FNN 6800 - Financial Performance: Environmental Cost, KPIs & Decisions

This report provides an analysis of financial performance management, with a specific focus on environmental cost accounting and its implications for decision-making within an organization, using Marks and Spencer as a case study. It delves into the identification, analysis, and utilization of environmental cost information, categorizing costs into compliance, preventive, and green costs, and evaluating the cost-benefit considerations. The report also explores management accounting techniques for reporting environmental costs and emphasizes the importance of environmental cost management for achieving sustainability goals. Furthermore, the report examines the role of management accounting in the decision-making process, highlighting the significance of financial planning tools, budgetary control, and key performance indicators (KPIs) in improving financial performance and ensuring long-term business sustainability.

Financial Performance
Management
Table of Contents

INTRODUCTION.................................................................................................................................3
Part 1.....................................................................................................................................................3
Environment management accounting...............................................................................................3
Environment cost...............................................................................................................................3
Cost vs benefits..................................................................................................................................4
Techniques of management accounting.............................................................................................4
Example of environment costing.......................................................................................................5
Importance of environment cost management...................................................................................5
Factors denote a cost as environment cost.........................................................................................5
Ways to control environment cost.....................................................................................................6
Environment cost are accounted for...................................................................................................6
Part 2.....................................................................................................................................................7
Decision making process...................................................................................................................7
Planning tools for financial problems................................................................................................8
Financial planning involvement in solving business problems..........................................................9
Relevance of budgetary control.........................................................................................................9
KPI relevance in improving financial performance.........................................................................10
Financial sustainability....................................................................................................................10
CONCLUSION...................................................................................................................................10
REFERENCES....................................................................................................................................11

INTRODUCTION
Financial management is all about managing the financial resources associated with
the organisation. This report is based on the case study of Marks and Spencer Company in
respect to its financial management practices. The organisation was initiated its business
operations in the year 1884 by the founders Michael Marks and Thomas Spencer. Company
is associated with approximately 14000 business locations all across the globe. This project
would discuss environment management accounting. What are the factors denoted a certain
cost as an environment cost. What are the key benefits associated with the environment cost.
Techniques of management accounting will also project to reflect the environment cost in the
company’s books of accounts. What are the significance management of environment cost
incur for the organisation. Ways to identify and record the environment cost. Furthermore,
this project will discuss the role of management accounting in the decision making process.
Key planning tools support the organisation to solve the problems. Relevenace of budgetary
control will discuss in this project. KPI significance in improving the financial decision
making will also project. What is the key approach to gain business sustainability will also
project.
Part 1
Environment management accounting
Environment management accenting is defined as identification, collection, analysis
and utilisation of two types of information for making the best level of decisions in
channelizing business operations. This is all about based on the relevant information take the
best level of decision in favour of the organisation. Management in the Marks and Spencer
Company make decisions in the overall growth and development of the business with the
support of environment management accounting technique.
Environment cost
Environment cost is denoted as three types of cost. Environment cost are denoted as
three types of cost such as compliance cost, preventive cost and green cost.
Compliance cost: Compliance cost is denoted as all such cost that Marks and Spencer
Company need to incorporate in order to compliance against the regulations opposed by the
government. This is the cost company entertain in paying salaries, bonus, funds spending and

