Where to Start with Mobile App Development?

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We’ve all heard about the amazing success stories of mobile apps around the world. Uber, Careem, Talabat, Carriage, Instagram, WhatsApp, Snapchat… just to name a few. The required capital is minimal compared to the potential returns. Therefore, it is not surprising that many aspiring entrepreneurs out there would want to follow suit.

If you have an idea for a mobile app and are wondering where to start with the development, this article is for you.

First of all, let’s share some statistics.

  • Only 2.5% of companies complete their projects 100% successfully. (Gallup)
  • The average IT project overruns its budget by 66%. (McKinsey)
  • One in six IT projects overrun its budget by 200% and suffer a schedule overrun of 70%. (HBR)
  • 17% of IT projects can go so bad that they can threaten the very existence of the company (McKinsey)

The return on a successful mobile app may be appealing, however, the risks of failure are also very real. It would be a shame if you have a world-changing idea which never comes to light due to reasons which could have been avoided. Therefore, it is important to have a clear plan prior to the start of your mobile app development journey in order to minimize risks of failure.

The 10 Steps of Mobile App Development

 

 

  • Step 1: Write down your feature list
  • Step 2: Do the market research
  • Step 3: Identify the users/audience
  • Step 4: Identify the monetization strategy
  • Step 5: Create a rough sketch/wire frame
  • Step 6: Approach mobile app developers and get estimates
  • Step 7: Complete the UI/UX
  • Step 8: Get the app developed and tested
  • Step 9: Launch the app and market it
  • Step 10: Gather market response and prepare for the next phase

As you might have noticed from the list, developing the app is way down at Step 8. There are 7 steps that need to be executed perfectly before any piece of code is written. This may be a cumbersome task, however, it could spell the difference between becoming the next success story or just another statistic.

Moreover, once the app is developed, there are two more crucial steps that need to be conducted. Launching and marketing the app is just as important as the idea itself. It doesn’t matter how good your app is if your potential clients never heard of it.

Finally, improving the app. If your app was launched successfully and people do realize the benefit of using it, it won’t be surprising to have copycat apps out there trying to mimic your success. Case and point, Uber and Careem, or Talabat, Hungerstation, and Carriage. The best way to avoid losing market share is to make sure that your app is continuously improved to cater to the ever-changing customer demands. In other words, once you start your journey in mobile app development, it never ends.

H.A. Consultancies has helped several clients bring their mobile app idea into reality. It has also helped some to realize the fault in their plan and avoid considerable financial losses. For more information on our Mobile App Development Consultancy Services, feel free to contact us at any time:

[email protected]

Tel: +973 17233747

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How to Work Remotely Efficiently

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work remotely

work remotely

 

COVID-19 has changed the world. Working remotely is merely one aspect of how we had to adapt. It is a solution that had to be implemented immediately and in a very short period of time. For companies that were not prepared beforehand, it was definitely a struggle.

This article aims to explain some of the steps, tools, and assets that need to be in place in order to ensure the most efficient transition to working from home and how this can actually increase productivity.

One of the biggest obstacles to overcome while working from home, or from anywhere other than your office, is the communication barrier. As the teams working from the office have their routine meetings, brainstorming sessions, and morning briefings, none of this seems possible while working remotely. Nevertheless, it can be done. All that is required are the right tools and know how.

There are essential things that need to be prepared prior to working remotely and, fortunately, technology has come a long way in a short period of time. Today, it’s easy to stay connected to your remote computers by having a stable VPN connection. This needs to be prepared and set up properly to allow the end users (the employees) to access the internal network/system of the company. Also, the employees need to have a computer/laptop to allow them to work remotely and access the network. Moreover, an adequate tool to communicate internally & externally that facilitates virtual meetings is necessary also to allow the employees conduct their meetings/conference calls. However, in order for all of this to work, a stable internet connection is required at both the company and the remote location.

