Financial Management Report: Tesco Plc Financial Strategy Analysis

This report analyzes the financial management practices of Tesco Plc, a multinational grocery retail company. It delves into both formal and informal approaches to effective decision-making, including structured, system, and process approaches, as well as relationship building and unwritten rules. The report then examines key financial management principles crucial for long-term sustainability, such as budgeting, debt management, and cost control, alongside financial strategies like re-investment and employee training. Furthermore, it highlights the role of management accountants in budgeting, cost control, and strategic decision-making, emphasizing their impact on stakeholder objectives and overall organizational success. Finally, the report evaluates the role of accounting control systems within the organization.

Assignment

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
TASK 1............................................................................................................................................1
P1 Formal or informal approaches used for effective decision making in the organization.......1
TASK 2............................................................................................................................................3
P2 Key financial management principle required by the business in order to achieve long tern
sustainability with the help of financial strategy.........................................................................3
TASK 3............................................................................................................................................5
P3 Role of management accountant in the organization..............................................................5
P4 Evaluate the role of accounting control system......................................................................7
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................9

INTRODUCTION
Financial management is method of managing their finance in order analyse the
investment of an individual or for a business. With the help of financial management, person can
take effective decision which is beneficial for the organization and it will further helps in
achieving their business goals & objectives (Andreou Louca and Panayides, 2014). It will
focuses on ratios. Debt, equity, portfolio management, distribution of dividend and further help
the top management to develop strategy to run their business in effective way. Tesco Plc selected
for the better understanding of this concept and it was established in 1919 by John Cohen. It is
British multinational grocery retail company which serve across the world. This report include
the various topics such as different approaches used in effective decision making, analyse
management accounting principle to develop financial strategy. In addition, it includes the role
of management accountant & accounting control systems.
MAIN BODY
TASK 1
P1 Formal or informal approaches used for effective decision making in the organization
In the organization, management use the different types of approaches which impact the
business or help the top management in order to take effective decision which further helps in
achieving business goals & objectives. There are two types of approaches followed by the
manager of Tesco and it is discussed below:
Formal approach:
Structure approach: This approach used to define the hierarchy within organization, it
will include the each job, functions and whom to report regarding their work. It is totally depend
upon how business operate their internal functions. It also include the different types of structure
in the organization such as divisional, matrix, functions and geographical. Basically, divisional
structure used in those entity which have different business units, geographical structure means
organization have business operations in several location. Along with this, functional structure
based on the different jobs (Banerjee, 2015). Manager of the Tesco Plc can adopt this approach
in order to build effective strategy for the decision making process. It further help the manager to
achieve their business goals & objectives.
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System approach: In this approach, organization focus on interdependent or interactive
activities which is beneficial for the company. It includes the management practices where
internal as well as external factors affect the organization. Basically system approach used for
the evaluation of market elements which affect the productivity or profitability of the company.
So manager of Tesco Plc can adopt system approach in order to analyse the factors which affect
the business and it will further helps in building effective strategy for the decision making
process. It further helps the organization to achieve their business goals & objectives.
Process approach: This approach include the various activities which required to
perform their operational or functional activity. It is the application of system approach where
they follow the each step to complete their task in order to successful completion. With the help
of this, organization enhance their performance along with efficiency or effectiveness. It will be
done through internal or external review of their process. So manager have to analyse the factors
and then develop strategy according to it (Baños-Caballero, García-Terue and Martínez-Solano,
2014). Tesco's manager can follow this approach in order to complete their task and achieve their
goals which further helps in increasing productivity or profitability.
From the above discussion, Tesco Plc follow the hierarchical organizational structure
where it is divided into may part which helps the manager to effectively focus on each unit. It
will help the manager to measure the requirement and build strategy according to it. For
example: food trading & non food trading manager analyse all the business activities and then
generate strategy which further helps in decision making processes.
Informal approach:
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Illustration 1: Organizational structure of Tesco Plc, 2016

Relationship: In the organization, manager have to develop relationship with other
employees in order to increase their efficiency or effectiveness. It is totally depend upon the
manager that how they build their relation with their workers and what kind of leadership styles
they follow for the effective results. In the Tesco Plc, effective relation with working staff help
the manager to achieve business goals & objective through increasing employees performance.
