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FREE BUSINESS STUDIES LESSON PLANS (FORM 1-4)

TEACHER’S NAME……………………………………………………..TSC NO…………….

SCHOOL/INSTITUTION……………………………………………………………………….

CLASS: 1           

SUBJECT: BUSINESS                                                                TOPIC INTRODUCTION TO BUSINESS STUDIES

SUB TOPIC: MEANING AND IMPORTANCE OF BUSINESS STUDIES

WEEK: 4                                                                                        LESSON NO:     1, 2

DATE……………………………………………….TIME……………………………………….

OBJECTIVES: By the end of the lesson, the learner should be able to explain the meaning of business studies, Explain the importance of business studies in the society

LESSON PRESENTATION

SELF EVALUATION:

SUBJECT : BUSINESS                                                                 TOPIC BUSINESS AND its ENVIRONMENT

SUB TOPIC: MEANING AND PURPOSE OF A BUSINESS

WEEK: 4                                                                                        LESSON NO: 3                                                                                                                   

OBJECTIVES: By the end of the lesson, the learner should be able to explain the meaning and purpose of a business

WEEK: 4                                                                                        LESSON NO: 3                                                      

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Business Studies Notes Form One

Business Studies Notes Form 1, Form 2, Form 3, Form 4,

Complete form one Business Studies notes prepared by professional business studies subject teachers. The notes are suitable for both teachers and students. You can also download the notes directly.

CHAPTER ONE OF BUSINESS STUDIES NOTES FORM 1

INTRODUCTION TO BUSINESS STUDIES

Definition of terms used in business studies

Business – refers to any activity that is carried out by an individual or an organization concerned with provision of goods and services with the aim of making profits

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Business studies – it is the study of the activities that are carried out in and around production, distribution and consumption of goods and services

Business environment – these are the business surroundings which may be internal or external

Goods – These are items which are tangible i.e. can be touched and felt e.g. furniture, buildings, bread. Etc

Services – These are actions or activities that may be sold. They are intangible e.g. teaching, banking, hairdressing etc

Production – It is the creation of goods and services or increasing their usefulness. Its done by producers e.g. farmers.

Distribution – It’s the movement of goods and services from the producer to the user. Involves transport, communication etc

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Business Studies Revision Questions and Answers

Consumption – Refers to using of goods/service mostly done by consumers

Disciplines in business studies

  • Economics – it’s the study of how human beings strive to satisfy endless wants using the available scarce resources. Human wants are the desires that people strive to satisfy using goods and services. Resources – Things that are required in order to satisfy human wants
  • Commerce – Study of trade and aids to trade. Trade is the exchange of goods and services for other goods or services or for money.
  • Accounting – It’s a systematic way of recording business activities which are used for decision making.
  • Office practice – these are activities carried out in the office e.g. communication, filling, reproduction of documents etc.
  • Entrepreneurship – It’s the study of activities involved in the process of identifying a business opportunity and acquiring necessary resources.

Importance of business studies in the society

  • Assists members to relate the knowledge, skills and attitude acquired to day to day business activities.
  • Equip members with knowledge and skills to start and run a business
  • Assists individuals in appreciating the role of business studies in provision of goods and services
  • Makes the members to appreciate the need of good business management practice.
  • Assist individuals to acquire self discipline and positive attitude towards work.
  • Equips individuals with abilities to promote cooperation
  • Enables individuals to understand the role of government in business.
  • Equips individuals with abilities to understand role of communication and modern technology to business management.
  • Help individual develop positive attitude towards the environment
  • Equips individuals with knowledge and skills required to evaluate business performance

BUSINESS STUDIES NOTES AND REVISION PAPERS DOWNLOAD LINKS

  • Business Studies Notes Form 4
  • Business Studies Notes Form 3
  • Business-Studies Notes Form 1
  • Business_Studies_Notes_Form_1- 4
  • Business Studies Revision Paper 1
  • Business Studies Notes Form 1- 4 Booklet

CHAPTER TWO OF BUSINESS STUDIES NOTES FORM 1

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BUSINESS AND ITS ENVIRONMENT

The main purpose of a business is to make profits. To achieve this, a business needs to

  • Satisfy customer needs
  • Reduce operating costs
  • Strive to survive by competing favorably

Types of business activities

  • Extraction – m eans obtaining goods from their natural setting e.g mining, farming, lumbering etc
  • Processing of raw materials – it is changing the form of goods without combining it with other goods
  • Manufacturing – combining different raw materials to come up with one final product e.g. table is made of wood, glue, nails and varnish
  • Construction – Rails, road and buildings
  • Distribution of goods – Spreading of goods from the manufacturers to the users. Done by distributors
  • Trade – Buying and selling of goods with the aim of making profits. Done by traders
  • Provision of services – Selling services to consumers e.g. hairstylist, car washers

Business environments and their effects

Internal and external

Internal environment

  • May either be strengths or weaknesses of the business e.g. skilled man power.
  • It is also called micro environment

They include :-

  • Business structure

This is the formal arrangement of the activities carried out at various levels of the organization. A well laid business structure would lead to success because:-

  • Each employee knows what is expected
  • No conflict or confusions
  • Team work is enhanced
  • Proper control – promotes efficiency

A resource is something that can be used to achieve an objective. The following are some of the resources to a business

  • Human resource

Employees in a business provide human resource. A business with qualified human resource is more likely to do well.

  • Financial resources

A business with adequate finances is more likely to do better than one lacking such aspects.

  • Physical resources

These are tangible facilities which belong to a business e.g. buildings, machinery, furniture and stock.

These are the skills and methods used in production. A business with the relevant technology is more likely to succeed.

  • Business culture

Business cultures arise from the combination of employees expectations, beliefs and values within the business. A culture of involving employees in decision making always does better.

He provides finances and makes decisions concerning operations of the business.

External Business Environment

  • Also called macro environment – large in scale

They include:-

  • Economic environment

These are factors that affect the buyers’ ability to buy goods and services offered by a business e.g charges, taxes, rates etc

  • Demographic environment
  • Includes factors in population change – size, distribution, age, density, birth and death rates
  • A growing population provides market for goods and services
  • Age and sex distribution shape the line of business while better education and jobs for consumers would improve their taste and demand for quality goods services
  • Legal – political environment

The government closely monitors and passes laws and policies to regulate activities. Traders may opt to invest in some areas because of lower taxes or nor taxes

Manufactures of foodstuffs are required to include expiry dates to their goods. Political stability also creates a conducive working business environment

  • Technological environment

Technology refers to level of know-how, efficient use of tools and equipments and other resources. Advancement in technology would lead to better quality of goods being produced.

  • Cultural environment

Culture is the norms that regulate the behavior of people in society. Includes customs, beliefs and values. Dictates how people live and products they consume e.g. Muslims and pork.

  • Competitive environment

Firms trying to outdo each other in their endeavors to maximize profits. Competition can ether be generic or enterprise.

Generic competition refers to competition where the products are used for the same purpose though the products are different. E.g. cinemas and discos are competing form of entertainment.

Enterprise competition is found were products are similar to those of the other firm. E.g a local shoe manufacturing company competing with imported shoes.

  • Physical environment

Includes factors such as climate and infrastructure e.g. roads, water supply, electricity, banks etc

CHAPTER THREE OF BUSINESS STUDIES FORM 1 NOTES

Satisfaction of human wants, human wants.

  • These are desires that people have or strive to satisfy e.g. thirst is a desire for drink
  • Goods and service provide by the business are intended to satisfy a human want.

Classification of human wants

  • Basic/ primary wants/needs
  • Are the necessities that are absolutely vital for the human survival
  • They include food, shelter and clothing
  • They must be satisfied first before one thinks of satisfying the rest
  • Lack of basic needs may lead to death
  • Are needs one can do without but are desired to make life more comfortable
  • They can be categorized into comforts and luxuries
  • Comforts improve ones living standards beyond the status of mere survival e.g. furniture, medication, education, utensils, transport etc.
  • Luxuries are goods that provide excessive comfort e.g. cars, watches. Luxuries are for prestige purposes

Characteristics of human wants

  • Unlimited – Human wants are so many that they can never be satisfied. They are insatiable.
  • Varied . They change with factors like age, gender, income, geographical location and social status.
  • Competitive . They compete against each other for satisfaction using the limited goods and services
  • Complimentary . Satisfaction of some wants automatically leads to creation of other wants e.g. when you purchase a cell phone, you will automatically need airtime.
  • Repetitive . After some wants have been satisfied once, they recur thereby creating the need to satisfy them again.
  • Habitual . Some wants result in the formation of certain habits e.g. use of certain brands of toothpaste, perfumes, body lotion and beverages based on habits .
  • Universal . Human wants are experienced by every human being without exception whether they are satisfied or not
  • Vary in intensity . Different wants have different priority

Challenges faced in the satisfaction of human wants

  • Human wants are too many and varied to satisfy fully
  • The resources needed for the satisfaction of human wants are never enough
  • Resources are scarce
  • People must continually look for fresh resources to satisfy recurring wants
  • Human wants change with time, age and gender

Goods and services

  • Goods are tangible visible objects that can be used to satisfy human wants
  • Services are intangible efforts or acts that can satisfy human wants. Services cannot be seen i.e. not visible

Goods can be categorized as follows

  • Free goods are gifts of nature e.g. sunshine, rain, oceans
  • They have utility but no monetary value
  • Economic goods are scarce in supply and have money value e.g. TV, books, minerals etc
  • Producer goods are used in producing other. They are also known as capital goods e.g. machines, equipments and tools.
  • Consumer goods are readily usable by the final consumer. E.g. food, clothing, furniture, cosmetics, medicine etc
  • Perishable goods go bad easily unless stored using very special facilities e.g. meat, milk, vegetables, tomatoes.
  • Durable goods continue giving services for a long time and can be spoiled by agents such as wear and tear e.g radio, furniture, buildings,
  • Public goods belong to no one in particular but are owned by the government or by all of us collectively e.g. roads, airports, rivers, public hospitals, public parks, railways, churches etc.
  • Private goods are owned by private individuals in their private capacities either singly or as a group e.g. personal cars, private schools etc.
  • Intermediate goods are used as inputs/raw materials to be processed into a more useful form. E.g sisal, sugarcane, wood, cotton etc.
  • Finished goods are final products that come out of processing in the required form (output) e.g flour from maize or wheat, dress from cotton.
  • Material goods and non material goods
  • Material goods are commodities that are tangible e.g food, books, chairs, vehicles, shoes
  • Non-material goods are intangible e.g. teaching, nursing etc

Differences between goods and services

Economic resources

  • These are inputs needed in the production process in order to produce what is required to satisfy human wants.
  • They are the means by which production and provision of goods and services is made possible.

Types of economic resources

Natural resources – Are gifts of nature e.g. land, natural forests, rivers, oceans and minerals

Artificial resources – Are man made resources e.g. machinery, tools, tarmac roads, dams, railways lines etc

Human resources – Refers to mental and or physical efforts rendered by people to organizations or to other human beings in producing goods and providing services e.g. nurses, teachers, painters, drivers.

Economic resources can be divided into

  • Renewable resources
  • Non-renewable resources

Renewable resources are those whose supply can be restored and if not, creating goods and services is reduced and it may stop altogether

Non-renewable resources are those whose supply cannot be stored after use. Using these resources leads to their exhaustion sooner or latter

Examp l e of renewable and non renewable resources

Characteristics of economic resources

  • They are scarce
  • They have monetary value
  • They are unevenly distributed
  • They can be used to create goods and service
  • They can be combined together in different proportions to create goods and services
  • They can be transformed from one party to another

Scarcity, choice and opportunity cost

  • Scarcity is used to describe the limited nature of economic resources
  • Choice id the act of deciding what wants to satisfy first with the scarce or in adequate resources available. Choice is made with a list of scale of preference which is a list of unsatisfied wants arranged in order of priority
  • Opportunity cost is the value of the best foregone alternative. The real cost of satisfying any want is the alternative that has to be foregone in order to do so

CHAPTER FOUR OF FORM 1 BUSINESS STUDIES NOTES

It’s the creation of goods or provision of services to satisfy human wants It involves activities of transforming of materials into finished goods, transportation and storage

U tility_-is the ability of a good or services to satisfy human wants.

Types of utility

Form utility –this is changing the form of a commodity by converting raw materials to finished goods .e.g. sugarcane may be converted into sugar Time Utility- this is created when a good is stored until it is appropriate time to use it. Example, storing food stuff in the school store during the holiday to use when the school opens. Place Utility – this is bridging the geographical gap between the producer of commodity and its consumers through transportation. Example, transporting books from a bookshop to the school Possessive Utility -this refers to the transfer of ownership of good and services from one person to another it maybe done through trade. Example, ownership of bread may be transferred from a canteen owner to a consumer when the customer buys it. Types of production Direct and Indirect Production Direct production (subsistence production) Is type of production from ones own personal consumption Characteristics of Direct Production

  • Goods and services are of low quality and quantity
  • Leads to low standards of living.
  • Encourages individualism
  • Can very tiring
  • Does not encourage invention and innovation
  • No one has the ability to provide all that he/she requires

b) Indirect production Production of goods and services for sale Characteristics of Indirect Production

  • Lead high quality and quantity goods.
  • Production with a view of exchange.
  • It results in surplus production of goods and services

Level of Production and Related Occupation Primary Level

  • This level is also called extractive level, involves extraction of goods from their natural setting.
  • The products can be used in the state they are or can be processed to make them more useful. example water, mining, fishing. Lumbering e.t.c

Secondary Level

  • Involves transformation of raw materials into finished products or more useful products including; manufacturing e.g. food processing, Construction e.g. house and roads

Tertiary Level

  • Involves provision of services. Divided into commercial and direct

Commercial services Activities either trade or consist trade to take place e.g wholeselling,retailing,banking . Direct Personal Service Service rendered by individual direct to the consumer e.g nursing teaching and legal service. Factors of Products and Their Rewards Are resources/agents required in production e.g

  • Entrepreneurship
  • Natural resource e.g. minerals, soils etc
  • They are all the natural resources below or above the earth surface.
  • The rewards are rent, rate or royalty

Characteristics of Land as a Factor of Production

  • It is a basic factor of production, that is, production can’t take place without it.
  • Its supply is fixed that is, we cannot add more earth service on to what nature has provided.
  • It lacks geographical mobility i.e it cannot be moved from one geographical to another.
  • Quality is not homogeneous .Productivity of one piece of land will have different levels of fertility, mineral deposits, soil textures and varying climate conditions
  • Productivity of land can be increased by increasing quality and quantity of capital
  • It’s subject to the law of diminishing return.
  • It’s a natural resource
  • Human efforts are applied in production either physical or mental
  • Not all human effort is labour. For it to become labour it must be aimed at production and be paid for.
  • Rewards are wages and salary.
  • Labour may be skilled, semi skilled or unskilled. Which is determined by the lvel of education, training and experience
  • Refers to all the artificial resources used in the production of goods and services
  • There are two types of capital namely fixed and operating /circulating capital
  • Fixed capital are things that stay in a business almost permanently e.g. machinery, buildings, vehicle, furniture etc
  • Working/circulating capital gets used up every time its applied in the production process e.g. raw material and money.
  • Capital is rewarded in form of interest

Entrepreneur

  • This is an individual who identifies a business opportunity, devotes the factors of production and starts a business venture which may involve the creation of goods and service
  • The entrepreneur pays for the services of all the other factors of production
  • He makes important decisions in business e.g s/he decides what to produce or sell, how much to produce or sell and what methods to apply in the production process.
  • The reward for entrepreneur is profit

Division of labour and specialization Division of labour

  • This occurs when the production process is split into many stages or operations
  • Each stage involves a special task performed by one or group of workers. For example, in clothe making factory, the production process is organized in such a way that each worker performs anly a small part of the whole operation. Some cut the cloth material, others join or sew them together, others fixing buttons etc

Specialization

  • This occurs when one worker performs certain specific tasks of a job
  • It ensures that workers concentrate on doing those jobs which they are best suited in terms of skills, qualification and experience

Advantages of division of labour and specialization

  • Workers skills are enhanced because of performing repetitive tasks, resulting in creation of experts.
  • Workers suffer less fatigue as they concentrate on doing one task in one place
  • New talents and inventions are developed as workers perform repetitive tasks hence one can detect and correct weaknesses in the techniques used
  • Work is done at a faster rate due to repetitive nature of tasks and reduced movement of workers from one station to another
  • Goods and services produced are usually of high quality since skills of workers are matched with tasks
  • Use of machines is made possible leading to standardization of products and lower production cost, which in turn leads to higher profits
  • Overall output increases because work is done at faster rate
  • Planning and management of workers becomes easy which increases efficiency in organization

Disadvantages of division of labour and specialization

  • Workers may suffer from boredom due to monotony of doing the same thing repeatedly
  • Individual workers cannot identify themselves in the final products since workers perform only small part of the whole process
  • Incase of loss of jobs, such workers find it difficult to get new jobs because they are specialized in a particular field only.
  • Leads to interdependence between countries, businesses or individuals which may lead to shortage of goods and services especially in times of conflict or natural calamities
  • Use of machines may reduce employment opportunities by replacing manual labour.
  • Workers eventually lose skills owing to the over-dependence on machines
  • Due to specialization, problem at one stage can disrupt the whole production process.

Mobility of factors of production

  • This is the movement or the transfer of a factor of production from one geographical area to another o form one occupation to another
  • Horizontal mobility is the movement from one office to another in the same capacity
  • Vertical mobility is the movement from one grade to another in the same occupation
  • Land lacks geographical mobility but highly occupationally mobile
  • Capital – fixed capital lacks geographical mobility and occupational mobility. Equipments, tools and money may be geographically and occupationally mobile
  • Labour – it’s the most highly mobile factor of production whether geographically, occupationally, horizontally or even vertically.

Factors hindering mobility of labour

  • Natural talent and ability differ from one individual to another
  • Training involved d for one to acquire skills in new occupations can be lengthy and expensive
  • Some organizations have strict regulations barring new entrants from joining these professions e.g. law, medicine and architecture
  • Some jobs though not well rewarding have better terms of service and pension schemes
  • Adverse climatic conditions cause discomfort and disease discourage people from changing geographical locations
  • Ignorance by workers on available job opportunities
  • Geographical transfer involves transport costs, changing residence and school of ones children
  • Security and political stability of given region
  • Social ties that bind one to his/her community
  • Language rules on immigrations

CHAPTER FIVE OF BUSINESS STUDIES NOTES FORM 1

Entrepreneurship.

The process of identifying a business opportunity and getting necessary resources to start and run a business. ENTREPRENEUR- A person involved in entrepreneurship Importance to the economy

  • creation of employment
  • formation of capital
  • reducing rural urban migration
  • raising standards of living
  • saving import
  • improving infrastructures
  • reducing foreign dominance
  • making use of local resources
  • promotion of technology
  • promotion of entrepreneurial culture

Characteristics of an entrepreneur

1. Desire to archive

2. Ability to solve problems 3. Readiness to take risk 4. Initiative 5. Time consciousness 6. Creativity and innovation 7. Independence 8. Self confidence 9. Persistence and patience

10. Seek information

11. Concept before high quality products

12. Commitment to work 13. Desire for feedback Business Idea Is what is cooking in the mind of an entrepreneur concreting on prospective business concept; 1. Product 2. Market 3. Location 4. Management 5. Objectives Sources of ideas

  • news papers
  • shows and exhibitions
  • magazines altitude
  • vocational training\ experience
  • waste products
  • listening to what people buy
  • sporting a market gap

Business opportunity A favorable chance that entrepreneur concepts for investments. Exist were there is a gap.

  • In availability of products
  • Quality product
  • Insufficient quantities
  • un affordable prices
  • poor services

Personal Considerations

Business Considerations

  • Availability of market
  • Technology –appropriation

–Cost

– Suffering in case of out dated

C. Raw materials –quality and quantity prices D. Government policy –requirement before starting the business E. Others –amount of capital – Level of competition – Difficulties in marketing – Expansion possibilities – Security – Level of development Business Plan A document that highlights the objectives of the business and steps to be followed in order to achieve the objectives

  • Name of business
  • product to be sold
  • personal to manage
  • capital needed
  • market to be served
  • type of employees
  • summary of plan

Need for a business plan

  • Avoid mistakes
  • identifying strength and weakness
  • requirement by financials
  • determination of amount of finance
  • Allocation of resources
  • motivating factors
  • adoptability

Tools For Control Factors influencing entrepreneur practices

  • Government policies
  • infrastructure
  • levels of education and skills
  • availability of market
  • availability of resources
  • competition
  • political stability
  • natural factors

Causes of Business Success

  • Ability to manage people
  • Hiring – Process of acquiring new employees to take up new positions or to be replaced employees who left the business
  • Assigning duties – allocating employees duties accordingly
  • Proper location – availability of customers
  • Availability of raw materials.
  • Adequate finance
  • lack of competition
  • commitment of the business
  • proper management of resources / finances
  • proper debt management

Ethical Issues in Business Ethics – set of values and principles which influence how individual groups of people and society behave Business Ethics – deals with how such values affect business operation Why should we have business ethics?

  • Create fairness in competition
  • ensure fair play
  • ensures no discrimination in business
  • ensures protection of the environment
  • ensures employees rights are upheld
  • avoid pollution
  • avoid consume exploitation

CHAPTER SIX OF BUSINESS STUDIES FORM 1 NOTES

An office is a place, a room or a building set aside in an organization where communication, secretarial, accounting, administration and clerical work take place

Functions of an office

  • Receiving and recording information

The office receives information by such means a letters, telephone calls, orders, invoices, face to face conversation and reports. Information may be recorded and stored

  • Distribution of information

This is passing information to the officers concerned for implementation or action.

It is an office where out-going correspondence and parcels from various departments are processed and dispatched

  • Reproduction of document. done through:-
  • Carbon copying

It’s a method used to obtain copies using carbon. Convenient when getting a limited number of copies

Advantages of carbon copying

  • Convenient especially where few copies are required
  • No special training required

Disadvantages

  • Not convenient for many copies
  • Copies could be misaligned
  • Poor quality
  • Difficult to produce different colours copies of photographs cannot be reproduced
  • Duplicating
  • Process of reproducing as copy or as succession of copies from a master copy
  • Used when many copies are to be produced
  • Can be through ink duplicating or spirit duplicating
  • Ink duplicating
  • Reproducing using ink duplication
  • Cheap when many copies needed
  • Errors can be corrected
  • Permanent copies of good quality
  • Stencil can be stored to be reused
  • Expensive when few copies required
  • Time consuming
  • Only coarse absorbent paper is used hence not suitable for quality copies
  • Separated runs required if two or more colours are needed
  • Spirit duplicating
  • Method of duplicating where a spirit duplicator is used
  • Economical when fe copies needed
  • Copies can be produced un several colors
  • Not suitable for many copies
  • Copies fade out with time
  • Photocopying
  • Reproduction of an exact copy of an original document by use of photocopier
  • Cheap if few copies needed
  • Quicker than duplicating or printing
  • No special training need
  • Copies produced of high quality
  • Colored copies also available
  • No need for comparison with original
  • No pollution
  • Expensive for large number of copies
  • Copies fade over time
  • Only selected colour can be copied
  • Convenient hence easily misused
  • Cannot be used without electricity

Method of producing documents using either printing machine or mechanical means. The methods of printing can be classified on the type of printing machines and the type of documents to be produced as follows:-

  • Copies can be produced using a printer attached to a computer information is just fed and the computer id instructed to print
  • High quality copies
  • Different colors can be produced
  • Convenient for many copies
  • Trained personnel required
  • Electricity is required to operate

Stencil (screen) printing

  • Method of printing where a screen is used
  • The screen is cut mechanically or by use of machine
  • The method is used to print large and irregular surfaces that cannot be fed in a machine widely in textile industries
  • Little training required
  • Can be used to produce variety of colours
  • Mass production is difficult

Offset lithography

Where documents are reproduced using a printing machine. The document to be reproduced is filmed using a camera. Lithography is mainly used for printing documents such as books, files forms, certificates and also to print on plastic, metals and cloth

  • Documents produced are of high quality
  • Appropriate for mass production
  • Different color can be produced
  • Initial and maintenance costs of machines are high
  • Trained manpower is required
  • Pollutes the environment
  • Printing is mainly done on paper which is obtained from trees. This may lead to deforestation
  • Filing is the process of classifying and arranging of documents and records for easy retrival by office staff
  • Information received in an organization is stored mainly in files. This ensures that information/documents are safe, neat and tidy.
  • Filing enables office staff to locate documents which they may need easily, conveniently and quickly.

Characteristics of good filing system

  • Simplicity – Should be simple to understand and operate
  • Compactness- should occupy little space
  • Suitability – Appropriate to the needs of the business
  • Classification – files should be named and numbered to make it easy to keep and retrieve them
  • Elasticity – system should be flexible, that is cater for future changes and expansion
  • Safety – Documents should be safe
  • Economical – Filing system should not be expensive to start and to maintain

Role of filing

  • Documents are protected from loss and damage
  • It aids in office tidiness and efficiency
  • It’s an important aid to memory
  • Ensures information is stored systematically and thus can be retrieved easily

Safeguarding and controlling organizations property

The office formulates systems and policies regarding assets, keeping records of their movement or usage, issuing directives on their use etc.

Communication

Communication is the passing of information from one person to another. Communication from within and out of the organization goes through the office.

Office layout

  • Refers to the outlook, arrangement and positioning of furniture and equipment in an office.

Types of office layout

Open layout

This is a large room where all staff work, but are grouped according to the type of work they do for example as found in many banks.

