Question

For my following business :
I will start my own business and the name of my business will be "Nesma Groceries Store".
- I will sell all the stuff of Grocery items and products, I will sell anything related to groceries.
- It will be bricks and mortar store because their sales are better.
-There are two types of policies I would put in place for my business, I see those are most important to the costumers:- Refund-Discounts offer. If I don't have those policies in my business, it probably won't succeed.

DiscussionBoard, you described a retail business you would create.

Chapter 5 has introduced us to Internal Controls that businesses use to prevent errors and fraud,

Name two internal controls you would institute for your new business and why you would use them.

Answer 1

REFUND POLICY

A well-written refund policy can boost your sales and increase profits, while an overly restrictive refund policy can scare potential customers away and cost you dearly.

Return and refund policy should typically address the following few points:

• Clearly state if returns, exchanges, and refunds are accepted by a company.
• The number of days customers have to return or exchange a product.
• List any products that may be exempt from returns.
• Outline any other requirements that customer has to meet to be eligible for a refund.
• SaaS companies often include information about prorated or partial refunds.
• For physical products, it’s a good practice to include some details about shipping charges in the event of a return.

What to include in a refund policy?

People don't have a tendency to read long and boring legal documents online. On the other hand, you have to provide all the necessary information.

This is why it is advised to break down your return/refund policy into smaller sections. This will increase the readability of the document, make it easier for customers to find what they need and, at the same time, protect you legally.

Despite what you sell, your refund/return policy should usually contain these three sections:

1. How many days a customer has to return the product. Does the counting start from the moment they order it, or from when the product gets shipped to them?
2. If the customer does return a product, you have to specify what kind of refund they are eligible to get. Some stores allow customers to get similar products or get a store credit in the value of the purchased item, while others return the cash spent on the product.
3. At last, you will have to specify who will pay for the return shipping. Some stores don’t charge customers that are in the same state or country as the business is, while others offer free return shipping regardless of the customer’s location.

If you run a company that sells digital products (downloadable software, SaaS, digital games, etc.) it is advised to provide these two additional sections:

1. If you allow your customers to get refunds on digital purchases, you have to clearly specify on which ones. In case return/refund policies are different for specific products, you will have to specify each one separately.
2. Sometimes businesses that sell digital products online offer refunds only in certain situations. In this case, you will have to specify each of the situations and provide a short description to each one of them.

If customers can make in-store, online and over-the-phone purchases, it is advised to specify the refund/return policy for each one of these. You can do this by adding three very short sections to your agreement (policy for in-store, online and over-the-phone purchase).

Discount Policy

Discounts are a staple of business strategy for many retail firms. As Tom Hartley noted in Business First of Buffalo, sales remain "the fuel that drives the retail engine." He cited the views of several retail experts who flatly insist that sales promotions are integral to most retailers' success. "The name of the game is promotion," one expert told Hartley. "Sales are the only way to drive the business and retailers have to have them, even if they seem to be going on all the time. Discounting in America has been built into the retail cycle. It is no longer a big deal."

But small retail firms should make sure that they go about the discounting process in an intelligent fashion. Business consultants cite several considerations that small retailers should weigh when putting together their overall marketing strategy. For example, retailers should beware of overuse. Indeed, according to many economists and business owners, discount periods increase sales volume but also deepen sales troughs between sales. Other analysts contend that frequent sales tend to numb customer response over time; Hartley pointed out that "many retail experts think consumer have become less trustful of retailers who[m] they see running weekly sales, or marking up items so high that they make a profit even after slashing prices 20, 30, or 50 percent."

In addition, retailers should study historic customer response, inventory levels, competitor pricing, seasonal cycles, and other factors in determining the level of discount. Some businesses are able dramatically to increase sales volume through discounts of 20 percent or less, which in many instances enables them to maintain a decent profit margin on sales. Other businesses may have to offer discounts of 40-50 percent (because of seasonal considerations, industry trends, etc.) in order to see meaningful increases in traffic. Of course, some retailers employ a price philosophy that emphasizes every-day low prices in the hopes that the increased volume will make up for the small profit margin achieved on individual sales.

As per the business suitability one should choose the policy i.e refund or discount or both.

The following factors that one should consider before choosing any type of policy are as follows:-

1. Type of customers in a business.
2. Types of Revenue
3. Whether a business is seasonal or cyclic.
4. profit%

As a small business owner, you know that implementing properly designed controls with limited resources can be challenging. However, not addressing deficiencies can expose your business to operational and financial risks and losses.

Fortunately, there are steps you can take to help prevent and detect fraud at your company. The most common types of internal control weaknesses detected in small businesses can often be mitigated through implementing a combination of anti-fraud controls and/or slightly modifying existing processes.

The following five internal control challenges are some of the most common found in small businesses.

1. Separation of duties

In larger organizations, the performance of critical functions is typically divided among different employees. In small businesses with limited human resources, it’s not uncommon for a single employee to be solely responsible for completing multiple tasks in a critical process. However, failing to properly segregate duties can result in a greater risk of errors or fraud.

Generally, assigning different people the responsibilities of authorizing transactions, recording transactions, maintaining custody of related assets, and reconciling accounts provides for more effective internal controls. Each employee should have specific job responsibilities, preferably defined in writing. Reassignment of specific duties within a process to other appropriate individuals can significantly help to mitigate risks in many cases.

2. Policies and procedures

Effective policies and procedures can help you to align your business objectives and help establish best practice operating procedures – and they are also one of the most underused control tools. Even if you think your business processes are uncomplicated and well known by management and employees, there is value in creating written policies and procedures.

Although each business is different, the following are examples of common processes that are important to define and document:

• Sales and accounts receivable
• Cash management and banking
• Purchases and accounts payable
• Payroll and human resources
• Financial statement closing and reporting

Documenting key controls in each of these cycles can provide transparency and consistency and allow for specific roles to be easily be assigned to specific individuals. If a key employee leaves the company, it will be easier to train new and/or temporary employees with thoroughly outlined and documented procedures already in place. Documenting policies and procedures can also help to clearly define business operations and confirm alignment with management’s expectations.

3. Documentation

Maintaining adequate supporting documentation is part of the foundation for developing an effective internal control framework within an organization. Without it, it can be difficult to demonstrate existence of transactions completed, procedures performed, and controls in place. Proper documentation can also make it easier and more efficient to research and respond to questions from customers, management and auditors.

By emphasizing the importance of maintaining proper evidence, your management team can help reduce risks to employees and to your business.