U2 Aos 1 Notes

Question 1

Key Legal requirements – registration, taxation and government regulations

Answer 1

-There are many licences, permits, approvals and authorities which must be taken into account by business owners.
-Businesses that don’t obey the law risk losing customers, being fined or losing the right to continue trading.

Question 2

Key Legal requirements – registration, taxation and government regulations

BUSINESS NAME REGISTRATION

Answer 2

-Businesses need to register their business name with the Australian Securities and Investments Commission (ASCIC) except when the name is that of the owner.
-You must have an Australian Business Number (ABN) before you register your name.
-The owner should conduct a search on the ASIC website to check whether the name is already taken.

Question 3

Key Legal requirements – registration, taxation and government regulations

REGISTERING A DOMAIN NAME

Answer 3

-A key element of a businesses online presence will be the domain name which is the address of the website.
-It’s important to choose a unique name with easy spelling so customers can find it. A business can register multiple names.
-Domain names can be registered through resellers and registrars by visiting the Australian Doman Administration website. Registering only costs between $10 and $100 a year.

Question 4

Key Legal requirements – registration, taxation and government regulations

TAXATION COMPLIANCE

Answer 4

-Tax is finances collected by the government from individuals and businesses.
-Tax can be imposed on income, capital gains and goods and services. A person starting a business should become familiar with all relevant tax regulations.
-The Australian Tax Office (ATO) is the government body in charge of administering and collecting tax for the federal government.
-Income tax exists for both individuals and businesses.
-Companies pay a flat rate and individuals pay a progressive rate.
-Other federal and state taxes include Pay as you go (PAYG), GST, Fringe benefits tax, stamp duty and land tax.

Question 5

Key Legal requirements – registration, taxation and government regulations

LOCAL GOVERNMENT LEGAL REQUIREMENTS

Answer 5

• Businesses must first seek local government approval or it could result in the closure of the business and wasted time, money and energy.
  -Local governments have control over activities such as: Zoning, new development applications, fire regulations, parking regulations, health regulation and business signs.

Question 6

Key legal requirements – trade practices legislation

WORK HEALTH AND SAFETY REGULATIONS

Answer 6

-Under the Work Health and Safety Act 2011 a business owner must ensure the health and safety of workers while they are at work.
-In Victoria the Occupational Health and Safety Act 2004 is the principal legislation covering this area.
-WorkSafe Victoria is the government agency in charge.
-They have the power to inspect work sites. Victorian employers must pay WorkCover insurance to cover the costs of workers if they are injured or become ill as a result of their work.

Question 7

Key legal requirements – trade practices legislation

Consumer protection and fair competition

Answer 7

– Australia has both federal and state laws in place to ensure that businesses and consumers are protected from unfair trading practices.
-Each major industry has its own code of practice which provides guidelines for dealing with customers.
-The Competition and Consumer Act is administered by the Australian Competition and Consumer Commission (ACCC) which promotes competition and fair trading across the nation.
-Consumer Affairs Victoria is the body which administers the legislation in Victoria.

Question 8

Key legal requirements – trade practices legislation

-The Competition and Consumer Act covers many activities, such as:

CARTELS

Answer 8

-A cartel exists if two or more businesses that would normally be in competition with each other agree to act together.
-The Act prohibits businesses from making agreements with competitors to fix prices, rig bids, share markets or restrict outputs.
-It is illegal for two businesses in competition with each other to agree to set identical prices for their products (price fixing).

Question 9

Key legal requirements – trade practices legislation

-The Competition and Consumer Act covers many activities, such as:

MISUSE OF POWER:

Answer 9

• The Act prohibits businesses with a substantial degree of market power from engaging in conduct that has the purpose, or has or is likely to have the effect, of substantially lessening competition in a market.
  -For example, a business should not take advantage of its power to damage or get rid of a competitor, prevent anyone from competing in a market or prevent another competitor from entering a market.

Question 10

Key legal requirements – trade practices legislation

-The Competition and Consumer Act covers many activities, such as:

EXCLUSIVE DEALING

Answer 10

-This occurs when one business trading with another imposes restrictions on the other’s freedom to deal with other businesses.
-An example is when a hair products supplier will only sell to a hairdresser on the condition that the hairdresser does not purchase hair products from a competitor of that supplier.
-This can be legal in some circumstances if it is not seen to lessen competition in the market for the products in question.