Many companies noticed an increase in productivity from the employees working remotely. This may be due to any of the following reasons:

  • Improved flexibility: virtual communication tools make communication between computers in different time zones easier. Thanks to messaging services, you do not have to wait for a team member from the other side of the world to be available to send you important information.
  • Convenience: you do not have to bother finding a meeting place when you contact via remote communication. People can communicate from anywhere using their computer or mobile device (and Internet access), making it easy for impromptu meetings. There are even applications to record video chats, so people who cannot attend also have the possibility to see what was discussed in meetings.
  • Ease of staying connected: connecting with a teammate, supervisor, or external collaborator has never been easier. When you need to ask a quick question or send a document to a coworker, you can connect to them with a click of a button.

Of course, working remotely also has its downsides as well, such as:

  • More distractions: remote communication tools can be very annoying. Being constantly bombarded by company emails and chat groups can have a negative impact on productivity.
  • Technical difficulties/internet interruption: remote communication depends on technology. A hardware malfunction, a service interruption, or an unstable internet connection could cut communication lines for an extended period of time.

Difficulty in conveying ideas: sometimes it’s easier to explain an idea in a face to face meeting rather than a conference call or through an online chat. Some ideas just need the human interaction element to get across.

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COVID-19: Vaccinate Your Company with ISO 22301 Standard

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ISO 22301

ISO 22301

In times of crisis and unexpected events, we are required to maintain all our processes and procedures in an orderly manner to ensure the continuity of our business.

In this series of posts, we will attempt to explain how ISO helps companies overcome the COVID-19 crisis.

This series would not be complete without explaining more about the most relevant ISO standard to the situation at hand, the ISO 22301.

ISO 22301: Business continuity

ISO 22301 provides us with a continuity plan for unexpected events and ensures that documented procedures are in place that lead organizations to respond, recover, resume, and restore the predefined level of operation after any interruption.

The ISO 22301 standard is a good tool to implement and manage a Continuity Plan, since it is a way of detecting opportunities and improving the operational efficiency of our business nucleus.

With this standard, the internal operating structure of the company can be analyzed, which allows finding various opportunities for improvement, the elimination of which clearly minimizes the risks and costs of our entity.

About H.A. Consultancies

We are a company with more than 20 years of experience in the implementation of ISO Standards and effective management solutions for your organization:

Quality Systems – Information Security – Software Quality – Compliance

Environmental management – Occupational Safety – Food Safety – Operational Excellence

H.A. Consultancies’ team of professionals and experts in ISO certifications will help you achieve your goals by offering you the best consulting service.

 

 

 

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COVID-19: Vaccinate Your Company with ISO 27001 Standard

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ISO

ISO

Many companies are concerned about how this ongoing pandemic is affecting the continuity of their activities and threatening their very survival.

Most business owners are concerned with how to keep their companies afloat and are updating their current procedures to accommodate events as unfortunate as the one we are experiencing.

For companies that are already ISO certified, they already have the tools in place to combat external threats. For those who are not, it is not too late.

In this series of posts, we will attempt to explain how ISO helps companies overcome the COVID-19 crisis. In this post, we are going to shed light on the ISO 27001 standard concerned with information security.

ISO 27001: Information Security

With the invasion of cloud technologies, the ISO 27001 witnessed strong growth. With the implications of the Coronavirus Pandemic, this growth is going to become exponential.

Equipment safety, backups, information exchange, network access control, laptops and mobile communications, remote access, key management, data protection and privacy of personal information, business continuity plans – surely if in your company you are working remotely, all these elements have been placed on the table. These are some of the controls established by ISO 27001 and that companies that are already certified have implemented. Therefore, their transition to working remotely or another new way of operating has been easy for them.

In addition, with the amount of malicious information circulating through the different digital media on the Coronavirus, it is imperative to keep the information safeguarded and establish security protocols within the company.

To that end, the ISO 27001 standard allows the implementation of an information security management system as an indispensable tool to protect companies and organizations from threats and risks against information.

This standard allows companies to:

  • Identify risks
  • Manage risks
  • Minimize risks

The ISO 27001 is a standard that keeps the information of the company, customers and suppliers controlled and protected from any intrusion and possible cyber pirate or cyber-attack.