Advantages of open office layout

  • Easy supervision of workers
  • Construction cost is low because partitions are few
  • Easy location of workers
  • Staff movement is minimized thus saving time on passing communication
  • Workers make good use of office machinery and equipment since close supervision discourages them from misusing them
  • Maintenance cost is low
  • Floor space is saved
  • Its cheap to decorate
  • Disruption from colleagues
  • Senior workers not placed in areas of privacy and it becomes difficult to communicate with juniors
  • Untidy and un-business like appearance
  • Overcrowding, air conditioning, lighting and heating in the room may not ne conducive to all.
  • There is noise from machines

Enclosed office

This office is normally occupied by one person or two usually having their names and designation pinned on the door

  • There is privacy for confidential discussion
  • There is less noise
  • Conducive working environment
  • Confer status on top level status
  • Easier to maintain than open office.
  • Landscape office layout
  • Similar open office layout but of higher standards in terms of look, furniture and other equipments
  • Senior officers occupy higher platforms for easy supervision of junior officers
  • Promotes team work
  • Promotes sharing of office equipments
  • Low maintenances cost
  • Discourages absentees of employees
  • Decorations provide attractive and conducive working environment

Office equipment

These are facilities used in an office to make work easier and efficient

Role of office equipment

  • Speed up and simply work that is time and labor saving
  • Enhance neatness and accuracy
  • Ensure security of documents
  • Provides comfortable working environment

The following are some of the office equipment

  • Guillotine – Used for trimming documents to the required shapes
  • Paper punch – To make holes in papers for filing
  • Stapling machine – For pinning papers together
  • Staple remover – To remove pins from paper
  • Folding machine – Folding letters and sealing envelopes
  • Franking machine – For printing postage impression on envelopes
  • Addressing machine – For printing addresses on mail
  • Sorting machine –For sorting letter
  • Letter opener – For opening letters
  • Composite – To fold documents, place them in envelopes and seal the envelope
  • Typewriter – For typing letters, reports
  • Dictating machine – For making short hand dictations and recording information on tapes
  • Paper shredders – Cutting unwanted documents into tiny pieces to avoid them getting into wrong hands
  • Duplicating machine – Reproducing documents from a master copy
  • Telephones – Used to send and receive verbal messages between two people
  • Tele printer – For printing messages which are telexed
  • Facsimile – Used to transmit printed messages such as letters, maps, diagrams and photographs
  • Photocopiers/ Printing machines/ Stencil duplicator – Used to reproduce documents
  • Cash register – Preparing cash receipts
  • Calculating machines – Calculating
  • Computers – for performing complex calculation/ document processing
  • Money counting machines – for counting coins and notes

Advantages of office machines

  • They are labor saving
  • They are much faster and thus save time
  • Produce presentable output
  • Machines assist in reducing fraud
  • Provides uniformity of output

Disadvantages of office machines

  • Initial cost and maintenance cost is high
  • Breakdown may lead to stoppage of the production process
  • Machine contribute to unemployment
  • Machines may become outdated forcing the organization to acquire new machines
  • Some require trained manpower who may be difficult to recruit, and at times training unskilled staff can be expensive
  • Special stationary and other material may be necessary
  • Carelessness of workers may result into enormous wastage of resources

Office staff

Is a team of employees who work to achieve the organizations goals.may be divided into thre groups namely: managerial, junior and subordinate

  • Managerial staff

They re involved in formulating, implementing policies and supervising the activities of the organization

  • Junior staff

Are either skilled or semi skilled.

Subordinate

Unskilled employees who perform non-specialized duties such as cleaning and delivering messages

Office staff and their duties

  • This is a senior employee in an organization

The duties of a manger are:-

  • Controls all the activities of the organization
  • Responsible for coordinating of all the activities of the organization
  • Responsible for staffing
  • Provision of resources required by the organization
  • Planning the work and the time schedule in an organization

Company secretary

This is senior employee of the organization.

  • Responsible for legal matters of a company
  • Takes down minutes at annual general meetings

A senior officer who deals with all financial matters of the organization

Keeping books of account

Collecting, banking and making payments on behalf of the firm

Making out financial returns to the managing director

Preparing financial reports

Personal secretary

A senior employee usually attached to one senior officer

  • Filing information for the boss
  • Attending meetings and recording minutes
  • Supervising junior secretarial staff
  • Receiving and making telephone calls for the boss
  • Taking dictations from the boss
  • Making travel arrangements for the boss
  • Keeping the petty cash

Junior employee usually in the typing pool

  • Typing information from original documents
  • Filing documents
  • Handling mails
  • Duplicating and operating various office machines
  • Filing and indexing
  • Helps in store keeping or record keeping
  • Ordering, receiving, storing and issuing of stationary

Telephone operator

A junior employee who runs a switchboard

Office messenger

A subordinate employee who performs unskilled office duties such as collecting and delivering mails

Receptionist :Duties

  • Supervision of messengers and porters
  • Receiving and directing visitors to their respective destinations
  • Taking and passing of messages
  • Making, renewing and canceling appointments
  • Keeping a reliable visitors record book

Qualities of office staff

Personal attributes

  • Refers to the general appearance of a person and includes
  • Physical appearance such as respectable style of dressing, moderate hair cuts and styles and use of make-ups
  • Hygiene – they must maintain high level of hygiene, for example, general and body cleanliness
  • Posture – they way of working and sitting
  • Neatness – Personal tidiness and organization of work.

Office etiquette

It may be defined as the prescribed or accepted code of behavior in an office

  • Punctuality
  • Diplomacy- Ability to convince others tactfully

Personal knowledge and skills

  • Knowledge – Refers to the relevant academic and professional qualification that enable a worker to perform their duty effectively
  • Skills – Refers to the capability of the worker to perform his duties accurately and easily

Trends in office management

Refers to the current changes in office management such as computerization.

A computer is an electronic device that is used to process data and information and storing information for future use

Uses of computer

  • Data storage and inventory control
  • It can be used to process accounting transactions and write-ups and update ledger and payroll
  • Keep records of sales to particular customer and enter in any new transactions
  • Computerized filing
  • Used for word processing

Advantages of using computers

  • It economizes on space and material
  • It speeds up operation
  • Its output is presentable
  • It can store a large volume of information
  • Its accurate
  • Leads to unemployment
  • Inhibits innovation
  • Require one to have a backup system for storage which is an extra expense

Uses of computers in communication

Refers to inter-connection of several computers over a wide area facilitating the flow of information from one place to another.

Inter-connection of computers within a small geographical location for example different departments in an office

A virtual location in the internet where the information can be posted for other parties to access. It can be used to get information

  • Teleconferencing

This is holding a conference through the computer while the participants are in different geographical areas

Advantages of the internet, intranet and websites

  • They are fast
  • Low cost incurred compared to travelling
  • Convenient as you get information at the touch of a button
  • Information can be stored for future reference
  • High initial cost of equipment
  • Maintenance cost is high
  • Users require training which may be expensive
  • Suffers from occasional breakdown for example virus attack
  • Facilities are prone to misuse
  • Receiving of information in various forms such as calls, personal visits or documents such as letters
  • Recording and sorting of information received.
  • Storing of information for future reference
  • Distribution of information within and outside the organization to the various sections, departments or personnel for necessary action
  • Reproduction or making of copies of document by use of various methods, such as photocopying, duplicating and carbon copying
  • Protecting or safeguarding the organization’s property
  • Stencil duplication

Advantages of photocopying.

  • It is a fast method of reprography
  • It is a simple method and require little training of the users
  • One will obtain the exact copies of the original document
  • The method is not expensive if the copies to be made are few
  • It is environmental friendly

Disadvantages of photocopying

  • The copies that are made fade in the cause of time
  • Photocopying can be costly if the copies being made are many
  • The employees may misuse the method due to its convenience
  • Photocopying machine requires electricity which may be expensive
  • Few colours in a document may be obtained by use of this method
  • Enclosed office layout
  • Open office layout
  • It creates a relaxed atmosphere for the workers
  • It is more attractive and beautiful
  • The image of the organization/firm is enhanced
  • It promotes good working relations and co-operation among the workers
  • Equipment and office facilities may be shared among the employees
  • The flowers or plants used break the monotony of open spaces
  • By placing plants/flowers in an office
  • By having paintings of animals or plants on the wall
  • By placing fish aquariums in an office
  • Through shaping of office furniture in form of animals, birds and concrete shapes
  • Creating miniature physical features such as waterfalls and mountains in the office
  • In an open office layout it is easier to supervise workers than in an enclosed office
  • An open office discourages absenteeism which may be common in an enclosed office
  • It is cheaper to maintain an open office than an enclosed office
  • Equipment, facilities and machines can be shared in an open office which may not be possible in an enclosed office
  • Floor space is saved in an open office than in an enclosed office
  • There is enhanced attraction and framework in open office
  • It is cheaper to light an open office than an enclosed office
  • It is easy to locate employees in an open office
  • It is ideal for work that is confidential in nature
  • It is more secure than an open office layout
  • The office is ideal where high level of concentration is required
  • It is prestigious for the occupant of such an office as they are recognized
  • The worker is not disrupted by noise or movement of other employees
  • There is a lot of noise and disruption from other employees
  • Contagious diseases may spread easily among the employees
  • The top ranked workers may feel belittled being placed among other workers
  • It is not very conducive for work that is confidential or secretive in nature
  • Property within the office is not very safe
  • Due to use by many people the office may not be very tidy
  • The cost of construction and maintenance
  • The number of staff to be accommodated in the office
  • The climatic condition of the area
  • Government directive if any
  • The nature of work to be carried out in that particular office
  • The nature and rank of staff to be accommodated in that particular office
  • The floor space available for the office
  • The need to maintain a good work flow among the workers
  • It can encourage absenteeism
  • It is not easy to supervise the employees
  • It is expensive to construct and maintain
  • Facilities and office equipment cannot be shared among the workers
  • Workers can misuse office equipment such as the telephone
  • The office layout takes up more space
  • A lot of time is wasted when moving from one office to another
  • It may promote individualism as some employees are isolated from others
  • The suitability of the machine for the task that is intended for
  • The availability of after sales services provide by the seller
  • Presence of office staff with the skills required to operate the machine
  • One has to consider space or room to keep the machine or equipment
  • The likelihood of the machine being outdated absolute or out of date
  • One has to consider whether that machine can adopt to future changes
  • They can be very costly/expensive to buy and operate
  • They occupy space which can be used for other tasks
  • Machines may replace labour causing unemployment
  • Some may require electricity which may be expensive
  • Any breakdown of the machine may delay work
  • The machine may become obsolete(out of date)
  • They are subject to wear and tear(depreciation)
  • Some may require specialized or trained personnel to operate
  • Subordinate staff
  • Machines are labour saving and can be cost effective in the long run
  • The output of machines is of good quality
  • They can be used to minimize fraud or theft
  • Machines can be very fast saving on time
  • They can produce uniform work
  • Machines can be very accurate as compared to human labour
  • Some machines can be adapted to multiple task such as a computer
  • Filing provides security/safety of documents
  • It facilitates easy retrieval or access of documents
  • Good filing enhances orderliness and tidiness of an office
  • It guarantees confidentiality of information since it cannot get to the wrong hands
  • Good filing promotes good communication
  • Filing guarantees that documents are protected from damage
  • Good filing guarantees good future reference in case the information is required
  • Courtesy i.e dealing with people politely
  • Punctuality-keeping time at all times
  • Honesty-telling the truth
  • Co-operation with other employees
  • Tactical or being diplomatic when dealing with others
  • Good judgement and coming up with the best decision
  • Neatness and orderliness in terms of work arrangement
  • Dedication or loyalty towards the organization
  • He should be presentable
  • He should maintain high standard of morality
  • He should have a good sitting posture
  • He should maintain high standards of hygiene
  • He should be neat and accurate in the organization of his work
  • He should maintain good health and physical fitness through having proper diet and exercising

(a)Departmental manager

  • Maintaining the books of accounts
  • He/she may prepare the budget for his/her department
  • Submitting reports to the senior manager about performance of the department
  • Monitoring and supervising workers in the department
  • Assigning roles and duties to employees in the department

(b)Personal secretary

  • Receiving and filing information
  • Booking appointments for the boss
  • Taking and writing minutes during meetings
  • He/she can maintain small amount of money for making small or petty purchases in the office
  • He/she receives and makes calls for his seniors
  • Use of modern computers enhances efficiency
  • Introduction of customer care desks or offices to address customers concerns
  • Movement toward open and landscape office plan to enhance more interaction among the workers
  • Outsourcing for some task that can be done by other firms instead of employing workers to do the same e.g. having external cleaners or security
  • Use of the cell phone for communication
  • One can have a wide variety of goods and services from all over the world
  • It reduces the cost of travelling to the market or in search of product
  • It is fast as deals can be made within a short period of time
  • A seller can advertise goods to many consumers over a wide area
  • Paper work and the many document used on other trade are removed or reduced as selling and buying is on-line
  • A lot of information about the market can be accessed on the internet
  • Business Studies Notes Form 1
  • Business Studies Notes Form 1- 4

CHAPTER SEVEN OF BUSINESS STUDIES NOTES FORM 1

Trade is the buying and selling of goods and service with the aim of making profit

Importance of trade

  • Avails a variety of goods and service
  • Helps producers to dispose their surplus produce
  • Creates employment
  • It encourages specialization and division of labor
  • Promotes social relations and understanding in the parties involved
  • Ensures steady supply of goods and services
  • Helps one to acquire what one may not be able to produce

Classification of trade

Trade is divided into home trade and foreign trade .

Home trade is the one which is carried within a country’s boundaries while foreign trade is carried out between two or more countries.

Foreign trade may be bilateral (between two countries) or multi lateral (among many countries)

Home trade may further be classified into wholesale and retail trade

Wholesale trade

This is the buying of goods and services from producers and manufacturers in large quantities and selling them to retailers in relatively smaller quantities

The person who does this is a wholesaler

Functions of retailers They can be discussed based on the service they render to the wholesaler, producer and consumers Services rendered to consumers

  • Credit facilities – since retailers are in personal contact with their customers, they may give credit to the customers they trust
  • After sale services – These services include transport, installation, repair and maintenance
  • Offer advice to consumers on choice and use of products
  • Make goods available to consumers at the right time and place
  • Breaking bulk. I.e. reducing of the size quantity to a convenient requirement

Services rendered to wholesalers

  • Assist in distributing goods to consumers
  • Relieve the wholesaler the burden of transportation
  • Retailers relieve wholesaler the burden of storage
  • Retailers are a good source of valuable information on market which assist wholesalers in anticipating consumers demand

Services rendered to the manufacturer

  • Providing valuable information on consumer demand
  • Marketing the manufacturers products
  • Advertise goods on behalf of the manufacturer

RETAIL TRADE

Retailers can either be small scale or large-scale retailers Small scale retailers

  • They form majority of the retail traders
  • They are found in most parts of the country
  • In most cases they are operated as one-man business
  • They are easy to start because they require little capital

Classification of small scale retailers Classified into two main groups i.e.

  • Small scale retailers without shops
  • Small scale retailers with shops

SMALL SCALE RETAILERS WITHOUT SHOPS Itinerant traders

  • They carry goods about with them on bicycles, motor-cycles or on their heads.
  • They move from town to town, village to village and from door to door selling their goods
  • They can sell clothes, plates, cups, vegetable etc
  • They are persuasive and as a results customers sometimes buy goods they do not need
  • Examples of itinerant traders are hawkers and peddlers
  • Hawkers use bicycles or motorcycles but peddlers walk around

Characteristics of hawkers and peddlers

  • Are found mostly in densely populated regions
  • Move from one shopping center to another, village to another and door to door in search of customers
  • They are persuasive
  • Their prices are not controlled

Advantages of itinerant traders

  • Flexible in that they move from one place to another
  • Require little capital to start and operate their business
  • Convenient in that they take goods to the customer
  • Don’t suffer bad debt because they sell in cash
  • Few legal formalities required
  • Affected by weather changes because they operate in open air environment
  • Difficult to transport business wares to various places
  • Do not offer guarantee, in case the items are found defective

Roadside sellers

  • Hey sell goods at places where other people pass such as in busy roadsides, streets, bus stages, road junctions and entrance to schools and public buildings
  • They deal with fast moving goods like sweets, roasted maize and fruits
  • Place their goods on trays, card boards, empty sacks or mats

Open air market traders

  • Found in convenient places which are normally centrally located, where people meet to buy and sell goods.
  • Traders pay entrance fee to be allowed to bring in goods
  • Market is under the administration of the local authorities
  • They are open on particular days of the week

Automatic vending machines

  • These are coin operated depending on what you want to buy
  • They are used for selling commodities like cigarette, drinks and stamps.
  • Juke boxes and telephone coin boxes are also vending machines where you buy services

SMALL SCALE RETAILERS WITH SHOPS Single shops (unit shops)

  • They have fixed premises
  • They are usually run by one person who gets assistance from his family or employed attendant
  • Some specialize in one line of commodities such as clothes, groceries etc
  • They sell exclusively the products of one particular manufacturer
  • They are owned and controlled by the manufacturer who designs the shop and its appearance, e.g in painting.
  • The manufacturer offers goods on credit to the trader
  • E.g. Bata Shops, Petrol stations like Shell, Kenol
  • Usually small shops or simple structures which sell fast-moving goods like newspapers, sweets and soft drinks
  • Located in strategic places like corners of busy street roads, residential areas

Market stalls

  • These are permanent stands found in market
  • They are open daily
  • Constructed and owned by the local authorities
  • Each stall deals with a particular good or service
  • They are rented or leased by individuals from the local authority
  • Examples Kariokor and City Markets in Nairobi.
  • These are retail shops found in institutions such as schools, colleges, hospitals and army barracks.
  • They sell goods mainly to the people working in the institution
  • They may be run by the institutions management or by individuals on rental basis
  • Can offer tea, sodas, sugar and other foodstuffs

Mobile shops

  • They move from village to village town to town selling their goods.
  • They have a converted van, lorry or bus arranged as a shop from which customers can buy their goods

Advantages of small scale retailers

  • Its easy to raise capital to start the business
  • Retailer is in close contact with consumers and may give credit to credit worthy customers
  • The risks involved in the business is small
  • The business is simple to operate and manage
  • Trader can easily change from one product to another
  • Trader has limited access to loan facilities
  • They do not hire specialist or technical staff
  • May suffer bad debt
  • They do not enjoy economies of scale
  • They have a low turnover because of the little capital invested

LARGE SCALE RETAILERS

  • They normally operate in urban areas
  • May occupy a single big building or several premises scattered in various areas of the same town or different towns
  • They require large amount of capital to start
  • They buy goods from wholesalers and manufacturers in large quantities
  • They are allowed trade discounts and other favorable credit facilities
  • The services of specialist like salesmen, storekeepers, accountants and managers are required
  • Management is centralized, stock purchases are made at the head office
  • Branches are required to submit monthly returns to the headquarters

Types of large scale retailers

  • Supermarkets
  • It’s a large self-selection store that deals mainly with house hold goods such as utensils, foodstuffs and clothes
  • Goods are well displayed on shelves and eac article carries a price tag.
  • The buyer walks around picking the goods one wants to buy and placing them in a trolley or a basket.
  • The goods are paid to one of the cashier stationed near the exit

Features of supermarkets

  • Require large capital to start
  • Stocks variety of goods
  • Offer self service facilities
  • Goods have price tags on them
  • Prices of goods are fixed
  • No credit facilities offered
  • Sell comparatively low prices

Advantages of supermarkets

  • They buy goods in large quantities which enable them to obtain good trade discount. They are therefore able to offer lower prices
  • Customers get all the goods they want under one roof. This saves time
  • Supermarkets employ few attendants therefore reducing their monthly wage bill
  • Impulse buying leads to more sales because customers have access to the goods which they pick from the well displayed shelves
  • They don’t sell on credit thereby avoiding bad debts
  • They don’t offer credit facilities to the customer
  • They don’t deliver goods to customers premises
  • They don’t give personal services to the customers
  • They incur many losses due to pilferage of goods
  • Impulse buying leads the customer to buy goods they may not want

Chain stores (multiple stores)

  • Chain stores are large scale businesses with separate branches which are managed and organized centrally. The branch managers are accountable to the head office
  • E.g. the Deacons and African Retail Traders (ART)
  • They have standard prices for their products no matter where the branches are located
  • They have similar shop fronts appearance and displays.

Characteristics of chain stores

  • Purchases are centralized
  • Standard prices for all products in all their branches
  • Sales are centralized
  • All branches deal in same type of product
  • They are uniform in outward appearance and interior layout

Advantages of chain stores

  • They buy goods in large scales which enables them to obtain good trade discounts.
  • The cost of running a chain store is controlled and managed at the head office. The headquarters advertises on behalf of the branches
  • Slow-moving goods in one branch cab be transferred to another branch where demand for them is higher
  • The identical sold by chain stores and the similar shop fronts and window displays publicize the business
  • Chan stores serve a wider market because they are spread all over the country
  • Goods are sold on cash basis, hence reducing the cost of managing bad debts

Disadvantages of chain stores

  • Large amount of capital are required to run a chain store
  • People tend to shy away from buying identical products such as clothes
  • Chain stores do not offer credit facilities, except those operating exclusively on hire purchase scheme
  • Lack of personal touch with customers

Departmental stores

  • Comprises many single shops under one roof and one management.
  • Each department deals in a different line of goods and is controlled by a departmental manager
  • Departmental manager is responsible for buying in his department although this may be centralized
  • They are located in town centers
  • In Kenya we have no departmental store

Advantages of departmental stores

  • Customers can buy a wide variety of commodities from different shops under one roof
  • Departmental stores buy goods in large quantities at lower prices and hence these goods are sold at lower prices
  • Generally open for long hours
  • Offer adequate parking facilities to customers
  • The store is able to employ qualified staff thus providing high quality services

Characteristics of departmental stores

  • They offer a wide variety of goods at lower prices
  • They are attractive and convenient to shop in
  • They are usually situated in town centers
  • They provide services such as restaurants, reading rooms and post office to attract customers
  • Each department is managed by departmental manager dealing in a different line of goods

Disadvantages of departmental stores

  • Large amount of capital is required to run the store
  • A departmental store may run one department at loss to attract customers to other profit making departments
  • Carter mainly for the urban communities in which they are located
  • Lack personal contact with their customers
  • Their big sizes posses management problems related to coordination and control of the activities on the different departments
  • Hypermarkets
  • It’s a large shopping centre in one building comprising a variety of business under one roof and managed by different people.
  • They are located away from the city centre and have good access roads and ample parking
  • E.g. in Kenya is the Sarit Centre in Nairobi’s Westlands

Characteristics of hypermarkets

  • Good access roads
  • Ample parking space
  • Many business in one building
  • Attractive and convenient to shop in
  • Located in the outskirts of town
  • Offer a variety of goods and services

Advantages of hypermarkets

  • Offer extensive parking for customers
  • Customers can do all their shopping in one building , especially those who buy their monthly supplies in bulk
  • They save on space, which reduces rents and rates
  • Usually open for long hours
  • They provide credit facilities by accepting credit cards

Disadvantages of hypermarkets

  • Since they are located away from the city centers, they serve only a limited number of people especially those with cars
  • Require a large space which is not available in the Central Business District (CBD)
  • Their prices are not controlled and therefore subject to bargaining

Mail order stores

  • It’s a type of retail trade where business is carried out through the post office.
  • The customers place their order for goods through the post office and the goods are also supplied through the same
  • Buyers get information from advertisements in print media, journals, radios.
  • The goods are dispatched mostly on the basis of cash with order (C.W.O) or Cash on delivery (C.O.D)

Characteristics of mail order stores

  • They sell goods through the post office
  • They advertise through the print media, roads, journals, cinemas etc.
  • All transactions are passed through the post office
  • Customers do not visit the selling premises
  • Goods are dispatched, mostly on the basis of cash with order or cash on delivery

Advantages of mail order stores

  • It reaches customers who are far away from the shopping centers
  • Does not require transport facilities
  • Total control of distribution is possible
  • Does not require the services of salesmen

Disadvantages of mail order stores

  • High cost of advertising increases the price of the goods
  • Inspection of goods by the customer is not possible
  • The variety of the goods that can be sold is limited
  • Personal contact between the buyer and seller is not possible
  • Suitable to those who can read and write
  • Problems arising in the post office may affect the business, for example strikes

WHOLESALE TRADE

  • It involves selling goods in large quantities to traders for resale.
  • Wholesalers are classified according to the range of products they handle, the geographical area in which they operate and method of operation

According to the range of goods they handle

General merchandise wholesalers

General line wholesalers

  • Specialized wholesalers

According to the geographical area in which they operate

Nationwide wholesalers

Regional wholesalers

Their method of operation

  • Cash and carry wholesalers
  • Mobile wholesaler
  • They deal in a wide range of products. The lines of products they deal in are distinct, e.g hardware, clothing, foodstuffs and chemicals
  • Deal with a wide range of products, but within one line, eg. Hardware

Specialized wholesaler

  • Deal in particular goods from a given line of products, e.g the line of foodstuffs
  • Distribute goods all over the country.
  • They establish warehouses or depots in different areas from which they supply the goods to their customers
  • Offer their products to certain parts of the country only.
  • They may cover a location or a district

Cash and carry wholesaler

  • Operate on self service basis like a supermarket
  • Traders come and pick goods and pay cash for them
  • They don’t offer transport facilities to their customers
  • No credit facilities are offered

Mobile wholesalers

  • Use vehicles to go around selling goods to traders

Rack jobbers

  • Specialize in selling particular products to their specialized wholesalers

Alternative classification of wholesalers

  • Those who buy goods, store them in warehouses and sell them to traders without having added anything to them
  • Those who, after buying the goods and storing them, prepare them for sale. They may break bulk, pack, brand, grade
  • Wholesalers who organize the distribution of goods, but who do not themselves physically handle the goods. This is normally the case with goods such a motor cars
  • Who act as wholesalers’ agents or brokers. These are middle men who are paid a commission for their work

Definition of terms used in whole sale trade Breaking bulk It is reducing the size quantity to a convenient requirement, eg buying in cartons from producers and selling them in packages to retailers Packing Putting goods in packets and boxes Branding Giving a product a name by which it will be sold. Sorting Selecting goods in desired sizes, weights, colors and qualities Grading Putting goods in groups of similar qualities to make it easier to price them Blending This involves mixing different grades to achieve desired tastes, color and other qualities Services of wholesalers to the producer

  • Act as link between the producer and the retailers
  • Relieve producers of some of the risks they would experience which include a fall in price due to fall in demand
  • The producer is saved the problem of storage.
  • They carry out market research that is important to the producers
  • Transport, break bulk, pack, brand, sort, grade and blend goods
  • Engage in product promotion through advertising, shows, displays, films, exhibitions and trade fairs.