Question 11

Key legal requirements – trade practices legislation

-The Competition and Consumer Act covers many activities, such as:

RESALE PRICE MAINTENANCE

Answer 11

• This occurs if a supplier sets the prices at which retailers will sell their products.
  -Suppliers can recommend a retail price for the sale of their goods, but it is illegal to attempt to force a retailer to sell at that price.
  -It is also illegal to set a minimum price that sellers must not sell below, and to force a retailer not to discount goods. On the other hand, it is quite legal for a supplier to insist on a maximum price, as this can discourage a retailer who has a monopoly in a particular location from overcharging customers.

Question 12

Key legal requirements – trade practices legislation

-The Competition and Consumer Act covers many activities, such as:

MERGERS AND AQUISITIONS

Answer 12

-The Act prohibits any merger or acquisition that would have the effect, or be likely to have the effect, of competition being substantially lessened.
-Mergers between one or more businesses and acquisitions can be important for the efficient functioning of the economy, as they can allow businesses to achieve efficiencies and spread their risk.
-Therefore, a merger or acquisition may be permitted if it does not substantially limit competition.
-Planned mergers and acquisitions must be notified to the ACCC, which will determine if they can proceed.

Question 13

Key legal requirements – trade practices legislation

The Act also includes activities that are deemed illegal, such as:

MISLEADING OR DECEPTIVE CONDUCT

Answer 13

-A business must not engage in conduct that is misleading or deceptive or that is likely to mislead or deceive.
-For example, advertisements must avoid words that are deceptive or make false claims or impressions about a product.
-Businesses must reveal full information about prices and not mislead customers about the origins of products.

Question 14

Key legal requirements – trade practices legislation

The Act also includes activities that are deemed illegal, such as:

UNCONSCIONABLE CONDUCT

Answer 14

-This is conduct in business transactions that is unfair or unreasonable and goes against good conscience.
It is illegal for businesses to engage in unconscionable conduct when dealing with other businesses or with customers.

Question 15

Key legal requirements – trade practices legislation

The Act also includes activities that are deemed illegal, such as:

UNFAIR CONTRACT TERMS

Answer 15

-A contract is a legally binding agreement between two or more parties.
-Unfortunately, some businesses draw up unfair contracts that are detrimental to the consumer.
-An example is if a contract allows a business to vary prices without notifying the consumer.
-Contracts must be clearly worded, legible and available to all parties.

Question 16

Key legal requirements – trade practices legislation

The Act also includes activities that are deemed illegal, such as:

FALSE OR MISLEADING REPRESENTATIONS REGARDING GOODS OR SERVICES

Answer 16

-A false or misleading representation is a statement that is untrue, such as claiming that a motor vehicle has a certain fuel consumption performance when it does not.

Question 17

Key legal requirements – trade practices legislation

CONSUMER GUARANTEES

Answer 17

-The Australian Consumer Law sets out protections for consumers who buy goods and services from businesses.
-Consumer guarantees are a comprehensive set of rights and obligations in relation to the supply of goods and services to consumers.

-Basic rights include the following:
*The consumer will gain clear legal title to goods
*Goods must correspond to any sample, demonstration model or description provided to the buyer
*Goods must be of acceptable quality
*Products must be fit for purpose
*Repairs and share parts are reasonable available
*Services are carried out with reasonable care and skill
*Services are completed with a reasonable time

Question 18

The role of external professionals when establishing a business

Answer 18

-External professionals such as accountants, solicitors and bank managers can support owners undertaking business planning by providing financial and legal services.
-Along with these, other processionals such as bookkeepers, recruiters, sales professionals, marketing consultants and IT technicians may continue to act as a sources of support beyond the establishment phase.
-The business needs to evaluate whether it has additional employees or freelance professionals act in these roles.
-A freelancer is an independent worker who charge the business for work on a per job basis.

Question 19

The role of external professionals when establishing a business

BOOKKEEPERS

Answer 19

-Bookkeepers assist a business in keeping and processing a business’s financial records.
-Professional bookkeepers often charge an hourly rate for their services

Question 20

The role of external professionals when establishing a business

RECRUITERS

Answer 20

-Human resource and recruitment professionals are often used by businesses to find the right staff, often charging a fee based on the salary of the person employed.
In this way, the most important and often quite complex aspect of the business, staffing, is handled by a professional who understands what the business needs.

