Financial Performance Management

This study focuses on evaluating the key issues faced by companies in managing environmental costs and the methods used in accounting for them. It also explores the importance of decision-making in improving business performance.

Financial Performance Management

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
PART 1............................................................................................................................................1
Evaluating the key issues which has been faced by the company to manage the environmental
cost and also evaluating the varied set of methods used by business in accounting of
environmental cost......................................................................................................................1
PART 2............................................................................................................................................4
Evaluating important decision making process and is relevant in providing right information
to improve the business performance..........................................................................................4
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................9

INTRODUCTION
Financial performance management is referred to as a significant way that the company
focuses monitoring and effectively managing the key financial results across the organization.
This helps in effectively equipping with the business goals. This study critically focus on
evaluating the key issues which has been faced by the company to manage the environmental
cost and also evaluate the varied set of methods which has been used within the business in
accounting of environmental cost. Furthermore, this study also focuses on important decision
making process and is relevant in providing right information to improve the business
performance.
PART 1
Evaluating the key issues which has been faced by the company to manage the environmental
cost and also evaluating the varied set of methods used by business in accounting of
environmental cost.
Environmental management accounting is considered to be one of the key process to
identify, analyse, and collect use of two type of information in order to carry out internal
decision-making. Environmental management accounting is useful in addressing the
management information which is needed for the managers for carrying out corporate activities
which eventually affects the environment and impacts associated with the environment within
the corporation (Song, Zhao and Zeng, 2017). The first is associated with physical information
upon the use, rate of energy, material, flows and water. However, the second is linked with the
monetary information upon the environment linked with earnings, cost and saving.
The key environmental cost is mainly linked with prevention cost, Appraisal cost, external
failure cost and internal failure cost. Prevention cost is mainly linked with the prevention of
adverse impact upon the environment. Appraisal cost is useful in assessing the compliance linked
with the environmental policies. External failure cost mainly incurred after the environmental
damages has been done outside the company. Internal failure cost is linked with eliminating of
environmental impact which has been created by the company.
The cost versus benefit analysis is one of the significant process within the business which
is usually used to analyse the decisions. However the analyst or the business focuses on summing
up the benefits of the situation and then deduct the cost linked with taking such action. The cost
– benefit analysis is referred to as a significant tool which is useful in evaluating the key
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potential social and economic impact upon the public investment choices. This tool is prominent
in the better decision making.
Management of the environmental cost is considered to be one of the key prominent
measure which must be taken by the company. Society in turn become highly environmentally
aware and focuses on ensuring that the company take measures associated with recycling of the
products and reducing carbon footprint. Environmental cost has been becoming one of the
serious issue for some companies and specially those who has been operating within highly
industrialised sectors. The management of the environmental cost is considered to be one of the
difficult process because it becomes difficult to separate and identify few environmental cost. It
is of crucial importance to identify the environmental cost correctly and take necessary actions
on a timely manner (Opstrup and Villadsen, 2015). Contingent cost is one of the key
environmental cost which incurs on a future date. Conventional cost is another environmental
cause which is linked with energy cost and raw material which have environmental relevance.
Potential hidden cost is associated with capturing by the accounting system which loses to
identify the general overheads.
Management accounting techniques in turn are considered to be of utmost importance
because it is useful in effectively identifying and managing the environmental cost. Management
of the environmental cost is considered to be of most importance for the company because it is
useful in controlling the cost and also helps in determining how the company can impact the
environment in ways such as manufacturing emissions, air pollution, waste disposal and wetland
impact (Feng and et.al., 2016). Environmental cost mainly comprises of future and current
environmental impacts upon the company. It is also useful in determining the Labour cost linked
with the accounting for environmental cost. However, effective control of the environmental cost
as well as promotion of other environmental benefits will be useful in increasing the overall
productivity, sustainability and profitability of the business.
Input output analysis: It is considered to be one of the significant technique which has been
used by the management accountants in order to effectively manage an identified environmental
cost. This technique is considered to be significant in recording the material inflows and also
useful in balancing the same with the outflows on the basis of what inflows and outflows. Ever,
input and output analysis is an affective environmental accounting tool which mainly focuses on
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reflecting consumption and production structures within one and varied other economies. This is
useful in recording the inflows of the material and balancing the same with the outflows.
