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UNIT 2
LEARNING OUTCOMES: On completion of this unit you should:
Know how human resources are managed:
The human resources department of any company or organization is responsible for recruiting and retaining employees, managing benefits and salary, training and compliance, working to resolve issues between management and employees, and contributing to a successful culture at work. Some companies have only one person managing all human resources functions and others have an entire team.

The human resource department has a direct impact on the success of the company and its employees. Manage a human resources department by assigning specific functions to the members of your team and promoting a professional and supportive environment.
Step one: One function of the human resources department is to hire good staff for all departments. Be sure the HR department is staffed well. Hire specialists for each function, such as a Benefits Administrator, Trainer and Recruiter. Or, if you have fewer employees, hire Generalists who can manage multiple functions.

Step two: To Communicate with your team about your expectations. To make sure all the members of the HR department understand their responsibilities.

Step three: Communicate individual responsibilities to the entire company. Your HR department will run more efficiently if the company employees know which team member to contact for payroll questions, and benefits enrolments.

Step four: Confidentiality. The HR department has access to a lot of personal information. The department also handles sensitive issues such as harassment complaints and labour disputes. Discretion is essential.

Step five: Maintaining and an open door policy for management and staff. The company’s workers as well as its leaders should feel comfortable coming to HR for assistance. To be sure to cross train the members of the HR team. This will help you cover vacations, sick days and other time off. No one will have to wait for help if one of your employees is absent.

Step six: Be sure all company policies and procedures are followed within your department. Complete reviews on time, keep your budget on track and report to management as required.
Know the purpose of managing physical and technological resources:
The management of human, physical and technological resources can improve the performance of a selected organisation. For maple in this assignment, I am going to show and explain how Tesco manages the three main types of resources. Ensuring that the human, physical and technological resources are carried out correctly can increase the performance of Tesco business.

HUMAN RESOURSES:
Management of human resources is very important of an organisation, the management should therefore, find the right to approach their employees to be able to plan and manage them in a professional manner. Human resources management is crucial for an organisation because, if employees performed efficiently it increases the production or customer’s services an organisation. A business can manage its human resources through methods such as: motivation, training, appraisal and personal development planning. A very important aspect in HR management is employing staff with the right skills and qualification required for a particular job role and training those staff who don’t have the right required skills to carry out a particular task.
Management of human resources is essential as it commits employees into achieving organisation goals and objectives. HRM function as a link between the organisation and the employees. Management of human resources plays a significant role in clarifying the organisation’s problems and providing solution, while making employees work more efficiently. Relating to Novatel hotels, the organisation could manage its employees into providing better and more efficient customers’ services.

PHYSICAL RESOURCES:
Physical resources are essential for the business to carry out its day to day activities and running of the organisation, therefore managing of physical resources is important to an organisation. Physical resources include: buildings and premises, equipment, facilities, plants and machinery, material and waste. Every business needs premises to operate.

Technological resources:
need good management as well as maintenance without these resources the company could possibly be delayed in certain aspects of the organization departments as the business world is getting extremely technological and is advancing very quickly in technologically physical resources such as computers, TV Screens, internal servers, telephones. These all require a high maintenance in a business. This is because they are very temperamental and can easily be damaged purposefully or accidently. If one of these resources has not been maintained well it could cause some members of staff to be delayed, for example if the computer has suffered damage such as a virus or it has not been maintained well it could cause the member of staff to lose work, delay on work and if this member of staff is part of a department and have a task that is part of the whole departments work it could cause a delay in the whole department which can affect the overall outcome of the work.

Know how to access sources of finance:
Sometimes it is the hardest part of starting a business is raising the money to get going. The entrepreneur might have a great idea and clear idea of how to turn it into a successful business. However, if sufficient finance can’t be raised, it is unlikely that the business will get off the ground.

Raising finance for start-up requires careful planning. The entrepreneur needs to decide:
How much finance is required?
When and how long the finance is needed for?
What security (if any) can be provided?
Whether the entrepreneur is prepared to give up some control (ownership) of the start-up in return for investment?
The finance needs of a start-up should take account of these key areas:
Set-up costs (the costs that are incurred before the business starts to trade)
Starting investment in capacity (the fixed assets that the business needs before it can begin to trade)
Working capital (the stocks needed by the business –e.g. r raw materials + allowance for amounts that will be owed by customers once sales begin)
Growth and development for example, extra investment in capacity)
One way of categorising the sources of finance for a start-up is to divide them into sources which are from within the business (internal) and from outside providers (external).

Internal sources: The main internal sources of finance for a start-up are as follows: Personal sources These are the most important sources of finance for a start-up, and we deal with them in more detail in a later section.

Retained profits This is the cash that is generated by the business when it trades profitably – another important source of finance for any business, large or small. Note that retained profits can generate cash the moment trading has begun. For example, a start-up sells the first batch of stock for £5,000 cash which it had bought for £2,000. That means that retained profits are £4,000 which can be used to finance further expansion or to pay for other trading costs and expenses.