Services of wholesalers to retailers

  • Wholesalers ensure that goods are available at convenient locations for the retailers. This save transport cost
  • They break bulk for the benefit of the retailers
  • Offer transport facilities to retailers, therefore reducing the operating cost
  • Offer advisory services to retailers, with regard to market trends
  • Offer credit facilities
  • Engage in sales promotion, hence retailers are saved the problem of having to do so
  • They grade, sort, blend, pack and brand goods and save retailers the cost of performing those functions

Services of wholesalers to consumers

  • Ensure steady supply of goods to retailers which ensures that consumers are not faced with shortage
  • Ensures stable supply of goods to the market which ensures steady prices
  • Make it possible for consumers to enjoy a variety of goods
  • Break the bulk thereby ensuring consumers get the goods in desired quantities
  • Give information to consumers through retailers about goods, e.g. new products or change in products

DOCUMENTS USED IN HOME TRADE These are documents that are used to show that a business transaction has taken place Letter of inquiry

  • Is a request by a possible buyer for information about the goods sold by a seller.
  • Inquiries can be oral or written
  • A written inquiry is called a letter of inquiry.
  • Seller may reply to a letter of inquiry by sending either a catalogue, quotation or price list
  • This is a booklet which briefly describes the goods a seller stocks.
  • Sent when a buyer send a general letter of inquiry

Its contents are

  • After sale services offered by the seller
  • Packaging and posting expenses to be incurred
  • Delivery services to be used
  • Terms of sale
  • Sent when an inquiry is specific in nature.
  • Shows the terms of sale, prices of the commodities and description of the goods to be supplied
  • It’s a list of items sold by trader together with their prices
  • Information is usually brief and not illustrated
  • Cheaper to print than catalogues

Local Purchase Order Send by the buyer after receiving either a catalogue, quotation or price list Order can be done verbally, or written in form of filing letters Contents are

  • Names and addresses of the buyer and seller
  • The number of the order
  • Quantities ordered and total amount to be paid
  • Description of the goods ordered
  • Price per item
  • Special instructions on such matters as packaging and delivery

Acknowledgement note Is a document sent by the seller to the prospective buyer informing them that their order has been received and that it is being acted upon. Packing note

  • It’s a document that is send with the goods that have been dispatched to the buyer
  • It used to make a spot check on the goods to ensure that the goods packed are the goods ordered
  • Quantities of the goods packed
  • A brief description of the goods
  • The means of delivery

Advice note

  • Its used to inform the buyer that the goods have been dispatched by the seller

Contains the following

  • A description of the goods

Functions of the advice note

  • Informing the buyer that the goods are on the way so that in case of any delays in delivery, the buyer can always make inquiries
  • Alerting the buyer so that the necessary arrangements can be made for payments when the goods arrive

Delivery note

  • It is sent along the goods to delivered
  • It is made in triplicate
  • One copy of the note is left with seller and the remaining two copies are sent with the goods to the buyer
  • When goods reach the buyer, one checks them against the delivery note
  • If the buyer is satisfied with the goods, they sign both copies of the delivery note, keep the original and the other copy is send to seller

Contents of delivery note

  • Names and addresses of seller and the buyer
  • Date of delivery
  • Delivery note number
  • Description of goods and quantities
  • Space for the buyer of the goods to sign and comment on the condition of the goods received

Consignment note If the seller doesn’t have transport services, they may hire the services of a transporting company to deliver the goods on their behalf. The transporter issues a consignment note to the seller Contents

  • Details of the goods to be transported
  • Name and addresses of the seller (consignor) and buyer (consignee)
  • Terms of carriages and conditions of transporting the goods
  • After the seller completes the consignment note, it is returned to the carrier who takes it with the goods to the buyer. The buyer signs the note upon delivery of the goods
  • Sent by the seller to the buyer demanding payment for goods delivered.
  • There are two types of invoices; cash invoices and credit invoice
  • A cash invoice is paid across the counter, thus acting as a cash sale receipt
  • Credit invoice is issued when the buyer is allowed to pay at a later date

Functions of an invoice

  • Shows details of goods sold
  • It’s a request to the buyer to make a payment
  • Used as a source document in recording the transactions in the books of accounts

The letters E & OE (errors and omissions excepted) are printed at the bottom of an invoice They mean that the seller reserves the right to correct any errors and omissions made in the invoice Pro-forma invoices Functions

  • It serves as a polite request for payment before the goods are sent to the buyer
  • Sent when the seller does not want to give credit to the buyer
  • Issued to an agent who sells goods on behalf of the seller
  • Used by importers to get customs clearance before the goods are sent
  • Can serve the same purpose as the quotation. A pro-forma invoice is used in both home and foreign trade

Damaged goods notes/returned goods

  • In case some of the goods are damaged, the buyer send them back to the seller together with the damaged goods note.
  • Its prepared in triplicate
  • Two copies are sent to the seller and the other is retained by the buyer
  • When the seller receives the damaged goods note they will issues a document called a credit note

Credit note It’s a document issued to correct an overcharge/reduce the amount due from a buyer as shown in the invoice It’s issued under the following circumstances

  • When the goods returned by the buyer because they are either damaged or they are not in accordance with the order
  • When packing cases and empty containers are returned
  • There is an overcharge in the invoice as a result of arithmetical error

It’s printed in red Debit note

  • Normally used to make undercharge corrections to invoices that had been previously sent to the buyer

Errors that may make a debit note be issued are

  • Mistakes in calculations
  • Omissions of items in the invoice
  • Price undercharge on items

Statement of account Incase transactions are carried out on credit, the seller send a document containing all the transactions between the buyer and the seller. It normally contains information derived for a specific period of time, such as a month, form the following:-

  • All invoices
  • All credit notes
  • A debit notes
  • All receipts
  • Names and addresses of the buyer and the seller
  • Account number
  • Date column
  • Particulars or details column
  • Money column with debit, credit and running balance column
  • Terms of credit

Receipt A receipt is a proof of payment. Contains

  • Date of payment
  • Name of the person making payment
  • Amount paid in words and figures and means of payment
  • Name of the institution or person to whom payment is made
  • Revenue stamp if the amount is above a set minimum
  • Receipt number

IOU (I Owe You) It’s a written acknowledgment of a debt Written by the debtor and does not specify the date when settlement will be made Means of Payment

  • Refers to form or manner in which payment is made for goods and services.

Cash Payment made using bank coins or notes Advantages of cash payment

  • It’s the only means with legal tender (recognized by the law)
  • Convenient for small debts
  • Convenient to people with or without bank accounts
  • Not convenient for large amount
  • Can be stolen
  • May be difficult to proof unless receipt is produced

Circumstances of cash payment

  • Amount involved is small
  • Payees doesn’t accept other means
  • Cash only means available
  • Cash needed urgently
  • Avoiding expenses

Cheques Written order by account holder with the bank to pay a specified amount of money to the bearer

  • Drawer – The person who writes the cheque
  • Payee- Person to be paid
  • Drawee – The bank

Open and crossed cheque Open cheque – one that can be cashed over the counter Crossed cheque – can only be deposited in an account A cheques is crossed by drawing two parallel lines. The crossing can be general or specific General – contains only the parallel lines Special – as other instructions Dishonored cheque A cheque is dishonored when the bank refuses to pay – bounced cheque Circumstances

  • Insufficient funds
  • Signature differing
  • Post dated cheque
  • Stale cheque – presented six months after issue
  • Drawer closed account with the bank
  • Death, insanity or bankruptcy of the drawer
  • Alterations in the cheque

Advantages of cheque

  • More secure than notes
  • Convenient to carry
  • Reduces traveling
  • Used for future reference
  • Negotiable – can pay third party
  • Requires payee to go to the bank
  • May be dishonored
  • Only issued by account holder
  • People refuse personal cheques

Circumstances for use of cheques

  • Amount involved is large
  • If the organization policy demand so
  • If cheques is the only means of payment
  • Avoid risks

Bill of exchange It’s an unconditional order in writing addressed by one person to another requiring the person to whom it is addressed to pay on demand Terms

  • It’s a command not a request
  • Its unconditional
  • Bill must be written
  • Amount be clearly stated
  • Payee should be named
  • Date of payment be stated
  • Rights may be passed to another person
  • Date of payment is determined
  • Acceptance by debtor makes it legally binding
  • May be discounted
  • May be dishonoured on maturity
  • Cash may not be ready
  • Circumstances for use of bill of exchange
  • Creditor wants to be assured of payment
  • When the creditor wants money and the debtor is unable to raise
  • Creditor wants to use the debt to pay another debt

Promissory note A document whereby a person promises to pay another a specified sum of money at a stated date Money order Sold by the post office, sender applies and fills an application form The information in the money order includes

  • Amount to be remitted
  • Name of the person the money is to be paid to
  • Name of post office to be cashed
  • Name and address of the sender

Sender gives the form, money to send and commission over the counter The payee has to

  • Identify himself
  • Identify person who send the money

The sender is left with a counterfoil as evidence to claim later Postal order Sold by the post office and is fixed in denominations of 5,10,20,50,100 Additional stamps worth in shilling are also needed Circumstances

  • Small amount involved
  • Only means available

Postage stamps Used to pay small amounts of money Premium bonds Issued by post office in denominations of 10 and 20 and matures at a given period Used to settle debts but unsafe coz they can be cashed by anybody Bankers cheque (bank draft) Cheques drawn on a bank. One fills an application form and hands it over the bank together with the money A cheque is prepared and is given to the applicant Circumstances

  • Large amount is involved
  • Payee wants guarantee of payment

TERMS OF PAYMENT Refers to an arrangement between the buyer and the seller on how the buyer should settle debts arising out of transactions between him and the seller Cash Paying immediately May be cash on delivery or cash with order C.O.D (Cash On Delivery) – Goods paid for when delivered C.W.O (cash With Order) –Payment made at the time of placing order Benefits of cod/cwo

  • Reduces risk of bad debt
  • Working capital readily available
  • Few records
  • No time wasted

Circumstances

  • Buyer new to the seller
  • Buyer credit worthiness is in doubt
  • Mail order business
  • Policy demand so

Deferred payments Goods and services not paid in full on delivery. Instead paid in future either in lump sum or several installments Open trade credit

  • Goods sold on credit such that the buyer pays for them in future in installments
  • The seller should however ensure that the buyer would pay by
  • Ascertaining the credit worthiness
  • Asking buyer to guarantee payment
  • Asking buyer to have someone to guarantee payment
  • Asking for security

Factors to consider when giving credit

  • Credit worthiness of the buyer
  • Repayment period
  • Amount of goods
  • Availability of stock
  • Reliability
  • Frequency of buying
  • Intention to attract and maintain customers

Cash discount – discount allowed to a buyer on order to encourage him/her to pay quickly Examples of open trade credit

  • Simple credit – short time not more than a week
  • Monthly credit – monthly basis

Regular payment

Maximum credit to be allowed

Charge for any special offer

  • Trade credit – goods bought for resale
  • Credit card facilities – enables one to obtain goods from suppliers as long as they accept cards examples Barclays card, American Express, Access cards and visa cards

Advantages of credit card

  • Enables one to get goods without paying
  • Convenient to carry around
  • Enalbles holder to get money from specified banks
  • Increases credit rating of individual
  • Safe to carry than cash
  • Some cards are internationally accepted
  • To acquire the card one must have established credit record
  • High card interest rate
  • Prone to abuse through fraud
  • Interest charged in case of delay in payment
  • Minimum age of 18 years to get card
  • Overspending
  • Limited to specific areas
  • Faces competition from other means
  • Few business accept cards
  • Long procedures to get the cards
  • People of high income only can afford

Hire purchase

  • A method of hiring property with an option to buy
  • A buyer ays initial deposit and the rest of the amount is spread over an agreed period of time
  • Ownership remains with the seller until final installment is paid
  • The buyer cannot sell the commodity until last installment
  • A certificate of completion is issued once final installment is paid as proof of transfer of ownership

Advantages to the buyer

  • acquisition and use of goods immediately after entering into contract
  • Pre-determined installments
  • Buyer can poses expensive goods

Disadvantages to buyer

  • Goods belong to the seller until last installment
  • Buyer may be tempted to buy more that he can pay
  • Expensive than cash
  • Limited type of goods

Advantages to seller

  • Able to increase volume of sales
  • Profit earned is higher
  • Goods belong to seller until last installment

Disadvantages to seller

  • Operating cost is high
  • Reposed goods only sold as second hand
  • Risks of loss is high
  • Large amount of capital required

Installment buying/credit purchase Similar to hire purchase except that ownership of the commodity passes to the buyer immediately down payment is made

Other terms

  • discounts- allowance by the seller such that the buyer pays less than the marked price
  • quantity discount – Allowance to encourage bulk buying
  • trade discount – discount allowed by a trader to another so that the buyer can make profit after selling
  • cash discount – allowance by a trader to his credit customers to encourage them to pay debts promptly

Circumstances for deferred payment

  • Credit worthiness of customer is unquestionable
  • Attract and retain customers
  • Increase sales
  • Dispose off slow stock

Standing order Instruction by an account holder to his/her bank authorizing it to make regular payments of specified amounts to a specific person till order is cancelled.

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Business Studies Presentation for Class 11

Business studies, chapter 1: nature and purpose of business, chapter 2: forms of business organisation, chapter 3: private, public and global enterprises, chapter 4: business services, chapter 5: emerging modes of business, chapter 6: social responsibilities of business and business ethics, chapter 7: formation of a company, chapter 8: sources of business finance.

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Book 2 - business finance and marketing, chapter 9: small business and entrepreneurship, chapter 10: internal trade, chapter 11: international business.

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The Ultimate Guide to Business Education Lesson Plans

Looking for new lesson plans and ideas for your business education classes can overwhelm any teacher. Your plans are the foundation of your students’ learning experience, so you’re concerned about using the right resources to provide your students with the knowledge and skills they need.

With so much material to cover, course standards to meet, and little time to plan and prepare, you need to quickly find high-quality materials for your classes.

In our experience working with teachers like you, we’ve found four common reasons business teachers look for new lesson plans.

To help you find exactly what you need, click below to jump to information in this article that is most relevant to you:

  • I have no materials to teach my business classes.
  • My business curriculum is outdated.
  • My students aren’t engaged.
  • I need supplemental business lesson ideas.

In this guide, you’ll find some of the best places to refresh your lesson plans with resources that are up-to-date, engaging, and easy to implement. We’ll also discuss the consequences of continually looking for new lesson plans and resources and help ensure you always have quality business education resources at your fingertips. 

What To Do If You Have No Materials To Teach Your Business Classes

Your school is expanding its business education offerings, and you’re in charge of teaching a new course. Suddenly, you have the daunting responsibility of coming up with an entire curriculum on short notice, and you have no idea what materials your students will need to succeed. 

If you’re in this situation, the task before you can feel ominous and scary. If you aren’t able to find materials quickly enough, you run the risk of your class becoming a total disaster.

You want to locate enough exercises and activities to create lesson plans as soon as possible. And it’s essential to choose the right resources from the beginning. You’re not alone in feeling this way; many other teachers have been in the same situation. 

To help you get started, we’ll answer four common questions teachers have about building a business education curriculum: 

  • What Should I Consider Before I Get Started?
  • How Do I Create Effective Lessons?
  • What Materials Do Other Teachers Use?
  • How Do I Choose A Good Teaching Resource?

By understanding the answers to these questions, you’ll be able to effectively evaluate which materials are suitable for your business courses.

What To Consider Before Creating Lesson Plans and Building Your Business Curriculum

Before diving in and creating your lesson plans and curriculum , you should consider the big picture of what you are teaching and how you’ll achieve success. 

Three things to consider before building your business curriculum are:

  • Your course standards
  • Your students’ goals and outcomes
  • The teaching methods you will use

Below, you’ll learn why you should keep each of these in mind as you create your lesson plans.

Consideration 1: Your Course Standards

Before choosing what materials you want to use, the first step is knowing what you need to teach. The best place to start is your course standards, which are usually published by your state department of education or another accrediting body. Many business education course requirements are based on the National Business Education Association (NBEA) standards, which can be a great starting point for you to reference.

In addition, connect with your administrator or program coordinator for more information on your specific course requirements. When you look at the requirements you are responsible for meeting, you can gain a better understanding of the steps you need to take to meet your standards.

Remember, course standards are the most critical content you need to cover, so starting with your standards ensures your lessons prioritize the essentials.

Consideration 2: Your Students' Goals and Outcomes

After reviewing your standards, it’s critical to consider the student outcomes you want to achieve. Every task should be designed to move your students forward in the learning process.

One key objective in many business classrooms is preparing students for a certification test. Business certifications have become increasingly common and demonstrate the scope of a learner’s knowledge and skills in business.

Some common certifications teachers incorporate in business courses are:

  • Entrepreneurship and Small Business (ESB)
  • Communication Skills for Business (CSB)
  • Microsoft Office Specialist (MOS)
  • 21st Century Skills Assessment

If your students will take a certification exam, you need to ensure your lessons will set them up for success in preparing. Since you are responsible for tailoring your instruction to these certifications, it’s a good practice to think about how every unit, lesson, and activity connects to these learning goals.

Consideration 3: The Teaching Methods You Will Use

Once you determine what you need to teach, you should think about which teaching methods you plan to employ.

Some teaching methods commonly used by business teachers include:

  • Lecture-based instruction
  • Classroom discussions
  • Hands-on activities
  • Project-based learning
  • Student-led instruction
  • Formative assessments

Although it is possible to rely on a single type of instruction for the entirety of your class periods, this is usually not the most effective way to reach all of your students. Instead, teachers have found that when they include a variety of active-learning exercises and techniques, they can better enhance their students’ learning process.

Overall, the methods you want to incorporate can help you determine what materials to use when building your business curriculum. The exact elements you choose for your lessons will depend on the type of course you are teaching, your standards, and the particular needs of your students.

How Do I Create Effective Business Lessons?

Now you know what you want to keep in mind when building your curriculum. But you might be wondering how you actually go about creating good business lessons. In this section, you’ll learn how you can make lessons that set your students up for success.

Fundamentally, a good business lesson is one that successfully communicates and reinforces critical concepts to ensure every student learns and grows within your class.

Educators often have different perspectives on how to quantify a good lesson, but ultimately the best lessons effectively engage students and help them master the course material.

Thankfully for teachers and students, there is not just one type of good lesson. Instead, an adept educator uses blended learning to provide effective instruction to students.

Blended learning strategies combine time-honored classroom learning techniques with digital resources. By engaging learners in different ways, blended learning helps students better retain and master course material over time.

Here are a few different types of lessons business education teachers can use to provide quality, varied instruction to their students:

  • Teach compelling class lectures that engage students during their initial period of learning course material.
  • Once students are familiar with the concepts of a particular unit, use discussion periods to allow learners to consider course material and ask questions.
  • Create compelling lessons using interactive exercises that prompt students to immerse themselves in the course material further.
  • Institute learning games and review exercises to reinforce knowledge and prepare for course exams.
  • Implement a curriculum system to teach fundamental concepts, and reinforce that information in class lectures to further solidify student understanding.

Mixing instructional methods can help you reach students with different needs and learning preferences. By using active learning techniques instead of relying solely on passive learning situations, you can help your students better comprehend content throughout an entire unit.

Regularly varying the type of lessons you employ helps create an environment where course material is reinforced, and every student can succeed.

When implemented successfully, blended learning strategies can foster a highly effective learning environment for students.

Want to learn more about blended learning? Download this free guide to find four strategies you can easily implement in your classes. Discover Strategies to Implement Blended Learning >

What Materials Do Other Teachers Use When Building Their Business Lessons?

When looking for new business education materials, it’s common to wonder what other teachers use. Business teachers like you find success with several different types of resources. 

The most popular types of business education teaching materials are:

  • Supplemental Materials
  • Digital Curriculum

Below, we’ll discuss the pros and cons of each one to help you determine which is right for your needs.

Business Education Textbooks

Textbooks are a reliable option for teachers who want a complete curriculum they can follow for an entire course. With a textbook, you have access to complete lesson content for students along with related assignments and activities. Many textbooks also include a teacher’s edition with lesson plans to guide your instruction and engage students.

The biggest drawback of using a textbook is that your text eventually becomes outdated. Some teachers have also found that their students perform best when they augment textbook resources with supplemental exercises and activities. For technology-related topics in particular, educators have discovered that they need to look beyond a traditional text.

However, textbooks remain incredibly valuable in providing teachers with everything they need to teach their courses, making them a great fit for many business classrooms.

Supplemental Business Education Teaching Resources

Supplemental materials play a significant role in many business education classrooms. These resources often take the form of individual lessons or activity ideas found on forums or marketplaces like Teachers Pay Teachers (TpT) . Teachers often turn to supplementary material to add to their existing curriculum or construct lesson plans from scratch.

The biggest strength of supplemental resources is that they allow teachers to have maximum control over the content of their courses. An adept educator can bring together outstanding resources from various providers to create an excellent learning experience for students. 

Teachers who want to build a business education course or program that uniquely meets their standards have been highly successful with supplemental materials. On the other hand, it can be very time-consuming to assemble lesson plans, activities, and assessments using supplementary materials. Doing so requires a substantial commitment from teachers to create the curriculum they need.

Digital Business Education Curriculum

A third option many instructors choose for their business education classes is digital curriculum. A digital curriculum system is a software based blended learning option that saves teachers time while providing a variety of teaching materials. 

Digital curriculum allows teachers to save time with planning and grading by providing a comprehensive set of teaching materials. It’s also adaptable to a blended learning environment, allowing teachers to make the most out of valuable classroom time while using technology to engage students with course content. Digital curriculum is also continually updated, keeping course content current with changing standards and technological innovations.

One of the drawbacks of digital curriculum is that although it can allow for more flexibility than some textbooks, it lacks the complete customizability of using supplemental resources. However, it can be the right fit for teachers who want a continuously updated curriculum to meet their students’ needs.

How Do I Choose a Good Teaching Resource?

Choosing teaching resources for your students is paramount to your work as a business educator. With textbooks, supplemental materials, and digital curriculum each having their pros and cons, you may be concerned that you are making the right choices.

Which teaching resources are right for your learners will depend on several factors. Consider what types of materials your students find engaging, the amount of time you have to teach a particular topic, and the issues you must cover to satisfy your course standards. You’ll also want to consider how all of your teaching materials fit together to create your course curriculum.

Just as there are many different subjects you may teach in your business classes, there are plenty of reputable providers you can turn to for quality lesson plans and activities.

Ready to build your business curriculum? Jump ahead to popular teaching resources for common business education topics you can use right now. Find Business Lessons for My Classes >

What To Do If Your Business Education Curriculum is Outdated

If you’re new to teaching business education in your school, you may have inherited lesson plans and teaching materials left by a previous instructor. It’s always great when departing teachers leave materials behind for the next instructor. However, not all of this content may be current or relevant to your students today.

Chances are, if you’ve been using an older curriculum, some or all of the material is outdated. The lesson plans may refer to software that your school no longer uses or emphasize aspects of business that no longer align with your standards. Either way, you’ll need to update your curriculum, or you and your students could face the consequences of outdated materials.

What are the Consequences of Outdated Materials?

An outdated business curriculum can have severe consequences for your students’ success in learning information and performing at their best on exams and certifications.

If you’re teaching with outdated materials, it may result in one or more of these issues in your classes:

  • Students who receive outdated or inaccurate information might not pass certification tests that will help them in their careers.
  • If students tell others they think your course is dated or irrelevant, enrollment in your program could drop.
  • Dated materials may not align with new course standards, resulting in not hitting your teaching requirements.

With such high stakes for you and your students, it’s paramount that every classroom uses current, accurate, and relevant resources.

How Do I Even Begin to Fix My Outdated Business Lessons?

When facing outdated lesson plans, you might find the task of improving them to be daunting and even stress-inducing. Where do you even start?

The first step to revising or replacing outdated content is to audit the amount of material that is genuinely outdated. A simple way to do this is to look at your entire curriculum for each course you teach.

When conducting a curriculum audit , review your materials to see how your lessons have been affected and note whenever:

  • Your content no longer meets course standards
  • Your content is inaccurate or irrelevant
  • The technology in your classroom has changed

Surveying these signs of outdated educational resources is an effective way to ensure every unit in your classes is relevant and ready for teaching.

As you complete your audit, note every time your resources include dated information. Use your best judgment to determine whether an example or activity is relevant to your current students.

What Do I Do if Only a Small Portion of My Lessons Are Outdated?

After you’ve finished auditing your curriculum, you may discover that only a few of your lessons are out of date. Most of your curriculum is ready for your students, but there are places you can tweak your lessons to make sure they are current.

In this case, you can easily address your problem by finding replacement lessons for material that is no longer up to date. When you locate new, timely lesson plans, you can integrate them into your curriculum to seamlessly bring your course up to date.

This technique is also helpful when you experience minor changes to your course standards. You can simply locate quality lesson plans to cover new standards and add them to your existing instructional materials.

Need a few lessons to replace your existing ones? Jump ahead to popular business education lessons you can use to replace your outdated content. Find New Business Lessons for My Classes >

What Do I Do if Most of My Business Lessons Are Outdated?

