Financial Performance Management: Environment Cost Analysis Report

This report provides a comprehensive overview of financial performance management, focusing on environment cost analysis and its implications. It begins by defining environment management accounting and environment cost, explaining how these costs arise from business activities and are categorized. The report then explores the use of cost-benefit analysis in decision-making and details various management accounting techniques used to recognize and manage environmental costs, including activity-based costing and life cycle assessment. The importance of managing environment costs is highlighted, along with methods for identifying, controlling, and accounting for them. The second part of the report examines the relevance of decision-making processes and how management accounting provides crucial information. It discusses planning tools such as activity-based costing and zero-based budgeting, the relevance of budgetary control, and the use of KPIs to improve organizational performance. Finally, the report explains how businesses can achieve financial sustainability through effective environment cost management and strategic decision-making.

Financial Performance
Management

Table of Contents
INTRODUCTION...........................................................................................................................4
PART1.............................................................................................................................................4
Brief description of environment cost..........................................................................................4
Use of cost -benefit analysis technique........................................................................................5
Brief explanation about techniques used by management accountants to recognize
management cost. ........................................................................................................................5
Examples of management accounting techniques. .....................................................................6
Importance of managing environment cost..................................................................................6
Brief explanation of the ways environment cost identified. .......................................................6
Explanation of the way through which environment cost can be controlled...............................7
Brief explanation of ways for which environment cost accounted..............................................7
PART2.............................................................................................................................................8
Brief description regarding relevance of decision making process and ways through which
management accounting gain right information..........................................................................8
Explanation of planning tools and their relevance of solving problems ....................................8
Relevance of budgetary control ..................................................................................................9
Brief explanation of use of KPI for improve organization 's performance..................................9
Explanation of how business gain sustain financially..............................................................10
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................12

INTRODUCTION
Financial performance management is systematic procedure of managing performance of
organization by controlling and managing resources. To understand concept of financial perform
ace measurement this report has been formulate. It is divide into two part. This first one is define
meaning and requirement of Environment management accounting, technique use for control
environment cost. And the second part is related with determine relevance of decision making
procedure, use of technique of management accounting for maintain sustainability of
organization. All these information are describe in systemic way.
PART1
Brief description of environment cost
Environment management accounting: It is modern concept of management
accounting and it is part of this approach. It is systemic procedure of identifying, analysing,
collecting and use of information related with environment factor, which includes, rate of water,
materiel, natural asst and monetary cost incurred during maintain environment assets.
Environment cost: The term environment cost refer as expenses incurred due to actual
deterioration of natural business assets which organization use to run their business activities
Environment cost arise due to running economic activities. In other words cost incurred due to
poor quality of environment in which organization work. This types of cost has been categorised
within 4 sector, which include detention cost, prevention cost, external as well as internal
environment failure cost. Management department need to formulate strategies and policies
regarding with paying their liability of environment cost (Johnstone, 2018).
Some times it become the reason or main cause of reduce sales rate and well as failure of
business organization. Environment cost include, fine or penalties take by government from
organizations due to engaged in activities which damage environment. Expense incurred in
purchasing pollution prevention equipments, cost of waste management and remedies formulate
to clean the site where business activities are run. This consider as modern concept include in
accounting and every organization need to formulate those policies after analysing and
considering environment cost.

Use of cost -benefit analysis technique
Cost benefit analysis: This is tool of financial management through which manager find
out strength as well as weakness of particular alternative and on the basis of that manager take
decision. Cost – benefit analysis is used by organization to take decision. Benefits are calculated
on their basis of sum up of expenses incurred and revenue generate within given time period.
Theses benefits are compare with cost and on the basis of that manager took decision
They select those alternative which give or able to attain more economic benefit the as compare
to another alternatives. In this manager find out ability of organization to generate profit upon
their investment after deducting or discounting all essential cash outflow. On the basis of result
arrived from this tool organization take decision this will also useful for measurement purpose
and evaluate value of profit thus most of corporation use cost – benefit analysis tool.
Brief explanation about techniques used by management accountants to recognize management
cost.
With the increment of encouraging green awareness among market economy, the
concept of environment management accounting has been increases. Every business corporation
focus on using those technique through which they can analysing their environment cost which
help in controlling cost and identify those activities which become the reason of incurring this
cost. Following are define below
Cost analysing: Accountant used this technique through which they can find out cost
incurred during resource exploitations, pollution prevention cost, opportunities cost. By using
activity based costing and life cycle assessment manager could find value of these cost .They
also use materiel flow accounting which help in identifying and divide environment and non
environment cost (Schaltegger, 2018).
Investment appraisal: Tools used for investment appraisal are help in finding out all
these opportunities cost which may effect on future business opportunities. By using capital
budgeting tools which includes pay back period, internal rate of return as well as net present
value technique account find out all those cost which use for prevent production pollution
system.