Question 21

The role of external professionals when establishing a business

MARKETING CONSULTANT

Answer 21

• Marketing consultants are responsible for raising awareness of a business’s products and brand with their target markets.
  -Such consultants often run campaigns that involve advertising and other forms of communication with potential customers

Question 21

The role of external professionals when establishing a business

SALES PROFESSIONALS

Answer 21

-Sales professionals are trained and experienced in finding and persuading people to consume a product.
-External sales professionals will often charge a business a percentage or commission for every sale they bring the business.

Question 22

The role of external professionals when establishing a business

INFORMATION TECHNOLOGY TECHNICHIANS

Answer 22

-Often, the IT needs of a business are beyond the capabilities of the business owner.
-Many IT service businesses exist to support the needs of other businesses, with everything from the setup of servers and software to troubleshooting problems that arise on a daily basis.

Question 23

Establishing bank accounts

Establishing separate accounts

Answer 23

-Whilst most business owners will have a personal bank account it is recommended to open a business bank account in order to keep finances separate.
-This is important as it is easier to monitor the financial performance and position of the business if it has a separate account.
-It is also easier to calculate business expenses.

Question 24

Establishing bank accounts

Choosing the right bank account

Answer 24

When choosing the right business bank account it is important to consider the following factors:
- Bank fees
- Interest rates
- Overdraft facilities
- Credit cards
- Convenience and support

Question 25

Establishing bank accounts

Choosing the right bank account
OVERDRAFT FACILITIES

Answer 25

-Some financial institutions allow a business to withdraw more money than they have available in their account.
-This is known as a bank overdraft facility and can be an important feature for a business that might temporarily fall low on cash flow.

Question 26

Establishing bank accounts

Choosing the right bank account
INTEREST RATES

Answer 26

-This is probably the most important factor in determining the choice of bank account as the interest rate will determine how much money the business will earn on the amount of money they have in the bank account, or how much they have to repay on any loans.

Question 27

Establishing bank accounts

Choosing the right bank account
CREDIT CARDS

Answer 27

-Having a business credit card can also be convenient for the owner.
-Different credit cards have different features, including the maximum amount that can be used, as well as the interest rate on unpaid balances.

Question 28

Establishing bank accounts

Choosing the right bank account
CONVENIENCE AND SUPPORT

Answer 28

-Some financial institutions offer a more practical way of banking.
-While smaller banks and credit unions can often offer a lower interest rate, they often lack the infrastructure (physical banks and ATMs) to support the business owner with their banking needs in a way that larger commercial banks can.
-Having a local branch with supportive staff and a variety of secure internet banking options and apps available is a convenience that can ease the burden of running a business for its owner.

Question 29

Establishing financial control systems

Answer 29

-It’s important for business to put in place financial control systems to prevent many financial problems or losses.
-Financial control systems allows a business owner to monitor and manage its financial performance.
-Systems will vary from business to business.

FINANCIAL CONTROL SYSTEMS:
-budgeting
-cash-flow management
-control of accounts receivable
-inventory control
-auditing

Question 30

Establishing financial control systems
BUDGETING

Answer 30

-refers to predicting or estimating the business’s financial performance for a given period in the future.
-There are many types of budgets and they can be prepared monthly, quarterly or yearly.
-By comparing actual with planned results it allows the business to assess successes and short comings.

Question 31

Establishing financial control systems
CASH-FLOW MANAGEMENT

Answer 31

– managing cash flow is crucial to the survival of the business.
-A business must have money available to pay it’s day-to-day expenses.
-A business should:
*Keep track of money that is owed to them.
*Ensure customers are paying in full and on time
*Offering discounts to customers who pay early
*Withhold future supplies to customers
*who are late to pay their accounts
*Arranging short-term loans or overdrafts if required

Question 32

Establishing financial control systems
CONTROL OF ACCOUNTS RECEIVABLE

Answer 32

-Accounts receivable refers to a business’s outstanding invoices or payments.
-In other words, it is money owed to the business from customers.
-Collecting accounts receivable is vital to a business to ensure cash flow.
-When establishing a business the owner should set the right credit terms, for example, 30 to 90 days.

Question 33

Establishing financial control systems
INVENTORY CONTROL

Answer 33

• Many businesses have large quantities of materials on hand to complete production. -This is called stock or inventory.
  -Holding a large amount of stock represents a cost to the business as it takes up space and takes up money that could be used elsewhere.
  -Materials can also become unusable after a period of time so it’s vital businesses manage their materials appropriately.
  -Stock can be managed using a computerised system using barcodes or stock can be counted physically.

