Small Business Management and Functional Areas
What the domain tests
This domain tests functional management in a small firm, especially cash and working capital.
Core rules
- Functions: production and operations, marketing, finance, human resources, procurement and MIS.
- Marketing: segmentation, targeting and positioning; the 4Ps-product, price, place and promotion; channel choice and customer retention.
- Finance: working-capital cycle from cash to inventory to receivables and back to cash; cash-flow forecast; credit policy; owner's salary must be counted.
- Operations: capacity, quality, layout, inventory control and vendor management.
- HR: multi-skilling, informal supervision, statutory compliance such as PF and ESI where applicable, and training.
- Compliance: Udyam, GST, shop and establishment registration and sector licences. Udyam classification uses both investment and turnover; the 2025 revision raised the limits.
Worked example
A bakery sells ₹6 lakh per month, but hotels pay after 60 days. Receivables are ₹12 lakh, while flour suppliers demand 15-day payment. The firm is profitable on paper but cash-starved. Remedy: tighten credit to 30 days, offer a 2% early-payment discount, and arrange a working-capital limit sized to the cash gap-not a term loan for a short-term need.
Traps
Profit is not cash. Do not use a term loan to fund routine working capital. Do not omit the owner's salary or depreciation. Marketing is not only advertising. Do not ignore statutory registrations; they affect loans and contracts.