The issue of alternative sources of finances for small businesses is considered to be a key facet in determining the success of any given entity. For this paper, there are different sources of finances as well as their respective significance which have been suggested for Coyle’s small contracting firm. The notion that the large and established firms take to intentionally underpin the economic struggles of their small counterparts is a challenge to both the maintenance of production as well as key working capital management. In that case, the paper tries to examine the situation facing the firm and proposes fair methodologies which can be embraced by Coyle in order to remain relevant and continue with its operations.
In the case study provided, it is evidently clear that small firms like the one owned by Coyle are forced to operate in tough business environments which is unfair and do not reflect the true ethics of competition. For instance, it is not counting up that in cases of contracts; small contracting businesses experience long periods of time before payment is made good. Despite the rules and regulations put forth by the government to check on the matter, there are still present instances when large contractors hold payments for periods that surpass 30 days threshold (Hurley 2009).
This situation is perceived as having negative effects on the growth of these businesses since in most cases such businesses use most of their capital funds into completing the contracts thus exposing them to incidents of ineffective operations due to insufficient working capital.
A Report on the Different Forms of Alternative Sources of Funds-finance to Coyle
The notion of securing funds for small businesses is almost impossible due to the fact that most of them lack a reliable credit background hence placing them at the least level upon which it is impossible to secure finance. A shortfall in the finance section of entities is the single-most facet that exposes companies to immediate shutdown of operations.
Thus, one of the methodologies used for financing such small businesses is Individual Development Accounts: which allows owners of small businesses to save money in accounts that match every of their dollar saved with another so that in the end the owners of businesses, who have participated in the program, get to receive a substantial amount of money which they use to reinvest in their business operations (Matlay 2006, p. 203). The significance of this form of finance lies in the fact that owners are allowed training programs that they apply in the course of budgeting for their operations. Another important feature is that these owners are not obligated to repay the funds.
Capital Assistance Program-Based Funds: refers to forms of financing provided to the SMEs, like Coyle, by the American Department of Commerce under the program; Minority Business Development Agency which sets aside a substantial amount of money for SMEs to access relevant markets, numerous contracts as well as provide crucial business strategic policies necessary for these entities. Notably, the funding program ensures that SMEs have access to working capital as well as investments (Matlay 2006, p. 203).
Micro-loans and Credit Unions: This forms a substantial base for loan providers which operate under Small Business Associations Loans Program which sees to it that SMEs access loans at lower interest rates and also provides local training finance budget programs (Matlay 2006, p. 203-204).
Significance of Working Capital:
In any successful business, irrespective of size, the aspect of working capital management is considered to be of key significance. Small businesses like Coyle are not an exception given the fact they operate under tight budgets due to limited financial resources. Management of the working capital of such entities determines their prospect of survival since it eliminates the possibility of going bankrupt. SMEs are encouraged to embrace strategies that are positive in striking a balance between investing in the business’s needs and obligations. Positive working capital management identifies the need to distinguish between the two as fairer decisions are made (Kimmel, 2006, p. 253-262).
Conclusion and Recommendations:
To sum up, it is fair for Coyle to weigh his options pertaining to the type of finance he deems most suitable for catapulting his business to a higher productivity level. Coyle should engage in intense research and development in order to figure out the exact source of funds given the fact that SMEs are limited in their respective areas upon which they can source these funds. In the case of maintaining positive working capital management, Coyle should engage in activities that limit the productivity levels of the business so that it performs tasks easier to attain.
Applied Accounting Concepts and Conventions in Coyle:
In the preparation of the financial statement of Coyle small business, there have been numerous accounting concepts that have been used to instruct on the manner of conducting business activities. First, in the course of preparing the financial reports, the application of the matching concept has been deployed effectively. This accounting concept postulates that a firm’s revenue collection should be matched with the instantaneous expenses used to generate it. In Coyle’s business case study, the evidence of the concept is perceived whenever the income statement has matched the total turnovers to such resultant expenses as heating and lighting and insurance rates. There has also been the reflection of the service made to possible loans acquired through payment of interest costs (Abbasi 2006, pp.326).
Consequently, the concept of consistency has been deployed fairly in preparing the statements of accounts for the business. This accounting concept postulates that businesses maintain a single manner of posting transactions as well as computing accounting items throughout their operational lifetime (Abbasi 2006, pp.326). In the case of Coyle, this concept is evident as the straight-line method for calculating provisions for depreciation has been established and is used throughout the entire financial period of the business as a whole.
The Going-Concern Concept is an accounting postulation that projects the continual survival of business operations. It presupposes that the business is not “going to bankruptcy” any time soon. This ensures that accountants carry on with their postings without the fear for these recordings to be termed irrelevant due to the closure of the business activity as a whole. In the case of Coyle’s business case study, the preparation of its financial statements has been conducted with the expectation that the business is going to survive into the future.
Monetary Value Convention: is an accounting stipulation that requires that accounting items be matched with their fair values. Thus, all accounting information should be quantifiable in monetary terms in order to allow for easier comparison and posting. In Coyle’s’ case study, this concept has been used immeasurably especially because assets such as premises and van have been quantified in terms of their monetary values. Even whenever depreciation is dictated, the accounting items is measured and reduced on the original cost of assets. Liabilities of the business have also been monetized.
Realization Convention: is an accounting requirement standard which requires accountants within a firm to account for business transactions at the correct time for which they took place (Kelly 1986, p.271). That is, these transactions should be recorded at the time when sale or transfer of ownership is made. In Coyle’s business case study, the preparation of the financial statements have reported fairly the changes in inventories size on a monthly basis. This practice has ensured that sales are posted at the exact time when they occurred.
Historical-Cost Convention: is an accounting requirement which demands that accountants value asset items at their initiative costs(Kelly 1986, p.271).In Coyle’s case, this convention is perceived to be adhered given the fact that most of assets which include vans, equipment as well as the premises have been reflected on the financial statements at their original costs. Current assets for the business have also been valued at their respective prices as at the exact financial period.