Question 34

Establishing financial control systems
AUDITING

Answer 34

-this is the process of testing and evaluating a business’s accounting processes and internal controls.
-Auditing can be done internally or externally and can provide a business with valuable feedback regarding their financial systems.

Question 35

Establishing record-keeping strategies

Answer 35

-Maintaining accurate records is an obligation but also is an invaluable tool for decision making.
-Investors and financial institutions are unlikely to invest or make loans to a business that cannot demonstrate its financial position.
-Businesses are required by law to keep records of their financial transactions for at least 5 years.
-Having the right systems and strategies in place can save on time and simplify the workload significantly.

Question 36

Establishing record-keeping strategies
SOURCE DOCUMENTS

Answer 36

-provide evidence of financial transactions and include cash register dockets, credit card or EFTPOS vouchers and purchase invoices.
-The business must keep records of these transactions.
-Businesses record the information from these documents into journals.
-This allows the business to keep a chronological summary of all transactions to assist in the preparation of financial reports.

Question 37

Establishing record-keeping strategies
CASH BOOK

Answer 37

-consists of 2 sections, cash receipts and cash payments.
-A cash book allows the business owner to keep a tight control of cash, monitor the business’s cash-flow position and determine the cash balance.

Question 38

Establishing record-keeping strategies
INCOME STATEMENT

Answer 38

• otherwise known as a revenue statement or profit and loss statement, is used to help a business to calculate how much profit it has made over a period of time.
  -It shows the amount of revenue received, the costs or expenses incurred and whether a profit or loss has been made.

Question 39

Establishing record-keeping strategies
BALANCE SHEET

Answer 39

-is a snapshot of what a business owns (assets) and owes (liabilities) and the owners equity on a particular date.
-In other words it shows the financial stability of the business.
-The main purpose is to help the business owner watch the debt and equity levels of the business and evaluate the businesses overall financial position.
-Assets are items of value that the business owns.
-Liabilities are the debts owed by a business to others.
-Owners equity represents the value of the business to the owner or the money that the owner has invested in the business.

Question 40

Establishing record-keeping strategies

Answer 40

There are many other record-keeping strategies such as using bookkeeping software, hiring a bookkeeper, establishing a good filing system and seeking assistance when needed.

Question 41

Choosing appropriate suppliers

Answer 41

Choosing the right suppliers is an important part of developing a successful business. Although all businesses have different needs, they all need to consider certain aspects when choosing suppliers.

Question 42

Choosing appropriate suppliers
PRICE, QUALITY

Answer 42

PRICE:
- In order to remain profitable a business needs to keep costs low where possible.
-Therefore the price of supplies will be a big consideration.

QUALITY:
-The quality of supplies can have a direct relationship to the quality of the end product of the business.
-Therefore it is important for the business to source quality inputs from it’s suppliers.

Question 43

Choosing appropriate suppliers
RELIABILITY, PROXIMITY

Answer 43

RELIABILITY:
– Some businesses rely on quick and timely delivery from their suppliers otherwise they may slow production and ultimately lose sales.
-Therefore it is important that suppliers are reliable.

PROXIMITY:
– Being close to suppliers can save the business time and money as less distance means less travel time and reduced cost of transportation. Sourcing supplies locally is environmentally friendly and helps the local economy, this is considered socially responsible.

Question 44

Choosing appropriate suppliers
CORPERATE SOCIAL RESPONSIBILITY

Answer 44

-business suppliers should meet the objectives of the business Today customers demand products and services that have been produced ethically that does not harm the environment.
-Businesses need to ensure their suppliers are also socially responsible or their own reputation can be effected.

Question 45

Choosing appropriate suppliers
CORPORATE SOCIAL RESPONSIBILITY

-CONSIDERATIONS WHEN CHOOSING SOCIALLY RESPONSIBLE SUPPLIERS

Answer 45

FINANCIAL/ECONOMIC IMPACTS:
-the costs involved in sourcing suppliers which meet the corporate social responsibility objectives of a business.
-the costs involved in maintaining the procurement of socially responsible materials.
-the savings gained from more efficient resource use.

SOCIAL IMPACTS:
-the labour conditions involved in the manufacture, use and disposal of materials.
-the labour conditions involved in the delivery of materials.

