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No matter how large or small the pharmacy, it must be organized in some manner. Whether organization is formal
or informal, activities and people should be defined in terms of what is to be done and who is to do each task
Many sole proprietors view organizing as a waste of time. A typical comment is, Why should I develop an
organizational chart? There are only 3 people here, myself and 2 employees. We all know what we are going to do, and
Im the boss. There is some merit to this perspective at least until an important task is left unattended to and creates a
crisis to the pharmacy.
Organization refers to the designated structure of the activities, processes and people who make up the business.
All employees need to know specifically what they are supposed to do, what they are responsible for, who they are report
to, and who is to report to them. An ambiguous work environment will result in unperformed tasks and frustrations and
uncertainty about the future. In a pharmacy where most employees can influence its survival and success, this is of
paramount importance.
Just as there is no one right way to manage, so too there is no one right way to organize. Each business is unique
and will reflect the interests and personality of the owner and the type of industry and environmental setting in which it is
involved.
1. Division of Work
Except in the case of the pharmacist who owns & operates the business alone, work activities must be divided
among employees in a logical manner. Early concepts of work division implied a narrowly defined on for each employee.
Modern views suggest that while the work should be divided, it should not be so specialized that the employee could not
see the end result of work effort.
3. Unity of Command
Within any business that has more than one employee, a chain of command must be established, and every worker
needs to be supervised by one and only one superior. Many large chain and hospital pharmacies have lines of authority
that are unclear, and employees receives orders from several people at once- store managers, pharmacy managers,
physicians, hospital administrators, etc.
4. Unity of Direction
Each employee should have a clear understanding of, and a willingness to work for, the goals of the business.
Without this unified effort, the pharmacy's effort are likely to be fragmented and work in several directions at once.
5. Scalar Chain
In any organizational structure, ultimate authority rests at the top and flows downward. Scopes and limits to
authority and responsibility must be well delineated on paper as well as in the minds and actions of employees.
6. Span of Control
The principle of span of control states that there are only so many employees a manger can effectively supervise.
A general rule of thumb is that at lower levels managers can oversee between 8 and 20 employees, while at the upper
levels the number is reduced to between 4 and 8. the reason for the lesser number at higher levels is that there is a greater
amount of communication needed to operate the pharmacy. The owner must prepare comprehensive training program,
develop an effective line of communication between personnel at all levels and between management and non-
management employees.
Manager
Department
Manager Manager
Employees Employees
1. Line organization is based on line of authority. A line organization approach is found mostly in small
pharmacies that employ few people. This method is effective and efficient is a small pharmacy. As the pharmacy
grows and becomes involved in more complex and specialized matters, this structure does not allow for the inflow
of the expertise needed to deal with these considerations.
Pharmacy
Manager
Manager Manager
Manager
Prescription Dept. Durable Medical
OTC Drugs &
Cosmetics Equipment
2. Line -and-Staff Organization To compensate for the lack of needed specialists within a line organization, a
line-and-staff structure is evolved. The key benefit to this approach is that line management is held responsible for
the operations of the business, but now they are assisted by technical specialists who have expertise on some of
the finer points of business
Pharmacy Accounting
Manager
-----------------------
Manager Manager
Manager
Prescription Dept. Durable Medical
OTC Drugs &
Cosmetics Equipment
Since organizations are based on people, natural and spontaneous human interaction can influence the
effectiveness of formal structures. Informal leader-follower relatonships develop whichl will not conform to those desired
by management.
The leader position is the result of a non-job related skill. Informal organizations can strengthen the cohesiveness
within the pharmacy and increase the chances of goal achievement for all.
One of the most common difficulties found among managers with respect to organizing is their uncertainty about
how to group their collective units.
Organization by Time
One of the easiest methods for organizing a homogenous group of employees is on the basis of their working
hours. The pharmacy operates day and evening shifts, workers and managers can be assigned to each shift. The logical &
convenient approach often is overlooked because of its simplicity. A danger of this method lies on trying to establish too
many organizational units and increasing costs of managing.
Owner
Organization by Number
A homogenous group of employees that is too large to be effectively supervised by one person can be grouped on
the basis of numbers. A disadvantage of this approach is that employees may become isolated from one another and not
share information on patient care, physician services, etc.
