Organizational and financial issues of business in the service sector
Posted: Thu Jan 23, 2025 6:42 am
Despite the fact that companies of different sizes can operate in the service sector, it is mainly represented by small businesses. The fact is that scaling an enterprise that provides any services is not so easy. This is often due to the inability to control it normally. Companies are mainly managed by their owners, they simply do not have the resources to scale the enterprise while maintaining high quality of services.
Organizationally and functionally, companies usually consist of one (several) people who take on all the main work and management tasks (they look for clients, provide services and search for resources).
Of course, the volume of activity investor database and the amount of time spent on it play a major role. The higher these indicators, the more modest the business owner's opportunities in terms of its expansion, because the main forces are spent on solving current problems.
A company that provides any services may have a very large staff, and some functions are even outsourced.
In some areas of activity there is no need for fixed assets (own or rented). Sometimes a computer with Internet access, a printer and a telephone are enough. Formally, the costs of acquiring them in official accounting reports can be written off as expenses if their cost does not exceed the officially established limit. Although in management accounting, computers and office equipment can be recognized as long-term assets of the company.
Financial issues of business in the service sector
Often, organizing a business in the service sector requires the acquisition of non-current assets. For example, we are talking about beauty salons and various types of service centers. In this case, they will have to be purchased (taken on credit), acquired on lease or rented.
Main assets of enterprises in the service sector:
cash;
accounts receivable;
advances issued to suppliers.
In addition to these, a number of companies also have fixed assets and consumables.
Sources of financing (liabilities) for companies in the service sector may be:
own funds (authorized capital, founders’ investments in it, retained earnings);
accounts payable;
advances received;
loans.
Organizationally and functionally, companies usually consist of one (several) people who take on all the main work and management tasks (they look for clients, provide services and search for resources).
Of course, the volume of activity investor database and the amount of time spent on it play a major role. The higher these indicators, the more modest the business owner's opportunities in terms of its expansion, because the main forces are spent on solving current problems.
A company that provides any services may have a very large staff, and some functions are even outsourced.
In some areas of activity there is no need for fixed assets (own or rented). Sometimes a computer with Internet access, a printer and a telephone are enough. Formally, the costs of acquiring them in official accounting reports can be written off as expenses if their cost does not exceed the officially established limit. Although in management accounting, computers and office equipment can be recognized as long-term assets of the company.
Financial issues of business in the service sector
Often, organizing a business in the service sector requires the acquisition of non-current assets. For example, we are talking about beauty salons and various types of service centers. In this case, they will have to be purchased (taken on credit), acquired on lease or rented.
Main assets of enterprises in the service sector:
cash;
accounts receivable;
advances issued to suppliers.
In addition to these, a number of companies also have fixed assets and consumables.
Sources of financing (liabilities) for companies in the service sector may be:
own funds (authorized capital, founders’ investments in it, retained earnings);
accounts payable;
advances received;
loans.