ENVIRONMENTAL IMPACTS:
-how resources such as energy and water are used in the manufacture, use and disposal of materials, as well as the delivery of materials.
-whether or not pollution or waste are produced from the manufacture, use and disposal of materials as well as the delivery of materials.
-how the removal or alteration of natural resources will affect flora and fauna.

Question 46

Choosing appropriate suppliers
BENEFITS AND COSTS OF CONSIDERING THESE THINGS

Answer 46

BENEFITS:
* Reduces costs - savings are achieved through ‘green’ initiatives such as reducing the use of energy
* Improves the reputation of the business - members of the community, including consumers, are likely to perceive that the business is meeting wider community expectations.
* Customers who are aware that the business is using socially responsible suppliers are likely to purchase from the business - this is likely to result in the business becoming more competitive and financially successful.
* Investors who are aware that a business is using socially responsible suppliers are more likely to invest in the business

COSTS:
* Increased costs associated with sourcing socially responsible suppliers - socially responsible suppliers are likely to pass costs of production on to the business.
* Maintaining a supply chain that sources sustainable materials will be expensive and time-consuming - checking and maintaining checks on all suppliers claiming to be socially responsible is likely to take time, and result in financial costs.
* The quality of materials may be lower than the standard required by the business.
-The business will need to work with suppliers to ensure that quality is on a par with competitors, if not superior.

Question 47

Policies and procedures
POLICIES

Answer 47

-a written set of broad guidelines to be followed by all employees when dealing with important areas of decision making.
-Policies set direction of the business and to determine standards of behaviour.
-Clearly defined policies promote good practices and help ensure employees are working within the requirements of the law.
-The right policies can also help establish a positive culture within the business, which will in turn help the business to reach its objectives.

-Policies should be reviewed regularly. The need for a new policy may arise because there is an issue or problem that needs to be resolved, or there is a change to the law.

Question 48

Policies and procedures
PROCEDURES

Answer 48

• a set of actions that enable a policy to be put into practice. It is a step by step set of instructions.
  -Most businesses have procedures for paying accounts, handling grievances, preparing budgets and dealing with customer complaints.
  -Like policies, procedures provide a sense of consistency within the business by putting common methods to deal with problem solving or routine tasks.

-Businesses can have policies for many areas of the business such as: harassment, bullying, uniform, attendance, safety, phone use, behaviour, Covid-19, supplier, accounting, recruitment, privacy, and drug and alcohol.

Question 49

Policies and procedures
ADVANTAGES AND DISADVANTAGES

Answer 49

ADVANTAGES:
-Help employees to know what is expected of them with respect to standards of behaviour and performance
- Provice a framework for consistent decision making and clear actions in routine situations, so that employees do not need to continually ask the owner or managers what to do
- Allow the owner or management to have an accepted method of dealing with complaints and misunderstandings
- Can prevent legal problems, including compliance issues, which may limit the liability of the business
-Provide the owner or management with a means of communicating information to new employees

DISADVANTAGES:
* Researching and writing policies and procedures takes time and money.
* It can be difficult to communicate policies throughout the business, particularly a large one.
- Policies need to be properly implemented, enforced and monitored - this can also be time-consuming
* Employees might view policies as a substitute for effective management. Policies are guidelines for decision-making and standards of behaviour.
- They are not a set of “how-to’ instructions providing specific answers for every business decision.
* The development of policies can restrict innovation and flexibility.
- A huge range of policies accompanied by cumbersome procedures can restrict a business owner’s ability to make quick decisions or change strategies

Question 50

Technological and global issues

Answer 50

-The world is more connected now in terms of trade and communication than ever before.
-A business owner will need to consider the technological and global issues that may affect the way that their business will operate once it is established.
-Failure to take advantage of technology and global opportunities could leave the business behind their competitors.

Question 51

Technological and global issues
TECHNOLOGICAL ISSUES

Answer 51

• Technology in manufacturing – 3d printing, Computer aided design, Computer aided manufacturing, Automated production lines and robotics.
• Technology in administration – Smartphones, websites, internet, conference calls.
• Technology in marketing – Social media advertising – Facebook, Twitter, YouTube
• Establishing customer databases – an organised collection of information on existing and potential customers.

Question 52

Technological and global issues
GLOBAL ISSUES

Answer 52

• Overseas suppliers and resources – Australians can source supplies from overseas, they are often cheaper due to lower labour costs. However businesses have less control when they source supplies from overseas.
• Customers and overseas retailers – Australian businesses can export their products which opens up their market share.