Photo AI
Evaluate the contributions that Stock Control and Credit Control make to the successful management of a business - Leaving Cert Business - Question C - 2008
Question C
Evaluate the contributions that Stock Control and Credit Control make to the successful management of a business. Use examples in your answer.
Worked Solution & Example Answer:Evaluate the contributions that Stock Control and Credit Control make to the successful management of a business - Leaving Cert Business - Question C - 2008
Step 1
Evaluate the contributions of Stock Control
Answer
Stock Control refers to the monitoring of stock levels to ensure that there is enough stock to meet demand while preventing excess inventory. The benefits of effective stock control include:
-
Reduction in Stock Loss: By keeping adequate levels of stock, the firm is less likely to run out, ensuring consistent sales and profits. For example, a grocery store that manages its perishable stock effectively can avoid spoilage, thus retaining revenue.
-
Optimized Space Utilization: Effective stock control prevents overstocking, which can lead to wasted storage space. For instance, a retailer can maximize floor space for current stock rather than storing excess non-essential items.
-
Cash Flow Management: Keeping only necessary stock means that money is not tied up in excess inventory, allowing for more liquidity. A company can invest cash in other areas of the business, such as marketing or product development.
-
Identification of Trends: Stock control systems can identify which items are selling well and which are not, allowing businesses to adapt to consumer demand efficiently. For example, if a particular type of soda is not performing, the company can reduce orders to avoid holding unnecessary stock.
-
Reduced Insurance Costs: By minimizing stock levels, companies can lower insurance premiums associated with inventory.
-
Minimization of Losses from Deterioration: Regular stock assessments help identify goods that are perishing or becoming obsolete, mitigating losses from shrinkage.
Step 2
Evaluate the contributions of Credit Control
Answer
Credit Control involves managing customer credit to ensure timely payments, which is crucial for maintaining a healthy cash flow. Its major contributions are:
-
Timely Payment Collection: By establishing clear credit terms and monitoring adherence to them, businesses can reduce delays in receiving payments. For example, a company that promptly invoices clients will likely see faster payment turnaround.
-
Reduction of Bad Debts: Setting and monitoring credit limits based on customer evaluation helps to prevent financial losses from bad debts. A retail store reviewing customer creditworthiness in advance would mitigate the risks of default.
-
Improved Cash Flow: Effective credit control ensures that cash is available for operational needs, thus reducing the chance of business operations being affected by cash shortages. For instance, timely collection can ensure that suppliers are paid without delay.
-
Administrative Efficiency: Keeping track of credit terms and customer payments can help streamline administrative efforts, decreasing the time spent on debt collection and related tasks.
-
Enhanced Financial Health: By minimizing overdue accounts, businesses can avoid excessive interest costs associated with overdrafts, leading to overall improved financial stability.
-
Increased Customer Trust: Well-managed credit control fosters trust as customers appreciate clear agreements about their payment obligations and timelines, which can enhance business relationships.