1. Planning

Planning means deciding in advance what the business will do and how to do it. A small business owner plans what goods or services to sell, where to buy them, how much to charge, and when to sell them. For example, before opening a school shop, the owner must plan which items to stock, such as pens, notebooks, and snacks.

2. Organising

Organising involves arranging resources like money, goods, and workers to achieve the business goals. This includes structuring the workplace, grouping tasks, and ensuring all materials are available.

3. Staffing

Staffing means hiring the right people with the right skills for each job. In a small business, the owner may hire helpers to sell goods, manage the shop, or deliver products to customers.

4. Directing

Directing means leading, motivating, and guiding employees to work towards the business goals. A good manager creates a positive work environment, appreciates good work, and helps employees improve.

5. Controlling

Controlling means monitoring the business activities to ensure everything goes according to plan. This includes checking sales, comparing actual performance with planned targets, and making corrections when needed.

Record-keeping is writing down all business transactions systematically. Good records help a business owner track money coming in and going out, detect errors, and make smart decisions.

Cash Book

A cash book is a financial record that shows all cash received (cash receipts) and all cash paid (cash payments). The left side records money coming in, and the right side records money going out.

Worked Example: Cash Book

Maria runs a small retail shop. Here are her transactions for January:

• January 1: Opening balance — TShs 70,000
• January 3: Cash sales — TShs 20,000
• January 5: Paid rent — TShs 50,000
• January 6: Bought stock — TShs 37,000

Her cash book looks like this:

To find the closing balance: Opening balance + Cash receipts − Cash payments = Closing balance

Sales Day Book

A sales day book records credit sales — goods sold to customers who will pay later. This helps the owner track how much money customers owe.

Purchases Day Book

A purchases day book records credit purchases — goods bought from suppliers without immediate payment.

Profit occurs when income is greater than expenses. Loss occurs when expenses are greater than income.

Steps to Calculate Profit or Loss

1. Calculate total income: Add all money earned from sales.
2. Calculate total expenses: Add all money spent on goods, rent, utilities, salaries, and other costs.
3. Calculate profit or loss: Subtract total expenses from total income.

$Profit = Total\ Income - Total\ Expenses$

If the result is positive, the business made a profit. If negative, the business made a loss.

Worked Example: Profit and Loss

Aisha runs a cosmetics shop. For last month, her records show:

Income:

• Sales of petroleum jellies: TShs 200,000
• Sales of hair shampoos: TShs 300,000
• Sales of perfumes: TShs 200,000
• Sales of lipsticks: TShs 60,000 (from textbook data)
• Total Income: TShs 760,000

Expenses:

• Cost of petroleum jellies: TShs 120,000
• Cost of shampoos: TShs 180,000
• Cost of perfumes: TShs 110,000
• Cost of lipsticks: TShs 60,000
• Rent: TShs 50,000
• Electricity and water: TShs 20,000
• Own salary: TShs 200,000
• Total Expenses: TShs 740,000

Profit Calculation:

$Profit = 760,000 - 740,000 = TShs\ 20,000$

The business made a profit of TShs 20,000.

An income statement is a simple report showing whether a business made a profit or loss over a specific period. It compares income and expenses to show the financial performance of the business.

A budget is a plan for managing money over a specific period. It shows expected income and planned expenses. Budgeting helps a business control spending and reach financial goals.

Needs and Wants

• Needs are essential expenses required to run the business, such as rent, salaries, taxes, and utilities.
• Wants are non-essential expenses that improve the business but are not necessary, such as advertising or new equipment.

Recommended Budget Allocation for Small Businesses

A useful guide for allocating business income:

• Needs: 40% — for rent, wages, taxes, utilities
• Wants: 20% — for upgrades, marketing, additional staff
• Savings: 30% — for emergencies, retirement, reinvestment
• Personal use: 10% — for the owner's needs

Monthly Budget Example

A small retail shop prepares a monthly budget:

The projected profit is calculated as:

$Projected\ Profit = Total\ Income - Total\ Expenses = 500,000 - 250,000 = 250,000$

Control means sticking to the budget and plan. A business owner controls spending by checking prices before buying, comparing actual expenses with the budget, and making adjustments when necessary.

Administration involves keeping records and organising business information. This includes writing down what the business bought, how much it cost, and how much money remains. Good administration helps the business stay organised and track its financial position.

In Tanzania, many small businesses operate in daily markets, such as selling fruits at Mlimani City market or running a dukala in Mwanza. A young entrepreneur starting a small snack business near school can use these management skills: keep a cash book to track everyTShs earned and spent, prepare a simple budget for buying ingredients like mandazi and chai, calculate profit each week by subtracting costs from sales, and review records to decide whether to continue or improve the business. These practices help ensure the business grows sustainably and makes real profits.