Business Functions and the Activities of the Business (Grade 10 NSC Matric Business Studies): Revision Notes

Key Functions: General Management, Administration, and Financial

Understanding business functions

Every business needs different departments or functions to operate successfully. In Grade 10, we focus on five key functions: General Management, Administration, Financial, Purchasing, and Public Relations. Each function plays a vital role in helping the business achieve its goals and objectives.

The general management function

What is general management?

The general management function serves as the central nervous system of any business organisation. This function establishes the overall direction and strategy for the entire company. General management leads, coordinates, and oversees all other business functions to ensure they work together harmoniously. Think of it as the conductor of an orchestra, making sure all the different sections play in harmony to create beautiful music.

The three levels of management

Management operates through a hierarchical system with three distinct levels, each having specific roles and responsibilities. Understanding these levels helps us see how decisions flow through an organisation.

Top level management

• Who they are: Chief Executive Officers (CEOs), directors, and business owners
• What they do: Make long-term strategic decisions that shape the company's future direction
• Their focus: Setting the vision, mission, goals, and business policies
• Time horizon: They plan for years ahead and focus on big-picture thinking
• Key responsibility: Ensuring all people work together to accomplish major organisational goals

Middle level management

• Who they are: Departmental managers, purchasing managers, and production managers
• What they do: Take medium-term tactical decisions to implement top management's strategic plans
• Their role: Act as the vital link between top management and lower-level employees
• Key functions: Execute organisational plans, manage specific departments, and pass information between management levels
• Focus area: Achieving goals and objectives set for their specific departments

Lower level management

• Who they are: Foremen, supervisors, and team leaders
• What they do: Make short-term operational decisions for day-to-day activities
• Their purpose: Provide supervision, performance feedback, and technical assistance to employees
• Special feature: Called "first management level" because it's often the first promotion opportunity for workers
• Main tasks: Motivate employees, control daily operations, and implement middle management instructions

The five essential management tasks

Management uses five fundamental tools to organise work efficiently and achieve business objectives. These tasks address the general need to organise, prioritise, and visualise work progress.

Planning Planning involves evaluating current activities and setting goals for the future. This task requires managers to:

• Assess existing business activities and performance
• Create strategic plans (done by top management for long-term direction)
• Develop tactical plans (created by middle management for medium-term goals)
• Formulate operational plans (prepared by lower management for daily activities)
• Gather all necessary information for effective planning
• Prepare backup plans in case the primary plan becomes impossible to implement

Organising This task brings together all resources needed to achieve set goals. Organising involves:

• Combining materials, human resources, and financial resources effectively
• Breaking plans into actionable steps
• Assigning specific tasks to appropriate individuals
• Coordinating activities to keep resources moving efficiently towards goals
• Prioritising resources for essential areas at any given time
• Arranging jobs within specific functions or departments
• Providing training to ensure tasks are completed successfully

Leading, directing and activating Leadership focuses on guiding and motivating people to contribute to business success. This includes:

• Communicating clearly what needs to be done and when
• Motivating employees through guided leadership and clear communication
• Inspiring workers to perform their tasks to the best of their abilities
• Establishing a productive working environment
• Setting and communicating goals and targets
• Guiding employees in the right direction to achieve business objectives
• Encouraging workers to use their skills and resources optimally

Controlling Control ensures the business stays on track and meets its performance standards. Controlling involves:

• Establishing clear performance standards
• Monitoring that activities are carried out as planned
• Ensuring the business achieves its stated goals
• Identifying potential problems before they become serious
• Comparing actual results with planned goals set by management
• Taking corrective action when there are differences between actual and planned results
• Maintaining continuous oversight to ensure smooth business operations

Risk management This task helps businesses identify and handle potential problems before they cause damage. Risk management includes:

• Identifying possible risks by finding activities that could go wrong
• Analysing each potential risk and assessing how likely it is to occur
• Evaluating the potential financial impact of different risks
• Monitoring risks by studying reports and environmental trends
• Developing contingency plans (backup plans for possible future events) to handle risks if they occur
• Communicating with stakeholders about risk management strategies

Organisational structure

Understanding organisational structure

An organisational structure creates a framework that shows how activities are directed to achieve business goals. This system outlines rules, roles, and responsibilities while determining how information flows between different levels within the company.

Types of organisational structures

Functional organisational structure In this structure, employees receive instructions from multiple managers, which can sometimes create confusion. The plans for execution determine who gives instructions, and employees may report to more than one manager depending on the task.

Project organisational structure This temporary structure forms around specific projects (planned pieces of work with specific purposes). Employees are selected from different departments to work together on a particular project. Once the project is completed, team members return to their original departments. This structure works well for businesses that regularly undertake specific projects with clear deadlines.

Matrix organisational structure This structure combines elements of both functional and project structures. A matrix structure means there is more than one line of reporting managers. Employees remain in their original departments but also work on specific projects. When a project reaches a certain point, it moves to the next team for the following phase. This creates multiple reporting lines, as employees report to both their departmental manager and project manager.