About H.A. Consultancies

We are a company with more than 20 years of experience in the implementation of ISO Standards and effective management solutions for your organization:

Quality Systems – Information Security – Software Quality – Compliance

Environmental management – Occupational Safety – Food Safety – Operational Excellence

H.A. Consultancies’ team of professionals and experts in ISO certifications will help you achieve your goals by offering you the best consulting service.

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The Strategic Planning Process 

strategic planning processA strategic planning process is something with which we are all familiar, consciously or not. We use it to go from where we are, to where we want to go. 

It can be a physical destination, like another city, or a goal in life, like doing a master’s degree. We make plans, organize our time and lives, gather resources and design a strategic planning map 

For a company, the stages of the strategic planning process are not that different. A direction is developed, decisions are made and the necessary resources are allocated to achieve the final objective. 

The strategic planning serves as a map, an itinerary to help the organization discover how to get to where you need. The process includes analyzing strengths, weaknesses, opportunities and threats, as well as planning future operations in a priority and realistic way. 

How to develop a strategic planning process? 

The first thing to do is to start with a goal in mind. That is very important, because if we do not know where we are going, we will certainly lose ourselves. Determine who is going, the destination, and what it takes to get there. 

The stages of the strategic planning process should also include a situation analysis. Study the current situation before heading to the next one. 

Analyze where the company is, why it is there, what are the problems and possible points for improvement. Only after that, you can start thinking about solutions and the paths to take. 

Long-term planning is not about future decisions but about the future with current decisions. 

– Peter Drucker  

  

Good strategic planning should consider: 

  1. Determine long-term goals 
  2. Analyze the internal factors causing the most important issues 
  3. Create strategic options that address those issues, prioritizing them 
  4. Decide between options 
  5. Monitor the results of the stages of the strategic planning process 

Strategic planning process models 

There are 5 models from which you can choose when applying strategic planning in your company. They are all effective, and you must choose the one that works best for your organization. 

1 – Basic planning strategy 

This planning model is the most basic and is suitable for new organizations that have never done the project before, small or very busy companies. 

The stages of this strategic planning process are as follows: 

  • Identify the purpose 
  • Identify specific approaches and strategies 
  • Identify action plans to achieve the strategy 
  • Check and update the plan 

2 – Issue-based strategic planning process 

This strategy is an improvement on the basic plan, and is used in companies that want to delve into strategic planning. 

The stages of its process are: 

  • SWOT analysis – strengths, weaknesses, opportunities and threats 
  • Stakeholders identify major issues and objectives 
  • Review the mission, vision and values ​​of the company 
  • Develop action plans (if possible, yearly) 
  • Set the budget 
  • Run and monitor 

3 – Strategic alignment plan 

The focus of this strategic planning process model is to align the company’s mission with its resources. 

It can be useful for businesses that want to understand why their objectives do not achieve the expected results, or that want to adjust their goals. 

  • Delineate mission, resources, and actions
  • Identify what is working and what needs to change 
  • Determine how those changes will occur 
  • Add changes to the strategic planning process 

4 – Strategic scenario planning 

It is best when used in conjunction with other models to ensure that strategic thinking is incorporated into the process. 

The stages of that strategic planning process are: 

  • Participants project different scenarios that can occur externally and affect the company. 
  • For each scenario, three possibilities are projected: the worst, the best and the reasonable 
  • A brainstorm is made of how the organization would respond to each of the possibilities in the best possible way 
  • Add it to strategic planning 

5 – Organic strategic planning process 

This strategic plan is different from the others. It develops in a much more natural way than the previous ones, which follow a more linear and structured formation. 

This plan naturally progresses through an ongoing focus on common values ​​and consistent communication between participants. 

  • Clarify the company’s cultural values 
  • Articulate vision 
  • Discuss what processes are necessary to reach that vision and how they will be conducted 
  • Establish a culture that reminds everyone that this type of strategic planning process never ends and must always be updated. 
  • Focus on learning and reflection 

 Now that you know everything about the stages of the strategic planning process, study your company and see which one is the best. 

Remember that this will not be possible without clearly defined processes, and that no strategic planning can improve your business if your processes are not mapped, optimized and automated. 

