Task: Evaluate the management of systems (e.g. people, technology, training, regulatory, compliance, finance) imperative to the success of small business.
Setting up a small business is generally not a challenge, but running them successfully is very difficult because efficient management systems need to be maintained. There are increasing numbers of small enterprises every year and 90% of these newly formed businesses do not run into the second year as they collapse mainly due to poor management (McMahon, 1995, p.8). In other words, management systems contribute a significant part to the achievement of small and medium enterprise (SMEs). A small business is defined as one in which one or two persons run the business and make all the critical decisions using their specific knowledge in a few certain areas without the other expert’s assistance in the same field (McMahon, 1995, p.3). This essay will evaluate the necessity of the management systems essential to the success of a small business, which are finance, personnel, and information.
Firstly, the management of finance is intensely important to the future growth or failure of a small business because gathering financial information at the right time is extremely supportive to make accurate decisions. The financial management system is basically defined as “the methodology and software that an organization uses to oversee and govern its income, expenses, and assets with the objectives of maximizing profits and ensuring sustainability” (Rouse, 2012). Various studies were carried out to interpret the significant influence of managing finance on the small business development. In this case, Australian Manufacturing Council (AMC) surveyed with the methodology of ‘‘self-ministered and structured questionnaire’’ applied for 5500 predominant Australian companies to determine which particular trait of enterprise and financial management have the greatest impact on business growth and performance outcomes for manufacturing SMEs based on “Polytomous logistic regression modelling, with underpinning from non-linear principal components analysis” (McMahon, 2001, p.17-24). As a result, business growth has a close connection with performance outcomes for the subjected manufacturing SMEs using the logistic regression modelling. The research finding shows that companies’ achievements are considerably influenced by financial management and enterprise characteristics, in which external funding dependence and external financial advice play an important role in raising the profit and the performance as well as gaining the experiences (McMahon, 2001, p.24-25). Therefore, it can be strongly said that the effective financial management brings an undoubtable support to reach higher productivity and achieve proposed goals during the firms’ development.
Another crucial factor of management is human resources. As its feature in the small enterprises, human resource is the personnel working in a company or an organization which is considered as the most valuable asset to the survival and the development of companies. Generally, human resource management (HRM) can be defined as the process of managing people in organizations in a ''structured and thorough manner'' (Department for Communities and Social Inclusion, 2008). Small business employees have a direct impact on the working environment that is created by managers, the way the business runs and ultimately whether they promote successful outcomes or not. In fact, the numbers of employees of SMEs are not so much; hence, the appropriate management of employees can be the vital element for the success of small business. Scarborough and Zimmerer (1993, p.830) point out that firms need to have good timing recruitment to minimize the dissatisfaction of employees because of various reasons, including overloaded work, unsatisfactory wage, or stress problems. Moreover, newly hired staffs are also needed to be well trained in order