Replacing outdated course content can be overwhelming for many teachers, but it’s important to find resources that provide what your students need. When you’ve finished reviewing your lesson plans, if you find that all or most of your materials have become outdated, you should consider a more comprehensive solution to replace your dated curriculum.

If the majority of your materials are outdated, the most straightforward way to bring your content up to date is to replace your curriculum entirely.

A brand new curriculum will provide content that adheres to the latest standards, engages students with relevant examples, and saves teachers the time it takes to assemble their coursework by themselves.

Teachers have seen success updating their lessons with a variety of new curriculum options. Two of the most common types of business curriculum are textbooks and digital curriculum systems. Both provide teachers with ample resources to teach business education courses and can help any teacher provide a more up-to-date, comprehensive curriculum.

Wondering whether textbooks or digital curriculum is right for you? Download your free comparison guide to find out.   Digital Curriculum vs. Textbooks: Which Is Right for You? >

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What To Do If Your Business Lessons Aren't Engaging

You know the struggle of dealing with students who aren’t engaged. You’ve worked hard to prepare for class and are teaching with as much energy and enthusiasm as you can muster. But your students simply aren’t responding. You’re met with blank stares, glances at the clock, and worst of all, dead silence. These are situations that every teacher dreads, and when it happens in your business education classes, it’s easy to feel embarrassed and unsure of what to do next.

Why Is Student Engagement Important?

Student engagement is essential to your classroom. Students who are alert and attentive participate more often, learn more thoroughly, and perform better on exams. When learners engage with your material, you can have more confidence that they comprehend and will remember valuable insights that will help them both now and in the future.

On the contrary, disengaged students miss out on valuable learning through everyday engagement with your course material. When they can’t focus and don’t contribute to discussions, students can’t reinforce the course material in ways that retain knowledge and skills.

Even worse, if your course is seen as boring, your enrollment numbers could decline and result in challenges with your program’s growth.

Ultimately, engaged students are more likely to be successful and ready for future learning and career opportunities.

How Do I Keep My Business Students Engaged?

If you notice that student engagement is dropping in your classes, you’ll want to grab their attention as quickly as possible. 

For a quick fix to your engagement challenges, try one of these student engagement strategies for business classes :

  • Use relatable situations and examples that feel relevant to students’ everyday life. Choosing examples students understand makes learners more likely to feel as though they have agency in the learning process and contribute to class discussions.
  • Promote active learning over passive learning to encourage students to get involved in classroom activities. Dynamic learning exercises help reinforce course concepts through differentiated instruction and allow students to better connect with the material.
  • Add role-play activities to mix things up and help students engage creatively with course material while developing critical soft skills. Students can develop public speaking, interviewing, and customer service skills, all while participating in fun classroom exercises.
  • Incorporate project-based learning into your program so students can create original ideas and express themselves. Projects help students reinforce content learned in class while working as individuals or groups.
  • Use a "hook",  also known as an anticipatory set, to get students' attention. There are many forms this can take, but one of the most tried and true is to begin class by sharing a story that both interests students and primes them for the lesson of the day.
  • Deliver lessons through multimedia to engage your students' senses on several different levels. Combining images, words, and sounds in a meaningful way can foster a deeper learning in students than simply having them read from a textbook. 
  • Try blended learning as a way to incorporate digital and traditional teaching methods. Blended learning allows students to get the most out of classroom time while using technology to learn and retain critical information.

While these strategies can help you boost engagement in the moment, if you find yourself constantly looking for new ideas and activities, chances are that your curriculum might be letting you down.

The best remedy to keeping your students active in your class is teaching from material that is engaging and relevant. Still, when you use more relevant and captivating resources, you won’t have to do as many things in your day-to-day instruction to boost student engagement.

If your material is compelling to your students, you won’t need to do as many extra things to boost engagement in your classroom. This is why it’s important to make sure you have the right curriculum resources for your classes! 

Where to Find Business Education Lesson Plans and Curriculum Resources

As a business educator, there is a good chance that you need to teach a wide variety of topics. Since business education encompasses many important subject areas, you might be concerned about finding the right lesson plans for all of the concepts you need to cover. Thankfully, there are many great resources available for teaching classes in your business program.

Below, you’ll find popular resources to help you teach 12 common business education topics:

  • Business Law
  • Career Readiness and Exploration
  • Communication
  • Computer Applications
  • Digital Literacy and Citizenship
  • Entrepreneurship
  • International Business
  • Personal Finance

Keep reading to find quality, engaging business education lesson plans for your courses!

Accounting Lessons

Accounting is one of the most common business education classes for high school students and a popular college major in the business career cluster. We often get questions from teachers about what accounting exercises and activities we would recommend for their students.

Refer to this article to find details about popular resources you can use: Top 3 Accounting Lesson Plans for High School . In this post, you’ll find details about three free, quality sources for accounting lessons, including the specific topics covered by each.

If you want a resource on accounting principles that you can use right now, download this free accounting lesson plan . This resource features presentation slides and speaker notes and can be used easily with your current accounting materials.

And if you teach in the middle school space, another article to check out is: 4 Best Accounting Lessons Plans for Middle and High School , which should cover many of your bases. 

Business Law Lessons

Business law is a topic that can provide valuable knowledge and skills for students aspiring to careers in the business world. Although it’s a broad topic area, introducing students to business law concepts and principles can help them prepare for management, finance, and legal compliance jobs.

This article addresses some of the top business law lesson plans for high school . These lesson plans are helpful for teachers who want to give their students context on different aspects of the legal system as it pertains to business, including tort law and criminal law.

If you need materials to teach business law, check out these resources to see if one would work for your course.

Career Readiness and Exploration Lessons

One of the first steps for business education students is learning about career development. Career development, which includes career exploration and career readiness, is essential to ensuring students are aware of work opportunities and the skills and qualities they will need to achieve their goals.

If you’re teaching career exploration to a younger audience, check out the best career exploration lesson plans for middle school . These resources introduce students to the possibilities of working in various careers and will help inspire them to dream big in their work aspirations.

In addition, these career readiness lesson plans will help your students learn what today’s employers are looking for and how they can achieve their goals. Teachers can also scaffold these resources to students at different grade levels to provide an optimal learning experience.

If you want a free resource that you can use right now, download this career exploration lesson plan and activity . It includes guidance to help students identify possible career choices as well as the steps necessary to achieve their goals.

Communication Lessons

Fluent communication skills are essential for individuals seeking business success. Developing these skills early on ensures that students have the best possible opportunity to rise to the occasion and prove their value to potential employers.

Finding resources to teach these skills isn’t easy, but other teachers have discovered this same problem and created valuable resources for teaching communication in the classroom. This post includes the 3 Best Resources to Teach Communication Skills in High School. Each resource comes complete with lesson plans, activities, and materials you need to teach communication.

If you’re teaching younger learners, the 3 Best Communication Lesson Plans for Middle School will help acquaint your students with the fundamentals of good communication.

Computer Applications Lessons

Some business teachers need to include computer applications in their curriculum. Understanding basic computer applications allows your students to be prepared for the many computing tasks they will often be required to complete as part of their education and future jobs.

If you’re looking for general computer applications resources, the 5 Best Computer Applications Lesson Plans for High School feature teaching plans for an array of age-appropriate applications.

However, you may need something more specific to the suite of computer applications your students are using.

If you’re searching for content specific to teaching Google Apps, here are Google Applications Lesson Plans Every Teacher Should Own .

If you need materials for Microsoft Office applications, check out the 4 Best Microsoft Office Curriculum Resources for Middle and High School .

Digital Literacy and Citizenship Lessons

Digital literacy is an increasingly important topic for teaching students discernment in a world full of media content and conflicting ideas. 

You can help your students develop appropriate skills for evaluating information online with resources in this article: How to Teach Digital Literacy Skills .

In addition, these digital citizenship lesson plans empower students to learn effective digital communication, combat cyberbullying, and maintain their privacy online.

Economics Lessons

There’s a good reason why economics is one of the most popular business education subjects taught in today’s high schools. An appreciation for the greater economic system is pivotal in helping students become competent money managers in their professional lives.

If you need more materials to teach this topic, look into the Top 3 Economics Lessons for High School . 

These lesson plans are perfect for educators looking for ways to introduce students to the fundamentals of macroeconomics and microeconomics. They also include roleplay scenarios and online learning features.

Entrepreneurship Lessons

Entrepreneurship is a popular elective in high school business programs. When you teach entrepreneurship, you can encourage your students to follow their aspirations in business through understanding the unique role and challenges of the entrepreneur.

There are some great resources out there to help teach entrepreneurship in your classes. To begin, check out the 4 Best Entrepreneurship Lesson Plans for High School . These materials range from simple lessons to cover just a couple of class days to more robust curriculum designed to last an entire course.

If you’re looking for additional resources, be sure to check out these additional entrepreneurship lesson plans . Each of these lessons will help you think outside the box and teach entrepreneurial skills to your students in a creative way.

International Business Lessons

Increasingly, high school teachers are looking for plans to teach international business to their students. The way business happens on a global scale is changing, and you need up-to-date information to keep your classes current.

This post provides five places to find international business lesson plans for high school . Inside, you’ll find reviews of resources that teach important international business concepts, such as international management, ethics and social responsibility, cultural differences, and etiquette.

These lesson plans come with interactive case studies, websites, exercises, and simulations to keep your students attentive and engaged.

Leadership Lessons

Leadership, including related capabilities such as communication, character, worth ethic, and critical thinking, is one of the most important qualities to cultivate in business students. While skilled managers help to run businesses, true leaders help them thrive and bring them to new heights. 

There are strong leadership lesson plans out there to help you teach this essential topic to your business students. Included are activities, handouts, teacher's guides, and other materials to help you implement this instruction in your classroom. 

With these resources, your students will both learn about and practice leadership skills so that they can guide a new generation of businesspeople to success. 

Management Lessons

Agile and perceptive management is an essential element of every thriving business. Developing sound management skills at an early age helps students prepare for work in business and sets them up to be respected and admired leaders.

Management is also one of the most common topics instructors need to cover in high school business courses. Unfortunately, it can sometimes be hard to find materials that learners find relevant and engaging. To help, we’ve brought together the top business management lesson plans for high school . Each of these resources includes detailed outlines and techniques for effectively teaching management to a young audience.

If you want help teaching effective leadership, the 4 Best Leadership Lesson Plans for High School reviews quality resources for developing student leaders. These lessons allow students to explore the qualities of a good leader and encourage them to cultivate these qualities in their own lives.

Marketing Lessons

Marketing can be one of the most exciting business subjects for students when taught in an engaging manner. Many teachers are searching for new methods for teaching marketing to pique the interest of their students.

The 7 Best Marketing Lesson Plans and Projects for High School include teaching materials ranging from supplemental marketing lessons to full-fledged marketing courses. When you read the article, you’ll learn more about each option to determine if one is suitable for your students.

Another excellent resource for marketing lesson plans is CTE Online, a career and technical education curriculum provider. CTE Online offers a 180-hour marketing course for teachers looking to cover the subject over an entire academic year.

If you teach the basics of marketing and want a lesson to use immediately, download this free principles of marketing lesson presentation . This free resource features prepared slides and speaker notes that discuss customer relationships, market segments, the value of marketing, and more.

Personal Finance Lessons

Middle school is the perfect time to begin instructing learners about responsible money management. Knowing how to manage personal finances is critical to helping students become sound money managers who have the foundations for financially solvent lives.

The best personal finance lessons for middle school feature complete resources to educate students about money management, credit, loans, and even consumer privacy.

If you're looking for more a robust curriculum, check out these financial literacy curriculum options for middle school .

Professionalism Lessons

Whether it's learning how to dress, how to be approachable, or how to make a good first impression, professionalism is a critical skill in the modern job market. Learning the strategies to thrive in a professional environment will benefit students almost no matter what field they choose to go into. 

Often, professionalism lesson plans can be tough to find, since they're usually focused on training new employees rather than high school students. If you're looking for some robust ones, though, these high school professionalism lesson plans will help you teach concepts like teamwork, communication, bringing the right attitude, and even having a good wardrobe. 

If you're looking for a quick lesson to teach this topic, check out this free downloadable professionalism lesson plan and activity . It includes resources like instructions, scenarios for students, and discussion questions. 

Consequences of Focusing Solely on Business Education Lesson Plans

In the section above, we looked at resources for the most common topics  teachers like you cover in their business education courses. Whether you’re teaching a new topic area or updating your content with something new and more engaging, any of these resources could be just what you need to fill a gap in your curriculum.

These supplemental resources are perfect for teachers looking to solve particular problems with their curriculum, but they aren’t a comprehensive solution. 

Have you found yourself searching for additional lesson plans, again and again, to meet an immediate need in your classroom? Did you complete an audit of your curriculum only to discover that most of your materials have become irrelevant and out of date?

If so, continually searching for new lesson plans, activities, and other classroom materials may be costing you more than you realize.

consequences-for-business-teachers

Three of the biggest consequences of constantly looking for new lesson plans are:

  • Spending your nights and weekends scrambling for new materials
  • Struggling to create a cohesive learning experience for your students
  • Discovering your favorite materials are outdated or no longer available

Consider the number of hours you’ve spent navigating the internet in search of replacement resources, only to use more time integrating your newfound content into your existing lesson plans.

Lost time strains your ability to handle other expectations like grading and working individually with students. You might also find yourself with less time to spend with your family or rest outside of school.

In addition to consuming a significant amount of time, we’ve heard from teachers who’ve shared other challenges in relying on supplemental resources to build their curriculum.

When students receive lessons and assessments from a variety of sources, they can experience a lack of instructional continuity within the course. This can be quite jarring when instructors jump around from various resources on a weekly or daily basis, leaving students confused about the most essential concepts of the class.

Other teachers have become disappointed and frustrated that the resources they’ve relied on suddenly become outdated, leaving them to replace these resources on an individual basis.

When tried-and-true resources aren’t current, or are no longer available on the internet, you’re left to search again. This cycle of replacing even the best supplemental resources can repeat itself, costing you even more time when you can least afford to spend it.

Ultimately, lesson plans only constitute the tip of the iceberg for supplying your business students with a comprehensive curriculum that will help them learn and grow. You also need effective projects, course assessments, discussion sections, and other resources to truly have a curriculum that meets your standards and keeps your students engaged.

To provide students with everything they need while saving yourself time and energy, consider a solution that will keep all of your curriculum current and engaging.

Overcome Your Challenges as a Business Education Teacher

Are you tired of searching for new lessons week after week, only to feel overwhelmed with your other responsibilities as a teacher?

Want to feel less overwhelmed and spend more time helping your students succeed? There are many strategies to help you do just that.

Read this free guide to discover how to overcome five common challenges:

  • Satisfying Your Course Standards
  • Meeting Diverse Student Needs
  • Keeping Students Engaged
  • Balancing Technology in the Classroom
  • Spending Too Much Time Planning and Grading

Overcome Your Teaching Challenges

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  • Business Law
  • Business Ownership
  • Case Studies
  • Classroom Activities
  • Entrepreneurship
  • Types of Ownership

Business Ownership - Lesson and Mini Case Studies

This lesson teaches students about forms of business ownership. First, use the Discussion Guide (found in Task 1) to teach students about this concept. Then, use the activity (found in Task 2) to assess their understanding. This activity asks students to read short cases and determine the form of business ownership or ownership strategy that each case depicts. An answer key is included in the Resource Library. A full lesson module related to this concept can be found on the MBA Learning Center. Visit  mba.instructure.com  and search for "BL:001" in the Commons. 

Discuss forms of business ownership as a class.

Use the attached discussion guide to lead the class in a lesson about the different forms of business ownership.

Learn about forms of business ownership.

Read the cases and determine the form of business ownership.

Distrubute the handout to students. Instruct them to read the cases and then determine the form of business ownership. 

Read each of the following cases and determine the form of business ownership or ownership strategy that each case depicts. 

                                Limited liability company (LLC)                 Close/private corporation

                                General partnership                                   Sole proprietorship

                                Limited liability partnership (LLP)              Nonprofit corporation

                                “C” corporation                                          “S” corporation

                                Limited partnership                                    Piggyback franchise

                                Product trade-name franchise                   Joint venture

                                Multi-level marketing                                Business-format franchise

                                Licensing

    1.  As a young child, Karina had a passion for animals and environmental issues. After she graduated from college, Karina landed a job in an organization whose mission is to create public awareness about endangered animals and other environmental issues. Karina’s employer depends largely on grants and donations to fund business activities.

    2.  Kyle and Palo had been friends for a long time. The friends shared a common interest in computer technology. Kyle had done some software design and computer work on his own for neighbors and family friends. It wasn’t long before he realized that there was a demand for small businesses to have affordable computer consultants. He decided to start a business. Kyle discussed his venture with Palo and asked him if he would like to combine capital and take an active role in the business with him. Both Kyle and Palo are equally responsible for the businesses’ risks and rewards.

    3.  Rachel worked in one of her family’s two furniture stores. When her grandfather decided to expand the business and build three more stores, Rachel realized that he would need a lot of capital to get the construction started. She suggested that her grandfather raise the money by selling shares of stock in the company to just a few people, not to the general public. Her grandfather filed Articles of Incorporation with the government. He sold 1,000 shares of stock to 100 people and kept 1,500 shares.

    4.  Doug grew up on a large farm in southwest Wisconsin. As a college graduation gift, Doug’s father gave him several hundred acres of land to raise organic soybeans, grain, and corn. Doug works the fields by himself, negotiates deals with buyers, repairs equipment, and handles all the accounting and financial issues for the business, which is called The Natural Element.

    5.  Shawna, Maya, and Andre’s interior design business was taking off in a big way. Their talent was in high demand. It wasn’t long before the trio needed to hire more employees. Since the needs of their company were changing, they reviewed their personal circumstances, finances, and goals. They decided to legally organize the company so it had a limited life as well as limited liability. 

6. Ming was an associate orthodontist in a large dental practice. While attending a professional seminar, Ming ran into a former colleague, Kevin. He told Ming that he and five others were planning to open their own dental practice. They were looking for an orthodontist to include in their practice. Within three months, six members of the dental practice filed the necessary paperwork and paid annual fees to the government to start their new dental practice. Before they open for business, they will have to make sure that each member has sufficient malpractice insurance.

    7.  Chip and Charlie own a local pizza shop. The pizza was the talk of the neighborhood. When customers suggested that they open more stores, Chip and Charlie were hesitant. They didn’t have the money. Chip and Charlie went ahead with plans to open another shop across town. To finance the venture, the partners formed a private corporation and sold shares of stock to friends. They chose a legal arrangement that allowed them to avoid dual taxation.

    8.  James owns part of a business. He purchased several hundred shares of stock in a large, nationally recognized steel company. Several thousand other people own stock in the company too. Each year, all the shareholders receive a detailed report about the financial activities of the company.

    9.  For years, Andrew worked for a national airline as a pilot. When the stress got to him, he decided to simplify his life. He packed his bags and moved to Key West. Andrew decided to start his own transportation and touring service for travelers. To accomplish his goal, he needed to purchase a small commuter plane. He only had one problem—money. Andrew telephoned his very wealthy uncle in Seattle to see if he would like a piece of the action. Andrew proposed that he would run the day-to-day activities of the company, while his uncle would just provide a percentage of the capital. His uncle agreed, and Andrew contacted an attorney to develop a written agreement.

  10.  Abby attended a party at a friend’s house. At the party, a sales representative presented a line of high quality, decorative baskets in an array of shapes and sizes. Abby has been a collector of the baskets for a long time. When the sales representative approached her about becoming a representative for the company, Abby told the representative that she would be very interested in becoming a distributor.

  11.  Jake loves science, particularly chemistry. While experimenting with a chemical combination for a school science fair project, he discovered that the concoction removed stains from virtually any fabric or fiber—from carpets to delicate linens. He knew that he had stumbled onto a great invention. He filed paperwork to get the product patented. He didn’t have the capital, equipment, or time to make the product, so he sold a manufacturer the right to produce and distribute the product. The manufacturer paid Jake a percentage of the annual profits.

  12.  Annette started working as a repairperson in a local appliance store when she was in school. She loved the work and was promoted to service manager within a few years. Annette had always wanted to own her own business, and she started to research ways to achieve her goals. The next year, Annette opened her own store, Annette’s Appliance and Repair Shop. Her store is a distributor for Whirlpool washers and dryers.

13. Gina loves food almost as much as she likes to make money. When Gina knew that she wanted to own her own business, she decided to open a restaurant. She didn’t know exactly what was involved and wanted some guidance as she developed her business. She contacted a nationally known restaurant xhain and purchased the right to operate her restaurant under the restaurant’s trade name.

  14.  As a successful businessperson, Ben wanted to take the next step to expand his mid-size company internationally. He knew he didn’t have enough capital and know-how to get into foreign markets. He contacted a former business associate who owned a garment manufacturing company in Australia. Together, they worked out a deal that would benefit both of their companies in a relationship that would last no longer than one year.

  15.  Tom purchased franchise rights to open a Maggie Moos ice-cream shop. Since this was his first business ownership venture, he decided to take advantage of the business proposition that a local merchant offered. The merchant owned a discount store in the center of town and asked Tom if he would like to open his business in the discount store. The arrangement proved beneficial to both Tom and the store owner.

Review student answers.

Using the answer guide, review students' responses.

Turn your work in to your teacher. S/he will review your answers.

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BUSINESS STUDIES FORM ONE NOTES FREE

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BUSINESS STUDIES FORM ONE NOTES  

INTRODUCTION TO BUSINESS STUDIES

  Objectives: By the end of the topic, the learner should be able to:

  • Explain the meaning of Business studies
  • Explain the importance of Business studies in society.
  • Business: Any activity that is carried out by an individual or an organization concerning provision of goods and services with a view to making profit.
  • Business studies: Is the study/examination of the business activities in society. These activities are related to the production of goods and provision of services.

– It can also be defined as the study of activities that are carried out in and around production, distribution and consumption of goods and services.

       iii) Goods: These are items that are tangible .i.e. they can be touched and felt.

Activity 1: The students to list items in the classroom that can be touched and felt

– Furniture, buildings, books, vehicles e.t.c

  • iv) Services: These are efforts or acts/actions or activities that may be sold and are intangible (cannot be touched nor felt).

Activity 2: The students to list items that money is paid to get but they cannot touch.

  • v) Production: Refers to the creation of goods and services or increasing their usefulness through activities such as transporting them to where they are required. People who are involved in production of goods and services are referred to as

Activity 3: Using the lists of goods and services above, the students to name those involved in their production.

  • vi) Distribution: Refers to the movement of goods and services from producers to the users. Some activities that take place as goods and services all moved include transportation, storage, insurance, communication, advertising.e.t.c

vii) Consumption: Refers to the act of using the goods or services produced consumption is the ultimate goal of production. The persons who uses a good or a service is referred to as a consumer.

Activity 4: The students to list the consumers of the goods and services listed in activity (1) and (2) above.

Business studies as a subject is composed of topics drawn from various disciplines such as:

Office practice

Entrepreneurship

This is the study of trade and aids to trade. Trade refers to the exchange of goods and services for other goods and services or money.

Aids to trade are human activities (services) that assist trade to take place.

This is the study of how human beings strive to satisfy their endless wants using the available scarce resources.

This refers to a systematic way of recording business activities which all used for decision making.

This refers to all activities that are carried out in an office e.g. communication, filling, clerical work, reproduction of documents e.t.c

This is the study of activities involved in the process of identifying a business opportunity and acquiring the necessary resources to start and run a business. The person who carries out these activities is refered to as an entrepreneur.

Importance of Business studies in society

Business studies is meant to prepare learners to function as informed consumers, producers and workers in the society.

Some of the benefits of learning business studies include:

  • Assists the learners/members of the society to acquire knowledge and awareness of business terminologies which are necessary when discussing business issues such as profit and loss.
  • Assists the individuals in appreciating the role of business in society/in provision of goods and services.
  • It enables the learners to acquire basic knowledge, skills and attitudes necessary for the development of self and the nation by starting and operating business.
  • Equips the members of society with knowledge and skills necessary to start and run a business comfortably.
  • Makes the members of society to appreciate the need for good business management practices
  • Assists individual to acquire self-discipline and positive attitude towards work
  • Equips individual with abilities to promote co-operation in society through trade
  • Enables the individual to understand the role of government in business activities
  • Equips individuals with abilities to understand the role of communication and information technology in modern business management
  • Helps the individuals to develop positive attitudes towards the environment
  • Equips the individual with knowledge and skills required to evaluate business performance
  • It helps individual to develop various intellectual abilities such as inquiry, critical thinking, analysis, interpretation, rational judgement, innovation and creativity.
  • It enables learners to acquire skills for wise buying and selling.
  • It creates a firm foundation for further education and training in business and other related fields.
  • It enables one to understand and appreciate the basic economic issues that affect the society such as increase in prices of goods and services.

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By the end of the topic, the learner should be able to:

  • Explain the meaning and purpose of a business
  • Identify various business activities
  • Identify various types of business environments
  • Explain how the various business environments influence a business.

Meaning of a business

This refers to any activity carried out by an individual or by an organization with the aim of making a profit.

Profit is what the business earns above what it spends in providing goods and services to the people who need them.

The term business also refers to firms or organizations that provide goods and services to make a profit.

Purpose of business (Reasons for the existence of businesses)

Business is important in any society because it is not possible for people to provide themselves with all what they need without direct or indirect aid from others. Some of the main reasons why businesses exist are:

  • To provide goods and services- Businesses exist to satisfy the needs and wants of buyers by providing them with goods and services. Buyers include individual consumers, other businesses and the government.
  • To create employment- Businesses provide job opportunities through which members of society can earn money, which can be used to buy goods and services for the satisfaction of their needs.
  • To earn profit- Profit is the primary goal of carrying out business operations. It is earned by the people who put their resources and effort in business
  • As an outlet of new innovation- Some businesses provide unique goods and services which may not be existing in society e.g. plastic fencing poles that are now replacing wooden poles.
  • To be as own boss- Some people run businesses so as to be in full control of the operations and make all the decisions regarding the business without need of reference to people.
  • To utilize extra resources- Some people go into business to make use of money or property which is not being put to profitably use at a given time.
  • To offer special services- Some businesses provide services that raise the living standard of people e.g. government enterprises that provide public utilities such as health care and water.
  • To utilize spare time- Some people run businesses in order to make use of extra time at their disposal and in the process make some extra money. A large number of formally employed people have small business which they run during their free time in order to earn more money.

