the customer acquisition charges in the long run.
Literature review
Different attributes of accounting system
There are a number of different attributes of effective financial planning. Some of these factors have been discussed with respect to sound financial planning. The factors have been further discussed under heads- simplicity, foresight, flexibility, optimum use of funds, liquidity, anticipation of contingencies and economy. As mentioned by Karadag (2015), the simple financial plan can help the management in the procurement of the required amount of capital. Effective foresight forms a very important component financial planning. It helps the organization to make wise and sustainable planning. As mentioned by Eniola and Entebang (2015), wise and sustainable planning helps in safeguarding the important and valuable assets of a business organization. The third aspect refers to introducing flexibility in financial planning. It is based upon the financial readjustments. Hence, it is guided more by instincts rather than lengthy business calculations.
CHESTRO as a start up has high customer acquisition charges which could lead to losses in the recent years. Therefore, for generating higher return on investment the CEHSTRO CHOCOLATES follows the next seasonal sale with higher rate of discounts. It follows a fixed pricing strategy in case the funds generated from the annuals sales are low. On the other hand, it follows an intelligent pricing strategy where it offers slight discounts on its range of confectioneries. It fixes the prices of some of its products at a difference of .50 dollars. This is in line with competitive pricing strategy where the goal is to offer the products at lower price range compared to the competitors. The strategy also helps on gathering sufficient amount of profits for the business firm. Additionally, effective accounting system lays importance upon the optimum use of funds for the business organization (Lusardi & Mitchell, 2014). This is further dependent upon striking the right balance between the fixed capital and the investment capital, which are used in the generation of the financial reports.
The accounting system of an organization could be explained with the help of a number of accounting system models. Few of them have been discussed over here with respect to the CHESTRO CHOCOLATES PVT. LTD. Some of these are – three statement model, discounted cash flow model, merger model, initial public offering model, leveraged buyout model and sum of the parts model. In the three statement model, the income statement, balance sheet and cash flow are all dynamically linked with formulas. The goal is to ensure that all the accounts are connected. The discounted cash flow values a company based upon the net present value (NPV) (Aouni, Colapinto & La Torre, 2014). The model is used in equity research and other areas of capital market. One such model is the budget model, which is used to effective accounting system and analysis. The budget model is designed based upon monthly or quarterly figures. Therefore, negative revenue generated per customer indicates more budget inflow for the organization, whereas positive revenue generated implies strong market position of the organization. The budget model emphasizes upon maintaining a higher customer acquisition rate compared to the lifetime value of a customer (McDonald & Wilson, 2016). The ration obtained, the better is the business prospects of the organization.
Since CHESTRO chocolate was a start up firm, it had to spend a significant amount on the values of individual customers which resulted in overall losses for the company. CHESTRO have been suffering due to the lack of effective accounting system and support. It could be further attributed to lack of an effective financial analyst team, which could be further attributed to the lack of effective hiring and recruitment policies. The organization offers a number of candid features to offer to the employees including promotions and appraisals. However, in the lack of effective absorption and induction process the best employees might often go amiss. Additionally, lack of support and concern from the management can also acts a hindrance in the process. In this respect, sufficient importance has been placed upon the importance of maintaining a positive and high ration for the CAC/LVC. Hence, as a start-up CHESTRO CHOCOLATES suffered from losses owing to higher customer acquisition charges. The lack of effective accounting support and expertise led to additional financial risks for the organization.
The behaviour adopted by an organization also plays an important role in monitoring of accounting. It could be described over here as human behaviour with respect to money management. As mentioned by Luthans, Luthans and Luthans (2015), effective work flow within the CHESTRO CHOCOLATES Ltd. ensures that process gaps are maintained, which helps in effective flow of finances. Therefore, it calls for an effective collaboration between multiple process channels. As commented by Drexler, Fischer and Schoar (2014), a positive organizational behaviour can help in setting of an effective connect between various departments, which further facilitates the exchange of valuable information. The collaboration between various departments and the exchange of data can further help in the development of an approved budgeting system for the organization. Additionally, setting up of standards against which the actual productivity of a company is compared from time to time can help in deciding upon the financed. A high productivity means that the financial investments could be relaxed for a while, whereas low productivity stresses upon more investments in enhancing products quality by the CHESTRO group of chocolates. As commented by Osadchy and Akhmetshin (2015), practicing management by exceptions where the managers focus upon variance analysis can help the business be market ready and mitigate the risks effectively. Additionally, implementation of robust innovative business tools can prevent misinterpretation of data as well as help in intelligent business practice by calculating effective price per product.