various other government and legal compliances (Barr and McClellan, 2018). This is the
mandatory cost that organisation need to incur in order to conduct the business operations.
Preventive cost: Preventive cost is another environment cost that is incurred to prevent from
quality issues at the operations. This is the key cost that company require to incur against the
business operations entertained. Total quality control is the key practice associated with the
Marks and Spencer Company.
Green cost: Green cost is among the modern practices followed by company. This involve
incurred cost to consume green energy, environment friendly aspects and different other cost
incurred by the company. Marks and Spencer Company has been involved in the renewable
energy consumption that also requires company’s costing.
The above mentioned cost are the key cost associated with the environment cost.
Cost vs benefits
In the financial accounting various times management needed to make the decision in
respect to whether it should incurred a certain cost or investment. What are the benefits
company will entertain against the cost it has incurred is a part of this concept. It is the key
concern associated with the company as to weather a certain cost company should incurred
against the operations in has entertain (Candreva, 2017). This concept is all about assessing
and analysing the benefits company should gain the competitive advantages against the
pricing incurred by company. Potential level of advantages company try to identify against
the cost company has entertained in order to incur such expenditures. Techniques like
different investment decision making and various others are used to achieve the best level of
costing advantages against the operations.
Techniques of management accounting
Environment management accounting is a technique that is used to report the
environmental cost in the company’s books of accounts. These are the factors that can be
channelizes by the company to achieve the best level of reporting of various environmental
costs company incurred (Hashim and Piatti, 2016). This is a conventional management
accounting technique that is used to report different environmental cost company incurred
against the business operations entertained by organisation. This involve utilising the basic
accounting principles for reporting all different environment cost company incurred. This

technique is utilised to report all types of environment cost company incurred to reporting
financial books of accounts of organisation.
Example of environment costing
Green energy equipment a/c Dr 50000
To cash 50000
Solar panels a/c Dr 100000
To bank 100000
Importance of environment cost management
Environment cost is the modern day requirements of organisation. Environment
protection is among the primary agenda of the business operations undertaken by the Marks
and Spencer Company. Environment cost company incurred play the significant role in the
overall development of the environment friendly practices and protection of environment.
This guide the company to make decision in respect to the protection of environment. Its
essential for the company to incurred cost in environment but its equally important for the
company to monitor its budget to incurred cost. Financial resources are minimum in numbers
so it is essential for the company to monitor the budget incurred in various environment
costing. Due to unavailability of the appropriate financial resources with the company it is
essential for the organisation to conduct the cost management practices (Mao and et.al.,
2017). This allow the company to implement cost control so that overall objectives behind
the business functions can be achieved by the company. Management of environment cost
allow the company to make the proper balance in between cost incurred for normal business
operations and environment cost company needed to incur to protect the environment.
Factors denote a cost as environment cost
Environment cost is the cost incurred to channelizes environment protection and other
associated factors that can drive the company to protect the environment. These factors play
the crucial role in the environment protection. Company entertain environmental cost in
directions such as environment protection, quality improvement and fulfilling mandatory
compliances to match up government standards. All these factors denote a certain cost is

associated with the environment cost or not. Any such costs that at some level contribute in
the environment protection at some level are denoted as the environment cost. On the basis of
these factors a certain cost denote as the environment cost. On the basis of these factors
denoted above a specific cost is denoted as the environment cost. The reporting of the
environment cost is done on the basis of the normal accounting principles and concepts.
Wirth the support of normal accounting principles, concepts and technique a certain cost is
reported as the environment cost. With the support of double entry book keeping technique
these cost are recorded in the accounting books.
Ways to control environment cost
Environment cost is the cost that is entertained on the basis of the certain specific
standards like compliance cost, environment cost and other such factors. Some cost is
controllable in nature but some are mandatory that needed to entertain by company in any of
the situation. All such cost that are controllable which ca further be demonstrate as such cost
that are not associated with any compliance and mandatory requirements can be controlled by
the Marks and Spencer Company with the support of proper techniques and cost controlling
approaches. Company can utilises the process evaluation technique, SWOT analysis
approaches and different other approaches over cost allocation practices and operations of
company (Illmeyer and et.al., 2017). All these factors allow the company to achieve the best
level cost controlling results against the practices.
Environment cost are accounted for
Environment cost is accounted in the financial records of the Marks and Spencer
Company in the income statement of the company. Profit and loss account of the company is
the place where all these financial transactions are recorded by the company. These cost are
not related to the normal trade process of the company so they can be a part of the trading
account of the company but they are associated with the respective financial year so that can
report in the profit and loss account of the company. With the support of normal accounting
practices company can record all its environment cost in the company’s books of accounts.
All the environment cost company entertain are charged against the net profitability Marks
and Spencer Company entertain every financial year. All environment cost are accounted
against the profitability of the company. Usual techniques are used by the company to record
all its environment cost in the respective financial year.