The administration function

What is the administration function?

The administration function serves as the information hub of the business. It collects, processes, and distributes information that management needs for effective decision-making. Administration also stores and records important business information using modern technology and handles general office work such as filing and information storage.

Key activities of the administration function

Management of information Administrative staff must handle information correctly to prevent incorrect decisions based on faulty data. The administration function manages several types of information:

• Accounting records for creating financial statements and reports
• Current business transactions and up-to-date records
• Cost accounting (recording all business costs to improve management) information to determine competitive pricing while considering production costs
• Budget (estimates of income and expenditure for set periods) information containing estimated expenses and income for specific periods
• Statistics (collecting and analysing numerical data) for analysis and reporting

Handling of information Information comes from both inside and outside the business. Reliable and accurate information must be available for meaningful decision-making and successful business operations.

Office practice This covers how administrative staff should handle their daily duties, including dress codes for employees, proper document filing, telephone etiquette, and appropriate internet usage.

Collection of information Gathering information from internal and external sources ensures that accurate and reliable data is available for decision-making and running the business successfully.

Information technology Modern businesses use electronic equipment to assist with various administrative tasks. Technology helps communicate and handle information more efficiently, often referred to as ICT (Information and Communication Technology).

Understanding data versus information

The financial function

Understanding the financial function

The financial function handles the acquisition and utilisation of funds necessary for efficient business operations. Every business needs a regular income stream to pay expenses, and this function plans and manages all the company's funds and assets.

Purpose of the financial function

The financial function serves three main purposes:

• Determines how much capital the business needs for operations and growth
• Establishes sources for acquiring the necessary capital
• Decides how to invest and allocate capital funds throughout the business
• Ensures the business generates sufficient income to cover capital-raising costs
• Prepares financial statements to present to banks and investors (people who put money into businesses expecting profit), convincing them that the business is financially healthy

Why businesses need finance

Businesses require funding for several important reasons:

• Starting up: Money needed to establish a new business through borrowing or investment
• Running costs: Funds to cover ongoing operational expenses while waiting for customer payments
• Equipment replacement: Money to replace machinery, equipment, and computers as they wear out or become outdated
• Business expansion: Capital needed to grow a successful business into new markets or locations

Sources of business financing

Bank loans These represent money borrowed from banks that must be repaid according to an agreed timeframe. Loans are sums of money expected to be paid back with interest. Bank loans are typically used for long-term financing needs, and entrepreneurs who borrow money may need to provide their fixed assets as security equal to the loan value.

Bank overdraft A bank overdraft provides short-term financing by allowing businesses to spend more money than they have in their account. This facility is repaid with interest over an agreed timeframe and helps businesses manage temporary cash flow problems.

Asset-based loans Money is lent to successful businesses wanting to expand their operations. The loan is used to purchase an asset, and that asset belongs to the lender until the loan is fully repaid. If the borrower cannot repay the money, the lender takes possession of the asset.

Government grants These funds are provided by the government to small businesses in their development phase. The money does not need to be repaid if it benefits the community, as the government wants to support small developing businesses that benefit the community and environment.

Receivable finance This loan helps businesses while they wait for payment of goods or services provided, avoiding cash flow shortages. The loan amount equals the value of outstanding invoices that customers still owe.

Angel funding Wealthy entrepreneurs offer money to other businesses in exchange for a share in that business. This funding is usually used when a business is still in its start-up phase and carries high risk for the investor.

Venture capital Individuals or organisations provide money to start up or expand businesses. This is done in exchange for a share in the business, and the investor usually requires a management position or board membership.

Understanding budgeting

Budgeting serves as a planning tool to estimate the money that will be received (income) and how it will be used (expenditure). Once prepared, budgets should be compared with actual income and expenditure to track financial performance. Budgets help businesses monitor their finances and ensure better profitability, with each department having its own budget.

Types of budgets

Capital budget: Determines whether long-term investment plans are worthwhile, estimates fixed capital needs, and plans for purchasing, upgrading, and changing fixed assets like buildings, machinery, and equipment.

Cash budget: Determines whether income will be sufficient to cover expenses, estimates working capital requirements, and assesses whether the business can afford all necessary operational purchases.

Types of capital

Fixed capital This represents money invested in fixed assets such as land and buildings. Fixed capital finances the long-term needs of the business and includes examples like capital markets, share sales, and mortgage bonds.

Working capital (Operating capital) This covers the day-to-day activities of the business, including trading stock and raw materials. Working capital finances short-term business needs and includes examples like money markets, supplier credit, and short-term loans.

Own capital This capital comes from business owners through their savings, asset sales, or investor contributions. Own capital is permanent funding that the company doesn't need to repay, represents no liability for the business, and provides returns based on profits.

Borrowed capital This capital comes from financial institutions like banks or private lenders. Borrowed capital is temporary funding that must be repaid after a fixed period, represents a liability for the company, and requires interest payments regardless of profit levels.