Financial Decision Making: Role of Accounting Techniques at Harrods

This report delves into the realm of financial decision-making, emphasizing the crucial role of management accounting techniques in achieving organizational goals. Focusing on Harrods Plc, the report examines various techniques such as financial planning, financial statement analysis, standard costing, budgetary control, cash flow analysis, and statistical analysis. It critically evaluates these techniques, offering recommendations for Harrods Plc to improve its financial performance. The analysis highlights the importance of these tools in planning, control, and decision-making processes, providing a comprehensive overview of how management accounting can be leveraged for strategic advantage. The report concludes with a summary of key findings and recommendations for effective financial management within the company. Furthermore, the report suggests employing financial statement analysis and budgetary control to enhance decision-making and facilitate organizational growth, making it a valuable resource for understanding financial management practices.

Financial Decision Making

TABLE OF CONTENTS
INTRODUCTION......................................................................................................................3
MAIN BODY.............................................................................................................................3
Role of management accounting techniques in planning, control and decision making
process....................................................................................................................................3
Critical evaluation of selected MA techniques and giving recommendations to Harrods Plc
................................................................................................................................................5
CONCLUSION..........................................................................................................................5
REFERENCES...........................................................................................................................7

INTRODUCTION
Financial decision making implies for the process which is undertaken by firm’s
manager for maximizing profitability and attainment of strategic goals. Manager emphasizes
on setting competent financial-mix which helps in getting desired level of outcomes.
Financial accounting may be defined as a process of recording, summarizing and reporting of
company’s transaction for providing an accurate view of position pertaining to the specific
time period. There are several type of accounting function which undertaken by the firm
namely financial, management, tax related and internal auditing (Types of accounting
functions, 2019). Hence, keeping systematic record of company and communicating results to
the main stakeholders is main function of accounting. Accounting emphasizes on meeting
legal requirements which in turn associated with businesses. It shows that effectual business
planning and control is highly required for the attainment of organizational goals and
objectives.
This project report is based on Harrods Plc, departmental store, located on Brompton
Road on Knightsbridge. Now, business unit falls under the category of largest departmental
store which occupies 5 acres. Company is involved in offering quality and luxury goods
through opening 330 departments. It offers designer clothes, luxury gifts and fashion
accessories to customers under the category of both men and women. For making optimum
use of financial and non-financial resources company prefers to use management accounting
systems (Types of accounting functions, 2019). Moreover, it clearly presents reasons due to
which firm failed to achieve predetermined target or goals. In addition to this, MA tools also
assist company in developing competent framework for the upcoming time period.
In this, report will provide deeper insight about the role of management accounting in
decision making. Further, it also shed light on the manner in which MA techniques can be
used for performance improvement. Report clearly entails critical evaluation of MA
techniques for selecting the best one.

MAIN BODY
Role of management accounting techniques in planning, control and decision making process
In the recent times, business units including Harrods Plc lays high level of emphasis
on using management accounting techniques with the motive to attain predetermined goals.
Such techniques mainly include financial planning, final account analysis, standard costing,
budgetary control, cash flow analysis, statistical and graphical analysis.
 Financial planning: Harrods pc can do procurement, investment and administration
of funds effectually by developing competent financial plan. It helps company in
ascertaining funds required or estimating capital requirement. Financial planning also
helps in determining competition and contributes in framing policies for the upcoming
time period.
 Financial statement analysis: Such technique of MA helps Harrods plc in evaluating
performance over the years and in against to competitors. By using financial
statements company can assess whether performance its performance improved or
deteriorated over the time frame. Further, through this technique Harrods Plc can do
evaluation in against to rival firm (Warren and Jones, 2018). In this way, FA analysis
technique provides company with suitable framework for decision making.
 Standard costing and budgetary control: By using this technique Harrods Plc can do
comparison of actual performance in against to the predetermined standards
pertaining to sales, material, labor and overhead. Hence, by comparing actual figures
over standards business unit can identify deviations (Trotman and Carson, 2018). In
this way, by assessing the causes of deviations company can take corrective measures
for improvement. Further, on the basis of deviations identified firm can develop
suitable budget for upcoming time period.
 Cash flow analysis: This is another most effectual tools of MA which contribute in
planning, control and decision making significantly. Such analysis highlights
company’s cash position at the end of specific time period. Moreover, cash flow
analysis contains information about both income and expenses (Weetman, 2019). It
assists Harrods Plc in planning as CFA analysis clearly presents funds which
company posses and thereby specify funds that need to be raised for meeting financial
requirements. Along with this, CFA analysis also gives input for budgetary control
and thereby indicates requirements in relation to taking measures for improvement. In