Owner
Organization by Function
Organization by function applies to situations where there is considerable diversity in jobs and skills required to
perform them satisfactorily. The services can be divided between pharmacists, nonpharmacist personnel and a manger
placed in charge of each unit. The commonality of tasks is not only a logical method of division but also serves to
strengthen the work group & provide a means of sharing expertise. The danger of this approach is that the work units may
become too specialized and incur higher administrative costs.
Owner
Organization by Service
In some cases, management may be organized on the basis of different services offered. This is beneficial when
dealing with highly complex products that require great amounts of technical knowledge, such as medical equipment and
cosmetics. The key advantage of this approach that the pharmacy can be organized along profit centers, in which each
service is held accountable for the costs it incurs and the revenue and profits it generates. The disadvantage lies in
ensuring that all of the organizational units are coordinated to work together for the good of the pharmacy and share the
limited financial and personnel resources available.
Owner
Home Health
Prescription Dept. SNF
Organization by Territory
For chain drugstore that has pharmacies scattered over broad geographic areas, it sometimes is best to organize by
territory. Each territory can be a separate, autonomous unit that will respond to the specific needs of the market are being
served. The primary advantage to this is that coordinated efforts between geographic areas in terms of achieving
economies in purchasing & maintaining consistency build a corporate identity.
Owner
Because the organizational structure will be unique, none of the methods described may prove satisfactory. It
maybe best to organize using a combination of methods.
Hospital Administration
10 Pharmacists 3 Pharmacists
Figure 8. Combination of methods of organizing small business
Once the pharmacy has been organized into operating units, staffing becomes a critical issue. The pharmacy
cannot afford to hire or retain bad employees or those that do not fit with what is to be accomplished or expected. Because
personnel do the work and are a major expense, management must staff the organization carefully.
1. Based on the objectives and level of business activity, forecast future personnel needs in terms of both numbers
and types of positions.
2. Based on pharmacy owner's personal goals, determine how many management positions will be needed in the
future and in what service areas.
3. Specify each type of job identified in steps 1 & 2 in terms of job descriptions.
4. Assess the internal aspects of employment in terms of working conditions, policies and other factors that may
affect future employees satisfaction with their jobs.
5. Based on the position open and their job description, determine where the right kind of potential employees might
be found.
6. Actively recruit good personnel by promoting job opportunities.
7. Select persons for employment on the basis of a formalized screening process which must be non-discriminatory
and conform to various employment laws.
8. Actively orient employees to their new positions and to the pharmacy and parent company if a chain or hospital
pharmacy. Making employees feel that they are fit as soon as possible is critical to long-term employee-employer
relationships.
9. Train employees to do their jobs, and develop them for any planned advancements.
10. Develop wage and benefit wage programs that are fair to the employees and affordable for the pharmacy. Wages
should be competitive and commensurate with the tasks to be performed.
11. Motivate employees and evaluate their activities. Being sensitive to their problems and complaints and
stimulating their productive effort is important to an effective & efficient operation.
Personnel Policies
To reduce some of the trauma for the prospective employee and to increase the chance of hiring the right person, a
job description should be developed to each position. This will be beneficial to the hiring process and help to keep job
functions from changing unintentionally over time.
A job description is a statement that identifies what the job consists of and what qualifications are needed to
perform the task satisfactorily. It answers the following questions:
1. What is the employee do? What activities is part of the job? How much authority and responsibility are included?
Where does this job fit within the organizational structure?
2. What qualifications are needed for this job? Are any special skills involved? Is any experience needed? What
personal characteristics, if any, are required- physical, mental, emotional? As already noted, the licensing and
registration requirements for pharmacists and technicians should be clearly established.
Providing an environment conducive to good work should be of prime concern to management. Work areas that
are properly lighted, free from disruptive noises, neither too hot nor too cold and equipped with proper rests facilities to
serve to improve employee morale and productivity. The physical layout should be planned to follow standard work
flows.
Safety also must be considered. Cluttered rooms or walkways, poor lighting, faulty wiring, equipment and so on
serve to increase the likelihood of accidents. Others require employees to carry workers' compensation insurance and as
accident rates, same with insurance premium.