Flow cost accounting: It is a significant tool of the management accounting technique
which has been used not only for the material floors but it is significant for the organisational
structure. This tool is considered to be significant in reducing the quantity of the material and has
positive set of effect upon the environment. Flow-cost accounting technique is a part or a manner
within which cost move through out a firm. It is also considered to be significant for the
management of the accountant to effectively quantify the cost linked with raw materials, finish
goods inventory, work in progress and cost of goods sold.
Life cycle costing: It is an effective tool of the management accounting to manage the
environmental cost (O'Donohue, and Torugsa, 2016). This technique is significant because it
requires the consequences linked with the full environment and also the cost arise from
production of the specific product across the whole life-cycle.
There are large number of costs which are linked with the environmental cost which in turn
is mainly linked with the waste. For example, the cost linked with the unused disposal and raw
material, fines for the compliance failure like pollution, taxes for landfill, etc. Panasonic
Company is a great example who focuses on reducing the negative impact of the business
operations on the environment. It focuses on the energy saving production and improve the
environmental cost linked to the business. In order to significantly collect the environmental
data associated with the critical workplace asset and emission data. Moreover, carbon footprint
calculation and Key performance indicator is considered to be as one of the key prominent
measure in order to effectively identify and record the environmental cost. The environmental
costs be effectively controlled using the energy in a more efficient manner and installing
renewable within the business. Effective renewable energy system is considered to be prominent
in lowering the energy bill and also reduces the environmental impact. The company must also
focus on 3 R rules which are reduce, reuse and recycle (Parvadavardini, Vivek and Devadasan,
2016). The environmental costs be controlled using the conserve water and must focus on
shipping goods efficiently in an eco- friendly manner. Use of the fuel efficient measures and
reducing travelling is an effective measure to reduce pollution and improve the business function
in a sustainable manner. However, the companies must effectively focus on improving the
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performance of the business and leads to improved business performance and higher operational
efficiency.
Environmental management accounting has been significantly accounted for systematically
tracing and accuraltely reallocating the cost to the environment. It is useful in improving the
economic and environmental performance.
PART 2
Evaluating important decision making process and is relevant in providing right information to
improve the business performance.
Decision-making is considered to be one of the most important component between the
activities of the management in the company (Xie, So, and Wang, 2017). Decision making plays
one of the key prominent role within the planning process. Especially, when the managers tend
to plan and decide on various set of matters as what set of goals the organisation tends to pursue
and also the resources that will be used to perform each specific task. In case of deviation within
the company the management of the company has one of the key prominent ways to take
necessary action to correct deviations within the company. The whole planning process mainly
comprises of the managers constantly make series of decision associated with the specific
situation. However, the quality related with the managerial decision mainly influence the
effectiveness of the plans. The manager mainly focuses upon the structure, nature of
responsibility, division of work, nature of relationship and so on. Effective decision-making
mainly comprise of two crucial aspects which includes the purpose of decision making and the
environmental situation within which the decision has been taken (Feng and et.al., 2018). The
key principles associated with the decision making or subject matter of decision making,
Organisational structure, analysis of the policies and objectives, alternatives, proper
communication, sufficient time, flexibility of mind, chain of action, impact of decision, etc.
The management accountant of the company focuses on taking relevant set of decision by
examining specific financial statements and Managerial statements (Sroufe, and Gopalakrishna-
Remani, 2019). This is considered to be one of the key prominent way to gain right set of
information related with the company and take necessary decision.