Here, individual can share their problems with manager so they try to find effective solution in
order to enhance their efficiency which further helps in increasing productivity or profitability
(Bryce, 2017).
Unwritten rules: It includes those rules which is not written anywhere to follow it, so it
is also important for the organization to instruct about those rules and make them force to follow
it. It includes the rule regarding working time, working day, open door policy, respond of email
etc. Here, manager have to build effective relation with their employees which helps them to
share their views, opinion etc. It helps the manager to analyse these things and builds strategy for
the future and develop strategy to achieve business goals & objectives.
Above discuss approves help the Tesco plc to complete their daily basis task in order to
complete their operational activity. Manager use the formal approach to maintain their
organizational structure and informal approach in order to build relation and force then to follow
unwritten rules. It will support the manager to develop strategy and take effective or efficient
decision for the future trends.
TASK 2
P2 Key financial management principle required by the business in order to achieve long tern
sustainability with the help of financial strategy
There are various strategy which helps the organization in order to achieve their long
term goals & provide sustainability and some of it used by the manager of Tesco plc which is
disused below:
 Organization have to produce budget which help the manager to estimate their actual
income or expenses in order to complete their task in effective manner and it will
provide the long-term sustainability.
 Business have to pay off their credit card debt because interest charges will affect the
cash flow of the company (Dunham-Taylor and Pinczuk, 2014).
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 Manager of Tesco plc have to save funds for the emergency situation which provide the
long term sustainability.
 Business need to evaluate their expenses and try to maintain them low according to their
income.
 Company also have to provide proper training in order to enhance skills & competencies
which further increase the performance or productivity.
Above mentions discussion help the organization to achieve their financial goals in order
to established all the strategy. Because of that, organization set the objectives in order to achieve
financial goals.
There are various financial management principle which help the organization to manage
their finances in order to provide high efficiency as well as effectiveness. It will mentioned
below:
 Organize their finances: It is the first move to increase their wealth where manager
have to organize their finance such as credit card, bank statements, personal loan,
account balance, etc. Budget control help the organization and provide complete
solutions in order to track all the financial information.
 Spend less then income: Manager have to ensue that, employees follow the budget and
spend as per the budget. It will help the organization to manage their expenses which
increase the profit margin (Finkler, Smith and Calabrese, 2018).
 Re-investment: It is the another principle of the financial management where
organization have to build strategy that, either they use the share of profit for the
personal use or reinvest the money for the future growth.
 Training & development: Manager also required to analyse the performance of
employees for the further training & development if they required.
By using above mention principle of financial management help the Tesco Plc, in order
to manage their internal control or provide financial stability. With the help of this, manager
build strategy and take decision to achieve their business goals & objectives.
Manager have to follow all the rules and regulation of the organization in order to
perform their task ethically and achieve high productivity or profitability for the long term
sustainability. Finance manager of the Tesco plc, have to provide timely information and
disclose the potential issues in order to resolve with the help of business practices. Manager have
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to response ethically regarding any issue which occur in the organization. Along with this,
manager have to balance the employees requirement which is important to fulfil because it will
provide the motivation to complete their task and able to achieve business goals & objectives
(Karadag, 2015).
Stakeholders objectives:
Every stakeholder group have different objectives which is required to fulfil by the
manager of the company to satisfy them for the longer duration and it is discussed below:
Employees: People who work in the organization also have some objectives and it
include the management as well as subordinate of the company. These people directly influenced
with the profit margin and day to day operational activities. So manager of Tesco, need to satisfy
them through providing effective returns in terms of the attractive salary and other benefits.
Government: It is the major stakeholder of the company where they regulate the
organization as well as provide the supervisory. Here, government ensure that organization
follow all the rules & regulation in order to perform their task efficiently without any legal
barrier.
Customer: These people purchase the goods of the company for their personal interest. S
every organization do not want to loose their customer for any reason such as quality or product,
quantity or price. So manager of the Tesco, need to analyse the customer require and build
strategy in order to satisfy them (Martin, 2016) (Matthew, 2017).