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ISO 22301 – Business Continuity Management System

ISO 22301

ISO 22301

ISO 22301 Business Continuity is the coined term to refer to the strategies and planning by which organizations prepare to respond to catastrophic events such as fires, floods, cyber-attacks, accidents, human error or diseases.

A Continuity Management System Certificate (BCMS) certified under ISO 22301 – the most internationally accepted standard – helps organizations prepare for emergencies, manage crises and improve their operational recovery capacity, securing the supply chain and protecting itself, for example, its reputation in the face of a crisis. The changing environment surrounding organizations In the current context in which they operate, all organizations may be subject to disruptions such as technology failure, floods, fires, interruptions of public services or even a terror attack  

The consequences of unexpected business interruptions can be far-reaching and may involve the loss of goods and services, the loss of people’s lives, or the inability to deliver key products/services to the survival of the organization.

ISO 22301 is available to any organization, regardless of its size or complexity of activity, that wants to manage its overall risks and develop the ability to plan and respond to incidents and interruptions in its activity or business. ISO 22301 Business Continuity Management System is characterized by the proactive identification of the effects of the interruption since it identifies those processes and products/services that are crucial for the existence of the organization and establishes the responses that will be necessary in the event of an incident powerful to occur. ISO 22301 BCMS provides the organization with the ability to react appropriately and trying to not affect the operations productivity as much as possible.

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فيروس كورونا: كيف يجب على الوالدين التعامل مع أطفالهم؟

الأطفال و فيروس كورونا

الأطفال و فيروس كورونا

مع استمرار انتشار فيروس كورونا، المسمى ب COVID-19 ، من المهم جداً من البالغين التواصل مع الأطفال حول الموضوع.

  • تذكر دائماً “يولي الأطفال اهتمامًا وثيقًا لكيفية حديث البالغين عن فيروس كورونا”.

من أهم الأشياء التي يجب وضعها في عين الاعتبار أن الأطفال يتطلعون إلى الكبار لفهم العالم. لذلك، سوف يكون الأطفال قلقين إلى حد ما اعتمادًا على كيفية تواصل الكبار من حولهم معهم.

يحتاج كل من الأطفال والمراهقين إلى مساعدة البالغين لفهم هذا الوضع بشكل أكبر، فإن الأطفال و المراهقين ليس لديهم الكثير من الخبرة لوضع شيء مثل COVID-19 في المنظور.

إن الأطفال غالبًا ما يدركون ما يحدث أكثر مما يدركه البالغون. فضع في اعتبارك أن الأطفال غالبًا ما يستمعون إلى محادثات الكبار حتى عندما لا يبدو الأمر كذلك. من الأفضل التحدث إليهم مباشرة وتهدئتهم قدر الإمكان.

  • يجب على الكبار توفير بيانات دقيقة ومناسبة لعمر الطفل حول فيروس كورونا.

قبل التحدث إلى الأطفال، يجب على البالغين فهم البيانات والاستعداد لمشاركة المعلومات الصحيحة حتى يتمكن الأطفال من فهمها.

يجب على البالغين التواصل مع أطفالهم و إخبارهم بأن معظم من بفئتهم العمرية لا يصابون كثيرًا بفيروس الكورونا، ذلك سوف يساعدهم على تقليل القلق. و أيضا يجب على البالغين التأكيد على أطفالهم بضرورة البقاء في المنزل لتقليل خطر انتشار الفيروس.

  • ساعد الأطفال على التعامل مع القلق بشأن إغلاق المدارس.

من المحتمل أن يكون البقاء في المنزل وعدم التواصل الاجتماعي وضعًا مرهقًا للأطفال من أي فئة عمربة، لذا يحتاج البالغون إلى توفير بعض الآليات للأطفال للتعامل مع الموقف.

قد يكون الأطفال الصغار مرتبكين بشكل خاص بسبب التغيير ويتساءلون عما إذا كان أصدقاؤهم ما زالوا أصدقاءهم. حتى المراهقين، الذين يقضون الكثير من الوقت في استخدام الأجهزة الإلكترونية ، قد يشعرون باضطراب كبير في حياتهم الاجتماعية مع إغلاق المدارس.