Examples of management accounting techniques.
By using activity based costing accountant can find out external cost which includes
clean-up cost arises for hazardous waste size, on the basis of that organization able to calculate
cost. They use life cycle assessment through which organization can easily recognize expected
environment cost arise during the whole life cycle. Internal appraisal technique help in finding
out value of those alternatives and projects which use to prevent the pollution arise during the
time of control, theses cost.
Organization use equipments. There will be various types of technique are used which
includes, electrostatic precipitation, fabric filters, selective catalytic reduction. By using internal
rate of return manager find out those alternative which are more beneficial and took less time to
control the pollution cost.
Importance of managing environment cost.
Environment management accounting is play vital role as with the changes of scenario of
business organizations need to focus on save their environment within which they run their
business activities. Followings are the relevance of managing encirclement cost:
By using techniques of environment management accounting organizations able to
reduce material use for production of hazardous products. They control use of those items which
may cause of adversely impact on environment.
By controlling cost of managing environment activities manager can utilized their
resource and it help in reduce requirement of energy product to run business cycle.
This will useful for control the release of gaseous residues (Zou, Zeng, Zhou, and Xiao, 2019).
Environment management accounting help in control the tax liabilities and penalties as
organization who have poor environment behaviour and not engaged in the program of
lifesaving environment , are penalise by government.
This also useful in formulate strong image within market economy.
Business corporation have more chances to spread their market by providing herbal products or
those service which are not adversely impact on personal as well as environment.
Brief explanation of the ways environment cost identified.
Environment cost has been divided into 3 categories on the basis of which managers need
to identify and sell down these cost on the basis of these categories. It includes transaction cost,
opportunity cost, non direct environment related expenses, and social cost. Managers the basis of

formulating general ledger accounts can divided each cost on the basis of their impact. And these
accounts help in formulating are proved base which useful for formulate separate statement
which define the value of cost, its impact, risk and theses information useful in formulate and
plan strategies which help in formulate plan to control environment cost.
Explanation of the way through which environment cost can be controlled.
By using tools of performance management organization able to control cost of managing
environment. Following are the tools used
Benchmarking: This is one of the most popular tool used by managers for identify cost ,
on the basis of setting benchmark target, they can able to measure the cost incurred during using
material or equipment which become the reason of arising environment cost. on the basis of that
manager formulate policies to provide rewards to their department which control or manage cost
of environment. thus benchmarking useful in setting target and manage theses resources.
Balance scorecard: It is used as tool of performance management. By using balance
scorecard manager can find out perspective of different organization or their rival industries
regarding using and work according to environment standards. This tool use for control and
reduce cost of managing accounting as well as enhance reputation of their corporation. On the
basis of viewing result of balance scorecard manager find out their position and formulate
policies which use to control those cost (Rodrigues, Pigosso, and McAloone, T2016).
Brief explanation of ways for which environment cost accounted.
For manage cost related with environment, organizations implement environment
management accounting system. This is useful for analysis, manage control record and calculate
cost related with environment. Manager by implementing this system can able to record all those
transactions which related with environment and on the basis of that they formulate those
strategies which useful in record all these transaction, they formulate ledger which help in record
all the cost in systematic manner.
Organizations on the basis of this system find out time required for manage and control
all these information and they by identifying all theses information formulate strategies which
useful in control and mange environment cost. Manage also use opportunity cost and on the basis
of that they choose those alternatives which useful in record and manage environment cost.

PART2
Brief description regarding relevance of decision making process and ways through which
management accounting gain right information.
Decision making process: This is consider as systematic procedure through which
managers select or choose those alternatives which are beneficial for organization and help in
gearing profits. Management accounting play vital role in decision making procedure they by
using their accounting system and by analysing reports of management accounting manager able
to collect right information which further use for formulate financial statement. Following are the
importance of decision making process:
 Identify the best alternatives: By using various tools of management accounting
decision have been take and on the basis of theses decisions organizations able to find out
those alternative which provides economic benefits as easily implement within the
organization (Trianni, Cagno and Farné, 2016).
 Better utilization of resources: Decision making useful for organization to formulate
policies and strategies which useful in distribute resource specially financial resource
according to the needs and requirement of various department.
 Motivate employee: Taken decision of providing training as well as organize new
program events and social event help in improving motivation and build positive image
of organization. They engaged employee in decision making process and ask them for
give suggestion which help in motivate employees
 Business growth: Decision making process help in identifying the opportunities and
alternative which useful in enhance growth of organization , as well as attain competitive
business advantage. Managers us management accounting technique and system for
identifying which attaining is much profitable for entity and on the basis that they take
decision. Thus it is essential process.
Explanation of planning tools and their relevance of solving problems
Planing tool: Theses are consider as techniques which help in formulating plan .
Following are the panning tools used within management accounting approach
Activity based costing: Managers formulate budget on the basis of allocate resources
thus it is known as activity based costing.

