Overtrading
Over trading is a situation where there is Sharpe
increase in sales
Reasons for over trading
The overtrading may represent the real growth in
business which is accordingly reflected in the sales
increase in revenue.The overtrading may result due to flexible or more
generous credit policy or allowing higher discount to the customer.
Indications of Over trading
The following are common indication of over trading
- Sharpe increase in receivables
- Sharp increase in stock levels
- Share increase in Sales/Revenue
Risks of Overtrading
- Enough funds not available to support
operations
- Over utilization of fixed assets
- Bad debts
- Over reliance on short tem financing
- Sufficient funds stuck up in high level of
stock
Limitations of E-Commerce
High cost are involved:- The E-commerce is not
an economical solution. This involve high cost for development of site
which can respond the customer online.
Complex Process :- There are complex process are
involved to process the transaction. each department must be well
connected with the server and website to complete the transaction.
Security Issues:- one of the greater concern is
the security on online business . if someone put his credit card number
on your site and the record is leaked to unauthorized person.
Customer privacy issues :- The customer
information protection is also great concern in the E-Commerce.
Taxation and Custom duties :- The different
taxation system are applicable around the global. It is very difficult
to tell the customer the exact price of the product when it will be
reached at customer door step.
Product offered are illegal :- Some product are
legal in one country but illegal in other country. for example alcohol
product
Important
Factor of E-Commerce Website
The following are important factor of website.
- Well integrated with support function and
system
- Quick response and processing of
transactions
- The transaction completion message or
report
- User friendly
- Interaction with customer options
- Stage of completion of transaction under
process
- Segment of frequqtly asked question for
most common question asked
- Details of products and services offered
- Information about the delivery charges and
timing
- Automatic invoice generation options
- well integrated security system
- A professional team for maintenance and
updation
- uninterrupted service
Characteristic of Service industry
1. The first important characteristic is that a
service is untouchable.
2. The other important aspect of service and
service provider has a very close relationship. The service provider is
more important that service itself.
3. The
service is a continuance process and long term relationship. for example
you are using an internet connection, only satisfied customer can be
retained.
4. There is no title transfer in
the services. you sell your skill or a virtual product for a agreed
period of time .
5. The services and time
has important relationship. The service diminish with the passage of
time. you can not claim that i was sleeping in the cinema house so
return me the ticket price back . i did not watch the movies.
Types of Stake holder
There are following important stakeholder in the
business and each stakeholder has different interest or stakes in the
organization . one may be interested in high profit and other is
interested liquidity information. i believe that all these interest may
be conflicting with each other, but by satisfying overall objective of
organization i.e maximization of profit will play a vital role in
satisfying expectation of different stakeholders.
Share holder are interested in high profit
because high profit will increase their wealth. they invest in the
business with the aim of increase in wealth. they choose this
opportunity for more rapid grow in their wealth.
Directors are interested in remunerations and
more and more powers. They will always pursue the policies which will
result to increase their remuneration and powers in the organization.
Employee are more concerned about increase in
remuneration , working condition, job security and social welfare.
Supplier and Bankers are more interested in
liquidity ,so that their payment may be realized in time also interested
in going concern of the organization as long term business opportunity.
Society are more interested in environmental
issues created by the existence of organization. The society would like
to have cleaner environment.
Types of Services by
Banks
- The bank offer organization to withdraw
fund more than their deposits, technical this is called overdraft
facility. Normally overdraft facility is not generally offered
facility . it limits and condition vary client to client.
- International Trade :- Facilitate
international trade by opening letter of credit.
- Personal Loans :- The bank offer different
personal loans to public for daily consumption. These loan is
usually unsecured.
- House Loan :- The bank offer loan for house
construction and renovation usually these loan are secured.
- Finance Leasing :- The bank also offer
finance lease facility i.e to provide asset against rentals , these
rental may vary from three to five years.
- Discounting the Bills :- The bank also
discount bill for businessmen.
- The Bank Guarantees ;- The bank offer
bank guarantee services to the client . This means bank guarantee
second party to pay on behalf of first party if first party default.
Advantages of
Debt Factoring
The debt factoring is technique where collection
for credit sales is the responsibility of independent third party
against an agreed fees. The credit sales and collection record is
maintained by the that party. The party is responsible to collect
debt and pay it back to the company.
The factoring company immediately pay some
portion to the company like seventy to eighty percent and the remaining
portion is paid when the debt is fully recovered and the fee is is
deducted from the remaining portion. The following are advantages of
debt factoring.
Cash are available :- The cash available as soon
as the sales invoices are issued to debt factoring company.
Cost of Sales ledger are saved :- The sales
ledger are maintained by the debt factoring company. therefore the cost
is reduced .
Cost of collection is saved :- The other
important cost is saved of the cost of chasing the customer. some time
in case of small amount of credit the cost of collection exceed the
actually amount collected from some customer.
Disadvantages of Factoring
- Factoring company charges high fee sometime
more than 5% of invoice values
- Aggressively chase customer may loss
customer
- Customer relationship and goodwill at stake
Advantages of
Commission Based Salary
Normally under this structure a very little
fixed salary is offered with a commission on sales made by the sales
representative. The totally new entity sometime offer only commission
and no fixed salary is attached. The main advantages of commission based
salary are as under.
- High self motivated sales staff
- High earning opportunity for the sales
staff
- High sales volume for the organization
- High sales volume improve entity cash flows
- High sales volume reduces the unit fixed
cost