Recruitment and selection of employees has become one of the more complex elements of the staffing process is
most pharmacies. Error made in hiring can have a significant impact o the pharmacy's ability to survive.
A. Recruiting Applicants
A common misconception among some employers is that it is easy to find qualified employees. This is considered
especially true during times of high unemployment when workers supposedly are readily available. Even during period of
high unemployment, most well-qualified personnel are already working for others.
Modern staffing requires serious consideration of where good prospects are likely to be and development of an
active recruitment effort. Some of the most common sources of potential employees are:
1. Pharmacy employees
2. Referrals
3. Employees of other companies
4. Employment agencies
5. Educational Institutions
6. Labor Unions
7. Advertising
8. Drop-ins
B. Selecting an Employee
Management should have a procedure for screening applicants- a means of sorting out the qualified from the
unqualified. An established procedure ensures that all relevant questions are asked and information obtained. It ensures
that the employer will not ask questions that are discriminatory.
A well-prepared process for selecting employee also makes the employer and the pharmacy look good. The owner
does not want to scare off promising applicants by appearing disorganized or being an inept business person. Since most
applicants come with the hope and expectations of a long-term relationship, they will be assessing the pharmacy and the
management- just as the employer to will be appraising the applicant.
The basic procedure consists of 6 steps, some of which can be taken simultaneously:
The employer will not know anything about the person who applies for a job, therefore the applicant complete an
application form. There are some variation among application forms, but nearly contain personal information, personal
references, educational background, work history and space for the employer-interviewer's comments.
Personal information name, address, telephone number, sss # and physical characteristics that are important in
performing the job, sex, age, race & educational background
Verifying the applicant's statements on the application form as well as personal interview is critical. Any serious
errors or omissions may indicate that the person is undesirable. This includes a check on personal references and previous
schools and employers.
There are types of tests that can be used in the screening process.
1. job proficiency examination - the applicant is given an opportunity to demonstrate occupational skills
2. psychologically related examinations aptitude, personality, vocational interest tests
F. Making a Selection
Selection of an applicant should be the culmination of an intensive search and screening process, and based on the
objective data collected and intuitive judgement. The employer must be using a process of elimination and trying to sell
the applicants on the benefits of coming to work for the pharmacy.
Some decisions must be made. If one applicant is selected, procedures should be established to inform the others
and present the pharmacy in the best light while maintaining the dignity of those not selected.
Another aspect of workforce planning and important concern in the overall staffing process is the possible use of
temporary help in some instances, it may be preferable to use temporary people on a very short-term basis. This usually
occurs during busy seasons or when regular employees quit or are fired, or are ill or on a vacation.
The use of temporary help may not be desirable if it becomes a regular part of the business. It may hamper efforts
to attract good permanent employees and the time spent orienting new people for short-term employment tends to be
excessive for the benefits received.
However, temporary help does offer employer flexibility in coordinating short and long term workforce needs. As
an emergency approach it can be valuable.
Unit 11
The search and selection processes for hiring an employee are just one part of the overall staffing process. To
some employers the process is complete once a person is hired. In fact, it is just the beginning. These employers fail to
realize that it also is imperative for the new employee-whether a pharmacist or not- to be oriented to the pharmacy and the
position, trained so that the work will be done properly, and told that future advancement within the pharmacy will be
based on job performance. If the new employee is not taken care of at this point, the chance of advancement is slim at
best.
I. Employee Orientation
New employees will be concerned about what the job will be like, whether they will be able to perform their tasks
satisfactorily, how well they will fit in with other employees and whether that nice interviewer will be a nice boss. Their
questions, concerns and fears will affect employees' initial performance. In fact, it may well affect their relationships with
the pharmacy over the long term.
Management must strive to acclimate new employees to the pharmacy, the job and the other personnel.
Orientation process is also important for existing employees who are moving to different positions within the pharmacy.
For new employees, an orientation program may span several days, weeks or even months depending on the job
and pharmacy. Certainly the first few days will be the most difficult and the manager should spend as much time as
necessary with the new employee. On the first day, the new employee should meet other employees and learn about the
physical facilities and the pharmacy's processes and policies. In chain and hospital settings, the employee also needs an
orientation to the parent company's operating process and policies. During this time, new employee should become
familiar with what the job entails and how it fits into the pharmacy's and parent company's total operation.
