9.04: Internal Organization

Expense journal

An expense journal is a journal where you write down your company's bills and expenses. It's a good idea to make monthly listings of expenses, so you can compare different months with each other. You should also keep a file of the receipts and paperwork related to the bills and expenses you pay.

Balance sheet

A balance sheet shows the assets, debts, and your equity in the company on a specific date. Assets are things your company owns that are worth money, such as cash, equipment, vehicles, materials, inventory, and real estate. Debts (also called liabilities) are amounts of money that your company owes to other people or companies, such as banks, lenders, or suppliers that you haven't paid yet. Equity is the amount of money that the company is worth to its owners. This is calculated by subtracting the company's debts from its assets. The equity may be more or less than the amount of money the owner originally invested in the company, if the value of the company has gone up or down since then.

Location

A company with many different locations and branches may be organized by location. For example, banks and department stores often have many different branches. If a company has more than one location, this usually affects the internal organization of a business, because it's often difficult for one person in one location to manage people in a different place.

How often should you record the transactions related to your business? (Select the best answer.)

Daily

Customer information

Depending on the type of company you are running, you might also need to track customer information. For example, you might track names, addresses, phone numbers, e-mail addresses, credit card information, and notes on interactions you have with the customer. If your company has many customers, you might decide to invest in a customer relationship management system (CRM) on your computer or online that is set up for you.

Customer

Finally, a company might be organized based on the type of customer being served. The product or service may or may not be different for each type of customer. For example, a department store's products are often grouped based on the type of customer being served. There are usually departments targeted toward different ages and genders.

Dave is the only manager in his gift basket assembly company, and he manages all of his employees directly. Which type of organization best describes his company?

Flat

Process

If a product is produced through a long process with many stages, the company might be grouped by those stages. For example, a company that publishes books might have a team that handles the printing, another team that handles the binding, and so on. Or a company that assembles cars or airplanes might be divided into teams based on the part of the vehicle they specialize in.

Employee records

If you have employees, you will need to keep records of the amount you have paid them, their hours worked, and other information about your employees.

It's important to keep official written records of your company's transactions, income, expenses, assets, employee payroll, and other legal and financial documents. Clear, accurate record keeping helps you see the progress your company is making and recognize when your company is in financial danger.

It also makes it much easier to prepare financial statements and your tax return. You can choose which record keeping method works for you. There isn't just one correct way to do it. You'll learn more about how to keep records in the second semester of this course. It is best to record transactions on a daily basis, and to organize your records by year and by category of income or expense.

Company checkbook

It's a good idea to open a checking account just for your company. This will keep the company's income and expenses separate from your own personal account. Make sure to keep your checking register updated, and compare it to your bank statement every month. You'll learn more about how to do this in the second semester of this course.

Product

When a company has many different products or services, it may be grouped into departments based on the different products or services. For example, a company that creates video games might be grouped into teams based on the game being produced. This means an artist who works on one game is on a different team than an artist who works on a different game, even though their jobs have the same function.

Function

When a company is organized by function, it is grouped into departments based on the type of work the people do. This means each department has its own specialty, such as production, marketing, sales, programming, or accounting.

Income statement

You should also keep track of all of the money that comes into your business. This is your gross income. Keep a file of records on the transactions that bring money into the company, and make a monthly listing of income. An income statement shows the income and expenses for the company for a specific period of time. You can create monthly income statements by comparing the monthly expense listings with the monthly income listings.

Other paperwork

Your filing system also needs to make it easy to find all other paperwork related to your company. This includes things like your DBA form, business licenses, permits, trademark applications, and so on.

1. Isabel owns a chain of smoothie stands, and she hires a different manager for each stand. 2. Arpita works for a company that produces children's toy blocks, and her team applies the paint to the blocks just before they are completed. 3. Ronnie's company produces cakes and cookies, so he has a team that focuses on cakes, and another team that focuses on cookies. 4. Kana works on the writing team of a large company, in a group of writers who share the responsibility for writing for many different purposes. 5. Alonzo hires three different teams for selling men's, women's, and children's shoes.

__2__ Process __3__ Product __1__ Location __4__ Function __5__ Customer

Matrix organization

is a newer trend and can work for many different sizes of companies. Some companies like this type of organization, but others find it confusing.

Hierarchical organization

means that the company has many different levels of management, and each person in the company reports to one other person. This type of organization is common in large companies.

Matrix organization

means the company is organized by both product and function, so each employee reports to two or more managers.

Flat organization

means there are few or no levels of managers in between the top people who run the company and the employees. This type of organization is common in small companies.

organizational chart

shows the organization of the company and the relationships between people and departments in the company. The lines that go straight up and down show the relationships between managers and employees. They show who each person reports to. Lines that go from side to side show relationships between people of equal rank. The chart may show that the company has flat, hierarchical, or matrix organization.