How a business runs

A business has many jobs to do. They fall into four functional areas (Fig. 6.9), each with its own team and skills. Together they keep the business running smoothly.

1. Management and operations: running the day. Management plans and organises resources to reach the business's goals. Operations makes and delivers the goods efficiently and on time. In a bakery: choosing equipment, arranging ingredients, checking quality and planning each day's baking so that everything is fresh, with no delay or waste.

2. Finance and accounting: minding the money. Finance plans, raises and uses money. Two kinds of cost:

• Fixed costs stay the same however much you produce: rent, insurance, equipment such as ovens and refrigerators. Ask: if I bake one cake or a thousand, does this cost change? No, so it is fixed.
• Variable costs rise and fall with how much you produce: ingredients and packaging. A thousand cakes need far more flour than one.
• Staff pay is tricky: regular staff salaries are usually fixed, while extra hourly help for a big order is variable. (The book lists salaries in both places.)

A new mixer is an investment: money put into an asset that will help earn more income later.

Accounting records and reports every rupee coming in and going out. It works like a body's nervous system: it tells the owner at once if something is going wrong. Revenue is the money earned from sales. Expenses are the money spent running the business (salaries, electricity, raw materials, loan interest, taxes). And:

• Profit = Total Revenue - Total Expenses.
• Think of a water tank: sales pour in, costs drain out; what is left in the tank is profit. If more drains out than comes in, that is a loss.

The profit and loss account tells you, for a month or a year, whether the business ended up in profit or in loss. ABC Bakery, for March 2026 (Fig. 6.11): income Rs 2,95,000 (bread and buns, pastries and cookies, cakes, delivery); expenses Rs 2,22,000 (raw materials, packaging, rent, salaries, utilities, advertising, other costs, loan interest). Profit before tax = 2,95,000 - 2,22,000 = Rs 73,000; after Rs 13,000 tax, profit after tax = Rs 60,000. (You need not memorise the categories.)

3. Human resources: the people. People are the heart of a business. HR hires bakers, helpers, cleaners and a cashier, trains them in hygiene and baking standards, and keeps the workplace motivating.

4. Marketing and sales: finding customers. A catchy name, social media photos and videos, discounts and offers, seasonal treats like a mango-flavoured cake, easy online ordering and delivery, and eco-friendly packaging.