Financial Performance Management: Issues, Methods, and Impact on Business

Financial Performance
Management

Table of Contents
INTRODUCTION...........................................................................................................................1
PART 1............................................................................................................................................1
Critically discussing issues that business faces while managing environmental costs along with
different methods utilized by business in its accounting:............................................................1
TASK 2............................................................................................................................................4
Discussing incorporation of management accounting planning tools for solving problems
related to finance and evaluating its affect on financial performance and achievement of
financial sustainability:................................................................................................................4
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................10

INTRODUCTION
Financial performance indicates effectiveness of firm in managing funds, utilizing assets,
and generating revenue. Overall, financial health of an organization is measured through this
technique. So, financial performance management can be defined as a way of managing and
monitoring financial results of an organization. Management of financial performance holds
primary motive of comparing actual results with the forecasted or estimated one. It helps in
aligning the financial goals of an enterprise with its operational targets (Alexander, 2018)
(Fatihudin and Mochklas, 2018). This report consists critical discussion on environmental costs
and its different methods. Further, ways of incorporating planning tools of management
accounting in business for the purpose of solving financial problems is explained, along with its
affect on financial performance of business.
PART 1
Critically discussing issues that business faces while managing environmental costs along with
different methods utilized by business in its accounting:
Environmental Management Accounting refers to a process of identifying, collecting,
estimating, and analysing information related to environmental costs for effective
implementation of conventional or environmental decision-making in an enterprise. It mainly
focuses of internal cost of company rather than external. It increases ability of an organization to
accurately track or manage the application as well as flow of energy. It reports environmental
performance which enables entity to improve its corporate image, as it ensures cleaner
production and pertains implementation of environmental management systems. Environmental
management accounting incorporates planning and policy formulation for monitoring costs
related to environmental management. It also studies environmental risk that influence business
activities and its investment decisions. Overall, it supports the process of internal environmental
management (Franco and et. al., 2020).
Environmental Costs can be elaborated as costs that is incurred by the environmental
impact on operations of business. This cost is incurred by an organization with the motive of
acquiring as well as maintaining permits or license in relevance to environment. Environmental
expenditures are related to various activities such as, costs incurred in procedure of cleaning up
or removal of wastages. Further, remediation or restoration expenses are also involved in it.

Additionally, investment cost is also comprised in it, which denotes fee payment expenses to
consultants or experts for the purpose of investigation and testing of environmental factors
(Gartenberg, Prat, and Serafeim, 2019). Therefore, environmental costs is any costs or expenses
that relates with environmental investigation, consultancy, authorization, permission or
protection in compliance with environmental law.
Cost- Benefit analysis indicates procedure that is applied to analyse decision
incorporated by management in an organization. It aggregates the benefit that business enjoys
than costs associated with it is subtracted. Hence, it refers to a systematic approach that focuses
on measurement of financial metrics of business. It includes tangible as well as intangible
benefits that an organization pertains along with its affect on decision making process of
management. Various types of costs in a analysed in this process, such as, direct costs, indirect
costs, intangible costs, opportunity costs as well as cost associated with potential risks. Potential
risks refers to environmental impacts or regulatory risk (Hassan, Marimuthu, and Satirenjit,
2015). Hence, this technique of cost vs benefit analysis provides opportunity to entity to evaluate
environmental costs incurred by firm and compare it with benefits gained.
Environmental cost assessment techniques: For the purpose of identification and
management of environmental costs, various techniques are applied by companies. It is
composed of analytical as well as practical tools that monitors environmental impacts and its
influence on environmental costs incurred by an enterprise. Such techniques are explained
below:
 Environmental risk assessment: It is an evaluation instrument for cost management of
environment. In this technique, plans and projects are prepared for conduction of
environmental activities an an entity. It helps in evaluating risks and costs associated with
such activities.
 Checklist Matrices: It consists various environmental parameters along with its impact
on business. Hence, entire environmental aspects is covered and investigated through
thus technique (Jakub, Viera, and Eva, 2015).
Examples: For example, any hazards or possible risk in an enterprise can be evaluated
with the application of environmental risk assessment technique. Evaluation of risk occurrence
helps firm in identifying suitable precautions for minimization of losses. Further, environmental