BUSINESS POLICY & STRATEGY ASSIGNMENT

 Topic:                                   Choose a company of your choice and extract the following: 1. Sales Policy, a. Cash Policy b.  Credit Sales Policy 2. Purchase Policy a. Bill Payable Policy, b; Bill Receivable Policy 3.Investment Policy 4. Debt Policy 5. Whistle Blowing Policy 6. Recruitment Policy

COCOA MARKETING COMPANY LIMITED

The following are extract policies of Cocoa Marketing Company Limited in year 2004.

Sales Policy

The major sales objective of the Company is to sell to the external and local markets at the best prices obtainable and to undertake its marketing function in a manner which will maximize the foreign exchange revenue that will accrue to the country.

Negotiation

Sales by the CMC are made by private treaty on the basis of World Cocoa Market values at the best prices obtainable. Negotiations are governed by normal commercial considerations only, without any kind of discrimination in favour of or against any individual firm or particular company.

Payments

Sales by the company, except those made under special trade agreements, are effected on the basis of Cash Against Documents on first presentation payment terms. The Company, however, reserves the right to insist on the establishment of Letters of Credit whenever it deems it necessary to do so. Sales under trade and payment agreements are made against Letters of Credit. Sales by the CMC are negotiated on a net basis and all local bank charges are for the account of the Buyer.

CASH SALES POLICIES

The company faces multiple risks related to cash, cash equivalents, and cheques that are received by departments, the greatest of which is loss or theft of funds. The best way to mitigate this risk is to deposit the funds in a company bank account as quickly as possible. This practice also allows the company to take advantage of options that will maximize investment returns that could result in reduced economic burden.

It is also important that the proper internal controls are in place to reduce the risk and temptation of fraud and to ensure the deposits are recorded accurately in the Company’s general ledger.

CREDIT SALES POLICY

Developing a credit policy is something a business eventually has to face. One of the basic decisions the company has to make when is whether or not we are going to extend credit to other businesses and consumers. This is a decision to be taken very seriously as it will impact the company cash flow and even the profit.

Here are three factors that the company considered in its credit policy and that should influence every decision whether or not to extend credit to customers. The company should grant credit only if the positives of doing so outweigh the negatives.

1.   The Effect on Cost of Goods Sold

Whether the company sell products, we  have to have them available and, in the case of products, in stock, when a sale is made. When we extend credit, that means paying for that product in order to have it in stock but not getting paid for it immediately when it is purchased.

Even though we will eventually get paid, our business has to have enough cash flow to compensate for the delayed payment.

2.   The Probability of Bad Debts

If the company makes all its sales for cash, there is no possibility of bad debts or debts it cannot collect. If any percentage of the company’s sales is on credit, there exists the possibility of bad debts or debts, as a business owner, will never collect. When the company developed the credit policy, it allow for some percentage of its credit accounts that will never be paid. The trade-off here is that some percentage of credit sales will never be paid.

3.   Offering a Cash Discount

Particularly when the company offers credit on a business-to-business (B2B) basis, most companies offer other businesses a cash discount. In other words, if the business pays the bill within the discount period, the business gets a discount. If it doesn’t pay within the discount period, then they must pay within the credit period or the original period within which the bill is due.

Investment Policy

The Company’s objective is to generate an attractive rate of return for Shareholders, predominantly through capital appreciation, by taking advantage of opportunities to invest.

The Company aims to provide equity and equity-related investment capital, such as convertible loans, to private companies which are seeking capital for growth and development, consolidation or acquisition, or as a pre-IPO financing.

In addition, the Company intends to invest in publicly traded equities which have securities listed on a stock exchange or over-the-counter market. These investments may be in combination with additional debt or equity-related financing, and in appropriate circumstances in collaboration with other value added financial and/or strategic investors.

PURCHASE POLICY

BILL PAYABLE  POLICY

Authorized Expenses

Expenses itemized in the annual Budget as approved by the Board are authorized for

payment.  A majority vote of the Board is required to obtain authorization for payment of expenses not included in the annual Budget. In addition, a majority vote by the Board is required to obtain authorization for all scheduled or open payment accounts (e.g. monthly billing accounts, open-ended hotel/catering accounts etc.).

Procedures

Request

A Payment Request Form must be completed for payment of a bill or reimbursement of

an incurred expense. The Payment Request Form is submitted to the Managing Director. The following are required with submission of a Payment Request Form:

1. Description. This must include sufficient information for the Managing Director to determine if the expense is authorized and for the Treasurer to determine which account should be debited.

2. Total amount payable.

3. Payee.

4. Method of payment. This must include sufficient information for the Treasurer to determine how to make the payment (e.g. a name which the cheque should be written).