The key planning tool associated with the management accounting mainly includes: Financial statement analysis: It is one of the key prominent tool which mainly
comprises of balance sheet, profit and loss statement and cash flow statement. The
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statements are considered to be significant which are useful in analysing for varied period
of time. It is useful in analysing and helping the management to understand the rate of
growth of the business and also useful in determining the financial stability of the
company. Cost accounting: It is useful in presenting all set of cost data in relation to process wise,
Process wise, department wise, branch wise and etc. This is useful in comparing the cost
data with the predetermined ones. This is useful in determining the difference between
the costs. Fund flow analysis: It is one of the key prominent tool for the management of the
company because it is useful in examining the fund flow of the company by comparing
with the previous year and helps in making necessary set of decision (Xie, So and Wang,
2017). Cash flow analysis: It is another key significant movement of cash from one period of
time to another period. It is useful in determining the change within the cash of the two
periods and also useful in examining the cash balance. Management reporting: It is one of the key prominent planning tool which is useful in
preparing the report on the basis of content of profit and loss account as well as the
balance sheet which has been submitted to the top management. It is useful in disclosing
the key weakness and strength in different areas the financial and operating activities
within the business.
 Budgetary control: It is significant in comparing the future needs with that of estimated
budget. This helps in determining the deviation and take necessary action in a prominent
manner.
Budgetary control is one of the key significant mean to control the actual results when compared
with the budgeted results. In case of any deviation necessary set of action has to be taken to
improve the business performance and efficiency. Budgetary control is a significant system to
control cost which mainly includes preparation of budgets to coordinate between the departments
and also establish specific set of responsibilities to compare performance with that of budgeted
plan. This is considered to be prominent in achieving maximum profitability for the company.
Budgetary control tool is prominent for the success of the company. Budget is considered to be a
numerical statement which focuses on expressing the policies, plans and goals in a definite
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manner for the future period. Budgetary control is a significant system to control cost which
mainly comprise of the preparation of the budget, establishing responsibilities, coordination
between the departments, comparing budgeted performance with the actual performance and also
acting upon the results to attain maximum profitability for the business. One of the key objective
of the budgetary control is that it is considered to be as a planning device (Jayakrishnan and
et.al., 2018). In the management of the company can anticipate the contingencies and provide
for the orderly manner to attain objectives of the business. But it is also considered to be useful
because it helps in ensuring coordinated efforts between the departments has been maintained
(Budgetary Control: Meaning, Objectives, Techniques, Steps, 2017). Another key objective of
the budgetary control tool is linked with effective communication. This helps the organisation to
accomplish the specific target by laying down the budget. Budgetary control tool is useful
because it aids to planning of the annual operations and also has in coordinating the activities of
the various parts within the company in order to ensure that harmony has been maintained
between the departments to attain common goal and objectives of the company. It is also useful
in controlling activities and evaluate the performance of the managers. Another key significant
objective of the budgetary control tool is to motivate the managers in order to strive to attain
common organisational goals and is also useful in communicating the plan to different
Responsibility centre managers.
Key performance indicators considered to be as a quantifiable measurement which is
useful in determining the overall long-term business and financial performance with utmost
degree of accuracy and relevance. Key performance indicator is useful in determining the
strategic, operational achievements, financial position of the company when compare the same
with that of the business within the same sector (Hassan, Marimuthu, and Satirenjit, 2015). Key
performance indicator is considered to be significant because it is useful in measuring success of
the company by setting targets and key goals and objectives of the company. Key performance
indicator is financial and is considered to be more anecdotal which measures for traffic within
the store, repeat customers, employees attention, quality of the customers, experience of the
customers, et cetera.
One of the key significant importance of the key performance indicator is that it helps in
setting objectives at the forefront in order to make the decision. It is also useful in ensuring that
the business attains overarching goals to improve business performance, financial performance
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and profitability. The key significant importance of the key performance indicator within the
company is that it leads to great degree of accountability and increased focus and clarity within
the organisation to attain higher operational goals and efficiency. It also leads management for
the better decision making and faster growth of the company. Integration of key performance
indicator within the organisation leads to improved level of relevance and reduced waste within
the organisation (Cui and et.al., 2019). It is also useful in increasing the visibility and leads to
better financial performance and high degree of return within the organisation.
It is considered to be significant in effectively maintaining the key financial sustainability of the
business and is also useful in effectively improving the business performance and leads to
improved business efficiency.
Kalpan Balance Scorecard is significant because it includes the key financial measure
which helps in prioritizing the key projects. It is a significant tool because it tends to identify as
well as improve the internal functions of the business and significantly provide feedback to the
company.
