Director, Business Affairs
- Monitor and evaluate the implementation of policies and guidelines concerning the business affairs of the University.
- Identify, initiate, plan and implement income-generating projects (IGPs) and other business affair activities of the University.
- Assume the responsibility on financial matters relating to the operation of the PSAU IGPs subject to pertinent provisions of law, accounting procedures, rules and regulations.
- Review and endorse budget proposals, feasibility studies and contracts for recommendation and implementation by the VP-PILLAR4D.
- Evaluate and process the business proposals based on the University objectives.
- Prepare and submit to the VP-PILLAR4D reports and communications relative to business affairs.
- Assist in the marketing operations of the IGPs and other PSAU business activities.
- Do other related work/s as may be deemed proper by the VP-PILLAR4D and University President.
Legal Basis for Implementing IGPs
The National Budget Circular (NBC) No. 331 in relation to Letter of Instruction (LOI) No. 872 provides for the creation of a school revolving fund (Fund 161) pertaining to its land grant agricultural operations and food production program and prescribing thereby rules and procedures on income derived therefrom.
COA Circular No 84-239, likewise, prescribes procedures and guidelines for the proper evaluation, recording and reporting of crop, animal, and fishery products acquired or produced by government agencies engaged in farming and other agri activities either as their regular or as additional special projects.
RA 8292 provides authority for the SUCs Board of Regents/Trustees to institutionalize IGPs in consonance with government accounting rules and procedures. IGP income shall accrue to Fund 161.
Starting, Expanding, or Modifying a Business Project
General Operations Framework
The operation of the business shall be grounded on a production and marketing framework that outlines a business system. It is designed to serve the industry and sector to where a business or project belongs to complete the production-marketing continuum that essentially brings commodities from the point of production to the point of consumption. Thus, the absence of one makes the system incomplete and this adversely affects the supply, availability and movement of goods that are essential in meeting food and allied products and services or requirements of the consumers at the end of the spectrum.
A production and market mechanism offers an understanding and vehicle of how resources are invested, allocated, and spent. The determination of how this happens is done through responses of farms or firms operating in product and resource markets.
This is a mechanism for coordinating production, distribution and consumption activities. It is a complex system with various subsystems interacting with each other and with the different marketing environments. As a system, it has the following characteristics:
- It has objectives to achieve;
- It has components or participants that perform certain functions such as production, sourcing, transport, storage, processing, grading, standardization and marketing information, and all the necessary jobs between the decision to produce and the final consumption of the product or service;
- It needs institutional arrangements which are necessary in the performance of its function;
- It needs planning and management decision structure which controls and coordinates the forces at work; and
- It has spatial and temporal dimensions and is most often commodity specific.
The production and marketing system has six components: producer, flow, functional, channel, consumer and environmental subsystems.
The producer subsystems consist of projects (as in the case of PSAU), small farmers, small and medium enterprises (SMEs), farmers’ cooperatives or associations and corporate farms or firms. Goods produced in this subsystem are brought to the final consumer via the channel subsystem, consisting of marketing participants or intermediaries who are directly responsible for making the farmers’ or growers’ products available to the user at the right place, time and form. The flow subsystem facilitates product, financial and information flows. Information to be relayed usually consists of production trends, demand trends, grading or standardization and prices. Functional subsystem, on the other hand, consists of marketing functions or services related to the creation of place, time and form utilities that involve assembly, concentration and dispersion activities. At the other end of the system is the consumer sub-system that refers to the final destination of products produced by the growers. These different subsystems interact with and are independent of each other and within the environment they operate. The environmental subsystem which facilitates market performance encompasses four other areas or factors that affect the entire marketing system: climatic or physical, socio-cultural, economic or technical and legal or policy factors.
Factors to Consider in Starting and/or Expanding or Modifying a Business
- Sound Business Model
In general terms, this first factor suggests docility of a project or an idea. To be doable, there shall be relevance as to its potential to attract buyers, access to technology and capital resources, availability of suitable area or location, as well as people who are going to work for the project, etc.
- Availability of suitable area or location
A suitable area or location is one which has access to (a) water resources especially when the project is agricultural or food in nature, (b) public utilities such as electricity, telecommunications, water services, and transportation, (c) sources of raw materials and production inputs, and (d) markets. Equally important for an area to be suitable is when it is secure from disaster, disease and pests, and any possible disorderly behaviour of people who are external and internal to the project.
- Proof of Market and Potential for Growth
Presence of effective demand for the product or service.