Special emphasis should be placed on the human aspects of employment meeting and fitting in with fellow
employees. If this is not handled properly, the new employee may not be accepted by other personnel. New and existing
employees should understand where they all fit in with respect to one another.
Also of great importance is a new employee's understanding of policies and procedures. If these are not clear, it is
unlikely that the employee will perform well. These policies and procedures should be fully specified in an employee
handbook.
B. Employee Handbook
It is possible to familiarize the new employee with pharmacy policies and procedures through a simple
explanation during the first day or two of employment. An employee handbook can be of considerable value in future
cases of labour disputes. Employees who have received these documents have less opportunity to claim that they did not
know the policies and procedures.
It is best to give each employee a copy of an employee handbook. This is a document that contains the goals,
policies and procedures relevant to the employee and the job he is assuming
The sample handbook has 7 parts, plus an index or table of contents. Parts 1, 2 and 3 serve to acquaint the new
employee with the pharmacy. By providing an overall picture of its history and purpose, the policies and procedures can
be understood more readily. Part 4 concerns the employer's future with the pharmacy. This is a critical component since
most persons will want to know what the pharmacy can offer over the long term. Part 5 contains the mechanics of day-to-
day operating procedures. Parts 6 & 7 deals with employee benefits and any services available to them. Benefit programs
are especially important to employees because they can represent significant savings from what they would have to pay if
they were to acquire these benefits for themselves.
Whether a new employee is brought in to fill a position or the job is being staffed by an existing employee, some
degree of training will be necessary. Training is important to the employee's and the pharmacy's success because a person
who is not well prepared for a job will most likely do unsatisfactory work and never reach his full potential.
Training Methods
The kind of training program used will depend on the type of and whether the employees are being prepared for
management or non-management positions.
Wage and benefit considerations are a necessary part of any staffing process.
The management of a business enterprise cannot be separated from finance, each being useless without the other.
To accomplish the desired objective, initially uses resources such as manpower, materials, machines and money and allied
services. All these resources need to be financed internally or externally and the use of such information serves the
important link for decision-making and judgement. Hence, accounting is the system that provides such information.
Accounting information is normally expressed in monetary amounts that are quantifiable or measureable. The non-
monetary information is included in accounting reports to guide the reader in interpreting the report. Information that is
quantitative in nature usually expressed in numbers while non-quantifiable information is in the form of conversation,
radio or television programs, newspaper and magazine articles and write-ups or visual impressions.
Accounting is described as the language of business because it is the medium og communication between a
business firm and the various parties interested in its financial activities. Accounting transmits financial information by
means of periodic reports. The principal accounting reports are the financial statements the balance sheet and income
statement. As the major end-products of accounting, these statements carry to the management and/or interested outsider/s
the messages about the financial activities of the business
Purpose of Accounting
A person engages in business to earn profits and thus provide him with a means of livelihood. In order to
accomplish these objectives, it is necessary to know from time to time the profits earned or the losses sustained by his
business. With this information he can determine the efficiency of present operations and have a guide for future actions.
He must also know the value of things owned by the business and the amounts of its debts at a certain date. This
information will enable him to determine the soundness of its financial position. To provide the owner/s of the business
with the statements containing the information is the principal purpose of accounting.
Accounting also deals with the analysis and interpretation of actual business performance as shown in the
financial statements. This analytical and interpretative function of accounting provides the owner with a guide and a basis
for formulating and adopting financial plan and policies. Thus, accounting information ultimately leads to the efficient
management of the business and the earning of maximum profits.
1. Operating information refers to the organization's daily activities that are to be reported to the appropriate
government agencies.
2. Financial accounting information refers to the information on the companys performance normally called
financial reporting.
3. Management accounting information these are summaries used in planning, implementing and controlling
management functions towards helping managers appreciate their performances, provide motivation and basis for
salary adjustments, and career development programs.
Accounting is the language of the business and the source of information to support financial decisions and consists of
the system of recording, summarizing, reporting and measuring the financial transaction of a business.
The accounting system of a business firm produces a summary of the financial status and performance of a business
balance sheet and the income statement.
1. To periodically account and present timely and accurate data on net income of the business operations during a
given period through the income statement or the profit and loss statement.