NB: Whatever purpose a business fulfills, it has to earn a reasonable return on the invested money to survive.

Download more free Business Studies resources here

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TYPES OF BUSINESS ACTIVITIES

People carry out different business activities in order to earn income. Business activities are activities which involve the provision of goods or services with an aim of earning a profit.

Activities done without the intention of making profit are referred to as non-business activities. Business activities may be grouped into the following seven categories:

This involves obtaining goods from their natural setting e.g. mining, farming, lumbering, fishing, quarrying e.t.c

  • Processing- This involves the conversion of raw materials into more useful products without combining it with other goods. Examples here include milling/grinding flour, refining oil, tanning of skins and hides, conversion of iron into steel e.t.c
  • Manufacturing- This involves combining different raw materials to come up with one final product. Such activities include bread baking, making a table e.t.c
  • Construction- This involves building of structures such as bridges,ships,aeroplanes,houses,roads,railways e.t.c
  • Distribution of goods- This refers to the activities involved in moving goods from where they are produced to where they are needed. People who carry out distribution are called distributors . Examples of distributors are wholesalers and retailers.
  • Trade- Activities in this category involve the buying and selling of goods with a view of making a profit. People involved in trade are called
  • Provisions of services-Activities in this category involve human acts which could be mental or physical. These include activities such as hair-cutting, hair styling, car-washing, nursing, teaching, driving, and entertaining e.t.c.

NOTE: Students to give examples of activities they pay money for which are not goods.

BUSINESS ENVIRONMENTS AND THEIR EFFECTS ON THE BUSINESS

Business environment refers to conditions or factors which surround and affect business operations. These factors could be within the business ( internal environment) or from outside the business ( external environment).

These factors affect the decisions, strategies, processes and overall performance of the business.

Activity: Discuss some factors that have a strong influence on businesses within the immediate environment.

Internal Business Environment

This comprises factors that are within the business unit itself. These factors can be controlled fully by the business. Internal environmental conditions could be either strength or weaknesses. The strengths tend to improve the performance of the firm while weaknesses tend to affect the operations of the business negatively.

Internal environment is also referred to as: micro-environment. Micro environmental factors include:

  • Objectives of the business

These ate targets or goals that are set by the owners or managers of a business to be achieved. The objectives will influence the following;

  • The strategies of a business- This is a plan of action which a business intends to follow so as to achieve its goals.
  • The resources required- By studying the objectives set; a business can determine the resources required for its effective operation. These resources may be physical,financial,human e.t.c
  • Management policies and style

The management refers to the people who are responsible for directing the day-to-day operations of a business. It is the management that sets the objectives and policies of an organization.

A policy is a course of action of action for achieving set objectives, which is adopted by a business.(it is the established way of doing things in a business.

  • The policies of a business- The policies adopted by a business may boost or hinder its growth and survival e.g. the management may decide that workers will not be allowed to join trade unions. This may make the workers feel locked out of the decision-making process, resulting in tension. This tension may interfere with the performance of the employees and result in inefficiency.
  • The activities of a business – Management policies will determine the activities of a business i.e. the goods and services provided, location of business e.t.c.
  • Management style- This refers to how managers conduct the daily operations of the business. This will determine how workers relate with their managers. The style adopted by the management will influence the workers performance positively or negatively thus affecting the overall performance of the business.
  • Business structure

This is the formal arrangement of activities that are carried out at various levels of the organization so that objectives of the business can be achieved.

Duties and responsibilities of all the workers are defined in the business structure. Their interrelationships are also defined.

A well laid out business structure is likely to lead to success of the business since:

  • Each of the employees know what is expected from them
  • There will be no conflicts or confusion among the workers
  • Team work is enhanced
  • Ensures proper control which is turn promotes efficiency.

A poor business structure leads to business failure.

  • Business Resources

A resource refers to anything that can be used to achieve an objective. These resources include;

  • Human resource- Human resource (personnel) refers to the employees working in an organization. Employees will only be useful if they have the necessary knowledge and skills to successfully carry out the assigned tasks. It is therefore necessary for the management to match the correct people with the correct job activities; this will ensure success for the business.
  • Financial resource- Money is required in order to start and operate a business.A business with adequate finances that are property allocated to various activities and also monitored is likely to do better than the one lacking such aspects.
  • Physical resources- These include tangible facilities which belong to the business such as buildings, machinery, furniture and stock. Availability of such facilities enables the business to operate.
  • Technology- This refers to skills and methods used in production. Use of modern technology enhances production of goods and services.

5.)    Research and development

Research and development is an important factor for the success of a business. Research generates new ideas, skills and better methods of doing things.

A business has to do market and consumer research regularly to find out how the consumers perceive its goods and services, and how they can improve in order to outdo their competitors.

Research also assists in the development of new and unique goods and services that may attract new consumers or maintain the loyalty of the existing ones.

6.)  Business culture

This is a combination of employees expectations, beliefs and values within the business. It is normally passed on from one generation of employees to the next. Employees acquire norms and code of conduct that is acceptable to all from the general manager down to the sweeper. A business that has a culture of involving employees in decision-making may perform better than one that does not involve its employees.

The owners of the business provide finances/resources to start and run the business. They also make decisions concerning operations of the business.

Appropriate decisions are likely to lead to well being of the business while poor decisions may adversely affect the business.

External Business Environment

This environment consists of all the factors which affect the operations of the business from the outside. Some of these factors offer business opportunities while others may create problems (threats).

Business have limited or no control over external environmental factors and should therefore try to do adjust in order to cope with them.

External environmental factors are also referred to as macro-environment i.e. environment that is in large scale.

External business environment can further be sub-divided into operating environment and remote environment, depending on whether the factors can be influenced to some extent or not. Those environments that can be influenced are referred to as operating environment while those that cannot be influenced are known as remote environment.

ENTREPRENEURSHIP

  • Explain the meaning of entrepreneurship
  • Discuss the importance of entrepreneurship to an economy
  • Describe characteristics of an entrepreneur
  • Generate business ideas
  • Identify a business opportunity
  • Evaluate a business opportunity
  • Explain the need for a business plan
  • Discuss factors that influence entrepreneurship practices in Kenya
  • Discuss the causes of business success
  • Recognize the need for ethical practices in business

Meaning of entrepreneurship

This is the process of identifying business opportunities and gathering the necessary resources to start and run a business.

An entrepreneur who identifies business opportunities and gets the necessary resources in order to start and run a business. The entrepreneur therefore creates new businesses or transform the existing ones in the face of risks and uncertainties in order to make profits.

An entrepreneur is therefore a business owner; he starts and organizes the business (the factors of production in appropriate combination )

Importance of entrepreneurship to an economy                                                                                                                                                                                               

  • Creation of employment- Through entrepreneurship, jobs are created which help in absorbing people who would otherwise have been jobless e.g. people employed in the jua kali sector .
  • Formation of capital- Profit earned by entrepreneurs may be used to expand the business or even to start other businesses. Wages and salaries paid to the employees is a source of capital to them.
  • Raising standards of living- Entrepreneurs pay wages and salaries to their employees which enable them to acquire goods and services they need to live comfortable lives. Entrepreneurs also provide a wide variety of goods and services to consumers hence leading to improved living standards.
  • Encourages the use of local resources- Entrepreneurship makes it possible to use/exploit local resources. Idle resources such as scrap metal may be used to make jikos .
  • Improving infrastructure- The existence of businesses in the economy makes the government establish or improve infrastructure such as roads, communication facilities and water. At other times, entrepreneurs may combine forces to improve infrastructure in their area of operation .
  • Savings on imports- Local entrepreneurs are able to produce goods and services that are a substitute to imports. This helps the country to reduce the amount of money required to pay for such imports.
  • Reducing foreign dominance of the economy- Participation of local entrepreneurs in various business activities helps in reducing investments by foreigners in the particular area .
  • Promotion of technology/promotion of innovation, research and development- Entrepreneurs are creative and they come up with new and better ways of accomplishing tasks. Most of the inventions and innovations in our society have been developed by entrepreneurs .
  • Promotion of entrepreneurial culture/helps in the creation of role models- Successful entrepreneurs/entrepreneurial ventures encourage other members of society to initiate their own businesses and hence act as role models in the business world.
  • It contributes to government revenue- Taxes and fees paid by entrepreneurial ventures constitute part of government revenue / income that helps it to facilitate its operations .
  • It promotes economic growth -Entrepreneurs produce goods and services. This increases the volume of goods and services in the economy leading to expansion of the economy .
  • It may promote self-actualization and esteem -By initiating busine-sses in which they are their own bosses, entrepreneurs pride is boosted and this may promote the overall productivity of the economy.

Characteristics of an entrepreneur

A good entrepreneur should have the following characteristics :

  • Desire to achieve- An entrepreneur is a person who wishes to excel and has the drive to succeed while competing with others. He/she always tries to accomplish something new.
  • Ability to solve problems- An entrepreneur is expected to struggle with determination to get solutions even under difficult situation so that the business can succeed .
  • Risk taker- Entrepreneurs take viable business ventures even when they are not sure of the returns. They assess situations and take calculated risks.
  • Initiative – An entrepreneur should be aggressive in implementing ideas well ahead of other businesses so that he/she can be ahead of them .
  • Time consciousness- An entrepreneur should be able to use time wisely and avoid wasting it. A wise and quickly implemented decision may mean success in business whereas time lost may mean failure .
  • Creativity and innovation- An entrepreneur should be able to generate new ideas as well as think of the best ways of putting them into practice .
  • Independence and self confidence- Entrepreneurs are their own bosses and should believe in their ability to do things and succeed .
  • Persistence and patience- An entrepreneur should not give up when challenges arise. Sometimes, he/she takes time and make a repeated action or adopts a different course of action in order to overcome such challenges so as to reach the target
  • Decisive- Entrepreneurs have strong problem, solving and decision making skills. The business environment is such that decision has to be made quickly to respond to any situation that may arise .
  • Persuasive- Convincing people to believe in their ideas and buy their products keeps entrepreneurs in business
  • Goal-oriented- Entrepreneurs are achievers who work towards set goals. They continually monitor progress to determine whether they are achieving the goals they have set and where improvements need to be made .
  • Seek information- Entrepreneurs use various methods to get the relevant information that is necessary for the success of the business .
  • Concern for high quality products -An entrepreneur should strive to cope or beat the existing standards of quality. This will enable him/her succeed in a competitive market .
  • Commitment to work- An entrepreneur places priority on getting tasks accomplished. To achieve this he/she may make extra ordinary personal sacrifice e.g. working until very late.
  • Concern for customer satisfaction- An entrepreneur should ensure that customers are satisfied so as to continue being/remain loyal to the business .
  • Desire to feedback- An entrepreneur should be interested in knowing how the business is performing.

Generating Business Ideas

For an entrepreneur, the first step in starting a business begins with an idea (business idea).

Business ideas are all about thoughts on possible businesses an entrepreneur can start or improve. It indicates among other things;

  • The products to produce/sell
  • Who the business will sell to (market)
  • Where the business will be located
  • How the will be run (management)
  • Why the business is needed (objectives)

Sources of Business Ideas

  • Newspapers- Local newspapers like the Daily Nation, East African e.t.c especially in the business and advertising sections have a lot of information about commercial opportunities as well as personal services.
  • Shows and exhibition- Visiting shows and exhibitions organized by manufactures and distributors and asking questions from the sales persons. Entrepreneurs can also get business ideas from products displayed in such shows.

iii. Magazines and journals- Reading magazines and journals with business information may equip an entrepreneur with new business ideas.

  • Hobbies – These are activities pursued for pleasure but they can also serve as a source of business ideas e.g. photography.
  • Vocational training and experience- A business idea may be developed from one’s own area of training or experience e.g. a teacher may use ideas from his/her training to start a private school.
  • Surveys and market research- This involves conducting an investigation to gather information from consumers on what products they require.

vii. Recycling/using waste products- Some waste products could be converted into useful products e.g. scrap metal for making jikos,old tyres for making sandals e.t.c

viii. Listening to what people say- By listening keenly to what people say, one can identify unsatisfied needs e.g. complaints about goods and services in the market. These complaints may form a basis of a business idea for an entrepreneur.

  • Identifying a market gap (niche)- An entrepreneur may try to identify/spot the needs of consumers which are not being met by the existing goods and services.
  • Brain storming- An entrepreneur can engage other people in a discussion on how best to develop businesses.
  • Listing attributes of a product- By listing the attributes of a product that is already existing in the market, one can find new use for the product.

xii. Copying/improving an existing business- This involves identifying the weaknesses of a business and trying to come up with solutions.

Business Opportunity

A good business plan is not necessarily a business opportunity. A business idea becomes a business opportunity if it is viable i.e. it can be developed into a successful/profitable business enterprise

A business opportunity is a favourable chance that an entrepreneur accepts for investment. It exists where there is a gap to be filled in the needs of the market. Examples of such gaps include:

  • In availability of products- This is where goods and services needed by the consumers are not available at all in the market .
  • Poor quality products- A business opportunity exists if one offers better quality goods and services than those of the existing businesses .
  • Insufficient quantities- This is where the goods supplied are not enough to meet the demand/need of the consumers .
  • Unaffordable prices- A business opportunity exists where one would charge affordable prices.
  • Poor services- A business opportunity exists where customers are not served well.

Evaluating a business opportunity

This means assessing whether the identified opportunity is viable or not. This helps in arriving at the best decision concerning the business idea to implement

Evaluation should be done carefully, systematically and without emotions. Evaluation is necessary even where there is only one business idea. This will help in avoiding starting a business that cannot succeed .

Factors to consider when evaluating a business opportunity

The following are the factors to consider when evaluating a business opportunit y.

  • Personal consideration- These are the abilities and expectations of an entrepreneur. They include the following ;
  • Objectives- The entrepreneur should evaluate the business idea to find out whether it is in line with his/her objectives .
  • Skills- Where a business requires certain specialized skills and those skills are lacking the idea may be dropped .
  • Commitments- Where the business is likely to interfere with the entrepreneurs other commitments it may fail .
  • Interest- It is necessary to check whether the intended business will interest the entrepreneur or not. If the entrepreneur will not enjoy running the business, the idea should be dropped .
  • Business consideration- These are external factors that are likely to affect the operations of the business and they include ;
  • Availability of market for the product- An entrepreneur should assess the availability of customers before starting a business. Customers exist where there is a gap/nich in the market.
  • -Appropriateness of the technology
  • -The cost of the technology
  • -The possibility of the business suffering in case the technology becomes outdated/obsolete.
  • Availability of raw materials and other resources- The raw materials and resources required should be within the reach and affordable to the entrepreneur.
  • Government policy- An entrepreneur should consider the requirements of the government before starting a business e.g. the government may require certain businesses to be located in certain areas only.
  • Amount of capital required- The capital required to run and maintain the business should be considered i.e the source of capital.
  • Profitability of the business- Within a certain duration of time .
  • The break-even period- How long the business can take to support itself .
  • Possibility of expansion i.e . the potential for growth of the business.
  • Impact of the business operations on the environments; some businesses lead to environmental degradation and should be located in appropriate places/effect on community and environmental health .
  • Security-Availability of security should be considered .
  • Level of competition- This will help determine whether the business will survive or not.
  • The risks that the business will face.

BUSINESS PLAN

This is a written document that highlights the objectives of the business and steps to be followed in order to achieve these objectives. It indicates where the business is, where it wants to move to, how and when .

Contents of a good business plan

  • Name of the business
  • The product to be sold or produced
  • Personnel to manage the business
  • Amount of finance and other resources required
  • The market to be served (customers)
  • Types of employees required
  • Projection (level of achievement in future in terms of profit)
  • Summary of the plan.

Need for the business plan

  • A business plan is necessary to an entrepreneur for the following reasons:
  • Avoiding mistakes-in the process of drawing a plan; mistakes that would take place in the business are identified and corrected in the plan. This helps in avoiding the occurrence of such mistakes in the business.
  • Identifying strength and weaknesses-A business plan helps in identifying strengths or weaknesses and where weaknesses are detected, remedial actions may be taken early enough.
  • Requirement by financiers-Financial institutions such as banks may require a business plan before they can accept to finance the activities of the business.
  • Allocation of resources-It helps to determine the resources required and plan on how and where to use them. This ensures that resources are neither underutilized nor used for the wrong purpose.
  • Facilitates business evaluation-A business plan helps an entrepreneur to assess the progress of the business and any deviation (difference) from the intended plan can be corrected in good time.
  • It helps an entrepreneur outline competition-It helps the entrepreneur to be fully aware of the market she or he plans to operate in, understand important trends and know who her/his competitors are and their strengths and weaknesses. This information aids the entrepreneur to develop products that are better than those of the competitors.
  • A motivating factor-A business plan is communicated to all employees in the business. This makes them aware of the direction to be taken by the business. This motivates them to work towards that direction.
  • Adaptability-Normally, not all events occur as predicted in the business plan. However, a well drawn business plan should give room to accommodate any changes that might occur in the future.
  • Tool for control-Planning involves setting of standards against which performances can be assessed. In case of deviation corrective measures can be taken.

Factors that influence entrepreneurship practices

There are many conditions or factors which may encourage or discourage entrepreneurship. Some of these factors are:

  • Government policy- Some government policies are favourable to the operations of the business and thus encourage people to go into business while other policies may be unfavourable and will discourage people from going into business. E.g. higher taxes are unfavourable hence discouraging.
  • Infrastructure- infrastructure includes transport and communication networks, water, security e.t.c. Availability of good infrastructure in an area tends to encourage people to set up businesses while poor infrastructure tends to discourage them
  • Levels of education and skills- Relevant and appropriate knowledge and skills are necessary if the business has to succeed. These are acquired through education, training or experience.
  • Availability of markets- Adequate markets encourages existing entrepreneurs to continue producing and also encourage/attract new ones to venture into business.
  • Availability of resources- Appropriate resources are necessary for starting and smooth running of a business. These resources include physical, human, capital and technology .
  • Cultural and social beliefs and attitudes- These are norms, values and beliefs of a given community. Culture helps determine the kind of goods and services that people consume. this in turn, dictates the type of businesses to be established in such communities.e.g Muslims do not take pork therefore businesses selling pork will not do well in such communities .
  • Competition- Businesses will do well if they are able to complete favourably. Others will avoid competition by establishing businesses where there is no competition .
  • Political stability- political stability gives conducive atmosphere for businesses to start and thrive on the other hands, where there is no political instability, businesses may not do well and entrepreneurs may close down businesses or new ones may not come up .
  • Natural factors- natural factors such as rainfall, temperatures, earthquakes, pests, drought e.t.c. may influence the type of businesses that are carried out in an area, especially agricultural businesses .
  • Presence of role models in the society- The presence of successful entrepreneurs acts as an encouragement to aspiring entrepreneurs .

Causes of Business success

A business is considered as being successful if it makes consistent profit and experiences progressive growth in the scale of its operations.

Some of the factors that lead to the success of business may include:

  • Right choice of business- A good business opportunity needs to be evaluated on the basis of ability to capture many customers, make reasonable profit for the owner(s) and provide an opportunity for growth. Making the right choice of a business or product ultimately contributes to the success of a business.
  • Proper managerial skills- An entrepreneur should be able to carry out management roles effectively. A good manager will carry out roles such as;
  • Hiring staff- The process of acquiring new employees to take up new positions or to replace employees who have left the business.
  • Assigning duties-Allocating employees duties according to their qualifications.
  • Supervising-Ensuring that employees carry out tasks that are assigned to them
  • Training-Enabling employees to acquire knowledge and skills necessary to perform duties assigned to them.
  • Motivating-giving employees inducement to perform their duties.
  • Proper location/availability of customers- The business should be situated in a place convenient for its operations e.g. where customers are easily available .
  • Adequate finance/capital- Money is needed to acquire other resources that are required by the business. A business that has adequate capital is likely to do well as it is able to finance all its operations.
  • Lack of competition- Most businesses are put out of operation by stiff competition. Therefore, a business operating in an area where there is little or no competition is likely to succeed.
  • Commitment to business
  • Proper financial management- Proper management of finances is necessary for the success of the business. It ensures that money is available and is used for the intended purpose.

Management of finances includes :

  • Acquisition of finances- This involves raising of the required amounts of money. This can be done through a variety of ways such as loans from financial institutions and owner’s contributions .
  • Managing cash- This ensures that the available money is only used for the activities that are beneficial to the well being of the business .
  • Proper record keeping- This involves having a record of finances raised and how they are used.
  • Proper debt management- Care should be taken to ensure that credit is only extended to credit worthy customers (credit worthy customers are those whose chances of paying are high).Debt collection should also be carefully planned to ensure that they are collected when due.
  • Good public relations- This involves creating and improving a good relationship between the business and other people. Good relations are necessary for attracting and retention of customers.
  • Being creative and innovative- This involves finding new uses of a product, new channels of communication and new ways of doing things. This enables the entrepreneur to be ahead of others.
  • Proper market research- The business environment usually changes at a high rate. This makes it necessary for an entrepreneur to study his/her customer’s preferences, tastes, spending patterns, income levels, competitions, and behavior and substitute products.
  • Good/proper time management- Time management is the ability to carry out planned activities within the allocated period.
  • Proper skills and attitudes of employees- Employing qualified staff results in work being done in a professional manner. This enhances the performance of the business.
  • Proper pricing of goods and services- Pricing should be done appropriately. If the prices for the products are too high, the business will lose customers. Very low prices may attract customers but kill the business. It is therefore important to create a balance between price to charge and the profit margin to realize.

ETHICAL ISSUES IN BUSINESS

Ethics -refers to a set of values, principles and rules of acceptable behavior which influence how individuals, groups of people and the society in general behave .

Business ethics- refers to acceptable behavior that should be displayed by business people. Business ethics helps businesses in deciding what actions are right or wrong depending on circumstances .

Ethical issues- are the moral concerns that arise in the course of carrying out business.

Need for Ethical issues in Business

The need for ethical issues in business includes the following;

  • Ensures no discrimination in business- Business ethics ensures there is no discrimination in areas such as recruitment (hiring), promotion, training, remuneration and assignment of duties. These processes should be objective and based on merit, qualification, experience and ability.

-It ensures that everybody is given an equal opportunity (has equal chance) and is not discriminated against because of their sex, religion, ethnicity, social background e.t.c.

  • Ensures protection of the environment/Helps in avoiding environmental pollution- Business ethics prohibits business units from carrying out activities that may cause pollution and degradation of the environment. Environmental degradation may be caused by human activities such as logging and unplanned cultivation. Pollution may be caused by activities such as:
  • Damping effluents from production units into water masses thereby causing water pollution. Water pollution is disastrous to human health and also to aquatic animals.
  • Emitting carbon dioxide and other gases into the atmosphere causing air pollution
  • Damping of waste material on the land surface causing solid waste pollution This creates terrible sites to watch and also breeding places for dangerous insects such as flies .
  • Ensures fair play in competition- Ethics ensures that businesses do not engage in unfair practices while competing with others. These practices may include:
  • Destroying a competitor’s product or promotional tools such as billboards
  • Buying and destroying competitor’s products before they reach the market
  • Giving false information about a competitor’s product
  • Helps in avoiding environmental degradation-Ethics ensures that the physical environment is not degraded through business activities. Such activities may include:
  • Deforestation through logging
  • Unplanned cultivation
  • Releasing carbon dioxide and other gases into the atmosphere thereby causing air pollution
  • Channeling effluents from factories to water masses thereby causing water pollution. Such pollution can be harmful to human health and aquatic animals.
  • Disposing of waste material such as paper and scrap metal on the land surface thereby causing solid waste pollution.
  • Producing too loud noise which might be harmful to human beings hearings
  • Emitting too strong light that may be harmful to our eyesight
  • Ensures rights of employees are upheld- Ethics ensures that the employer does not violate the rights of employees especially as laid out in their terms and conditions of employment. Such rights include payment of dues in time .
  • Eliminates use of unfair means of achieving business objectives- Ethics ensures that the business operations are carried out in a professional way e.g. it is unethical to give or receive a bribe in order to win a business contract. Similarly, it is not ethical to hoard goods awaiting their prices to go up.
  • Avoids consumer exploitation- Ethics ensures that consumers are not exploited by the business. Consumers may be exploited through practices such as:
  • Overcharging them
  • False advertisement
  • Selling poor quality goods and services
  • Selling wrong quantities
  • Selling harmful commodities
  • Define the term an office

An office is a building, room or a place set aside for administrative, communication or clerical work of an organization.