Generally, this factor refers to the presence of a positive difference between demand and supply of a good or service. This information can be established by looking at the behaviour of potential buyers and the degree by which present and existing suppliers are able to meet their needs.
Presence of effective value or price of the product or service.
The value or price of a product is shaped by the workings of the market and government intervention. Simply put, this is a result of the degree by which a product or service is sought by buyers and the reaction or receptiveness of businessmen or entrepreneurs in the area to produce and make available these items in the marketplace in the right form and in the right time.
Potential for growth in demand, value and/or price.
The common denominator for growth is a mass of population or customer base that is growing. This can be by natural reproduction and movement of people as they respond to seek a better place of residence, school, work, as well as play. The potential can also be harnessed thru changes in tastes and preferences that can be partly initiated by the project or business itself.
- Proof of Technology and Potential for Improvement
This refers to production or manufacturing technology that shall be responsible in turning outputs, be it products or services. Technology can be results of research and development and/or practice that have evolved through time. A good choice of technology is one that has shown stability and reliability for existing users and potential for further improvement. The latter can be harnessed by the existing and potential presence of public research institutions and agencies. Otherwise, the private sector is actively involved in making technology available either by local and international acquisitions, or their own R&D initiatives.
- Proof of Financial Viability and Potential for Growth
The proof of financial viability shall have to be established at the outset of planning for the project. A benchmark Returns on investment (ROI) is a function of a hurdle interest rate of 12 percent-plus allowances or adjustments to cost of money, inflation, and private/social profits. The total value of this is then compared to the forecasted ROI of a proposed project. If the latter is equal and/or greater than the benchmark, then the project is considered viable. For more complex projects, other financial ratios are employed to test profitability, leverage, and their economic worth.
- Availability of Capital
Capital is essentially crucial to a business. It is needed to start a new enterprise or a new budget year. It is also necessary in expanding or modifying a project. Thus, its availability is decisively important. This can be in the form of working capital and capital outlay that can be sourced internally and externally. Undercapitalized projects shall be encouraged not to proceed, unless there is a scaling down of the target size of business. Since financial resources are also finite and meager, a deliberate and conscious effort of building the capital base of projects and the business program as a whole shall be made. Borrowings or seeking of grants and donations may be made to support highly viable and/or impact projects.
- Availability of Project Management Material and Manpower
A pool of project management and manpower material provides the active ingredient in developing and growing a business. The College Business Program shall look in these human resources the character and personality that is driven by the passion to lead, succeed, create, innovate and take some degree of risk in whatever they do and/or attempt to do.
- Proof of PSAU Administration Support
This refers to interest and active support of management in nurturing institutional environment conducive to business projects. This can be shown in policies, approved and funded plans and projects, and actions that are direct, swift, and economically reasonable.
Steps to Consider in Starting and/or Expanding or Modifying a Business
- Prepare and submit a capsule business idea
- Brainstorm its soundness to arrive at the “right” business model
- Secure go signal to prepare feasibility study and business plan
- Prepare feasibility study and business plan
- Defend feasibility study and business plan
- Secure approval and/or acceptance of feasibility study and business plan
- Secure funding of business plan
- Organize resources to start the business
- Launch an opening event to start the business’s operations
General Guidelines and Procedures
A. General Guidelines
- The management and operation of all business and income generating production projects shall be in accordance with the guidelines of the National Budget Circular Nos. 331 and 331-A and COA Circular No. 84-239.
- The BMC, in consultation with its technical consultants shall draw medium range business and production plans and land use program.
- No business and income generating production project will be implemented without an approved Business Plan and Budget.
- Procurement of supplies, materials, and equipment shall be the function of the College Buyer or Procurement Officer. The President may authorize the end-user to assist the College Procurement Officer in the procurement process. Procurement shall be in accordance with RA 9184.
- Issuance of inputs in accordance with the approved project plan and budget shall be done after properly accomplishing the Request Issuance Slip Form or Withdrawal Slip.
- Record keeping shall be enforced in all project managers using the prescribed forms formulated for the purpose.
- A consolidated project report/statement of operation must be submitted. For crops and special projects, the report has to be submitted at the end of the cropping period, whereas the project report on poultry, livestock, nursery, and other similar projects shall be submitted on a monthly basis.
- Marketing and choice of outlets shall be pre-determined in the plan or before the produce is harvested in coordination with the Marketing Section.
- Hiring of private machinery and other services for IGPs must be approved by the President and coursed thru channels for recommendation.