By applying activity based budget managers able to allocate their resource and use it is effective
and efficient manner.
Zero based budget: In this type of planning tool, budget are formulated on the
information collected from initial basis thus it is known as Zero based budget.
This budget beneficial for newly set up business entities as all the data is collected from initial
base thus they give relevant information (Maas, Schaltegger and Crutzen, 2016).
Strategic planning tool: By using SWOT, PESTLE and porter's 5 model managers find
out opportunists as well as threat. This will help in formulate plans.
On the basis of identifying strategies use by their rival industries , managers plan for formulate
those policies which help in attain goals of organization.
Relevance of budgetary control
Budget is statement which define future business outcomes in monetary terms. Process
and technique use for control the deviation arse between budget and actual outcomes are know as
budgetary control. Following are relevance of budgetary control
Measure performance: On the basis of recognize budget and actual outcome, managers
able to measure and evaluate financial position of their organization.
Identify deviations:On the basis of find out different between actual and budget
outcome, managers find out those activities which are main reason of arising differences.
Allocate recourse: Budgetary control techniques useful in allocate recourse to different
department which includes, marketing, finance, production as well as research by using tools of
budgetary controls.
Control risk: By using budgetary control tools managers find out future risk activites
and on the basis of that they implement strategies through which thy cut throat risk activities
Use as forecasting technique: Budgetary control useful for organization to forecast or
predict future business possibilities.
Thus budgetary control help in decision making as well as measuring, allocate resource
and control risk in effective manner.
Brief explanation of use of KPI for improve organization 's performance.
Key performance indicator: This tool is used for measure value of business
organization that efficiently they attain their business goals. It is part of management accounting

and managers use this at multiple level of their organization structure to find out the relevant and
success criteria. Following are importance of Key Performance Indicator:
 Useful in relevant change: On the basis of collecting data from key performance
indicator manager formulate policies for change, which help in increase the level of
performance of each business department.
 Measure performance: The most essential purpose for which manager use this tool to
measure the performance of their department and employee. They on the basis of setting
target measure financial performance (Rodrigues, Pigosso, and McAloone, 2016).
 Formulate policies: On the basis of evaluate performance of each departments manager
formulate reward policy, they distribute monetary incentive, promotions and recognizant
by using data collected from key performance indicator.
 Useful for personal growth: This tool is useful for enhance growth of the organization.
As by using key performance indicator the performance of department has been increases
and employee get reward for their work which help in enhance their personal growth and
useful for increase living standard.
Explanation of how business gain sustain financially.
Financial sustainability is defined as ability of organizations to maintain their financial
growth or revenue even they attain profit or not within specific time period. It totally depend on
hiving capital budget for the organization. Profit is consider as essential part of financial
sustainability as thus will useful in generate cash inflow which directly impact and related with
maintain sustainability of business corporation (Nassar, and et.an. 2020).
For maintain position and give toughest competition to competitors organizations need to
maintain their financial sustainability. Business gain is the symbol of success and on the basis of
generating gain organization able to recognize value of profit well as find out result which help
in create strong position and maintain sustainability within organization by continuity provides
cash inflow.
CONCLUSION
From the above analysis it has been concluded that to maintain and improve financial
performance of organization manager need to focus on environment management accounting
concept,they by using management accounting technique can control the cost of environment.

Performance measurement, total quality control and planning tools are useful in solve issue arise
due to financial problem and help in attaining growth of organization by improve motivation of
organization's workforce.

REFERENCES
Books and journals
Johnstone, L., 2018. Theorising and modelling social control in environmental management
accounting research. Social and Environmental Accountability Journal, 38(1), pp.30-48.
Trianni, A., Cagno, E. and Farné, S., 2016. Barriers, drivers and decision-making process for
industrial energy efficiency: A broad study among manufacturing small and medium-
sized enterprises. Applied Energy, 162. pp.1537-1551.
Maas, K., Schaltegger, S. and Crutzen, N., 2016. Integrating corporate sustainability assessment,
management accounting, control, and reporting. Journal of Cleaner Production, 136.
pp.237-248.
Schaltegger, S., 2018. Linking environmental management accounting: A reflection on (missing)
links to sustainability and planetary boundaries.Social and Environmental
Accountability Journal, 38(1), pp.19-29.Saeidi, S.P., Othman, M. S. H., Saeidi, P. and
Saeidi, S.P., 2018. The moderating role of environmental management accounting
between environmental innovation and firm financial performance. International
Journal of Business Performance Management, 19(3), pp.326-348.
Zou, T., Zeng, H., Zhou, Z. and Xiao, X., 2019. A three-dimensional model featuring material
flow, value flow and organization for environmental management accounting. Journal
of Cleaner Production,.228, pp.619-633.
Rodrigues, V. P., Pigosso, D. C. and McAloone, T. C., 2016. Process-related key performance
indicators for measuring sustainability performance of ecodesign implementation into
product development. Journal of Cleaner production, 139. pp.416-428.
Nassar, A., Hobeika, C., Lamer, C., Beaussier, M., Sarran, A., Yamazaki, S., Sanou, Y., Bonnet,
S., Gayet, B. and Fuks, D., 2020. Relevance of blood loss as key indicator of the quality
of surgical care in laparoscopic liver resection for colorectal liver metastases. Surgery,
168(3). pp.411-418.