Building block model by fitzgerald and moon is considered to be as evolution of the
Balance scorecard awhich is useful meeting the needs of the company. It is useful in finding the
solution to performance measurement problems.
Financial sustainability within the organisation is referred to as maintaining financial
capacity over a period of time. It is considered to be useful in maintaining staff within the
business and leads to long-term financial stability. Accessing to the capital is considered to be
one of the key prominent component in order to maintain financial stability and sustainability
within the organisation. Self-finance, equity infusion, loan from banks and finance Agency are
considered to be the key prominent tools which is useful in having access to the capital. This
eventually leads to long-term sustainable growth and higher operational efficiency. Profitability
of the business is considered to be one of the key prominent factor which is useful in ensuring
that the significant level of finance and funds has been maintained within the company. High
degree of profit within the business leads to better investment opportunities and higher degree of
financial sustainability. Reporting is also one of the key prominent factor which is useful in
improving the business performance and efficiency (Xie, So and Wang, 2017). Financial
reporting is significant in securing increase degree of capital support and capture unique set of
positive opportunity. Planning is considered to be one of the key significant process which is
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useful in improving the business performance. Financial planning is one of the key prominent
way which helps in allowing flexibility and improving the business financial
sustainability. Maintaining optimum level of funds is considered to be prominent in improving
the business performance and leads to gaining high degree of financial sustainability.
CONCLUSION
From the conducted study it has been summarized that, financial performance management
helps in effectively equipping with the business goals. Environmental management accounting is
useful in addressing the management information which is needed for the managers for carrying
out corporate activities. The cost – benefit analysis is referred to as a significant tool which is
useful in evaluating the key potential social and economic impact upon the public investment
choices. Input output analysis is considered to be significant in recording the material inflows
and also useful in balancing the same with the outflows on the basis of what inflows and
outflows. Effective renewable energy system is considered to be prominent in lowering the
energy bill and also reduces the environmental impact. The management accountant of the
company focuses on taking relevant set of decision by examining specific financial statements
and Managerial statements. Budgetary control is a significant system to control cost which
mainly includes preparation of budgets to coordinate between the departments. Key performance
indicators considered to be as a quantifiable measurement which is useful in determining the
overall long-term business and financial performance. Profitability of the business is considered
to be one of the key prominent factor which is useful in ensuring that the significant level of
finance and funds has been maintained.
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REFERENCES
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Feng, M and et.al., 2018. Green supply chain management and financial performance: The
mediating roles of operational and environmental performance. Business strategy and the
Environment, 27(7), pp.811-824.
Feng, T and et.al., 2016. Environmental management systems and financial performance: The
joint effect of switching cost and competitive intensity. Journal of cleaner production, 113,
pp.781-791.
Hassan, R., Marimuthu, M. and Satirenjit, K.J., 2015. Diversity, corporate governance and
implication on firm financial performance.
Jayakrishnan, M and et.al., 2018. Implementation of business intelligence framework for
Malaysian halal food manufacturing industry towards initiate strategic financial performance
management. Management Science Letters, 8(10), pp.1059-1076.
O'Donohue, W. and Torugsa, N., 2016. The moderating effect of ‘Green’HRM on the association
between proactive environmental management and financial performance in small firms. The
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Opstrup, N. and Villadsen, A.R., 2015. The right mix? Gender diversity in top management
teams and financial performance. Public Administration Review, 75(2), pp.291-301.
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practices on quality performance and financial performance: evidence from Indian
manufacturing companies. Total Quality Management & Business Excellence, 27(5-6), pp.507-
530.
Song, H., Zhao, C. and Zeng, J., 2017. Can environmental management improve financial
performance: An empirical study of A-shares listed companies in China. Journal of cleaner
production, 141, pp.1051-1056.
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Sroufe, R. and Gopalakrishna-Remani, V., 2019. Management, social sustainability, reputation,
and financial performance relationships: An empirical examination of US firms. Organization &
Environment, 32(3), pp.331-362.
Xie, K.L., So, K.K.F. and Wang, W., 2017. Joint effects of management responses and online
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Online
Budgetary Control: Meaning, Objectives, Techniques, Steps. 2017. [ONLINE]. Available
through<https://www.iedunote.com/budgetary-control>
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