فمن الضروري دعوة الأطفال والمراهقين لمشاركة ما يشعرون به حيال الانفصال عن أصدقائهم، ومساعدتهم على تنظيم خطط للحفاظ على هذه العلاقات عن طريق المكالمات الهاتفية أو  كتابة الرسائل النصية.

يمكن للبالغين أيضًا توضيح أنه في حين أن هذا الانقطاع صعب، إلا أنه مؤقت. و أن الأطفال سوف يعودون إلى المدارس، وسيعود البالغون إلى العمل، وأن الناس سوف يكونون قادرين على الإلتقاء في مجموعات كبيرة مرة أخرى.

و يجب على البالغين أن يشرحوا للأطفال أن كل هذه التغييرات، على سبيل المثال، إغلاق المدارس ، يتم إجراؤها لمنع انتشار الفيروس.

للمساعدة في تقليل القلق عند الأطفال، من الضروري على البالغين الحد من تعرض الأطفال للأخبار ووسائل التواصل الاجتماعي. حتى المراهقين، الذين قد يستخدمون وسائل التواصل الاجتماعي للتواصل مع الأصدقاء، يحتاجون إلى أخذ استراحة من الإلكترونيات.

يحتاج الآباء إلى متابعة مراقبة استخدام أطفالهم لوسائل التواصل الاجتماعي، وضمان أن الأطفال والمراهقين لديهم أوقات لا يكونون فيها أمام الشاشة، خاصة في الليل.

  • تحدث إلى الأطفال للمساعدة في تخفيف القلق حول فيروس كورونا

هذه فرصة للأطفال لتعلم أنه عندما يتعلق الأمر بهم، من المهم جداّ التحدث عنه إلى الناس. فيمكنك أن تقول لأطفالك، عندما تشعرون بالقلق، يجب التحدث مع شخص بالغ بشأن ذلك لأنه يمكنه أن يقدم لك المساعدة.

يجب أن يفهم البالغون أن الأطفال يمكنهم الاستجابة بشكل مختلف للضغوط. قد يتصرف الأطفال بشكل سيئ، أو يصبحون أكثر اعتمادًا ، أكثر عصبية أو مفرط النشاط ، أو أكثر تطلبًا و تهييجاً. فالأطفال لا يدركون دائمًا أن سلوكهم قد تغير أو لماذا تغير، لذلك فهم بحاجة إلى الكبار لمساعدتهم على فهم مشاعرهم والتعبير عنها بطرق صحية.

يجب على الكبار بدء المحادثة مع أطفالهم وتشجيعهم على مشاركة كيف يفكرون وكيف يشعرون. تحدث عن كل أنواع المشاعر التي قد يشعر بها الطفل. “قد يكون بعض الأطفال قلقين للغاية بشأن مرضهم.قد يشعر بعض الأطفال بالسعادة لأنهم لا يضطرون للذهاب إلى المدرسة أو أنهم قد يفتقدون أصدقائهم.” شجع الطفل على المشاركة إذا كان لديه أي من هذه المشاعر أو أي شيء آخر.

غالبًا ما يستخدم الأطفال الالهاء كاستراتيجية للتكيف ، ويمكن أن يكون مفيدًا جدًا ؛ ومع ذلك ، يجب على البالغين مساعدتهم على التحدث عما يشعرون به حيال ما يحدث في حياتهم .

قد يستفيد الأطفال الأكبر سنًا والشباب من التذكير بمدى سهولة الابتعاد عن طريق التضليل أو الذعر الإعلامي عبر الإنترنت ، وقد يحتاجون إلى المساعدة في معرفة مصادر المعلومات الموثوقة وتعلم التحكم في ما يرونه على الشاشات .

  • اشرح لأطفالك أن البالغين يعملون على استمرار حمايتهم

إن فيروس كورونا COVID-19 هو وضع متغير، مع ذلك يمكن للبالغين أن يؤكدوا للأطفال أنه حتى إذا تغير الوضع، على سبيل المثال ، زيادة في وضع احتياطات السلامة، يتم ذلك حتى نكون جميعًا آمنين.

