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Coffee Break Café (CB Café) is a business start up in Saudi Arabia with the intention of rolling out a new financial accounting system based on a spreadsheet. This paper evaluates the use of spreadsheets as a better strategy than using paper, pen, and calculator.
Introduction
Business startups have many issues to handle. The success of a startup usually depends on how well the management prepares to run each of the functions of the business. This paper relates to the financial management system of the CB Café in Saudi Arabia, which is a business start up. The central idea in the paper is that the business will benefit from the use of a spreadsheet to manage financial records compared to the use traditional tools such as paper, pen, and calculator.
Statement of Primary Problems
The main problem that this paper deals with is the use of papers, pens, and calculators as the basic instruments of financial accounting. The position of this paper is that there are better tools available for use for these tasks. The use of paper, pen, and calculators complicate the process of data entry and slows down the capacity of a business owner to make important financial decisions. The use of paper-based records to document financial transactions worsens the situation. The business owner must look through all the manual records and make calculations every time there is need to know where the business stands financially. This is labor intensive, and inefficient.
Evidence of the Problems
Evidence of the problems caused by the use of paper, pen, and calculator includes the following. First, the manager of the CB Café takes at least three hours daily to balance the books in the evening after the closure of the café. The work the manager does include ensuring that all the sales made during the day find their way into the books.
The manager also deals with invoicing issues. Secondly, the manager cannot tell before the end of the month whether the work done on any day produced profits. In other words, the manager cannot make effective tactical decisions to address any significant changes in the cash flow of the business. Thirdly, the manager at all times needs a large storage area to keep the records related to the management of the café.
Effects of the Problems
The main effects of the problem are that it slows down decision-making, and it robs the manager of the ability to make quick decisions that can lead to savings or increased business.
Statement of Secondary Problems
The secondary problems associated with the use of papers, pens, and calculators are that it leads to the need for large storage space for the paper records. The café will generate a large quantity of paper records in the next few years. There will also be the related problem of retrieving the information from the files. In addition, there is a serious risk of data security because access to the manager’s office provides access to the records in the files. Even if the café uses cabinets for storage, it is possible to access the records.
Evidence of the Problems
The evidence that exists for the problem associated with information storage is the number of box files and the increasing number of shelves in the storage areas. The storage required to store files will increase with time. Therefore, the cafe will have rooms it cannot use for any other productive purpose.
Evidence of the problem of access is that currently, the manager’s office is vital for the functioning of the café. This means that the office must remain open at all times whether the manager is present or not. The effect of this situation is that anyone with access to the office can access the records.
Effects of the Problems
The effect of these problems is that the CB Café is misusing resources it should employ to create growth. The time spent by the manager balancing books would serve the café better if the manager spent it thinking about growing the business. The use of papers, pens, and calculators will also lead to problems related to loss or records. If there are any creditors in those records, then the loss of records may lead to the loss of money. In addition, loss of the records may also lead to loss of business relationships.
Situational Analysis
The CB Café operates in a specific business environment. This section examines the aspects of the operating environment that affect the operations of the Café.
Environment
Political and Legal Issues
Saudi Arabia is home to a growing number of immigrants. Their taste will affect the type of food on demand in Saudi Arabia.
Summary of Environmental Opportunities
The growing stature of Saudi Arabia as an international travel hub and its position as an international financial and trading hub means that at any one time, there will be foreigners looking for familiar food. The hospitality industry in Saudi Arabia is growing quickly to match the demands of the growing middle class.
Summary of Environmental Threats
The main threat in the operating environment of the CB Café is competition from other cafés in the region, and the threat of disruption in the arrival of clients in the event that an international incident occurs.
Industry
The CB Café is in danger of failing to keep up with customer demand if it fails to improve its bookkeeping to increase the rate of work it can handle per unit time.
Organization
The main issue in the café as an organization is that its paper based order processing and accounting systems will lead to loss of business. This will arise because of the slow speed of processing orders.
The Strengths of the CB Café
The CB Café has a homelike feel. It targets the large growing market of immigrants working in Saudi Arabia, and the tourists and traders who visit Saudi Arabia for business. CB Café is located in a busy area, meaning that it will have high visibility, which should translate to high traffic of clients to the Café.
Weaknesses
The use of manual accounting systems is reducing the time the café can remain open because the manager must close the café to do the bookkeeping. The café does not have much space for expansion, leave alone space for storing paper records.