Part 2
Decision making process
Financial decision making play the crucial role in the overall operational planning in
the company. On the basis of the availability of the financial resources at the organisation
entire financial planning is conducted. In every operational decision company take at the
Marks and Spencer Company at the prior level company assess the availability of the its
financial resources. Financial decision making involve making decision in respect to how
much funds company should allocate in conducting different functional activities. In context
to the business decision making play the significant role in achieving all different goals and
objectives behind the business operations undertaken by the company. On the basis of the
operational needs and requirement of the copany this decision making is executed by the
company. By assessing and evaluating the needs and requirements of the company in respect
to operations and management this decision making is executed by company (Morozko and
Didenko, 2018). Assessment is also done in respect to other competitors available in the
market associated with the retail sector. In business it’s essential for the company to analysis
the competitors associated with the retail sector in market. On the basis of the competitors
and their business strategies company also form its own strategies and policies to drive the
business growth and success. The level of competition available for the company in market
put a direct impact over the business decision making of company. The previous performance
of the company also measured and analysis before taking decision in the business. On the
basis of the past strategies and policies formed by company in business all decision making in
respect to the business is entertained by company.
Information utilised in the management accounting significantly affect every business
decision company has made. Management accounting allow the Marks and Spencer
Company to make all crucial decisions in respect to investment of company in different
projects, assessing the financial performance of organization in the respective financial year
with the support of techniques like ratio analysis and different other approaches are used to
make the best level of decision in order to boost the growth of company. Information is an
important fundamental behind taking the decision in business (Piatti-Fünfkirchen and
Schneider, 2018). Its essential for the company to use the right information in order to make
the best level of decisions for enhancing the growth of company. Some information is used
on the basis of the hypothetical figures based on the previous records and future expected
situations. Some information is actual on the basis of the current situation. It’s important to

use the right frame of information in order to take the best level of decision. With the support
of right information company get to make the best level of decision in order to achieve the
growth in the business.
Planning tools for financial problems
Different planning tools are used to deal with different financial problem organisation
face against the business operations it has undertaken. These planning tools allow the
organisation to make the best level of financial decision making and address all different
challenges associated with the financial management process.
Business plan: Business plan is among the key tool that can be used to conduct the financial
planning of the company. This involves different strategies and processes that can allow the
company to achieve the best level of business objectives. Business plan is among the key
factor or tool that can allow the company to make the best level of business decision making.
This allow company to control effectively all its financial resources.
Budget and cost projection: Budget and cost projection is another critical tool that can be
used by company to conduct the financial planning of the company. This allows the company
to implement cost control with the support of budget and other such aspects (Munge, Kimani
and Ngugi, 2016). Cost projection allows company to control the overall cost incurred in
various functional activity of company. On the basis of the cost projection tool budget is
prepared in the company to manage various operational activities of the company.
Break even analysis: Break even analysis is another key tool that is used to conduct the
financial planning of the organisation. This is the tool that denotes the point where company
will be able to recover all its cost and investment it has incurred in the certain project. The
breakeven point can be calculated in both the modes overall cost and unit that company
needed to sale to recover its overall cost it has incurred (Sazonov and et.al., 2017). This tool
supports the company in framing proper strategies to achieve the high level of growth in the
business.
Financial statements: Financial statement includes income statement, balance sheet and
cash flow statement like tools. These allow the organization to achieve the highest level of
cost control. It support the company in channelizing effective level of financial management
at the organisation level.