2. To periodically account and present timely and accurate data on the financial status of the business during a given
period through the balance sheet.
3. To provide a rational investment and credit decision useful to investors and creditors.
4. To provide historical financial information to owners and operators of the business, entrepreneurs and marketers
for purposes of fine-tuning sales and market forecasts over a specified period of time.
Summarizes the financial status of a company usually at the end of the year, the assets, equities (liabilities and
owner's equity) of the netrprise at a specific period of time. The objective of the balance sheet is to show the ability of the
management to direct and safeguard the value of the assets of the company and to use them wisely and prudently thus
maximizing owner's equity. In the account form, the assets are listed on the left and equities on the right. In the report
form, the assets are listed at the top of the page and the equities listed beneath them.
Balance Sheet
Assets = Liabilities + Owner's Equity (Proprietorship)
Example:
If the business has total assets with a recorded value of PhP 50,000.00 and unpaid liabilities of PhP 20,000.00. the
proprietorship is PhP 30,000.00. This means that while the business has an assets valued at PhP 50,000.00,the owner
has a financial interest in these assets of 30,000.00 only. The remaining PhP 20,000.00 is the financial interest of the
creditors in the same assets.
Let us assume that the business is liquidated or dissolved and the assets are sold for exactly PhP 50,000.00
cash. Out of this PhP 50,000.00 cash, the amount of 20,000 will be paid to the creditors. The proprietor gets the
remaining cash of 30,000.00 as a return of his capital investment.
The example illustrates that assets, liabilities and proprietorship are three different elements of a business
enterprise.
Assets properties owned or controlled by the business and where cost at the time of acquisitions
could be objectively measured.
1. Tangible assets - these are resources with either physical or monetary existence
2. Intangible assets these are claims, rights and other assets without physical existence
3. Current assets are resources that are held for a short period of time only
a. Accounts receivable amounts owed to the entity by its customers
b. Notes payable amounts owed to the parties other than customers
c. Inventories items held for sale or items in process of production for such sale or items to
be consumed and available for sale
d. Marketable securities investments that are expected to be converted into cash within a year
e. Prepared expenses intangible assets that will expire in the immediate future
4. Fixed assets tangible and long-lived to their purchase
5. Non-current assets
Liabilities are obligations of a company to suppliers, banks, other companies, government and company employees and
officers. These are claims against the entity's asset. These are obligations to outside parties arising from events that have
already occurred.
Current Liabilities these are obligations satisfied either by use of current assets or by other current liabilities.
1. Accounts payable the claims of suppliers arising from their selling of goods and services to
the entity for which they have not yet paid
2. Notes payable or short-term loans refer to the amounts owed to financial intermediaries
which supplies funds instead of goods and services
3. Accrued expenses these are amounts earned by outside parties but not yet collected or paid
by the entity
4. Deferred revenues, unearned revenues or precollected revenues these are liabilities that
arise when the entity received advance payment for goods and services to be
rendered in the future
5. Current portion of long~term debt refers to that part of long-term loan due within the next
year
Owner's Equity are claims of owners in the business or sheet reflecting the amount of the owner's investment in the
entity referred to as shares of stocks or shareholders equity or stockholder's equity
1. Paid~in capital or contributed capital refers to the owner's investment in the business by purchasing shares of
stocks
Accounting Equation
Assets= Liabilities + Paid~in Capital + Retained Earnings
Income Statement
A summary of the financial performance of a company, reflecting revenues, expenses and net income. Income
statements are prepared to show the variance or the change in value of the owner's equity during a given period.