Share capital – invested by the founder The founding entrepreneur (/s) may decide to invest in the share capital of a company, founded for the purpose of forming the start-up. This is a common method of financing a start-up. The founder provides all the share capital of the company, retaining 100% control over the business.

The advantages of investing in share capital are covered in the section on business structure. The key point to note here is that the entrepreneur may be using a variety of personal sources to invest in the shares. Once the investment has been made, it is the company that owns the money provided. The shareholder obtains a return on this investment through dividends (payments out of profits) and/or the value of the business when it is eventually sold. A start-up company can also raise finance by selling shares to external investors – this is covered further below.

External sources
Loan capital This can take several forms, but the most common are a bank loan or bank overdraft.

A bank loan provides: a longer-term kind of finance for a start-up, with the bank stating the fixed period over which the loan is provided (e.g. 5 years), the rate of interest and the timing and amount of repayments. The bank will usually require that the start-up provide some security for the loan, although this security normally comes in the form of personal guarantees provided by the entrepreneur. Bank loans are good for financing investment in fixed assets and are generally at a lower rate of interest that a bank overdraft. However, they don’t provide much flexibility.

A bank overdraft: is a more short-term kind of finance which is also widely used by start-ups and small businesses. An overdraft is really a loan facility – the bank lets the business “owe it money” when the bank balance goes below zero, in return for charging a high rate of interest. As a result, an overdraft is a flexible source of finance, in the sense that it is only used when needed. Bank overdrafts are excellent for helping a business handle seasonal fluctuations in cash flow or when the business runs into short-term cash flow problems (e.g. a major customer fails to pay on time). Two further loan-related sources of finance are worth knowing about:
Share capital – outside investors. For a start-up, the main source of outside (external) investor in the share capital of a company is friends and family of the entrepreneur. Opinions differ on whether friends and family should be encouraged to invest in a start-up company. They may be prepared to invest substantial amounts for a longer period of time; they may not want to get too involved in the day-to-day operation of the business. Both of these are positives for the entrepreneur. However, there are pitfalls. Almost inevitably, tensions develop with family and friends as fellow shareholders.

Business angels: are the other main kind of external investor in a start-up company. Business angels are professional investors who typically invest £10k – £750k. They prefer to invest in businesses with high growth prospects. Angels tend to have made their money by setting up and selling their own business – in other words they have proven entrepreneurial expertise. In addition to their money, Angels often make their own skills, experience and contacts available to the company. Getting the backing of an Angel can be a significant advantage to a start-up, although the entrepreneur needs to accept a loss of control over the business.

You will also see Venture Capital mentioned as a source of finance for start-ups. You need to be careful here. Venture capital is a specific kind of share investment that is made by funds managed by professional investors. Venture capitalists rarely invest in genuine start-ups or small businesses (their minimum investment is usually over £1m, often much more). They prefer to invest in businesses which have established themselves. Another term you may here is private equity – this is just another term for venture capital.

A start-up is much more likely to receive investment from a business angel than a venture capitalist.

Personal sources
As mentioned earlier, most start-ups make use of the personal financial arrangements of the founder. This can be personal savings or other cash balances that have been accumulated. It can be personal debt facilities which are made available to the business. It can also simply be the found working for nothing! The following notes explain these in a little more detail.

Savings and other “nest-eggs” An entrepreneur will often invest personal cash balances into a start-up. This is a cheap form of finance and it is readily available. Often the decision to start a business is prompted by a change in the personal circumstances of the entrepreneur – e.g. redundancy or an inheritance. Investing personal savings maximises the control the entrepreneur keeps over the business. It is also a strong signal of commitment to outside investors or providers of finance. Re-mortgaging is the most popular way of raising loan-related capital for a start-up. The way this works is simple. The entrepreneur takes out a second or larger mortgage on a private property and then invests some or all of this money into the business. The use of mortgaging like this provides access to relatively low-cost finance, although the risk is that, if the business fails, then the property will be lost too.
Borrowing from friends and family: This is also common. Friends and family who are supportive of the business idea provide money either directly to the entrepreneur or into the business. This can be quicker and cheaper to arrange (certainly compared with a standard bank loan) and the interest and repayment terms may be more flexible than a bank loan. However, borrowing in this way can add to the stress faced by an entrepreneur, particularly if the business gets into difficulties.

Credit cards: This is a surprisingly popular way of financing a start-up. In fact, the use of credit cards is the most common source of finance amongst small businesses. It works like this. Each month, the entrepreneur pays for various business-related expenses on a credit card. 15 days later the credit card statement is sent in the post and the balance is paid by the business within the credit-free period. The effect is that the business gets access to a free credit period of aroudn30-45 days!
4. Be able to interpret financial statements

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