The above mentioned tools are used to conduct the proper financial planning and
control at the organisation. All these tools allow the company to achieve the best level of
financial planning. Control over company resources also play the significant role for the
company to achieve the best level of outcomes against the financial planning company has
entertained.
Financial planning involvement in solving business problems
Financial planning play the important role in solving all different issues and problems
company is facing. In business different problems always becomes part of the business.
Limitation of company’s financial resources is among the major problem company face.
Limitations of financial resources are always a part of business. Financial management
support the company in dealing effectively against the limitation of company’s financial
resources. With the support of tools like budgetary control, business plan and other such tools
this issue can easily be dealt by the company. Other issues like facing losses in the business
of company can also be erased by company with the support of financial planning tool call as
break even analysis. This would allow the company to deal with this issue. All different
financial tool can support the Marks and Spencer Company in dealing with all different issues
and problem company face (Myende, Samuel and Pillay, 2018). Financial management is a
key aspect that company use to improve the overall growth of the company. Financial
planning is among the critical practice that can deliver the positive results in favour of the
organisation to achieve the maximum level of impacts against the financial planning it has
entertained.
Relevance of budgetary control
Budgetary control is another crucial practice Marks and Spencer Company use as a
part of its financial management operations. Budgetary control is all about controlling the
overall cost of conducting different functional activities with the support of budgetary
technique. This has allowed the organisation to improve the overall operational profitability
of the company. Budgetary control is a key area of practice company has entertained as a part
of different financial management tool. Budgetary control technique is very relevant in
favour of the organisation. It has the positive impact over the business operations of
company. Budgetary control allows the company to improve the scale of business operations
of company. This allows the organisation to achieve the best level of business outcomes.

KPI relevance in improving financial performance
KPI is denoted as the key performance indicators. They are the indicators that denote
about the performance of organisation in respect to its finance. In order to conduct the
financial planning KPI is the tool that allow the company to achieve the best level of financial
planning of the organisation. KPI allow the organisation to monitor the financial impacts of
various decisions it has made against the business operations it has entertained. KPI played
the key role in enhancing the financial growth of the company (Njenga and Jagongo, 2019).
In order to improve the financial performance of the organisation key performance indicator
like balance sheet, profit and loss account and different other tools that project the company’s
profitability and growth.
Financial sustainability
Financial sustainability is the aspect that allows company to manage the financial
growth of the company. This is the factor that denote company is performing the best
according to the needs and requirements of the organisation (Nkundabanyanga and et.al.,
2017). This is the aspect that denotes that the decisions company has made against the
business operations could contribute the business in the best way possible. Financial
sustainability is the indicator that project about the strength of the organisation in context to
its financial performance of the organisation.
CONCLUSION
Financial management is all about managing the financial resources of the
organisation. This is about to make different decisions that can support the best level of
financial outcomes in favour of the organisation. Environmental accounting involves
different factors such as compliance tool, environment protection and other such factors. The
reporting of the environment cost is done in the same way other financial transactions are
reported in the company books of accounts. Management accounting comprises with different
methods such as budgetary control, ratio analysis and various other methods that can support
the company for achieving the best level of growth against the business operations it has
entertained.

REFERENCES
Books and Journals
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Practice. IAP.
Hashim, A. and Piatti, M., 2016. A Diagnostic Framework to Assess the Capacity of a
Government's Financial Management Information System as a Budget Management
Tool. World Bank Publications.
Illmeyer, M. and et.al., 2017. The impact of financial management on innovation.
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satisfaction: Personal management quality, perceived partner behavior, and
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Morozko, N. and Didenko, V., 2018. Financial management of small organizations based on
a cognitive approach.
Munge, M. N., Kimani, E. M. and Ngugi, D. G., 2016. Factors influencing financial
management in public secondary schools in Nakuru County, Kenya.
Myende, P. E., Samuel, M. A. and Pillay, A., 2018. Novice rural principals’ successful
leadership practices in financial management: Multiple accountabilities. South
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performance of selected non-deposit taking SACCOs in Kiambu County, Kenya:
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Nkundabanyanga, S. K. and et.al., 2017. The impact of financial management practices and
competitive advantage on the loan performance of MFIs. International Journal of
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Piatti-Fünfkirchen, M. and Schneider, P., 2018. From stumbling block to enabler: the role of
public financial management in health service delivery in Tanzania and
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Sazonov, S. and et.al., 2017. Theory and methodology of the financial management of the
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