- In case a project incurs net losses due to force majeure, the Project Manager after due investigation and/or evaluation, shall not be held accountable. Otherwise, and for unjustifiable reasons, the Project Manager shall be made directly accountable by requiring him that such losses be covered first from the current income before the overall project ROI during the production year shall be computed as a basis for giving the incentives of project personnel concerned.
- In case of a critical project activity where manpower is needed, pooling of manpower shall be done with the approval of the Director concerned; hiring of contractual labor is also allowed under this situation.
- All Project Managers shall be on vacation/sick leave basis.
- All OBA personnel shall be issued an appointment. An academic faculty participating in any IGP activities shall receive a corresponding minimum ETL based on the existing policy of the College and in the case of non-teaching staff, their additional assignments in the OBA shall be properly documented and recognized.
Procedures in Starting New Project Operations
- Follow Part VII on steps to consider in starting and/or expanding or modifying a business.
- For operations that require government licenses and permits, these shall be acquired and paid for.
- The designated project manager and his or her manpower complement shall go thru an orientation of the Manual of Operations of the Pampanga State Agricultural University Business Program.
- Forms for reporting of business performance shall also be obtained by the Project Manager from the OBA.
Procedures in Starting Operations in a New Calendar Year of Existing Projects
- The project manager shall submit to the OBA for consideration and final approval of the BMC every December of the outgoing year, a (a) new business plan and budget for the incoming year and (b) the starting capital requirements for the incoming year.
- The starting capital shall come from the cash balances in the project, still remaining. When necessary, the OBA shall transfer funds from its account to the account of the project for budgetary support, subject to the approval of the BOT upon the recommendation of BMC.
- Pertinent forms for business and project operations shall be obtained from the OBA to be used in the purchase of raw materials or inputs, record keeping especially of sales, credit sales, expenses, and inventory, payment of wages and/or salaries, hiring of services, storage of produce, and disposal and marketing of products and/ or services.
- Forms for reporting of business performance shall also be obtained by the Project Manager from the OBA
- Subject to college internal controls and COA rules and regulations, projects in-charge or managers have the discretion to contact buyers of products and/or services. The Director of Business Affairs does not preclude them to engage customers, explore possible contracts, or dispose to marketing outlets in coordination with the Office of the Business Affairs
- Price determination of products and services shall be competitive with reference to market trends
- Disposal of products through credit shall be by salary deduction and applicable only to employees of PSAU. The credit card scheme shall be implemented. Products disposed through cash shall be priced based on farm gate price; and through credit, market price shall be the basis
- Advertising shall be encouraged at any point in time in the form and frequency with prior approval.
- Incentives shall be given based on Net Profit Margins (NPM) or Returns on Investment (ROI) of at least 12 percent during an accounting year. NPM or ROI shall be computed based on the formula:
(Net Profit) divided by (Total Expenses) or (Net Profit) divided by (Total Investment to/of the Individual Business or Project) and Multiplied by 100.
In turn, total investment is computed as the Starting Budget for the Incoming Year. This is composed of Working Capital to take care of Personal Services and Maintenance and Other Operating Expenses Plus Capital Outlay that includes either new (with no depreciation) or existing infrastructure and equipment (less accumulated depreciation).
- The details of this scheme shall be subject to the approval of the President upon recommendation of BMC. In cases where businesses or projects did not earn or even incur a net loss, the BMC may recommend the payment of the barest of incentives possible.
- The monthly RATA of the Director of Business Affairs shall be consistent with the level and amount received by PSAU’s Director of Instruction, Research and Development, and Extension and Training.
- The division of income accruing to the Project Managers, OBA, and PSAU as a whole shall be computed as follows: (based on existing COA Circulars)
(Undivided) Net Income or Net Profit
Less: Provisions for Business or Project Starting Capital/Budget for Incoming Year
12 percent (of Undivided Net Profit) for OBA
Net Profit for Division Between Project Managers & PSAU
Less: 40 percent to Project Managers & Workers
Proportion of Net Profit to PSAU (60%)
Less: <(12/60) x 100> percent to Institute/Office/Unit
(This shall be distributed according to the proportion
of participation of the institute, office, and/or unit in the management of projects or businesses
Proportion of Net Profit to PSAU Administration, & BMC <(48/60) x 100> percent.
- Award for Outstanding IGP of the Year shall be given in accordance with the criteria adopted by the BMC (please see annexes).
Control System and Procedures
- A control mechanism shall be instituted to ensure success of the enterprises.