this way, CFA analysis helps in assessing, evaluating, monitoring and controlling
company’s performance.
 Statistical and graphical analysis: Harrods Plc can also use statistical and graphical
techniques for ensuring better decision making. Moreover, statistical techniques such
as correlation etc help in identifying relationship between two variables. Referring
this, suitable strategies can be formulated by Harrods Plc for growth purpose. Along
with this, graphical techniques are also highly effective which shows company’s
performance pictorially (Pavlatos and Kostakis, 2018). In other words, through the
means of graphs business unit can understand and analyze trends. Such analysis
exhibits whether there is an improvement or declining trend in business unit’s
performance. Hence, by taking into account all such aspects Harrods Plc can develop
suitable policies for controlling and improving performance level.
Critical evaluation of selected MA techniques and giving recommendations to Harrods Plc
According to the views of Shields (2018) financial statement analysis technique helps
company in analyzing performance from both internal and external perspective. In other
words, it enables firm to evaluate performance trend over the years and in against to the rival
firm. However on the critical note, Adler (2018) said that FA or ratio analysis technique
furnishes information about past, whereas management wants to take decisions about future.
In the study, Booth (2018) presented that budgetary control tool facilitate
improvement in the performance level to a great extent. Moreover, it presents the level to
which company is far from predetermined targets. Thus, as per the causes identified by taking
corrective measures business unit can ensure improvement in performance level significantly.
On the contradictory note, White (2019) entailed that such technique of MA negatively
impacts employee motivation. Moreover, when business unit fails to set realistic targets then
it may result into high deviations.
Hence, by taking into account pros and cons of MA tools Harrods Plc is advised to
employ FA analysis and budgetary control tools which in turn proves to be more beneficial
for it.

CONCLUSION
By summing up this report, it can be concluded that with the motive to fulfill
company’s vision and mission Harrods plc makes focus on using MA techniques. Company
uses MA tools for analyzing and monitors its performance. It can be seen in the report that
FA analysis, standard costing and budgetary control etc are the most effectual tools which
help in making assessment of company’s performance. It can be summarized from the report,
using FA analysis tool management of Harrods Plc can do suitable modifications in the
existing strategic framework. Besides this, it can be inferred that budgetary control tool
assists Harrods plc in developing realistic financial framework for the near future. It can be
stated from evaluation that competent financial planning facilitates optimum utilization of
monetary resources.
Along with this, it has been articulated that cash flow analysis (CFA) helps in
ascertaining company’s position in monetary terms. In other words, CFA clearly exhibits net
inflow of the company over outflow and thereby help in planning about future. Further, it can
be presented from evaluation that Harrods Plc also makes focus on undertaking statistical and
graphical techniques for tracking performance effectually. Hence, it can be mentioned that
Harrods Plc should employ the techniques of budgetary control and financial statement
analysis. Such techniques assist higher management in taking appropriate decisions which
contribute in organizational growth.

REFERENCES
Books and Journals
Adler, R. W., 2018. Strategic performance management: Accounting for organizational
control. Routledge.
Booth, P., 2018. Management control in a voluntary organization: accounting and
accountants in organizational context. Routledge.
Pavlatos, O. and Kostakis, X., 2018. The impact of top management team characteristics and
historical financial performance on strategic management accounting. Journal of
Accounting & Organizational Change. 14(4). pp.455-472.
Shields, M. D., 2018. A Perspective on Management Accounting Research. Journal of
Management Accounting Research, 30(3), pp.1-11.
Trotman, K. and Carson, E., 2018. Financial accounting: an integrated approach. Cengage
AU.
Warren, C. and Jones, J., 2018. Corporate financial accounting. Cengage Learning.
Weetman, P., 2019. Financial and management accounting. Pearson UK.
White, L., 2019. Understanding the Benefits of German Controlling and Management
Accounting. In Performance Management in Retail and the Consumer Goods
Industry (pp. 3-9). Springer, Cham.
Online
Harrods Plc: overview. 2019. Online. Available through: <
https://www.harrods.com/en-gb/harrods-group>.
Types of accounting functions. 2019. Online. Available through: <
https://www.accountingtools.com/articles/types-of-accounting-functions.html>.