  • Outline the functions of an office
  • Receiving of information in various forms such as calls, personal visits or documents such as letters
  • Recording and sorting of information received.
  • Storing of information for future reference
  • Distribution of information within and outside the organization to the various sections, departments or personnel for necessary action
  • Reproduction or making of copies of document by use of various methods, such as photocopying, duplicating and carbon copying
  • Protecting or safeguarding the organization’s property
  • State the various reprographic techniques that can be carried out in an office
  • Carbon copying
  • Stencil duplication
  • Photocopying
  • Spirit duplicating
  • Ink duplicating
  • Your school would wish to use photocopying as a method of making copies of exams. State the advantages and disadvantages of using this method

Advantages of photocopying

  • It is a fast method of reprography
  • It is a simple method and require little training of the users
  • One will obtain the exact copies of the original document
  • The method is not expensive if the copies to be made are few
  • It is environmental friendly

 Disadvantages of photocopying

  • The copies that are made fade in the cause of time
  • Photocopying can be costly if the copies being made are many
  • The employees may misuse the method due to its convenience
  • Photocopying machine requires electricity which may be expensive
  • Few colours in a document may be obtained by use of this method
  • State the types of office layout
  • Enclosed office layout
  • Open office layout
  • Landscape office layout
  • Suggest reasons why an organization should use landscape office layout
  • It creates a relaxed atmosphere for the workers
  • It is more attractive and beautiful
  • The image of the organization/firm is enhanced
  • It promotes good working relations and co-operation among the workers
  • Equipment and office facilities may be shared among the employees
  • The flowers or plants used break the monotony of open spaces
  • State ways in which landscape office layout can be created
  • By placing plants/flowers in an office
  • By having paintings of animals or plants on the wall
  • By placing fish aquariums in an office
  • Through shaping of office furniture in form of animals, birds and concrete shapes
  • Creating miniature physical features such as waterfalls and mountains in the office
  • State why you will advice an office manager to use an open office layout instead of an enclosed office layout
  • In an open office layout it is easier to supervise workers than in an enclosed office
  • An open office discourages absenteeism which may be common in an enclosed office
  • It is cheaper to maintain an open office than an enclosed office
  • Equipment, facilities and machines can be shared in an open office which may not be possible in an enclosed office
  • Floor space is saved in an open office than in an enclosed office
  • There is enhanced attraction and framework in open office
  • It is cheaper to light an open office than an enclosed office
  • It is easy to locate employees in an open office
  • State the advantages of enclosed office layout
  • It is ideal for work that is confidential in nature
  • It is more secure than an open office layout
  • The office is ideal where high level of concentration is required
  • It is prestigious for the occupant of such an office as they are recognized
  • The worker is not disrupted by noise or movement of other employees
  • Highlight the disadvantages of an open office layout
  • There is a lot of noise and disruption from other employees
  • Contagious diseases may spread easily among the employees
  • The top ranked workers may feel belittled being placed among other workers
  • It is not very conducive for work that is confidential or secretive in nature
  • Property within the office is not very safe
  • Due to use by many people the office may not be very tidy
  • Outline the factors that have to be taken into consideration when deciding on a type of office layout to use
  • The cost of construction and maintenance
  • The number of staff to be accommodated in the office
  • The climatic condition of the area
  • Government directive if any
  • The nature of work to be carried out in that particular office
  • The nature and rank of staff to be accommodated in that particular office
  • The floor space available for the office
  • The need to maintain a good work flow among the workers
  • State the disadvantages of an enclosed office layout
  • It can encourage absenteeism
  • It is not easy to supervise the employees
  • It is expensive to construct and maintain
  • Facilities and office equipment cannot be shared among the workers
  • Workers can misuse office equipment such as the telephone
  • The office layout takes up more space
  • A lot of time is wasted when moving from one office to another
  • It may promote individualism as some employees are isolated from others
  • Enumerate the factors you will advice Mr.Mwajuma to consider when buying office machines for his company
  • The effect of the machine on the workers
  • The cost of the machine or equipment
  • The suitability of the machine for the task that is intended for
  • The availability of after sales services provide by the seller
  • Presence of office staff with the skills required to operate the machine
  • One has to consider space or room to keep the machine or equipment
  • The likelihood of the machine being outdated absolute or out of date
  • One has to consider whether that machine can adopt to future changes
  • State the best type of machine one would use to perform the following tasks:
  • Highlight the disadvantages of using office machine
  • They can be very costly/expensive to buy and operate
  • They occupy space which can be used for other tasks
  • Machines may replace labour causing unemployment
  • Some may require electricity which may be expensive
  • Any breakdown of the machine may delay work
  • The machine may become obsolete(out of date)
  • They are subject to wear and tear(depreciation)
  • Some may require specialized or trained personnel to operate
  • State the three categories of office staff
  • Managerial staff
  • Junior staff
  • Subordinate staff
  • Outline the advantages of using office machines
  • Machines are labour saving and can be cost effective in the long run
  • The output of machines is of good quality
  • They can be used to minimize fraud or theft
  • Machines can be very fast saving on time
  • They can produce uniform work
  • Machines can be very accurate as compared to human labour
  • Some machines can be adapted to multiple task such as a computer
  • Highlight the role played by a good filing system in an organization
  • Filing provides security/safety of documents
  • It facilitates easy retrieval or access of documents
  • Good filing enhances orderliness and tidiness of an office
  • It guarantees confidentiality of information since it cannot get to the wrong hands
  • Good filing promotes good communication
  • Filing guarantees that documents are protected from damage
  • Good filing guarantees good future reference in case the information is required
  • Outline the various categories of office equipment giving examples in each case
  • Distinguish between centralized and decentralized filing system

In centralized system one department is given the responsibility of keeping and managing all the files in the whole organization. This department is referred to as a registry.Decentralised filing

  • State the characteristics of a good office worker with office etiquette
  • Courtesy i.e dealing with people politely
  • Punctuality-keeping time at all times
  • Honesty-telling the truth
  • Co-operation with other employees
  • Tactical or being diplomatic when dealing with others
  • Good judgement and coming up with the best decision
  • Neatness and orderliness in terms of work arrangement
  • Dedication or loyalty towards the organization
  • Highlight personal attributes that Bakari should have as an office worker
  • He should be presentable
  • He should maintain high standard of morality
  • He should have a good sitting posture
  • He should maintain high standards of hygiene
  • He should be neat and accurate in the organization of his work
  • He should maintain good health and physical fitness through having proper diet and exercising
  • Define the roles played by the following office workers

(a)Departmental manager

  • Maintaining the books of accounts
  • He/she may prepare the budget for his/her department
  • Submitting reports to the senior manager about performance of the department
  • Monitoring and supervising workers in the department
  • Assigning roles and duties to employees in the department

(b)Personal secretary

  • Receiving and filing information
  • Booking appointments for the boss
  • Taking and writing minutes during meetings
  • He/she can maintain small amount of money for making small or petty purchases in the office
  • He/she receives and makes calls for his seniors
  • Highlight trends in office management
  • Use of modern computers enhances efficiency
  • Introduction of customer care desks or offices to address customers concerns
  • Movement toward open and landscape office plan to enhance more interaction among the workers
  • Outsourcing for some task that can be done by other firms instead of employing workers to do the same e.g. having external cleaners or security
  • Use of the cell phone for communication
  • E-Commerce is a recent trend in business. Outline the advantages of using this method in carrying out business activities.
  • One can have a wide variety of goods and services from all over the world
  • It reduces the cost of travelling to the market or in search of product
  • It is fast as deals can be made within a short period of time
  • A seller can advertise goods to many consumers over a wide area
  • Paper work and the many document used on other trade are removed or reduced as selling and buying is on-line
  • A lot of information about the market can be accessed on the internet

TOPIC OBJECTIVES : By the end of the topic, the learners should be able to:

  • Explain the meaning and importance of trade.
  • Classify trade
  • Explain the forms of home trade
  • Discuss the types and functions of retailers
  • Discuss the types and functions of wholesalers
  • Describe the documents used in home trade and the circumstances under which they all used
  • Explain the means of payment used in home trade and the circumstances under which they are used
  • Explain the terms of payment used in home trade and circumstances in which they are used.

MEANING OF TRADE

This is the buying and selling of goods and services with the aim of making a profit.

Importance of trade:

Trade plays a vital role in any economy. The various roles played by trade in the economy include:

  • Helps people to acquire what they cannot produce
  • Avails a variety of goods and services thereby improving the peoples living standards
  • Creates an outlet for goods thereby enabling the producers to dispose of their surplus produce
  • Creates employment opportunities
  • Encourages specialization and division of labour
  • Promotes peace, social relations and understanding the parties involved since they depend on one another
  • Provides revenue to the business and the government in form of taxes and fees charged on the various trading activities
  • Ensures steady supply of goods and services
  • Exploitation of local resources as traders create goods and services using locally available resources
  • Encourages economic growth and development

Classification of Trade

  • On the basis of geographical location of the portion involved, These are:
  • Home trade- Also called internal, local or domestic trade.

– It refers to the buying and selling of goods and services within the boundaries of a given country.

– It is further divided into retail trade and wholesale trade.

  • International trade (foreign trade)

-This is trade that is carried out beyond the boundaries of a country

-This is trade carried out between individuals or government of different countries e.g. trade between a citizen of Kenya and a citizen of Tanzania, or trade between the government of Kenya and the government of Southern Sudan

-International trade carried out between two countries is referred to as bilateral trade and international trade carried out among many countries (more than two countries) is referred to as multilateral trade.

International trade is classified into the following;

  • Export Trade- Which is the sale of goods and services by a country to another country or individuals in one country to another country or individuals in one country to individuals in another country.
  • Import Trade- Which is the buying of goods and services by one country from another country or by individuals in one country from individuals in another country.

Forms of Home Trade

  • Retail Trade

-Retail trade involves the buying of goods and selling them to the final consumer. A retailer is the trader who buys goods with a view of selling them to the final consumer.

Classification of Retail Traders

Retailers are classified/categorized according to the amount of capital they need to start and operate their businesses and their sales volume. Thus retailers can be classified as;

  • Small scale retailers
  • Large scale retailers
  • Small-scale Retail businesses/small scale Retailers

These are retailers whose capital requirement is low and their sales volume also low. They form the majority of retail traders and all found in all parts of the country.

Small scale businesses are easy to start and in most cases they are operated as one-man’s business.

A small scale trader serves the needs of people in the immediate neighbourhood and deal mainly in fast moving goods such as foodstuffs, detergents, kerosene e.t.c

Categories and Types of small scale

These are two main categories of small-scale traders as shown below;

  • Small scale Traders without shops

– Itinerant Traders (Hawkers and peddlers)

– Roadside sellers

– Open air market Traders

  • Small scale retailers with shops

– Single shops               – Tied shops                  – Kiosks      – Mobile shops

– Market stalls               – Canteens            – Mail order stores

  • Small scale Retailers without shops
  • Itinerant Traders

These are retailers who move from place to place selling their goods either on foot, by bicycles or motor cycles

-They move from town to town, door to door and from village to village selling their goods. Their goods may include clothes, utensils and foodstuffs. Customers can buy goods without having to travel to look for them

-Examples of itinerant traders are hawkers and peddlers (Hawkers move around on bicycles, handcarts or motorcycles while peddlers walk around)

-The itinerant traders require a licence from the local authorities in order to sell their goods.

Characteristics of itinerant Traders

  • Are found mainly in densely populated areas
  • Move from place to place in search of customers
  • They are very persuasive
  • Their prices are not controlled.

Advantages of itinerant Traders

  • They require little capital to start
  • They are convenient because they bring goods closer to the people
  • The business is flexible in that they can move from place to place. They can also change from line of business to another
  • Few legal formalities are required
  • They usually do not suffer bad debts because they sell in cash.

Disadvantages of itinerant Traders

  • The traders get tired because of moving from one place to another while carrying goods.
  • The business is affected by bad weather conditions
  • The traders sale a limited range of goods
  • It is difficult to transport goods from one place to another.
  • Do not offer guarantee, in case items are to be found defective
  • They are constantly in conflict with the local government.
  • Roadside sellers

These are traders who sell their goods at places where other people pass by and at busy places such as along busy roads, bus stages, road junctions and entrances to public buildings.

They place their goods on trays, cardboards, empty sacks and mails

They sell items such as fruits, utensils, sweets, clothing and some hardware.

  • Open-air market Traders

Open air markets are places set aside by the government through the local authorities where people meet to buy and sell goods. Traders selling similar commodities are allocated a special area. Such markets are open on particular days of the week.

The variety of goods sold here is wide and include agricultural produce, clothing, household items, animals, foodstuffs and even furniture.

The traders move from one market to another depending on the various market days.

Advantages of small-scale retailers without shops

  • They require a small amount of capital to start and operate their businesses.
  • They are convenient since they take goods to the customers within their reach.
  • They incur low costs of doing business
  • Most of their goods are low-priced and hence more affordable to customers.
  • The business is flexible. It is easy to change from one business to another
  • They require few legal requirements
  • The financial risks involved in these businesses are minimal
  • They do not suffer bad debts since they sell on cash bases
  • They interact at personal level with the customers and can convince them to buy their goods.

Disadvantages of small-scale retailers without shops

  • It is tiring for traders to move from place to place especially if the goods are heavy and the distance covered are long
  • The traders face stiff competition from other traders with more resources
  • They offer a limited variety of goods
  • They are affected by unfavorable weather condition
  • Lack of permanent operating premises denies them a chance to develop permanent customers
  • They face a lot of certainty, especially in terms of a steady flow of income
  • They sometimes sell defective or low quality goods because customers expect to pay little money for them.
  • Small scale Retailers with shops

These are small scale retailers with permanent locations to operate from. They include;

These are small shops or structures found mostly in residential areas, busy streets, highly populated areas or inside building where people pass by or work

They deal in fast-moving items and groceries such as; sodas, cakes, sweets, cigarettes, and newspapers e.t.c. some kiosks also sell food

  • Market stalls

These are permanent stands found in market places, especially those operated by the various local authorities

They are of different designs depending on the goods they sell or services they offer.

They are rented or leased by individuals from local authorities

They deal in fast moving household goods though some may specialize in other products such as clothing and shoes.

Examples are stalls at Muthurwa markets, Kariokor, and most municipal markets.

Advantages of kiosks and market stalls

  • They are small, hence easy to start and operate
  • They are conveniently located close to their customers
  • They tend to have a loyal group of customers since they have permanent premises
  • They incur relatively low running costs
  • They give personal attention to their customers
  • They are flexible since the owner can change from one business to another easily.

Disadvantages of kiosks and market stalls

  • They provide a limited range of products
  • They usually do not have adequate higher capital for expansion
  • They charge relatively higher prices than the retailers without shops
  • They face stiff competition from more established retail businesses
  • They sometimes suffer from bad debts
  • Due to their size, they do not enjoy economies of scale
  • For market stalls the hours for operation are controlled by the local authority concerned
  • Single shops (unit shops)

– Single shops are mostly located in the trading or market centres in rural areas or in the residential areas of high towns

-They are operated from fixed premises

-They are usually run by one person who may get assistance from him/her family or employ attendance

-Some deal in one line of commodity such as houses, clothing, groceries or electronics

Advantages of single shops

  • Minimal capital is required
  • Running costs are usually low as the owner may use the services of family members
  • They may offer credit facilities to some customers
  • They are easy to start because only a licence is required
  • They usually have a loyal group of customers
  • The owner can change his or her line of business at will
  • They are easy to start since the owner does not have to meet any manufactures requirements
  • Products prices are fixed by the shop owners
  • The owner has the freedom of creativity and independence
  • They are convenient since they ensure goods are within easy reach of their customers.

Disadvantages of single shops

  • Expansion is difficult due to limited funds
  • They face stiff competition from large businesses
  • The absence of the owner may result in closure and loss of business
  • May suffer bad debts
  • Provide limited variety of goods
  • The operations of the business are affected by the owner’s commitment.

These are shops that mainly sell the products of one particular manufacture or are owned by a specific supplier of certain goods. The shops are owned or controlled by the manufacturer, and are thus tied to the manufacture.

The manufacture/supplier designs the organization of the shop and its appearance e.g. painting hence they look alike. The supply closely supervises the shops.

Examples of tide shops include; Bata shops which sell shoes made by Bata Company, petrol station like National, Kobil, and total e.t.c

Advantages of Tied shops

  • Availability of goods is assured at all times
  • The supplier carries out promotion for the goods
  • The manufacturer/supplier can easily give credit to the shops
  • Customers can return or change faulty goods at any of the shops
  • The shops are easily identifiable due to their similarity
  • Traders are financed by the manufacture
  • They get loyal customers who keep buying their branded products
  • Advertisement expenses are met by the manufacture
  • They get technical advice from the manufacture
  • Some operate from permanent premises owned by the manufacture.

Disadvantages of Tied shops

  • Decision making is slow because the manufacturer must be consulted
  • The variety of goods is limited
  • The shops cannot sell goods from any other manufactures even if customers require them
  • Prices are fixed by the manufacture and sometimes profit margins may be low
  • They inhibit the retailers creativity and innovations
  • There is a likelihood of disagreements between the manufacture and the tied shop owners.

Differences/Distinction between a tied shop and single shop                                                                                                                                           Single shop                                                         Tied shop

  • Canteens: These are retail shops found in institutions such as schools, colleges, hospitals and army barracks.

-They stock a variety of consumable goods such as sodas, bread, tea, groceries and other things used by the people in that institution.

-They are run by the institutions management or by individuals on retail business

-Most of them operate without a license as they are considered to be part of the institution. Their hours of operation are sometimes regulated by the institution

Advantages of canteens

-Some do not pay any rent, thus they incur low overhead costs

-They often require low capital to start

-Some offer credit facilities to their customers

-They are situated at ideal location which is convenient for their customers

-They are assured of a market as they cater for people in particular institution.

Disadvantages of canteens

-The market is limited to people in a particular institution

-They do not open throughout/they open for limited hours e.g. after classes in schools

-They close down when the targeted customers are not available e.g. during school holidays.

-They may suffer from bad debts

-They are difficult to expand due to insufficient funds

  • Automatic vending machines; These are coin or card operated machines used to sell commodities like drinks, stamps, and snacks e.t.c. Examples are coffee shops, ATM’s e.t.c

-They dispense goods or services once a coin or a card is inserted and instructions keyed in.

-They operate without an attendant

-They are usually placed at strategic places such as busy streets, office buildings, shopping centres and hospitals.

Advantages of vending machines

  • Commodities can be bought anytime because no attendant is required
  • They save the owner the cost of employing a shop attendant
  • They can be put strategically to boost sales e.g at institutions
  • They are fast and accurate
  • They are not affected by weather changes
  • They provide goods and services on cash basis protecting the owner from the burden of bad debts.

Disadvantages of vending machines

  • Break-downs or stock-outs may discourage customers
  • Maintenance costs are high due to regular servicing, repairs and sometimes vandalism
  • The owner may incur losses through fraud and use of inappropriate coins and cards by consumers.
  • Customers are forced to carry coins and cards in order to obtain goods or services
  • Their use is limited to customers who are familiar with how the machine works
  • They are mainly found in urban areas, thereby locking out the people in rural areas.
  • Mobile shops

Mobile shops, like itinerant traders move from town to town or village to village selling their goods.

-They have vehicles that they have converted into a shop from which customers can buy their goods

-They visit different towns at regular intervals.

Advantages of small scale Retailers

  • Easy to raise capital to start
  • Retailers are in close contact with the consumers and may give credit to credit worthy customers.
  • Are able to use free or cheap labour from family members
  • The risks involved in their businesses are small
  • The business is simple to start and manage
  • Few legal formalities required to start and run the business
  • The trader can easily change from one form of business to another i.e. the business is flexible

Disadvantages of small-scale retailers

  • Traders have limited access to loan facilities
  • They may not afford to hire specialists or technical staff
  • May suffer bad debts if they give credit to customers without proper assessment
  • Do not enjoy economies of scale
  • Have a low turnover because of the little capital invested

LARGE SCALE RETAILERS

Large-scale retailers have the following features/characteristics;

  • Require large amounts of capital to start and maintain
  • They operate from larger fixed premises
  • They operate mainly in urban areas
  • They have a large labour force
  • Buy goods in large quantities from wholesalers or directly from producers and are therefore allowed large trade and quantity discounts and other favourable credit facilities
  • Require the services of specialists such as salespersons and accountants
  • May occupy one large premise or several premises in the same town or in different towns
  • They have large stocks and large sales volumes

TYPES OF LARGE SCALE RETAILERS

  • Supermarkets: A supermarket is a large-scale self-selection/self-service store that deals mainly with household goods such as utensils, foodstuffs and clothes. It has the following features;

Features of supermarkets

  • Requires large capital to start
  • They stock a wide variety of goods
  • Offers self service facilities
  • Goods have price tags or bar codes
  • Prices of goods are fixed
  • No credit facilities are offered
  • Sell at comparatively low prices
  • Goods are systematically arranged for easy selection
  • Shoppers are provided with baskets or trolleys for convenience
  • There is minimal interaction between buyer and seller
  • There are employees who pack goods for customers at the pay points.

Advantages of supermarkets

  • Prices may be relatively low because they buy their goods in bulk and are given discounts
  • Saves time as customers are able to get most goods they require under one roof
  • Self-service saves the customers time
  • Few attendants are employed thereby reducing the monthly wage bill
  • Impulse buying leads to more sales, hence high profits
  • Bad debts are avoided because there are no credit sales.
  • The price tags on goods help customers to monitor their spending.

Disadvantages of supermarkets

  • Do not offer credit facilities to customers
  • Do not deliver goods to the customer’s premises
  • Are found mainly in urban areas
  • May incur losses due to pilferage of goods
  • Impulse buying may lead the customers to buying goods they may not need.
  • They are expensive to start and operate due to the large amount of capital required
  • Prices are fixed and bargaining is not accepted, which discourages some customers
  • Minimal personal interaction limits chances for making more sales
  • Hypermarkets

A hypermarket is a large shopping complex/centre comprising a variety of businesses managed by different people all housed in one building

Examples; village market, sarit centre, Tuskeys-Kisumu, Nakumatt mega city-Kisumu e.t.c

Features/Characteristics of Hypermarkets

  • Are served with good access roads
  • They have ample parking space
  • Many businesses in one building
  • Located in the outskirts of town
  • Offer a variety of goods and services
  • Occupy a large space.

Advantages of Hypermarkets

  • Offer ample and secure parking space to customers
  • Customers can do all their shopping in one building
  • They are usually open for long hours
  • They may provide credit facilities by accepting credit cards
  • There is less traffic congestion as hypermarkets are located away from urban centres
  • Provide a wide variety of goods and services to customers under one roof.
  • They have fair prices that are customer friendly.

Disadvantages of Hypermarkets

  • Are only convenient to customers who have cars because they are situated away from city centres
  • They serve limited number of people due to their location
  • They require large amount of capital to establish
  • They can easily exploit their customers since their prices are not controlled
  • Require large amount of space which are not available in central business district (CBD)
  • They spend a lot of security to safeguard properties
  • Chain stores (Multiple shops); Are large scale businesses with separate branches which are managed and organized centrally. The branch managers are accountable to the head office. Examples; African Retail Traders (ART), White Rose dry cleaners, Nakumatt, Tuskys, Uchumi e.t.c

Characteristics/features of chain stores

  • Are managed centrally from a head office
  • Prices are standard for all their products in all their branches
  • All branches deal in the same type of products
  • Sales are decentralized i.e. the various shops situated in different places act as selling points or branches
  • Purchases of stock are centralized i.e. buy stock buy stock in bulk centrally and distributed to the different branches
  • Goods can be transferred from one shop to another where the need for them is higher
  • The shops operate under one name and are similar in appearance and interior layout

Advantages of chain stores/multiple shops

  • They enjoy large trade discounts since they buy their goods in bulk centrally and is passed to consumers in form of low prices
  • Common costs such as those of advertising are shared
  • Goods that do not have a high demand in one branch can be transferred to another where their demand is high
  • They are easily identified by their colour and design
  • They have low operational costs because of the centralized buying, storage, advertising and accounting
  • They serve a large number of customers because they are spread in many towns and cities
  • The similarity of the shops in appearance and services serves as an advertising tool
  • Risks such as losses are spread among many shops
  • It is possible to pay for goods in one branch and pick them up in another.

Disadvantages of chain stores/multiple shops

  • Large amount of capital is required to start and maintain the business
  • They cater mainly for the urban areas as they are situated in those places
  • Organizational problems may occur due to their large size
  • No credit facilities are offered except those operating exclusively on hire purchase schemes
  • Response to market changes is slow due to the slow decision making
  • Decision making is slow as the head office must be consulted
  • Lack of personal touch with customers
  • Absence of personal touch between employer and employee may reduce incentives for hard work among staff
  • People tend to shy away from buying similar products such as clothes and this may reduce sales.
  • Departmental stores

This is a group of single shops operating under one roof with a centralized management

Each shop/department specializes in a particular line of products and is headed by its own department manager.

Characteristics of departmental stores

  • Each department has its own manager
  • Each department sells only one line of products
  • All departmental managers are answerable to a general manger
  • They offer a wide variety of goods at relatively low prices
  • They sell goods strictly on cash basis
  • They are usually in town centres
  • Goods are not transferable from one department to another as each has its own variety of goods.

Advantages of departmental stores

  • Customers can buy/access a wide variety of goods at fair prices under one roof.
  • They can afford to hire trained qualified experienced staff who provide quality services
  • They buy goods in large trade discounts. This enables them to sell at low prices.
  • Each department is able to make independent and quick decisions that affect its operations.
  • The independence of departments ensures that the weakness of one department does not affect each other.
  • Savings can be made on some activities such as product promotion by centralizing them.

Disadvantages of Departmental stores

  • A large amount of capital is required to start and maintain the stores
  • They require a large number of customers to operate profitably
  • It is difficult to give personal attention to customers
  • They cater mainly for the urban communities in which they are located
  • They strictly sell their goods on cash basis
  • Operational costs are high due to the wide variety of services offered
  • Their large size could encourage theft and pilferage of goods
  • The independence of departments can make central control difficult.
  • Mail order stores

This is a type of retail business where business is carried out through the post office, telephone or email

-Ordering of the goods is done through the post office telephone or email and delivering of goods is done by post or courier

-There is no personal contact between the seller and the buyer and buyers get information from advertisements.

-Goods are dispatched on the basis of cash with order (CWD) or cash on delivery (COD).

Characteristics/features of Mail order stores

– They sell the goods through the post office

-They operate on cash with order (CWO) or cash on delivery (COD) terms

-Heavy advertisement are involved

-Customers do not visit the selling premises.