As commented by Veit et al. (2014), the success of an organization further depends upon the leadership model adopted by the very organization. For a start up venture it has often been seen that a laissez fair model is adopted, which eventually leads to gaps in effective work flow. In the absence of effective guidance and leadership, the CHESTRO CHOCOLATES PVT. Ltd. can fail in achieving its goals. The accounting reports could be used to access the market positioning of the company. Additionally, maintaining a clear and transparent accounting report helps the organization in planning of the future investments.
Since CHESTRO is a start-up company it failed to follow an international financial reporting system. The reporting system is based upon parameters like innovation, responsiveness, relevance, credibility and accountability. As per the international financial reporting system an organization should have – an independent decision making body, adequate due process, independent fundraising and independent oversight. Thus, in the lack of these activities effective distribution of finances between various departments of the organization is not possible.
Research gaps
There are a number of gaps in the research process which made the collection of data and analysis difficult for the researcher. For example, being at an arm’s length from the organization made data collection and the analysis of data difficult for the researcher. Additionally, the researcher failed to get sufficient cooperation and participation from the management and the employees of the CHESTRO CHOCOLATES. Therefore, the researcher failed to gather the required amount of data. In the lack of an effective accounting system structure of the organization it became difficult for the researcher to reflect upon the process gaps.
Chosen methodology
The researcher will use a positivist research philosophy over here. Therefore, the researcher will be using practical observations and data for the development of the hypothesis. The positivist research philosophy works in line with quantitative data where much of statistics and calculations are involved. However, here the researcher will be using interview transcripts for the formation of effective themes based upon the responses. These will be further presented by the researcher in stoichiometrically significant figures.
The methodology of the research can be further divided into research approach, research design and research strategy. The researcher will be using an inductive research approach over here where the researcher will be using observations and theories for the formation of the hypothesis. Therefore, the responses gathered from the interview will be used by the researcher for the compilation as well as analysis of the data.
The researcher will use an exploratory research design, where the researcher will be using newly revealed figures and data for the analysis and representation of the final results. As mentioned by Lewis (2015), exploratory research is the initial research which will form the basis of more conclusive research.
Research methods
The research method refers to the data collection and data analysis methods. The researcher will use interview methods for the gathering of statistically significant results. The interview responses will be used by the researcher for the formation of similar dissimilar themes. Some of these will be used by the researcher for presentation in the form of graphs and charts.
Research instruments
The researcher will use audio recordings for the collection of the interview data. These will be referred to by the researcher during the synthesis of effective themes and designs (Brinkmann, 2014). These themes will be used by presented by the researcher in the form of important facts and data.
Sample participants
The researcher will involve the management as well as employees of the CHESTRO CHOCOLATES and use them to form a small focus group of 4 including two managers and two process employees.
Ethical considerations
The researcher will to take into consideration a number of factors while conducting the research study. Since the researcher will be adopting a qualitative research design for the study, they should ensure that confidentiality concerns are taken care of at all of the interview process, as per the Data Protection Act. Additionally, the participants should be allowed to leave the interview process at any pint of time (Moen & Middelthon, 2015). In process of the interview, the researcher will not coax the participants to give out facts or data they might feel uncomfortable in disclosing.
Timeline (GANTT CHART)
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5-6 months |
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Develop interview questions |
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Conducting of the interview |
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Thematic analysis |
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Presentation of results |
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Timeline (GANTT CHART)
(Source: Author)
Conclusion
The current assignment focuses upon the collaboration of different attributes and factors within a business organization. In the current study, NewZeland based CHESTRO CHOCOLATES have been taken into consideration. Being a start-up the organization lacked effective accounting system features, which served as a competitive disadvantage for the organization. The lack of effective accounting system could be attributed to failure in the business model. In this respect, an effective research design and study has been established where the researcher had used qualitative interview methods for the collection of research data. Some of these will be used by the researcher for the analysis of the process gaps. However, effective leadership and organizational contingency planning forms the basis of success of any organization.
References
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