Organization become confused and it will generate conflict due to different objectives of
the stakeholders. For example: customer's objective is to purchase goods at lower price,
employees want higher salary and government want tax on time by following all the regulations
and other rules.
TASK 3
P3 Role of management accountant in the organization
Management accounting techniques used by the organization in order to develop various
strategy or support in execution of business and their decision making process. This technique
include the various methods and cost control is one of them which is followed by the manager of
Tesco Plc in order to maintain their operational as well as functional activities. It help the
organization to increase their employees performance or organizational as well. With the help of
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cost control techniques manager develop the strategy for the further functioning and applied at
the time of taking effective decision. With the help of this method, organization maximise
stakeholders value which further affect the productivity or profitability.
Cost control is the management practices which help the organization to reduce their
expenses in order to increase profit margin. So business start using budgeting system that is
management accounting technique (Mien and Thao, 2015). With the help of this, manager
compare actual performance with the estimated budget. For example: Tesco obtain bids from the
vendors and in return they provide the same product in lower price. Cost control is the important
factors which affect the business in order to reduce the cost of east unit and further it increase the
profit margin.
Role of management accountant:
In the organization, management accountant plays very important role which help the
business to determine the success or status of the company. Accountant focuses on the
operational activities in order to achieve their goals & objectives. Role of management
accountant in the Tesco are discussed below:
Budgeting: Accountant have to develop budget in order to follow it and maintain their
expenses according to it. Manager of the company, estimate the income as well as expenses of
the company and then develop their strategy (Moutinho and Vargas-Sanchez, 2018). Budget help
the organization to increase their efficiency as well as effectiveness in order to achieve the goals
and maximise the profit margin.
Handling tax: This is the another role of management accountant where they handle the
tax which business have to pay annually. So firstly they have to estimate overall income after
deducting all the cost. Accountant of the Tesco Plc have to calculate tax as per the generated
profit after distributing dividend to their shareholders.
Develop strategy: One of the biggest role of the management accountant is to develop
strategy as per the available information. On the basis of daily transaction and operational
activity help the manager to produce strategy which further helps in decision making process.
After implementing strategy, organization able to achieve their business goals & objectives.
Above mention role play by the management accountant help the Tesco Plc in order to
increase their efficiency or effectiveness which further helps in enhancing employees
performance.
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P4 Evaluate the role of accounting control system
Accounting control is the process of implementing strategy in order to provide accurate
financial statement which provide the actual position of the business. This accounting control
does not compliance with the laws and regulations but organization try to comply with them. So
major concern of the organization is to ensure that company comply with accounting policies and
procedure. Along with this, accounting control system also ensure to protect the organizational
assets and produce financial report which help the stakeholders to analyse their decision for the
further investment (Renz and Herman, 2016). Before developing financial report, organization
have to detect the problem which occur in the organization and then use various methods to
resolve it.
In the organization, manager have to conduct various practices in order to detect the fraud
which affect the organization and its profit margin. With the help of internal as well as external
auditing, company analyse the fraud or error which impact the financial statement. It is very
important for the business to get unqualified opinion from the auditors because it further affect
the stakeholders of the company. If any organization get the qualified opinion which means,
there is some error in their financial statement where figures can be changed due to some
unethical practices. Auditor opinion affect the stakeholders because they have to take decision
for their investment which can affect the liquidity of the organization. Due to this reason, most of
the organization conduct the external auditing because it will provide the exact position of the
company. Most of the organization reduce their net profit in order to pay less tax, so sometimes
government suddenly conduct the audit on any organization to check their accuracy. Along with
this, stakeholders also analyse the financial report in order to measure their accurate position in
the market. Or in the future, it is beneficial or not. If organization show higher profit then
investors think about to invest but some times, accountant change the figures just to attract
stakeholder but actually they are in heavy loss.
There are various methods available which help the organization to identify the fraud and
provide effective solution in order to and it is disused below:
Deduction of fraud by tip lines: Is the most effective way to detect fraud in the
organization and it is the most common one. Here, investigation will be done independently or
directly go to the internal auditors, inspector general, legal department etc. So business have to
record each transaction carefully without any personal interest.
