Management Accounting Tools for Red Energy Australia

Red Energy Australia can benefit from using Variance Analysis and Cash Flow Forecasting as management accounting tools. Variance Analysis helps in analyzing the current financial and operational performance of the company, while Cash Flow Forecasting helps in forecasting future inflow and outflow of cash. These tools will help the company in making informed decisions and developing strategies to optimize cash outflow and maximize cash inflow.

Recommendation of 2-management accounting Tools that will be useful for
Red Energy Australia
Management accounting tools and techniques are of various types and render different types
service to the company’s using them in their own way. It is important that company’s use
management tools and techniques which suit there operational and financial activities. This will
extract essential type service that is required by the company for their future operation. In case of
Red Energy Australia the essential need of the company is to know there financial and
operational performance in the market. The company also aim to mange there cash flow in future
activities. Hence, the following management tools and techniques will suit the needs of the
company:
Variance Analysis: It can be said that variance analysis is management account techniques in
which the company can analyze the current performance of the company both financial and
operational. As the company uses budget for future operational activities and fund allocation
through the use of variance analysis the company will be able to measure the performance of the
company in context of their expected results. There are parameters set in the budgeting process
which are then compared with the actual results showing the variance between the budgeted and
actual performance of the company (Kelly and Rivenbark, 2014). This helps the firm to critically
analysis the extent to which the company has fared in there operational activities. If the actual
result is higher than that of estimated one then the company has done better and vice versa. This
is effective method that will give a prominent overview of the company’s operational and
financial performance helping the company in there future decision making process and will also
help the company to make strategies which will benefit the company in the near future of firm’s
operation (Miller, 2018).
Cash Flow forecasting: Cash flow forecasting is also a method through which the company is
able to forecast the future inflow and outflow of cash and monetary resources that is expected to
happen in the future days of the business. Cash Flow is not generic process it involved cash
discounting factors that create weights on the future value of money and have more realistic view
on the future cash inflows and outflow of cash (Rubin, 2016). The Realistic approach is derived
through the concept of real time money value. The company can use this tool and technique of

financial management to ensure that the firm knows the future business value and the financial
benefits which the company can incur in the future of the business. The process involves
marketing analysis to know the future trend of market based on which the forecasting done. This
makes the process more relevant and helps the company to know the probabilities of the
happenings in the future. This process will help Red Energy to develop strategies to optimize
cash outflow and maximize cash inflow in order increase profitability of the firm in the market
(Bogsnes, 2016).
Hence, from the above recommendation it can be said that Variance analysis and Cash Flow
forecasting are the management accounting tools which will suit the operational needs of the
firm in the future.

References
Bogsnes, B., 2016. Implementing beyond budgeting: Unlocking the performance potential. John
Wiley & Sons.
Kelly, J.M. and Rivenbark, W.C., 2014. Performance budgeting for state and local government.
Routledge.
Miller, G., 2018. Performance based budgeting. Routledge.
Rubin, I.S., 2016. The politics of public budgeting: Getting and spending, borrowing and
balancing. CQ Press.