-There is no personal contact between the buyer or the seller

-All transactions are done through the post office

-They deal with goods that are less bulky, have high value, and are durable and not too fragile

-May have large warehouses

Advantages of Mail order stores

  • They reach customers who are far for away from the shopping centres
  • Do not require the services of sales personnel or shop attendants for skilled labour since selling is routine
  • Total control of distribution is possible
  • Payments is made with order or delivery so there is little chance of bad debts
  • Eliminates the loss associated with shop space, thus saving on rent
  • Supply of goods is based on order thus a trader requires little working capital
  • The method eliminates trips to congested stores and lengthy waits queues
  • Do not require large storage space for goods.

Disadvantages of Mail order stores

  • Advertising and postage costs may increases the price of goods
  • There is lack of personal contact between the seller and the buyer
  • There is limited variety of goods on offer
  • Customers do not have the opportunity of inspecting goods before buying
  • There are no credit facilities
  • The method is only suitable for those who can read and write
  • Should there be a problem with the post office.e.g industrial action like strikes, the business may be affected
  • Difficult to operate in places where post office services are poor or unavailable
  • Chances of being defrauded are high.

FUNCTIONS OF RETAILERS

These can be discussed as services rendered to consumers, wholesalers and producers

Services Rendered to consumers

  • Offers credit facilities: Retailers are in close contact with the consumers and some may give them credit facilities
  • After-sales services: Retailers who sell technical goods e.g. cars, electronics e.t.c may offer after sale services to consumers e.g. transport, installation repair e.t.c
  • Provision of variety of goods: Retailers stock a wide variety of goods from different wholesalers and manufactures enabling the consumers to have a wide choice.
  • Advising consumers: Retailers may offer advice to consumers on choice and use of products
  • Availing needed goods: Retailers make goods available to consumers at the right time and place
  • Breaking bulk: Retailers sell goods to consumers in convenient quantities
  • Accumulating bulk
  • Stabilizing prices: By ensuring that goods are continuously available to consumers

Services Rendered to wholesalers

  • Retailers store goods and relieve the wholesalers the burden of storing goods and the storage costs
  • They relieve the wholesalers the burden of transportation
  • Retailers advice wholesalers on market trends(on consumers demand)and give valuable information
  • They help in distribution of goods to the consumers
  • They help in breaking bulk on behalf of the wholesaler
  • They finance wholesalers to continue with their operations through paying for the goods
  • They relieve the wholesaler of some risks that arise from the storage of goods such as theft, fire and accidents.

Services Rendered to producers

  • Through wholesalers retailers provide very vital information to manufactures about market demand
  • They advertise goods on behalf of producers
  • They sell and market goods to consumers. This relieves the manufactures the task and risk of retailing
  • They store goods on behalf of the producers
  • They break bulk on behalf of producers to consumers
  • They finance producers by buying and paying cash

WHOLESALE TRADE

Wholesaling involves selling goods in large quantities to traders for resale. A wholesaler is a trader who buys goods in bulk from producers/manufactures for resale to retailers at a profit.

-There are wholesalers who carry out retailing but that do not make them retailers.

Classification of wholesalers/Types of wholesalers

Wholesalers may be classified depending on a number of factors. These factors include;

  • According to the range of goods they handle
  • According to the geographical area in which they operate
  • According to their method of operation.

Under this classification, wholesalers may be any of the following;

  • General merchandise wholesalers
  • General line wholesalers
  • Specialized wholesalers

The word merchandise means goods .

-The general merchandise wholesalers stock and sell a wide variety of goods e.g. hardware, clothes, cosmetics and foodstuffs. The retailers who buy from these wholesalers are thus able to get a wide variety of goods for resale.

-They are also called general wholesalers or full-line wholesalers

  • b) General line wholesalers

-These are wholesalers who deal in a wide variety of goods within the same line e.g. textbooks, duplicating papers and other types of stationary.

  • c) Specialized wholesalers

-These are wholesalers who deal in a particular good from a given line e.g. in the line of grains, they may specialize in maize only.

  • ii) According to the geographical area in which they operate.

Under this category wholesalers may be;

  • Nationwide wholesalers
  • Regional wholesalers.
  • Nationwide wholesalers:

These are wholesalers who supply goods to traders in all parts of the country.

-They establish warehouses or depots in different areas from Kenya National Trading Corporation (KNTC)

  • b) Regional Wholesalers

These are wholesalers who supply goods to certain parts of the country only. They may cover a county, District, division e.t.c

iii) According to their method of operation

Under this classification, wholesalers can be:

  • Cash and carry wholesalers
  • Mobile wholesalers
  • Rack jobbers
  • Cash and carry wholesalers: These wholesalers sell goods on cash and self-service basis like supermarkets

-They neither offer transport nor credit facilities to their customers.

  • Mobile wholesalers/Track distributors: These are wholesalers who use vehicles to move from place to place supplying goods to retailers e.g. soda distributors, bread distributors, beer distributors e.t.c.

These wholesalers specialize in selling certain/particular products to other specialized wholesalers. They buy goods from producers or from other countries for reselling.

E.g. some wholesalers buy horticultural products from producers and sell to other wholesalers in urban areas

-Rack jobbers usually stock their goods in shelves or racks from which customers select the goods to buy. Customers may be allowed to pay for the goods after they have sold them.

  • d) Drop shippers

These are wholesalers who make orders for goods from manufactures/producers but do not take them from the producers premises. They then look for the buyers for the goods and supply the goods directly from the producers

Alternate classification of wholesalers

An alternative classification of wholesalers is given below:

  • Those who buy goods store them in warehouses and sell them to traders without having added anything to them.
  • Wholesalers who act as wholesaler’s agents or brokers. These are middlemen who are paid a commission for their work e.g. commission agents
  • Those who after buying the goods and storing them prepare them for sale. They break bulk, pack, brand, sort, grade and blend the goods

These terms are explained as below:

  • Breaking bulk- Reducing a commodity into smaller quantities for the convenience of the buyer e.g. buying sugar from the producer in sacks and selling it in packets.
  • Packing- Putting goods in packets and boxes ready for sale.
  • Branding- Giving a product a name by which it will be sold
  • Sorting- Selecting goods to desired sizes, weight, colour and qualities
  • Grading- Putting goods in groups of similar qualities to make it easier to price them
  • Blending- It involves mixing different grades of a product to achieve qualities like taste and colour.

Functions of a wholesaler

These can be discussed as services rendered to producers, retailers and to consumers.

Services of wholesalers to the producers

  • They relieve the producers the problem of distribution by buying goods from them and selling to retailers
  • They relieve the producers of some risks they would experience e.g. damage, theft, fall in demand e.t.c
  • Save the producers from the problem of storage by buying goods and keeping in their warehouses
  • They prepare goods for sale on behalf of the producers
  • They get feedback from consumers on behalf of producers
  • They promote products through advertising, displays, trade fairs and exhibitions
  • They finance producers by buying goods from them and paying in cash.

Services of wholesalers to the Retailers

  • They stock a wide variety of goods in large quantities relieving the retailer from buying from different producers
  • They avail goods at places convenient to retailers
  • They break bulk for the benefit of retailers
  • They offer transport facilities to retailers
  • They offer advisory services to retailers regarding market trends
  • They offer credit facilities to retailers
  • They engage in product promotion on behalf of retailers
  • They sort, blend, pack and brand goods saving retailers from having to do it.

Services of wholesalers to consumers

  • They ensure a steady supply of goods to retailers hence consumers are not faced with shortages
  • They ensure a stable supply of goods hence there will be stability in market prices
  • They enable consumers to enjoy a wide variety of goods
  • They break the bulk of goods thus enabling the consumer through the retailer to get the goods in convenient quantities
  • They prepare goods for sale e.g. branding, blending and packaging
  • Pass information to consumers through retailers about the goods e.g. new products, new prices and their use.

DOCUMENTS USED IN HOME TRADE

A business document is a written record which gives evidence to a stage in the transfer of goods or provision of services from one party or it is written record which gives evidence that trader or a business transaction has taken place.

A business transaction is a deal between two or more people involving exchange of goods and services in terms of money.

Business transaction may take place on cash basis ; in which case goods are paid for before or on delivery or a short while after delivery

Business transaction may also take place on credit basis; which means payment is made after a specified period from the date of delivery of the goods or the provision of the services

There are various business documents that are used in various stages of business transactions as discussed below;

  • Documents used at the inquiry stage

This is the first stage in transaction. An inquiry is a request by a prospective buyer for information on available goods and services. It is aimed at establishing the following;

  • Whether the goods or services required are available for sale
  • The quality or nature of the products available
  • The prices at which the goods or services are being sold
  • The terms of sale in respect to payment and delivery of goods or services

Some of the documents used at this stage include;

  • Letter of inquiry;

This is a letter written by a potential buyer to the seller to find out the goods and services offered by the seller.

A letter of inquiry can be general or specific. A specific letter of inquiry seeks for information about a particular product.

Reply to an inquiry

The seller may reply to the letter of inquiry by sending any of the following documents;

-Price list  -A catalogue                -Quotation                   -A tender

  • i) A price list

This is a list of items sold by the trader together with their prices. The information contained in a price list is usually brief and not illustrated and may include;

– Name and address of the seller  -List of the goods and services

-The recommended unit prices of the products     -Any discounts offered

Price list show the prices of the commodities at that time.

  • A catalogue; A catalogue is a basket which briefly describes the goods a seller stocks.

It is normally sent by the seller to the buyer when the buyer sends a general letter of inquiry. It usually carries illustrations on the goods stocked, and could be in the form of attractive and colorful pictures

The content of a catalogue includes the following;

  • Name and address of the seller
  • Details of the products to be sold; inform of pictures and illustrations
  • The prices of the products
  • After-sales services offered by the seller
  • Packaging and posting expenses to be incurred
  • Delivery services to be used
  • Terms of sale

-Catalogues carry more information than the price list and they are more expensive to print.

  • Quotation; This is a document sent by a seller to a buyer in response to a specific letter of inquiry. It specifies the conditions and terms under which the seller is willing to supply the specified goods and services to the buyer.

The content of a quotation includes the following;

-Name and address of seller -Name and address of the buyer

-Description of goods to be supplied               -Prices of the commodities

-Terms of sale i.e. discounts, time of supply, delivery

-Total of the goods to be supplied

Quotations are normally in form of letters, but many large-scale businesses have pre-printed quotations forms which they readily send to the potential customers.

This is a document of offer to sell sent by a seller to a buyer in response to an advertised request

Tenders contain the following;

– Date when the tender advertisement was made       – Mode of payment

-Date of making document                                – Discounts given

– Name and address of prospective seller called the tenderer

– The prices at which the goods can be provided

– Period of delivery                                   – Mode of delivery

-Tenders are delivered in sealed envelopes which are opened by the buyer on a specified date

The winning tender is usually awarded on the of the lowest quoted price although the buyer is not obliged to accept this especially if quality is likely to be low

Tenders are not binding unless accepted by the buyer.

  • Documents used at the order stage

After receiving replies to inquiry in form of price list, catalogue or Quotation, a prospective buyer will study the terms and conditions stated in them, and then may decide to buy products or not.

If a prospective buyer decides to purchase an item(s), he or she then places an order

An order is a document sent by a potential buyer to a seller requesting to be provided with specified products under specified terms and conditions

-An order issued for goods is called a local purchase order (LPO)

An order issued for services is called a local service order (LSO)

Ways of making an order

  • Filling an order form. This is a pre-printed document that is used for making orders
  • Writing an order letter
  • Sending an e-mail, faxing or sending a short text message
  • Giving a verbal order. Verbal orders have the disadvantage in that they can be misunderstood and there would be no record of items ordered

-Where written orders are made, the potential buyer keeps a copy of the order for use in verifying the goods ordered when they are delivered.

– A written order may contain the following;

  • Name and address of the buyer
  • The number of the order
  • Quantities ordered and total amount to be paid
  • Description of the goods ordered
  • Price per item
  • Special instructions on such matters as packaging and delivery
  • Acknowledgement note

On receiving the order, the seller sends the buyer an acknowledgement note

An acknowledgement note is a document sent by the seller to the prospective buyer to inform him/her that the order has been received and it is being acted upon.

After sending the acknowledgement note, the seller has to decide whether to extend credit to the buyer or not. At this stage, the seller has the following options;

  • If the seller is convinced that the buyer is credit worthy, arrangements are made to deliver the ordered goods or services to the buyer.
  • If the seller is not sure of credit worthiness of the buyer, a credit status inquiry can be issued to the buyer’s bankers or to other suppliers who deal with the buyer to ascertain the credit worthiness.
  • If the buyer is not credit worthy then a polite note or a pro forma invoice can be sent to him/her

A proforma invoice

This is a document sent by the seller to the buyer requesting the buyer to make payment for goods or services before they are delivered. It indicates that the seller is not willing to grant the buyer credit

Functions of a proforma invoice

  • A polite way of asking for payment before the goods are delivered
  • Sent when the seller does not want to give credit
  • Used by importers to get customers clearance before goods are delivered
  • Issued to an agent who sells goods on behalf of the seller
  • Show what the buyer would have to pay if the order is approved
  • Can be used to serve as a quotation

Circumstances under which a pro-forma invoice may be used

  • If the seller does not want to give credit
  • If the seller wants to sell goods through an agent
  • If the seller wants to get clearance for imported goods
  • If the seller wants it to function as a quotation
  • If the seller wants to inform the buyer what he/she pay if the order is approved e.t.c

Documents used at the Delivery stage

After the seller has accepted the order sent an acknowledgement note and where necessary the pro-forma invoice, the seller then prepares the goods for delivery to the buyer. This can be done in the following ways;

  • The seller can ask the buyer to collect the goods
  • The seller can deliver the goods to the buyer using his/her own means of transport
  • The goods can be delivered to the buyer through public transport
  • The services(s) can be rendered to the buyer at the sellers or the buyer’s premises or at any convenient place.

The main documents that are used at this stage are;

  • Packing note; Before delivery goods are packed for dispatch. This is a document prepared by the seller showing the goods contained/packed in every container, box or carton being delivered to the buyer

-A copy of the packing note is packed with the goods to make/help the buyer have a spot check.

The contents of a packing note include;

– Description of goods packed

-Quantities of goods packed

-The means of delivery

NOTE: A packing not does not contain prices of goods. This ensures that those people involved in checking and transporting goods do not know the value of goods. This is done as a precaution against theft.

  • Advice note; This is a document sent by the seller to the buyer to inform the buyer that the ordered goods have been dispatched. It is usually sent through the fastest means possible.

-It contains the following;

-The means of delivery                  -A description of the goods

-The quantity dispatched               -Date

-Name and address of buyer and seller

Functions of an advice note

  • Informing the buyer that the goods are on the way so that in case of any delay in delivery, the buyer can make inquiries
  • Alerting the buyer so that necessary arrangements can be made for payments when the goods arrive
  • Can serve as an acknowledgement note, where one is not sent/
  • Delivery note; This is a document sent by the seller to the buyer to accompany the goods being delivered.

-A delivery note is always made in triplicate (3), one copy remains with the seller and two sent to the buyer.

-When the goods reach the buyer, he/she confirms that the goods are the ones ordered for and that they are in the right condition by comparing the delivery note, the order and the goods. If the buyer is satisfied with the goods, he/she signs the two copies, retains the original and send the copy back to the seller. This serves as evidence that the goods have been received in the right condition and in the right quantities.

-Some businesses keep delivery books in which the buyer signs to indicate that goods have been received in good condition. A delivery book is used by the seller if he/she delivers goods by himself/herself as an alternative to a delivery note

The content of a delivery note includes the following;

  • Date of delivery
  • Delivery note number
  • Description of the goods delivered
  • Quantities of the goods delivered
  • Space for the buyer to sign and comment on the condition of the goods received.
  • Consignment note

This is a document prepared by a transporter to show that he/she has been hired to deliver specified goods to a particular buyer. This document is used when goods are delivered to the buyer by public means of transport e.g. by trains.

-The seller is the consignor , the buyer is the consignee and the goods the consignment

– The transporting company prepares the consignment note and gives the seller to complete and sign. The seller then returns the note to the transporter (carrier) who takes it together with the goods to the buyer.

-On receiving the goods, the buyer signs the consignment note as evidence that the goods were actually transported.

The content of a consignment note includes the following;

  • Details of the goods to the transported
  • Name address of seller (consignor)
  • Name and address of buyer (consignee)
  • Terms of carriage and conditions of transporting the goods
  • The transportation cost
  • Handling information
  • Destination of goods
  • Goods Received note; This is a document sent by the buyer to the seller to inform him/her that goods sent have been received. It usually prepared in duplicate, the original is sent to the seller and the copy retained by the buyer.

The contents of the goods received note include;

  • Date of the document
  • Corresponding purchase order
  • Details of goods received
  • Date the goods were received.
  • Returned goods note/Damaged goods note; If goods are damaged on the way, the buyer may return them to the seller. The buyer may also return goods for other reasons e.g.
  • Wrong type of goods
  • Excess goods
  • Wrong quality goods

-When the goods are returned, the buyer informs the seller of the return by sending a goods returned note.

– A goods returned note is a document sent by a buyer to a seller to inform him/her that certain goods are being returned to the seller.

-Where the goods are returned because of damage, the note may be referred to as the damaged goods note.

The contents of the goods returned note include;

  • Details of goods that have been returned to the seller
  • Date goods are returned
  • The number of (GRN)
  • Order number
  • Delivery number
  • Name and address of both buyer and seller

– When the seller receives the note together with the goods, he issues a credit note

  • Documents used at the invoicing stage

This stage involves the seller requesting or demanding for payment from the buyer for the goods or services delivered.

Some of the documents used at this stage include:

This is a document sent to the buyer by the seller to demand for payment for goods delivered or services rendered.

There are two types of invoices namely:

  • Cash invoice- This is sent when payment is expected immediately after delivery thus acting as a cash sale receipt
  • A credit invoice- This is sent when a buyer is allowed to pay at a later date.

Functions of an invoice

  • It shows the details of goods sold i.e. quantity delivered, unit price, total value of the goods and terms and conditions of sale.
  • It is a request to the buyer to make payment
  • It serves as an evidence that the buyer owes the seller a certain amount of money
  • It is used as a source document in recording the transaction in the book of accounts.

The contents of an invoice include the following:

  • Invoice number
  • Date document is prepared
  • Details of goods repaired
  • Unit prices of goods delivered
  • Total value of goods
  • Discounts offered
  • E and O.E printed at the bottom

The letters E and O.E ( Errors and Omissions Excepted) means the seller reserves the right to correct any errors and omissions made in the invoice.

-On receiving the invoice, the buyer verifies the contents using the local purchase order and the delivery note. If the invoice is in order, the buyer makes arrangements to pay the amount stated.

Businesses which offer services issue a document called a bill , which serves the purpose of an invoice.

Differences Between the invoice and pro-forma invoice

  • Credit note

This is a document sent by the seller to the buyer (credit buyer) to correct an overcharge. It is used to inform the buyer that the amount payable by him/her has been reduced

An overcharge is an excess amount charged beyond the right price.

Causes of overcharge may include;

  • Arithmetical errors like wrong addition
  • Price overcharges
  • Inclusion of wrong or unordered items in the invoice
  • Failure to deduct the allowable discounts
  • Return of goods (damaged goods)
  • Failure to note the return by the buyer of packing cases or containers used to deliver goods to him/her
  • Use of wrong price list.

-The purpose of the credit note is to reduce the total invoice amount by the amount of the overcharge.

-A credit note is usually printed in red to distinguish it from other documents.

– Contents of a credit note include;

  • Name and address of the seller and the buyer
  • Credit note number
  • Description and value of goods returned by buyer (in case that was done)
  • Total overcharge

Reasons why a seller would send a credit note to a buyer/circumstances under which a credit note is sent to a buyer.

-When there is an overcharge in an invoice

-When the original invoice had indicated items that were not supplied

-When the buyer returns empty cases/crates that had been charged in the invoice.

-When the buyer returns some goods to the seller

-If the buyer was entitled to a discount which was not given or taken care of in the invoice.

This is a document sent by the seller to the buyer to correct an undercharge on the original invoice. It is used to inform the buyer that the amount payable by him has been increased.

-A debit note acts as an additional invoice.

-An undercharge arises when amount charged on products is less than their right price.

Causes of undercharge include:

  • Price undercharges on items
  • Arithmetic errors/mistaken in calculation
  • Omission of items in the invoice
  • Retention of crates and containers that were not involved by the buyer
  • Deductions of more discount than what was give/intended

Circumstances under which a debit note will be sent to the buyer

  • When there is an undercharge in the invoice
  • If the buyer had been given a discount that was not due to him
  • If some items had been omitted in the original invoice
  • If the buyer decides to retain some empty containers or crates

Differences Between a debit note and a credit note

Documents used at the payment stage

This is the final stage of a credit business transaction. It takes place after the invoice has been received and ascertained to be correct or where necessary, corrections made.

The documents used at the payment stage include;

This is a document issued to the buyer by the seller as proof that payment has been made.

-Payment can be done in cash, cheque, other forms of money or in kind

-The receipt also serves as a source document for making entries in books of accounts.

Contents of the receipt include;

  • Date of payment
  • Name of the person making payment
  • Name of person/institution receiving payment
  • Amount paid in words and figures
  • Means of payment
  • Receipt number
  • Signature of person issuing the receipt.

-The issuance of a receipt by the seller to the buyer after receiving payment marks the end of the credit transaction between the seller and the buyer (where payment has been done in full)

-A receipt serves the same purpose as the cash sale slip

  • ii) Statement of Account

This is a document prepared by the seller and sent to the buyer, giving a summary of all the dealings/transactions between them during a particular period of time, usually a month. It has the following details;

  • Date when it was prepared
  • Account number
  • Date column-where the date of each transaction is recorded
  • Particulars (Details)column-where the explanation of each transaction is shown
  • Money column

-Debit column-increases in the amounts payable due to credit sales or under charge correction.

-Credit column-Decrease in the amounts payable due to overcharges corrected or payments recorded.

-Balance column-Amount owing after each transaction (Balance outstanding)

  • Any discounts allowed to the buyer
  • Date when the buyer is expected to clear the balance
  • Terms of credit e.t.c.

-The statement of account enables the buyer to ascertain the correctness of the transactions which have taken place with the seller over the stated period.

An IOU (I owe you) is a document written by the buyer and sent to the seller to acknowledge a debt.

-It does not specify date when settlement will be made.

-It acts as evidence that a debt exists.

Summary of documents used in home trade

MEANS OF PAYMENTS

These are the methods or ways the buyer may use to settle debts arising from a business transaction. These are various means of payments that can be used. These means of payments can be put into the following groups;

  • Means of payment provided by the post office
  • Means of payments provided by the commercial banks
  • Means of payments which arise from private arrangements between sellers and buyers
  • Other means of payment.

This refers to the use of notes and coins to make payments. Currency notes and coins are issued by the central Bank of Kenya and are therefore legal tender

– Legal tender means everyone is obliged by law to accept them as a means of payment i.e. no one can refuse to accept them as they are backed by the law.Notes and coins are available in different denominations as follows;

Coins; 5cents, 50cents, sh.1, sh.5, sh.10 and sh.40

Notes; sh.10.sh.20,sh.50,sh.100, sh.200,sh.500 and sh.1000.

-Coins are suitable for settling small debts and are acceptable as legal tender up to a certain maximum e.g. 50cents coins the maximum is sh20 and sh.1 the maximum is ksh.100.

Advantages of cash as a means of payment:

  • It is the only means of payment which is a legal tender
  • Convenient for settlement of small debts
  • Convenient to people with or without bank accounts
  • Cash is readily usable

Disadvantages of cash as a means of payment

  • Not convenient to carry around
  • Cash can be lost or stolen easily as it is readily usable
  • Payment is difficult to prove unless a receipt is issued

Circumstances under which cash payment is appropriate

  • Where the amounts involved are small
  • Where the payee (receiver) does not accept other means of payment
  • Where cash is the only means available
  • Where the payee requires cash(money) urgently
  • Where there is need to avoid expenses associated with other means of payments
  • Means of payments provided by the banks

Commercial banks are financial institutions that accept deposits to and withdrawals from them.

They also lend money to customers. Examples of commercial banks include: Commercial bank of Kenya, National bank of Kenya, Barclays bank, and Co-operative bank e.t.c

-There are various means of payments provided by the commercial banks. They are:

  • Bank drafts/bankers cheques
  • Credit transfers
  • Standing orders
  • Travellers cheques
  • Telegraphic transfers
  • Debit cards
  • Electronic fund Transfer(E.F.T)

This is a written order by an account holder with the bank (drawer) to the bank (drawee) to pay on demand a specified amount of money to the named person (payee) or the bearer

Parties to a cheque

  • Drawer- This is the person or institution who writes and issues the cheque.He is usually a current account holder with the bank
  • Payee- The person or institution to be paid
  • Drawee- The bank(where the drawer has an account)

Details on a cheque; they include:

  • Date when it is issued
  • Name of the drawer
  • The name of the payee, except in bearer cheques
  • The name of the drawee(bank)and branch from where it is issued
  • Amount to be paid in figures and in words
  • The account number of the drawer
  • The signature of the drawer
  • The cheque number and bank code
  • The appropriate revenue stamps

Types of cheques

  • Open cheques
  • Crossed cheques
  • Bearer cheques
  • Order cheques

This is acheque that can be presented for payment over the counter. You present it and cash is paid to you.

This is acheque that bears two parallel lines on the face. This means the cheque cannot be cashed over the counter. The cheque is deposited in an account (payee’s account)

The payee then withdraws the money from his/her account

A crossed cheque can be opened by the drawer signing twice on its face.

-A crossing can be general or special

– General crossing- general crossings only contains the two parallel lines. This implies that the cheque will be paid through any bank in which it is deposited.