- Adherence to government accounting and auditing rules and regulations. In addition, a monitoring plan shall be developed by the Project Monitoring and Evaluation Section and approved by the President upon recommendation of BMC, and its operation shall be done by this unit also.
- Conduct of weekly meetings of Project Managers presided over by the Director of Business Affairs.
- Project visitation shall be encouraged.
- Conduct of monthly meetings of the BMC.
Records, Forms and Prescribed Formats
- Standard project and financial forms shall be used by all IGPs as required by government accounting and auditing rules and regulations.
- These may include: Purchase Request, Canvass, Purchase Order, Inspection Report, Certificate of Acceptance, Acknowledgement Receipt, Record of Inventory, Sales Record, Record of Expenses, Profit and Loss Statement, Statement of Cash Position, and Balance Sheet, etc. These forms are presented as Annexes in this Manual.
- Investments shall be encouraged by the OBA. These can be internally and/or externally generated funds.
- Daily cash counting shall be required.
- Weekly reports of cash positions shall be required.
- Monthly sales and expenditure reports are also required.
- Monthly and/or quarterly inventory reports shall be required.
- Disbursements of funds shall follow usual government accounting and auditing rules and regulations.
- Any amount for division of profit shall be net of provisions and allocations for capital build-up.
- Standard financial statements shall be required every end of an accounting year.
- Business hours are usually from 8 am to 5 pm with a lunch break at 12 noon, Monday to Friday. However, by the nature of the production schedule specific to each project, business hours may have to be adjusted. Project Managers and/or workers shall report beyond normal hours as may be required by their projects and superiors. Likewise, for projects that involve live animals and poultry, Saturdays, Sundays and holidays shall be part of the working days of the manpower complement, albeit done in reduced intensity with most of the chores involving feeding, harvesting and monitoring.
- A working day is started by going the rounds of inspecting and taking stock of any deviation of inventory. Starting cash budget for the day is made available for merchandising and/or retail type of business. For production and manufacturing types, the inputs and raw materials for the day are prepared and made available to the production and manufacturing processes. As these are being done, cleaning the premises is also being made.
- Right demeanor, business and working clothes, personal hygiene, and grooming should be observed by Project Managers and workers at all times, most especially when in front of clients and customers as well as superiors and visitors.
- All PSAU Business Program personnel and officers shall be guided by the principle that “customer is always right”. Customer relations and services shall at all times biased in favor of business clients. They must therefore, be made to feel welcome and important.
- Items for sale and disposal are properly valued, priced and assessed. Corresponding receipts and gate passes are issued at all times. Cash collected are properly secured in bags, drawers and/or vaults. Fast moving stocks shall be noted for replenishment, while slow moving goods shall be observed for obsolescence, spoilage and/or deterioration.
- At the end of the day, all transactions are summarized, cash collected are remitted, and premises are secured by (a) turning off electricity-using facilities and gadgets, (b) closing windows, and (b) locking doors and gates.
- At the end of the year, all transactions are summarized in three basic financial statements. The first is Net Profit (Loss) Statement. Net profits (losses) are computed as follows:
Sales (net of discounts)
Less: Cost of Sales/Production
Less: Operating Expenses (inclusive of interest charges, if any)
Net Income, or Net Profit (Loss)
The second is Cash Position Statement. Individual Business or Project Cash positions shall also be computed as follows:
Cash Carry-Over from Previous Year
Plus: Loan Proceeds, if any
Budgetary Support, if any
Grants, Donations, Etc., if any
Collection of receivables, if any
Less: Cash Expenditures (includes operating budget)
Payment of payables
Ending Cash Position/Ending Cash Balance
Overall (Office) Business (Affairs) Cash Position shall also be computed as follows:
Carry-Overs from Previous Year
Plus: Remittances from Individual Business Units or Projects
Loan Proceeds, if any
PSAU Budgetary Support, if any
Grants, Donations, Etc., if any
Collection of receivables, if any
Less: Operating/Overhead Expenses (OBA) Marketing Expenses
Budgetary Support to Individual Business or Projects Payment of payables
Ending Cash Position/Ending Cash Balance
The third is Balance Sheet. This shall take care of recording and computing current assets, fixed assets (net of depreciation), current liabilities, fixed liabilities and net worth. There shall be separate balance sheets for individual business or projects and the whole Office of Business Affairs.
Likewise, Net Profit (Loss) and Cash Position Statements for the Office of Business Affairs shall be prepared and reported.