من المهم للأطفال أن يعرفوا أن هناك العديد من البالغين الذين يعملون بجد للتأكد من الحد من انتشار هذا الفيروس و إيجاد دواء له. و أيضاً يمكننا أن نقول لهم أن هناك أشخاص أذكياء للغاية يعملون بجد في هذا الأمر وأن المدارس مغلقة لأن البالغين اتخذوا هذا القرار لحمايتنا جميعًا.

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Where to Invest with the Coronavirus Crisis?

Where to Invest with the Coronavirus Crisis?

Where to Invest with the Coronavirus Crisis?

 

The objective of today’s post is simple, as its title indicates, we are going to see how to make money with the Coronavirus crisis. For all those who have a tendency to be offended, I know that it doesn’t sound good at all to make money out of misfortunes, but the solution to eradicate this virus is not in my hands. The most I can do is comply with the prohibition not to leave home so as not to aggravate the situation, and I am doing it. That said, we must be aware that it is something that can harm or benefit our investments, so I have no ethical dilemma in trying to address this issue from an economic point of view. So, let’s try to save our finances.
First of all, it is important to highlight that nobody knows how things are going to turn out. Whether this crisis is going to subside next week, next month, or next year. Hence, there are two opposing views:

1. The Optimistic View
A cure is going to be discovered or the virus will simply disappear in the summer.

2. The Pessimistic View

The virus recreates itself and the situation we are in will continue for over a year.
Investment opportunities differ significantly depending on which view you follow. On the short term, I imagine there will be a thousand ways to take advantage of this situation: buy liters of disinfectant alcohol in bulk and sell it online, import medical masks and sell them on Instagram, trade in companies in the face of rumors of the creation of a vaccine to the Covid-19… Unfortunately, the option that I will propose here today is much more boring:
                                                                     Create a long-term investment portfolio!
Yes, I’m sorry. The title promised to be much more interesting, but it is what it is.
Ok, for those of you who want to keep on reading beyond this point, here is what I have to say…
In order to explain how you are supposed to create a long-term investment portfolio and make money from it, we will need to classify investments into three categories:
1. Growth Companies
Companies that are expected to grow amidst this crisis such as pharmaceutical and IT companies such as Alphabet, Facebook, and Zoom.

2. Wounded but not Dead Companies
Companies that have been impacted but are expected to come back strong once this crisis subsides. For instance, who would invest in Ryanair with how bad the airline sector is now that flights have been paralyzed globally?
Who would invest in oil with the current oil crisis and the price of crude oil plummeting?
Who would invest in a cruise company now that everyone is canceling their trips and no new hires are anticipated in this scenario?
Well, this is what I mean by “Wounded but not Dead Companies”. Something that nobody wants today but years from now, when we see it in retrospect, we realize that there is no evil that lasts forever.

3. Safe havens
Finally, to give a little balance, also invest in gold (of course) and stable companies that have not been affected much by this crisis such as: Disney, Altria, and Netflix.

 

Depending on your risk appetite, you can spread your investment among these three categories. A risk averse investor would put a bigger percentage of his funds in gold, whereas those with higher risk tolerance would put a bigger percentage of their investment in the other two categories.
With this clear, all that remains is to prepare our shopping list and establish prices at which you would be happy with the acquisition.

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Revenue vs. Profit

Any business owner needs to know how to maximize their profit and to demonstrate to investors that the company is heading in the right path since revenue can indicate a firm’s potential.

The most important difference between revenue and profit is that while any company can increase its revenue, it may well be registering a net loss of earrings at the same time.

 

Revenue

Revenue means the total amount of money that the company generated through its business activities (in other words, it is the total sales of the company).

 

Profit

  1. Gross profit

It is basically revenue minus cost of goods sold, on the income statement, gross profit appears directly after revenue, it is calculated by subtracting Cost of Goods Sold (COGS) from the total revenue.

As a metric, it is used by business owners to gain an idea of how much money they have with which to fund the business after their core product is produced and sold.