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External auditors: Organization conduct the the regular auditing for the efficiency of
internal control. With the help of auditors, they identify business is free from the material
misstatement or they develop something wrong such as fraud or any kind of error. It is beneficial
for the organization to invite external auditor for the audit. Because internal auditor or team
members can be base and they hide the fraud or any error which is not ethically right. It is the
way to eliminate the fraud and conduct audit program with the help of external auditors. It is the
another way to identify the fraud and then manager of the company take prevention to resolve it
with effective solutions (Salikin, Ab Wahab and Muhammad, 2014).
Fraud detect by the internal auditors: Internal auditors done the same function as
external auditor do. Internal auditors are more concern about the fraud rather than its impact on
the financial statement. They discover the few fraud in their daily routine and as per the ACFE
study, internal auditing is the second most common method to detect the frauds.
Fraud detect by the dedicated department: Most of the department detect the fraud
without any auditing program such as bank where internal security department give the alert,
customer account fraud etc. These type of department independently perform and then detect the
fraud and then control under the chief information officer.
Above mention methods will used by the organization in order to detect the fraud which
affect the organization. Manager of Tesco Plc can adopt on of the above technique to identify the
error and use appropriate solution to resolve the problem.
CONCLUSION
From the above discussion, it has been concluded that financial management help the
organization as well as manager to manage their finance by following budget. Preparing budget
is the most important role play by the management accountant. Because with the help of budget,
manager perform their activities as per the budget. Where spending amount is fixed for the each
function, or if it is exceed then it is observed that cost of the activities will exceed. So manager
have to build different strategy in order to maintain their operational as well as functional
activities. In addition, there is various methods to detect the fraud and provide suitable solution
for it.
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REFERENCES
Books & Journals
Andreou, P. C., Louca, C. and Panayides, P. M., 2014. Corporate governance, financial
management decisions and firm performance: Evidence from the maritime
industry. Transportation Research Part E: Logistics and Transportation Review. 63.
pp.59-78.
Banerjee, B., 2015. Fundamentals of financial management. PHI Learning Pvt. Ltd..
Baños-Caballero, S., García-Teruel, P. J. and Martínez-Solano, P., 2014. Working capital
management, corporate performance, and financial constraints. Journal of Business
Research. 67(3). pp.332-338.
Bryce, H. J., 2017. Financial and strategic management for nonprofit organizations. Walter de
Gruyter GmbH & Co KG.
Dunham-Taylor, J. and Pinczuk, J. Z., 2014. Financial management for nurse managers. Jones
& Bartlett Publishers.
Finkler, S. A., Smith, D. L. and Calabrese, T. D., 2018. Financial management for public,
health, and not-for-profit organizations. CQ Press.
Karadag, H., 2015. Financial management challenges in small and medium-sized enterprises: A
strategic management approach. EMAJ: Emerging Markets Journal. 5(1). pp.26-40.
Martin, L. L., 2016. Financial management for human service administrators. Waveland Press.
Matthew, B. T., 2017. Financial management in the sport industry. Routledge.
Mien, N. T. N. and Thao, T. P., 2015. Factors affecting personal financial management
behaviors: evidence from vietnam. In Proceedings of the Second Asia-Pacific
Conference on Global Business, Economics, Finance and Social Sciences
(AP15Vietnam Conference). 10-12/07/2015.
Moutinho, L. and Vargas-Sanchez, A. eds., 2018. Strategic Management in Tourism, CABI
Tourism Texts. Cabi.
Renz, D. O. and Herman, R. D. eds., 2016. The Jossey-Bass handbook of nonprofit leadership
and management. John Wiley & Sons.
Salikin, N., Ab Wahab, N. and Muhammad, I., 2014. Strengths and weaknesses among
Malaysian SMEs: Financial management perspectives. Procedia-Social and Behavioral
Sciences. 129. pp.334-340.
Online
Organizational structure of Tesco Plc. 2016. [Online]. Available Through:
<http://www.orgcharting.com/tesco-company-organisational-structure-chart-example/>
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