– Special crossings- Has other instructions included in the crossing i.e;

  • Not negotiable -Means the cheque can be transferred by the payee to a third party, but he third cannot transfer the cheque (only the original payee can transfer the cheque)
  • Account payee only- Means the cheque should be deposited in the account of the payee.
  • Not transferable- Means there is no negotiation or transfer of the cheque
  • Bearer cheques- This cheque does not have the name of the payee written on it. The person presenting it to the bank is the one who is paid.
  • Order cheque- The cheque bears the name of the payee. The bank pays this particular payee the amount stated in the cheque after proper identification

Dishonouring a cheque

A cheque is dishonored if the bank refuses to pay and returns the cheque to the drawer.

-A cheque can be dishonored due to the following reasons:

  • Insufficient funds in the account
  • If the signature on the cheque differs from the drawers specimen signature in the bank.
  • If the cheque is stalc i.e. presented for payment after six months from the date of issue.
  • If the cheque is post dated- meaning the cheque is presented for payment earlier than the date on the cheque
  • If the amount in figures is different from the amount in words
  • If there are alterations on the cheque which are not countersigned by the drawer
  • If the cheque is torn, dirty or defauld making it illegible
  • If the account holder(drawer) is dead and the bank is aware of the fact
  • If the drawer instructs the bank not to pay the particular cheque
  • If the cheque contains errors which need to be corrected
  • If the drawer becomes bankrupt or insane
  • If the drawer has closed his/her account.

Advantages of using cheques

  • They are more secure than notes and coins because if they are lost or stolen, they can be traced to the person who cashed them.
  • They are convenient to carry and can be used to pay large sum of money which would be otherwise inconvenient to pay using cash
  • They can be transferred to a third party to make payment/cheques are negotiable
  • Payment can be made by cheque without the need to travel to make payment
  • They provide a record of payment because of the counterfaits.The counterfaits acts as proof that payment has been made.
  • Under special circumstances, they can be cashed or discounted before maturity.

Disadvantages of using cheques

  • Cheques can be dishonored
  • Requires the payee to go to the bank and in some cases to have an account
  • The drawer pays some charges e.g. charges for the cheque book
  • Can only be issued by an account holder/the drawer must have an account
  • They are not readily acceptable by everybody
  • They do not provide immediate cash.

Circumstances under which a cheque is appropriate as a means of payment

  • Where the amount of money involved is large
  • Where the policy of the business demands so
  • Where a cheque is the only means available
  • Where there is need to avoid other risks associated with other means of payments
  • Bank drafts/Banker’s cheques

-This is a cheque drawn on a bank i.e. a cheque drawn by one bank to another requesting the latter bank to pay a named person or institution a specified sum of money and charge it to the drawing bank

-It can also be drawn by a bank on the request of a customer. The customer fills in an application form obtained from a bank and hands it over to the bank together with the money she wants to transfer and a commission for the service.

-The bank then prepares the cheque and gives it to the applicant who can then send it to the payee

-A bank draft has the drawing bank’s guarantee for payment. It is therefore more readily acceptable than personal cheques.

-It is suitable when urgency is desired in the payment as it is more readily acceptable.

  • Credit transfer

This is a means of payment provided by commercial banks to their current accounts holders who want to pay many people using one cheque/at the same time

-One cheque is drawn and is usually accompanied by a list of the people to be paid, the amount to be paid to each person and the addresses of the bank branches where the payment is to be made.

-The bank then ensures that a credit transfer is affected to the various bank branches and each payee is paid

-A credit transfer is usually used by employers to pay salaries to their staff members.

  • d) Standing order

This is an instruction to a bank by an account holder to pay a named person or an organization a fixed amount of money at regular intervals over a specified period of time or until stopped

-It is a very useful means of payment for business people as it enables them to regularly pay their recurrent bills e.g. water, insurance, electricity, loan payment, hire purchase payment e.t.c

  • e) Traveler’s cheques

This is a cheque drawn by one bank to another requesting the latter to pay a specified sum of money to a named bearer, who usually would have bought that cheque from issuing bank. The cheque holder pays the value of the cheque plus the charges for the services to the issuing bank.

-Travellers cheques are usually issued in fixed denominations and are very convenient for travel purposes, hence their name. They enable a person to travel without having to carry a lot of cash. The cheques are also readily acceptable as a means of payment.

  • f) Telegraphic Transfers

This is a method /means of transferring money offered by commercial banks to anybody who wants to send money to another

The sender is required to fill an application form and provide the following information among others:

-His/her name                        -The amount of money to be remitted

-Name of the payee               -The bank where the money would be paid

The applicant is charged a commission and telegraph fee. The paying bank sends a telegram to the payee who has to identify himself/herself before the payment is made

The method is fast and safe.

These are plastic cards issued by financial institutions e.g. banks that enables a person to purchase goods and services from any business that accepts them.

Debit cards are used to make payments from money held in ones accounts and are therefore an alternative to cash payments. Examples are ATM cards.

  • Electronic Fund Transfer (E.F.T)

EFT is a method of transferring money from one account to another where computers are used. The sender is required to fill an electronic fund transfer form provided by the bank which instructs the bank to transfer money from his/her account to a named account.

Information is then sent to the payee’s bank electronically and the amount in the account is increased accordingly. The method is very fast.

  • Means of payments provided by the post office

The post office provides means of payments that can be used to transfer money from one person to another

The means of payments provided by the post office to facilitate payments includes,

  • Money orders
  • Postal orders
  • Postage stamps
  • Premium bonds

A money order facilitates the transfer of money from one person to another through the post office (and/or bank)

A money order is usually for a specified sum of money usually purchased with cash from the post office

A person wishing to send money using this method visits a post office and completes an application form. Some of the details contained/given in the form include:

  • The amount of money to be remitted
  • Name of the payee
  • The name of the post office where the money order will be cashed
  • Name and address of the sender
  • Whether the money order is to be ordinary or sent by telegraph
  • Whether the sender wishes to be informed if the money has been paid
  • Whether the money is to be paid through a bank account or at the post office counter.

The application form, money to be remitted and commission for the service is handed to the post office cleark who prepares the money order and gives it to the sender who may post it or send it to the payee.

-Telegraphic money orders, the post office sends a telegram to the payee informing him/her to go to the post office and claim the money.

-Before payment is made, the payee must;

  • Identify himself/herself by producing an ID card
  • Identify the person who sent the money.

-The sender of the money is left with a counterfoil which serves as evidence that money was sent and it can be used to reclaim the money if it did not reach the payee

-Money order may be open or crossed. A crossed money order bears two parallel lines drawn diagonally on its face and must be deposited in the bank account of the payee. It cannot be cashed over the counter at the post office.

-An open money order can be presented for payment at the post office counter.

Circumstances under which money order is appropriate

  • Where it is the only means available
  • Where other means are not acceptable
  • Where there is need to avoid inconveniences or risks associated with other means

This is an Electronic Fund Transfer (EFT) service offered by the postal corporation of Kenya, for sending and receiving money instantly from various destinations both locally and internationally.

-The person sending money fills in a form called ‘send form’ giving the following details;

  • Name, address and telephone number of sender
  • Name, address and telephone number of receiver
  • Pay city, town and location of the receiver
  • Signature of the sender
  • Amount to be sent

-The sender hands over the form, the amount of money to be sent and the commission to the post office clerk for processing

-The transfer is done via the internet through a machine that gives a twelve-digit number for the transaction called the  ‘Transaction control number’(TCN). The sender then conveys this number, amount sent and pay location to the recipient and instructions to the recipient to visit the named post office for payment. This message is usually conveyed through the quickest means possible such as a telephone call

-The sender is given a copy of the processed ‘send form’ as proof that money has been sent. The post office retains the original for record purposes.

-When the receiver visits the post office, he/she will fill a ‘receiver form’ giving the following details;

  • The transaction number(i.e. the twelve-digit number)
  • The expected amount
  • The name, address and telephone number of the sender
  • The city town or location of the sender
  • Signature of the receiver

The receiver then identifies himself or herself by producing an ID card or passport before receiving the money.

-The recipient/payee is then given the money, a copy of the receive form as proof of having received the money. The paying post office retains a copy as proof of payment.

Advantages of using Posta pay as a means of payment

  • Accessibility- Posta pay outlets (post offices) are located countrywide to eliminate movement over long distances to get money
  • Ease of use- Sending or receiving money is easy as one only needs to fill a form which is processed immediately
  • Speed- the transfer of money is instant (fast)
  • Security- Confidentiality in the transmission of money is provided and money is only paid to the person intended
  • Convenience- Posta pay services are offered for long hours during the day and pay locations are conveniently located
  • Affordability- Posta pay services are relatively affordable as large amounts can be sent at reasonable costs.

– Postal orders are sold by the post office for the purpose of remitting money

-They are available in fixed denominations of sh.5, 10.20,40,60,80,100 and 200

-On buying a postal order, the sender pays for both the face value of the postal order and a commission charged for the service

-Postal orders just like money orders are issued with counterfoils that the sender will keep as evidence of remittance in case the person to whom he/she remits the money does not receive it.

The sender writes the name of the payee on the postal order as a safety measure.

Payment to the bearer can be made in any post office with postal order facilities

Postal orders may also be crossed or open (see crossed and ordinary money orders)

Circumstances under which postal orders are appropriate

  • Where there is need to avoid inconveniences and risks associated with the other means of payment.

Differences between postal orders and money orders

Postage stamps may be used to pay small amounts of money. The person to whom the stamps are sent can then use them for sending mail and/or to pay someone else.

  • Premium Bonds

Premium bonds are issued by the post office in denominations of sh.10 and sh.20.They mature after a given period, after which one can cash them.

-Bearers can also enter into draws so as to win money.

-Premium bonds can be used to settle debts, but it is not a safe method because they can be cashed by anybody i.e. by the bearer.

Circumstances under which postage stamps and premium bonds are used

  • Where they are the only means available.

 Means and payments which arise from private arrangements between the sellers and the buyers

There are various business documents that originate from private agreements between buyers and sellers. The buyer acknowledges the credit and accepts to pay at specified future dates by signing some documents. These documents include;

  • I Owe you(IOU)
  • Bill of exchange
  • Promissory note.
  • Bill of Exchange

This is unconditional order, in writing, addressed by one person to another, requiring the person to whom it is addressed by one person to another, requiring the person to whom it is addressed to pay on demand, or at a stated future date, the sum of money on the bill to the drawer, or a named person or to a bearer.

  • Order- is a command not a request
  • Unconditional- Without condition i.e. no use of such words as ‘if’ or ‘whom’
  • The bill must be in writing
  • Amount of money must be clearly stated
  • Payee must be named. He/she can be the drawer or someone else or the bearer
  • Date of payment must be stated or can be determined e.g. ‘Two months from the date of today’ or Three days after 31 st January 2012’

-A bill of exchange is prepared by a creditor to a debtor when a creditor wants to be assured of payment by a debtor on a given future date or when asked to do so by the creditor

-If the buyer/debtor signs the bill “accepted” then he/she cannot deny responsibility for the debt since he/she has acknowledged responsibility for the date.

Procedure for preparing a bill of exchange

A bill of exchange is written by a person (creditor) to his debtor to seek assurance that the debtor would pay the debt.

Step 1. The creditor prepares the draft and sends to the debtor.

Step 2. The draft and after accepting the conditions laid therein, he/she signs on it and write the words “ accepted”. He/she then sends it back to the creditor. At this point the draft becomes a bill of exchange.

Step 3. The creditor receives the bill and may:

  • Keep it until maturity when he would present it to the debtor(accepted) for payment
  • Discount it with a bank. This is presenting to a bank or any financial institution and receiving cash against it before the maturity date. One is however charged(discounting charge) for the service
  • Negotiate it-Using it to pay someone else apart from the payee.

Parties to a bill of Exchange

  • Drawer- This is the person who gives the debtor the written order to pay the value of the bill of exchange(the creditor)
  • Drawee- This is the person to whom the order to pay is given (Debtor).He or she accepts the bill.
  • Payee- This is the person to whom the payment is to be made. The payee may be the drawer, or

Essentials of a bill of Exchange

  • It must be signed by the drawer(creditor)
  • It must be accepted by the drawee(debtor)
  • It must be accepted unconditionally
  • It must bear appropriate revenue stamps

NOTE: A bill of exchange becomes a means of payment when it is presented (discounted) to the banks or negotiated.

Advantages of using a Bill of exchange

  • The holder may pass rights on the bill to another person
  • Date of payment is determined
  • Acceptance by the debtor makes it legally binding
  • The payee may receive money before due dates by discounting

Disadvantages of using a Bill of Exchange

  • It may be dishonoured on maturity
  • Cash may not be readily available as banks may be reluctant to cash bills from debtors of doubtful financial backgrounds
  • It is an expensive form of credit as the creditor may lose part of the face value of bill in form of discount

Circumstances under which a Bill of exchange is appropriate.

-When the creditor wants to be assured that the payment would be done

-Where the creditor wants money while the debtor is not able to raise it before the end of the credit period

-Where the creditor wants to use the debt to pay another debt.

  • Promissory note; This is a document in which a debtor promised to pay a creditor a specified sum of money at a specified time/date.

Features of a promissory note

  • There are two parties i.e. the drawer(debtor) and the payee(creditor)
  • There is a promise to pay
  • It is written by the debtor to the creditor
  • It does not require acceptance since it is signed by the person committing to pay the money
  • The writer/maker is liable on the note as he/she is the debtor.

-After drawing and signing the promissory note, the debtor (borrower) sends it to the seller. (Lender)

-The seller/lender may keep it until maturity and then present it for payment or may discount it with the banks before maturity.

Similarities between a Bill of Exchange and a promissory note:

  • Both act as evidence of the acknowledgement of a debt
  • Both may be discounted or endorsed before maturity
  • Both are negotiable i.e. can be transferred from one person to another
  • Both are legally binding
  • Both allow for adequate time within which to organize for the payment of the value of the bill or note.

Differences between a promissory note and a bill of exchange:

-IOU is an abbreviation of ‘I owe you’

-It is a written acknowledgement by a buyer of a debt arising from the purchase of goods and services on credit. It is written and signed by the buyer and sent to the seller

-If the seller accepts it, then the buyer can receive goods and services on credit.

Though the IOU does not usually indicate the specific date of payment, the buyer acknowledges the debt and accepts responsibility to pay at a suitable future date

NOTE: The use of IOU is restricted to commercial transactions involving parties who have dealt with each other for a long time; hence they know each other well.

  • Other means of payment
  • Credit cards
  • Mobile money transfer services e.g. M-pesa.
  • Credit cards(plastic money)

– These are plastic cards that enable a person to purchase goods or services on credit from any business willing to accept the card

-They are both a means of payment and a term of payment

  • Mobile money transfer services e.g. M-pesa

-This is a means of money transfer services provided by mobile phone service providers to their customers (subscribers)

-It can only be used to transfer money between people subscribed to the same mobile phone network e.g. from one safaricom subscriber to another safaricom subscriber, Airtel to Airtel e.t.c

-The sender must register for the money transfer service and is issued with a PIN (personal identification number)

-When money is sent, both the sender and the receiver will receive a message confirming the transfer.

-A person can send money anytime anywhere so long as he/she has value in his/her m-pesa, pesa pap account.

-Each mobile service provider has a range of value that can be transferred using this method.

-A small transaction fee is charges for the transfer i.e. for sending and withdrawing

Benefits of mobile money transfer services

  • Confidentiality- The secret PIN protects the value in the customer’s account
  • Ease of use- The service is easy to use as the agents assists to carry out transaction
  • Speed- Money transfer is an instant service conveyed to the receiver via the short message service(SMS)
  • Convenience- The service is convenient to both the sender and the receiver, as they only need to go to the nearest agent(money can be sent/deposited or received anywhere)
  • Accessibility- The agents e.g. m-pesa agents are located in most parts of towns and also in rural areas. Money can hence be sent and received anywhere and anytime.
  • Affordability- The service charges are very low for registered users and very affordable for non registered users
  • Security- Relatively secure when the sender uses the correct phone number of the receiver.

TERMS OF PAYMENTS

These are the various agreements/conditions agreed upon between sellers and buyers regarding how debts arising from their transactions should be settled. These conditions include;

-How payment is expected

-When payment is expected

-What is included in the quoted price e.t.c.

Terms of payments are broadly categorized into two;

  • Cash payments
  • Deferred payments(credit payments)

– This classification depends on whether the agreement is to pay for the products immediately or at a later date.

  • Cash Terms of payments

Cash terms of payment apply when a buyer is required to pay for goods or services immediately before or after delivery. They include the following:

  • Spot cash- This is where payment is done at the point of purchase.

– Mainly used in retail businesses where customers are required to pay as they get the goods or receive the service.

  • b) Cash on Delivery (C. D)

– This is where the buyer pays for the goods (or services) as soon as they are delivered to his or her premises.

  • c) Cash with order (C.W.O)

– This is where the buyer is required to pay for the goods when making the order for the goods or the services.

Circumstances under which C.O.D and C.W.O are appropriate

  • When the buyer is new to the seller
  • Where the buyer’s credit worthiness is in doubt
  • Where the seller is operating mail order stores(C.W.O only)
  • Where C.W.O or C.O.D is the policy of the business
  • If the cost of collecting debts is considered high by the seller
  • When a seller is to make goods based on unique specification provided by a particular buyer(C.W.O only)
  • Where the seller wants to avoid tying up business capital in debts.
  • d) Prompt cash; This is where payment should be made within a few days (normally seven days) after delivery.

-Prompt cash period allows them to examine the goods and check the invoice to certify its corrections

  • ii) Deferred payments

This means that goods or service are not paid for in full on delivery. They are instead paid in future in a lump sum or in several instalments.

The period within which a buyer is supposed to pay the seller is referred to as credit period and is expressed in terms of days.

-Terms of payments in credit transactions are usually agreed upon by the seller and the buyer depending on;

  • Capital base/financial stability of the seller
  • The nature of the goods supplied
  • The relationship between the buyer and the seller
  • The credit worthiness of the buyer

-In determining the credit worthiness of a buyer, the seller will consider;

  • a) Character- The behavior of the buyer in terms of honesty, which determines the probability of the buyer honoring his /her debt obligations
  • b) Capacity- The buyer’s ability to pay as indicated by past business performance records or the profitability and the value of his/her assets.
  • c) Capital- The financial position of the buyers business or how much the buyer’s business is worth.
  • d) Collateral- These are the properties of value pledged by the buyer as security for the credit
  • e) Condition- The effect of the existing economic conditions on the buyer’s ability to pay his/her debts.

Forms of Deferred payments (credit payments)

  • Open trade credit/open credit

– Under these forms, goods and services are sold to the buyer who is expected to pay for them at a future date or within a given period

-The buyer may also be required to pay for goods or services on installments.

-Discounts may be allowed to encourage the  buyer to pay on time.

-The ownership of the goods passes to the buyer immediately after entering the contract. The seller should however ensure the buyer will pay by:

  • Ascertaining the credit worthiness of the buyer
  • Asking the buyer to guarantee payment by signing some documents e.g. bill of exchange
  • Asking the buyer to have someone else to guarantee the payment
  • Asking the buyer to pledge (mortgage) some of his/her property as security

Factors to consider when giving credit

  • Credit worthiness of the buyer
  • Repayment period
  • Amount of goods the customer wants
  • Availability of adequate stock
  • Honesty i.e. reliability of the customer
  • Frequency at which the customer buys from the seller
  • Seller’s intention to attract and retain customers

NOTE: No interest is usually charged on open trade credit.

Examples of open trade credit

  • Simple credit(prompt cash/personal credit)

-Is a form of credit extended to a trader or a customer for a very short time, usually not more than a week

-It is a common form of credit between retailers and their customers.

-It is also referred to as prompt cash because payment is made within a short time.

  • ii) Monthly credit

– A form of credit extended when a seller allows the buyer to pay/settle his/her debt after one month

-The buyer can continue taking goods from the seller up to the end of the month.

-It is a form of credit usually allowed by retailers to salaried workers for goods such as food items and newspapers

iii)  Budget Accounts

-Are usually operated by large scale retailers to approved customers

-The retailer keeps an account of the customer in his/her books

-To operate budget accounts;

  • A deposit is required
  • Regular payments are to be made
  • There is a maximum amount of credit to be allowed
  • The customer may be charged for any special services given by the seller called “ after sale services”

iv)Trade credit

– This is credit given by a trader to another trader when goods are bought for selling

-Payments for the goods is made after selling the goods or within an agreed period of time

  • v) Credit card facilities

– Plastic money (credit cards) enables the holder to obtain goods and services on credit form specific suppliers (people willing to accept the cards)

-They also enable the holders to obtain money from specific banks and other specified financial institutions

-They are available to adults of approved credit worthiness

-Some credit cards can only be used locally while others like visa cards can be used both locally and internationally.

-When a customer makes a purchase using the card, the seller electronically verifies the validity of the card and whether the credit-card holder/customer has sufficient credit to cover the purchase. If all is well, the credit card customer signs a specific form that have been filled by the trader. Such forms are usually provided by the card company to the trader. The trader and the card holder retain a copy each and the other copies are sent either to the credit card company or to the trader’s bank.

– There are therefore 3 parties to a credit card;

  • The company that issues the cards
  • The card holder

-At regular intervals, the credit card company sends a statement of account to each card holder showing the outstanding balance at that time. The outstanding balance should not be greater than the allowed credit limit.

-Examples of companies that issue credit cards include; Barclays card, American Express, Access cards and Visa cards.

Advantages of credit card

  • They are safer to carry around than cash
  • Convenient to carry around
  • Enables the holder to get goods and services from specified sellers without paying immediately
  • Some are acceptable both locally and internationally
  • Enables the holder to get money from specified banks
  • Increases credit rating of an individual

Disadvantages of credit cards

  • To acquire the credit card, the applicant is required to have an established credit record
  • The holder is charged high interest rate by the card company
  • It is prone to abuse through fraud
  • Interest is charged if there is delay in payment
  • Can only be used by those who are 18 years and above
  • Holder may be tempted to overspend
  • Their use is limited to only specific areas(urban areas)
  • Faces stiff competition from other means of payment such as cheques, money orders and postal orders.
  • Only few businesses accept the cards
  • Long procedures are involved in getting the cards
  • The cards can only be affected by people with high income.
  • Hire purchase

To Hire: Means to use someone else’s property for a payment

Hire purchase: Is a method of hiring property with an option to buy.

-The term of payment for a hire purchase are;

  • The buyer pays an initial deposit(down payment)
  • The remaining amount(balanced is paid in equal monthly installment spread over an agreed period of time
  • The installments paid include interest which usually makes the overall price paid relatively higher than would be the case if the goods were obtained on cash terms.

-Goods sold on higher purchase are durable and expensive such as; vehicles, furniture, electronics e.t.c

-The buyer can only posses the commodity but not own it.Therefore’the buyer cannot sell the goods to another person before all installments are paid

-Ownership of the goods remains with the seller. The goods are ‘on hire’ to the buyer.

-After completing the payment (after the last installment has been made), a certificate is issued to the buyer as proof of transfer of ownership

-Incase the buyer fails to make payment/defaults in payment; the seller can repossess the goods. However if the buyer has paid two thirds of the total/hire purchase price at the time of defaulting, the seller has no legal right to repossess the goods.

-The seller can only recover the remaining amount of money through a court action

-The seller must display both the cash price and the hire-purchase price on the items to enable the buyers to decide under what terms they want to buy the goods.

-A written agreement has to be entered into by both the seller and the buyer. The agreement safe-guards the intervals of all of them

-Examples of hire purchase businesses operating in Kenya include; Africa Retail Traders (ART), Kukopesha, Singer and Amedo.

-For salaried people, the hire purchase has introduced a system where the installments are deducted directly from the buyer’s salary every month. This is called the check-off system . In this system, no deposits/down payments are required. The buyer’s employer takes up the duty of remitting the deposits to the seller on a monthly basis.

Advantages of Hire purchase

To the buyer

  • The buyer acquires possession and use of goods immediately after entering into the contract
  • Installments to be paid are pre-determined, so the buyer knows and is able to budget for this amount
  • One can acquire expensive goods/items which are difficult to get on cash terms
  • Payment is spread over a long duration of time making it convenient/suits the buyer’s income
  • Raises standards of living despite limited resources

To the seller

  • The goods belongs to the seller until the last installment is paid
  • He/she can repossess the goods in case the buyer defaults in payments
  • The seller is able to make more profit due to higher prices in the long run
  • The sales volume increase due to greater ability by customers to pay/more buyers are attracted to hire purchase terms leading to more sales
  • No refund is payable to a buyer for goods repossessed from him/her
  • Due to the check-off system, chances of non-payment are minimized.

Disadvantages of Hire purchase

  • The hire purchase price is higher than the cash price.
  • The goods belong to the seller until the last installment is made
  • Because of the easy payment terms, the buyer may be tempted to overspend which might lead to financial problems
  • The variety of goods sold on hire purchase terms is limited to those goods that are durable
  • If the buyer defaults in payment, the already paid ones are treated as hire charges and are not refunded.
  • Goods may be repossessed if the buyer defaults in payment
  • Goods repossessed can only be sold as second hand
  • There is a lot of documentation and filing of information/records
  • The cost of operating the business is usually very high
  • The risks of loss on hire purchase sales are normally high as some buyers may default in payment
  • High amount of capital is needed to finance a hire purchase business
  • A lot of money is spent on repair of damaged goods
  • A lot of capital is tied and held in stock and debts.
  • Installment Buying/credit sale(deferred payment)

-In this form of credit selling, the buyer is not required to pay a down payment. Payment for the goods is made in equal installments spread over a period of time. These installments cover interest and related costs of selling.

Other features of installment buying

  • The ownership and possession of goods passes on to the buyer immediately the first installment is paid
  • Once the goods have been sold, they cannot be repossessed by the seller even if the buyer defaults in payment.
  • In case the buyer defaults in payment, the seller can obtain compensation through court action.
  • There is a written agreement between the buyer and the seller(creditor)
  • The buyer may dispose of the goods before paying for them fully
  • Can be used for non-durable goods

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