Market Strategy
The CB Café uses word of mouth as a marketing strategy. The café also uses social media strategies to reach its potential customers. In addition, the Café’s website plays an important role in its marketing strategy.
Problems Found in the Situation Analysis
The Café has a number of problems uncovered in the situational analysis.
Statement of Primary Problems
First, the café is using paper based order processing and accounting systems, which slow down the pace of service, and will slow down the speed of the growth of the business. Secondly, the café will suffer harm if there is a disruption in the arrival of clients. It needs to diversify its markets to take care of the local market in the event that the country loses access to international clients. Thirdly, the slow processing of orders and the use of a paper-based accounting system slows down the business processes of the Café.
Evidence of Problems
The time it takes to serve clients at CB Café is slightly longer than cafés that use computerized order processing. In addition, the time it takes the manager to handle accounts in the café is long. Thirdly, the use of paper systems creates a large pile of paper records every day.
Effects of Problems
The problems listed above are robbing the café of growth opportunities and the ability to become competitive in its operating environment. It is making it impossible for the manager to concentrate on business growth. It is also making it impossible for the manager to have complete control over the affairs of the café. This is because the manager does not have real time knowledge regarding whether the company is making profits or not.
Strategic Alternatives for Solving the Bookkeeping Problems
Two viable options currently on the table for the café are the do-nothing option, and the adoption of spreadsheets for bookkeeping and accounting.
The Do-Nothing Option
This option involves doing nothing about the current situation. Business process reengineering requires a careful consideration of the pros and cons of not taking any action. In simple terms, there is need to find out whether the existing situation is the most efficient way of handling the situation.
Benefits
The benefits the CB Café will have from doing nothing is that there will be no learning needed to keep operating the system. In time, the manager can learn how to prioritize the paperwork to achieve the same results within a reduced time. Secondly, the Cafe will not need any more investments in equipment such as computers.
Costs
The costs the café will pay if it continues to use the paper-based systems is that it will lose the capacity to grow at a faster pace. Secondly, the Café will need more space to store paper records and it will need a steady supply paper to meet the needs of paper-based accounting.
Adopting Spreadsheets for Book Keeping
This project includes a spreadsheet template that can meet the needs of the café. The spreadsheet allows the café to prepare projections for the next year based on estimated income and revenue streams. The spreadsheet also allows the café to project its income in the first three quarters of the year.
Benefits
The first benefit that the café will experience by adopting a spreadsheet-based bookkeeping system is faster bookkeeping. The café will be able to increase the rate at which bookkeeping functions take place. Secondly, the manager will have more information and analysis at an almost instantaneous basis. This will improve decision-making processes for the café. Thirdly, the spreadsheet-based systems will eliminate the need for paper-based records, or at least reduce the need for paper in the office. It will save storage space too.
Costs
The direct cost of implementing a spreadsheet-based alternative is the capital cost of acquiring a computer and the spreadsheet software. In addition, the café will need to have a data liberation system for making backups. In the event of the collapse of the system caused by the crashing of the computer, or theft, the café may experience loss of important records.
Selection of Strategic Alternative and Implementation
Given the discussion of the costs and benefits spelt out above, the decision to choose one alternative over the other is as follows. First, as a new business, the café needs to focus on growth and improving efficiency of services offered. The company needs to attract and retain customers in order to meet its financial obligations.
Apart from these objectives, the company also needs to free up the manager so that he can focus on implementing growth strategies, and not just keep the books. In addition, the manager needs accurate and timely data to work with to ease decision making for the business.
Based on the needs of the Café, the financial cost of adopting a spreadsheet-based system will yield more benefits than the do-nothing option. Over the long term, a focus on growth will improve the performance of the café compared to spending the energy of the manager on bookkeeping. The fact that the manager will have all the information relating to the financial performance and all the critical ratios of Café at the end of every day will empower the Café’s management to make accurate tactical decisions. This is important for sustained growth.
Summary
In summary, the adoption of a spreadsheet based accounting system by the CB Café will give it immense power to determine its future. The manager of the Café will have more time to deal with the important questions relating to the operations of the business, rather than using it on bookkeeping. The use of computer is both convenient and powerful in the management of a business.
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You can choose either format of your choice ( Apa, Mla, Havard, Chicago, or any other)
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