Operational activities are the main activities that a company carries out to generate revenue. These activities affect the flow of deposits and withdrawals and determine the company’s net profit.
Some basic operational activities for a company are sales, customer service, administration and marketing. These activities are part of the normal running of a business that will affect your monthly, quarterly and yearly revenue and profits. They also provide most of the cash flow and determine profitability.
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What is included in the business activity?
A company’s operations can be found in the company’s financial statements, specifically the cash flow and income statements.
The operational activities section of these statements is considered the most important section as it provides cash flow information relate to the daily operations of the company and allows stakeholders to see the company’s viability. It also determines the company’s ability to pay its ongoing expenses, such as labour costs and debt service.
The operational activities that result in revenue generation are:
- Cash Income from Sales
- sale of shares
- capital gains
- Handling of litigation and insurance claims
- debt collection
- Provider Refunds
The operational activities that generate cash outflows are:
- employee payments
- Payments to Suppliers
- tax payment
- Customer Refunds
- fines and judgments
- interest to creditors
- purchase of equipment
- Payment of interest on loans and dividends
The cash flow from these activities is included in the “Operating Activities” section of the cash flow statement. These are changes focused on current assets and liabilities and net income. In addition to current business activities, the cash flow statement shows the cash flow from investing and financing activities.
What is an example of an operational activity?
Income Generating Activities
What is the company’s main cash-generating activity? There are two main income-generating activities of businesses: providing services and selling products.
marketing and advertisement
Operational activities include the promotion and advertising of goods and services. For example, an accountant can provide introductory training for small businesses at the local chamber of commerce.
management
Functions such as accounting, purchasing, human resources, facility maintenance and information technology are includ in the operational activities.
maintenance and after-sales service
Customer service and facility maintenance expenditures include rent, utilities, consumables, insurance and licenses.
What are the six types of business activities?
Regardless of your activities, the ultimate goal of any business is profit maximization. With this in mind, all businesses must undertake six types of activities at some point.
1. sale
The sales team is the soul of slightly business. The sales team reaches out to customers to expand the customer base and ensure repeat sales.
2. Marketing
Marketing and advertising help develop the brand and increase awareness of the company and its services.
3. Finance
The budget and finances help decide how the revenue will be use to grow the business and achieve optimal results.
4. Accounting
Managing the money going in and the availability of your business falls under accounting. When you keep up with expenses and income, you know where and how money is being spent.
5. Customer Service
Customer service helps attract new customers, build lasting relationships, and drive referrals for your business.
6. Human Resources
The human resources team is integral to maintaining ongoing operations and planning for expansion. They are responsible for conducting interviews, hiring candidates, managing interpersonal conflicts and determining the benefit packages employees should receive.
Not every commercial activity is a business activity. Major operational activities include cash flows related to the company’s core or activity profitably carried out.
The business activity report helps determine the business focus and its profit potential.