 

  1. Operating Profit

Operating Profit means Gross Profit minus all fixed expenses encountered when you run the business, such as rents, utility bills & payroll. It is used to demonstrate the earning power of any business in terms of its regular operations, removing external factors to show its potential profitability.

Some companies may choose to use Operating Profit over Net Profit to highlight the financial impact of external overheads. For example, investors can use Operating Profit to compare the business with a similar firm operating under a different tax structure.

 

  1. Net Profit

Whenever people start to talk about any firm’s profit, they usually refer to Net Profit which means the remaining income after all the operating costs, debts, expenses, interest and taxes are deducted.

Net Profit is the most important financial metric on the income statement, it is the most important figure to the investors and shareholders.

In terms of Operating Profit, Net Profit can be expressed as Operating Profit minus interest and taxes:

Net Profit = Operating Profit – Interest – Tax

 

  1. Net profit margin

The Net Profit Margin is the ratio of the company’s net income to its revenue, it is presented as a percentage.

 

Taking all of this into account, a business owner should always try to maximize his Gross, Net, and Operating Profits rather than just increasing sales revenue. Nevertheless, if operating expenses are kept under control, increasing sales revenue might well result in an increase in profits.

 

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Inventory Valuation Methods Impact on VAT

Inventory Valuation and VAT

Inventory Valuation and VAT

Would changing the inventory valuation method from First In First Out (FIFO) to Weighted Average (WA) or vice versa reduce my VAT payments?

VAT is computed on the amount paid to purchase or sell an item. So, in case a retailer purchases stock for 1,000 BD from a distributor, the VAT amount would be 50 BD on top of the 1,000 BD that is to be paid for the stock.

Subsequently, when the retailer sells the stock for 2,000 BD, he would have to collect 100 BD on top of the 2,000 BD as output tax. The retailer would then deduct the 50 BD paid to the distributor from the 100 BD collected from the customer and give the difference (50 BD) to the government.

Inventory valuation on the other hand has to do with calculating the value of stock that a company has on hand in order to identify the value of the assets in stock and accordingly the Cost of Goods Sold when a sale is done.

To clarify this, let’s take an example of an item that a reseller purchases at one time for 10 BD and another time for 9 BD and then sells the items for 20 BD.

 

Weighted Average Method

If the reseller buys 100 items for 1,000 BD at 10 BD a piece and then another 100 of the same item for a discounted price of 9 BD a piece for a total of 900 BD, the value of each stock item would be (1000 + 900)/200 = 9.5 BD if the reseller was following the Weighted Average inventory valuation method. Therefore, for each sale of this item, the reseller would have to record COGS of 9.5 BD.

The reseller would have paid 5% on each purchase, hence, he would have paid 50 BD on the first purchase and 45 BD on the second purchase totalling 95 BD.

The reseller would then sell each of the 200 items for 20 BD and collected 5% VAT on each sale totalling 200 BD for all the items (200 x 20 BD x 0.05 = 200 BD).

Finally, the reseller would deduct the 95 BD VAT that he paid to his distributor from the 200 BD VAT that he received from his customers and pay the difference (200 – 95 = 105 BD) to the government.

 

First In – First Out (FIFO) Method

If the same reseller is following the FIFO inventory valuation method, the reseller would have to track the sales of the items to make sure that for the first 100 items sold, a COGS of 10 BD is recorded, and then the next 100 items a COGS of 9 BD is recorded. However, the reseller would still have paid 50 BD VAT for his first purchase and 45 BD VAT for his second purchase. Moreover, the reseller would still have collected 5% VAT for each of the items sold. Assuming that the selling price was maintained at 20 BD per item, the total VAT that he would have collected for all 200 items would still be 200 BD.

Again, the reseller would have to deduct the 95 BD that he paid on his purchases from the 200 BD that he collected from his customers and pay the difference (105 BD) to the government.

As we can see from the preceding example, the inventory valuation method has nothing to do with the amount of VAT that is going to be paid. Inventory valuation methods are concerned with the value of stock and COGS while VAT impacts the selling/purchasing price of the goods.

 

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