5. Requestor name.

6. Requestor signature and date.

7. Documentation. This must include sufficient information to prove the total amount of the payment.

Approval

The Managing Director determines if the expense is authorized or obtains authorization from the Board. If the expense is not authorized, the Managing Director returns the Payment Request Form to the requestor with an explanation.

If the expense is authorized, the MD signs and dates the Payment Request Form and forwards the form and all documentation to the Treasurer for payment. To expedite payment, a copy of the signed form and documentation is sent to the Treasurer.

Payment

The Treasurer makes all approved payments in a timely manner. The Treasurer pays bills from Chapter accounts by cheques.  In no case will cash be used for payments.

 

BILL RECEIVABLE POLICY

The company has established a due date for customers. The company also has written policies and procedures, and a system of internal control for managing the Bills receivable.  The written procedures include at a minimum:

• Requirement for establishing and recording a bill receivable.
• Collection actions and timeline for the collection process.
• Approvals for adjustments to accounts.
• Periodic review of past due bills.
• Criteria for writing off bills and approvals needed.

All bills receivable activities undertaken should be documented in writing and, as appropriate, recorded in the company Integrated Record System (IRS).

DEBT POLICY

The Debt Policy sets forth comprehensive guidelines for the financing of capital expenditures. It is the objective of the policy that (1) the District obtain financing only when advisable, (2) the process for identifying the timing and amount of debt or other financing be efficient, (3) competitive interest and other costs be obtained.

USE OF DEBT FINANCING

Debt financing, to include general obligation bonds, revenue bonds, certificates of participation, lease/purchase agreements, and other obligations permitted to be issued, shall be used only to: purchase revenue rolling stock; purchase or construct related operating equipment; and/or purchase or construct real property, facilities, and other improvements. The useful life of the asset or project shall exceed the payout schedule of any debt the company assumes in order to acquire the asset or project.

SHORT-TERM DEBT

Short-term obligations may be issued to finance projects or portions of projects for which the company ultimately intends to issue long-term debt; i.e., it will be used to provide interim financing that eventually will be refunded with the proceeds of long-term obligations.

INTERIM

Interim financing may be appropriate when long-term interest rates are expected to decline in the future. In addition, some forms of short-term obligations can be obtained more quickly than long-term obligations and, thus, can be used in emergencies until long-term financing can be obtained.

LONG-TERM DEBT

Long-term obligations will not be used for operating purposes, and the life of the obligations will not exceed the useful life of the projects financed. Debt service structure will approximate level debt service unless operational matters dictate otherwise.

WHISTLE BLOWING POLICY

The company has an established Code of Ethics which sets out the standards of conduct expected in the management of its business. All employees are expected to carry out their duties in a manner that is consistent with the Code. If employees become aware of circumstances which are not in compliance with the Code then they should communicate their suspicions using the “whistle blowing” policy explained below.

Whistle blowing – what is it?

The term “whistle blowing” is most commonly used to describe when an employee (or ex employee) discloses wrong doing within an organization. Such wrong doing can include unlawful conduct, financial malpractice or dangers to the public or the environment.  Public disclosure of confidential information about an organization could clearly be a breach of an employee’s contract, therefore special arrangements are needed to protect both the employee and the organization. It is important that the employee’s concerns about illegal or unethical activities can be raised without fear of victimization and that the organization is alerted to malpractice early so that it can be stopped and the perpetrators dealt with.

A whistle blowing procedure allows employees to raise concerns with management about the conduct of others which they consider to be in some way damaging to the organization or others within it.

RECRUITMENT POLICY

Introduction

Effective and consistent recruitment practices are essential to ensure that all applicants are treated fairly and with diversity and equality of opportunity and that costly recruitment mistakes are avoided.

The recruitment process must result in the selection of the most suitable person for the job in respect of skills, experience and qualifications.

This Policy of the company defines the principles that the Company considers important in the recruitment process and aims to ensure that consistency and good practice is applied across the Company.

It is against the Company’s Policy and against the law in many cases to discriminate either directly or indirectly on the grounds of race, nationality, ethnic origin, gender, marital status, pregnancy, age, disability, sexual orientation, gender reassignment, ethnicity, cultural or religious beliefs.

CONCLUSION:

The Company’s policies and procedures reflect its commitment to achieving and maintaining equal opportunities to its customers and the society at large.  It is the responsibility of the company to monitor continually and evaluate formal and informal practices and procedures to ensure that they do not directly or indirectly discriminate against any individual, group or company.

 REFERENCE:

Chinelo Grace Obeleagu-Nzelibe (Mrs) & Bissan D.J. Ezekiel (2011), Business Policy and  Strategic Management; Published and Printed by Joyce Graphic Printers and Publishers, Kaduna.

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