Small business concepts and applications

¶ … risks facing this company that immediately need to be addressed. The major risks include the fact that the company has already violated a number of the premises upon which the company was formed. Those premises are the close relationship with a number of sunglass manufacturers, the product value and the brand development. Additionally a risk assumed by the company was that they were providing an untested product to untested sales people; these are individuals who have no previous ties to the company. It was nice that Evan was able to establish a relationship with Mark and Judy Chen, and that is a good start along with the fact that they would oversee the operations in Hong Kong. However, the trust put into Mark and Judy is one that is double-edged in nature. If they do not do their job in an efficient manner, who then will coordinate the manufacturing activities? Another risk that faces the company is the 'knock-off' look and feel of the sunglasses. The success of the company hinges on providing a quality product at reasonable prices, not in providing a product that 'appear disappointingly inexpensive'.

2. The firm's marketing strategy does affect the company's accounting principles and practices due to the fact that independent commissioned sales reps will be charged with distributing and selling the product. An accountant might want to forewarn Evan and Nicki that a sales force that was independent and commission might mean lower expenses in the beginning, but that there is inherent risk involved with establishing a firm in that manner. Risks include the fact that it would be difficult to track and maintain inventory.

Additionally, commissioned reps are not employees and certain rules and regulations would have to be followed regarding employee status, and that the reps who had exclusive rights to market and sell the companies products would necessarily have to be treated as different entities as compared to the individual sales reps without those rights. Each would have to be defined in a manner that coincided with standard accounting practices.

3. The strengths of the business include the fact that there is a certain amount of money and expertise already present to work with. Evan has experience as a marketing director and was obviously good enough at his job to warrant share options each year, and Nicki is a veteran merchandiser with major customers as clients who would provide avenues to sales and revenue. Additionally, they have brought Brad on board who has the accounting expertise to keep the company on the financial straight and narrow. Some of the weaknesses of the company include the fact that they have no brand name, no presence, and no product of their own (as of yet).

4. Initially the company is going to face a number of decisions regarding how to report various revenues and segments. In an ongoing manner, similar products will have to be segregated or reported in similar manners. The company will also have to remember that disclosures for products and services that are not substantially similar will have to be disaggregated. Of course, the initial product is sunglasses, but the marketing plan does call for additional products within a relatively short period of time.

Choosing the correct accounting method will also be a choice that will affect the company going forward and it should be addressed right from the start. Other issues might include the fact that the company is developing a sales force that will be independent contractors; this is always a sticky area for companies as the rules that govern who is and who is not an employee are stringent and arbitrary.

5. Some of the best management tools are the ones that have been around for a number of years and provide managers with the ability to present ideas or material in a cohesive and understandable manner. Many of these tools can now be purchased for use online; Evan and Nicki should probably invest some funds in doing so. Management software to track sales and data as well as to assist in successfully managing a company are abundant. The company should look to purchase software that allows for management of both the product; sales, revenue, expenses, cost of goods, etc. And the independent contractors; how many sales, who are they selling to, profitability, etc. Specific software can be found based on the ease of use and management's comfort level with the software. Tools should include such items as charts, tracking, profitability, and budgeting procedures. Additionally, software that allows for complete quality control of the product (returns, refunds) and a process for ordering (or returning) product for the field reps.

6. Information technology will play a key role in the success (or lack thereof) for Action Accessories. Not only does the company have to establish online communications with their overseas manufacturers, they also have to have online accessibility for their field reps. Most importantly, however, could be the role that information technology plays in direct orders from customers. Modern technology allows the customer to go online and with just a click order a product. With a centralized distribution center in Houston, the company could conceivably sell and distribute product online in a much more profitable manner, especially after their brand has been established. Recommendations to the company could include building a website immediately and promoting that website as the brand becomes more established.

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