Income Statement
Revenues Expenses = Net Income (Loss)
Accounting Terminologies
1. Gross sales the total invoice/catalogue price of the goods delivered or services rendered during the period,
excluding VAT or Excise tax
2. Sales returns and allowances the sales value of goods returns by customers and allowances given to customers
3. Sales discount the amount taken by customers either by prompt payment, volume purchase or cash payments
4. Trade discount list price less deductions from actual payments
5. Gross margin or gross profit the difference between net sales revenue and cost of sales
6. Net income referred to as bottom line of the income statement which is the net earnings (if negative, net loss
7. Statement of retained earnings or a reconciliation of retained earnings reflected on a separate page or at the
bottom of the income statement
8. Gross margin percentage the gross margin divided by the net sales
9. Profit margin the net income divided by net sales
10. Cash-basis accounting an alternative way of measuring income
11. Accounting period measures activities for a specified interval of time for a period of one year
12. Materiality refers to disregarded insignificant events
1. The income statement shows the income, costs and expenses for a given period (shows the result of operations
of the business)
2. The balance sheet shows the assets, liabilities and capital at a given date (shows its financial conditions)
The price at which goods are sold by a merchandizing business normally covers the cost of goods sold, the
operating expenses and a certain amount of profit. The difference between the selling price of the goods sold and their
cost is called gross profit; and gross profit less operating expenses equals net profit. In equation form, these relationships
maybe expressed as follows:
Net sales
A sale takes place when ownership of or title to merchandise passes from the seller to the buyer. Income from a
sale is recognized at the time of such sale, not when the invoice price is received in cash. The total sales represent the
invoice prices of all merchandise sold, whether for cash or on credit, during the period covered by the income statement.
Net sales may then be obtained by deducting sales returns and allowances and sales discounts from the total sales.
Sales returns and allowances refer to deductions from the invoice prices due to damages, defects or errors in the
kind or quality of the merchandise delivered to the customers. Sales discounts represent the deductions allowed to
customers because of the prompt settlement of their accounts.
Cost of Goods Sold
Under the periodic inventory system, the cost of goods sold cannot be determined directly from the accounting
record because as the goods are sold only the selling price is recorded. But it is possible to compute the cost of the goods
sold on the basis of the amounts of the following items:
1. Beginning merchandise inventory cost of unsold merchandise at the end of the immediately preceding fiscal
period
2. Purchases gross cost of merchandise bought
3. Purchases returns and allowances deductions from invoice cost due to damages, defects or errors in kind or
quality of merchandise received
4. Purchases discounts reductions in the cost of merchandise bought due to the early payments of creditor's
account
5. Freight-in transportation cost on merchandise bought
6. Ending merchandise inventory cost of unsold merchandise at the end of the current fiscal period
Operating Expenses
There are costs other than the cost of the merchandise sold that are incurred in connection with the earning of
income. The business has to buy and use store and office supplies and pay for the services rendered by the salesmen,
clerks, advertising agencies, transportation companies, Telephone Company, etc. The costs of these supplies used and
services received are called expenses.
All expenses incurred in the regular operations of the business are shown in the operating expenses section of the
income statement. This includes the different expenses incurred in the sale and delivery of merchandise and the
administration of the business. Some of these are freight-out, delivery expense, advertising expense, supplies expense,
licenses and taxes, light, water and telephone, bad debt expense, depreciation expense, salary expense and miscellaneous
expense with the exception of bad debt expense and depreciation expense, the given expense items are self-explanatory.
A bad debt expense is the estimated amount of loses from uncollectible accounts arising from credit sales of the
current period. Such loses are provided for because even if great care is taken in granting credit to customers, some
accounts will prove uncollectible.
Depreciation expense is the portion of the cost of a fixed asset, like building, furniture and delivery equipment
which is allocated to the current period. It is an estimate for the period of the decrease on the value of the asset due to
wear and tear effects of the elements and obsolescence that is effect of new
end better models.
Income Titles
1. Sales or merchandise sales
Asset titles: 2. Rent income
1. Cash 3. Revenue from fees
2. Accounts receivables 4. Service income
3. Notes receivables 5. Interest income
4. Merchandise
5. Supplies on hand Deductions from income titles
6. Marketable securities 1. Cost of sales or cost of goods
7. Lands sold
8. Buildings 2. Advertising expense
9. Machinery and equipment 3. Salesman's salaries
10. Furniture and fixtures 4. Salesman's commission
11. Office equipment 5. Postage and communications
12. Delivery equipment 6. Office salaries
7. Taxes
8. Utilities expense
Liability titles 9. insurance expense
1. Accounts payable 10. Repairs and maintenance
2. Notes payable 11. Rent expense
3. Taxes payable 12. Depreciation expense
4. Bonds payable 13. Interest expense
Proprietary titles
1. Owner's capital
2. Owner's drawing or personal