Financial Management Report: Principles for Long-Term Sustainability

This report provides a comprehensive analysis of financial management principles within the context of a business, specifically using Sainsbury's as a case study. It begins with an introduction to financial management, encompassing strategic planning, organization, and control of financial undertakings. The report then delves into formal and informal approaches to decision-making, techniques such as decision trees and Pareto analysis, and the factors influencing these decisions. Stakeholder management and the resolution of conflicting objectives, including maximizing shareholder wealth, are also examined. Furthermore, the report explores management accounting techniques in cost control, the roles of managerial accountants, and the benefits and limitations of different decision-making approaches. It emphasizes the importance of financial management principles for achieving long-term sustainability, including setting objectives, productive investments, and debt control. The report also covers the role of management accountants, accounting control systems, and techniques for fraud detection, providing a detailed overview of the financial management practices essential for business success.

FINANCIAL
MANAGEMENT

TABLE OF CONTENT
INTRODUCTION
MAIN BODY
CONCLUSION
REFERENCES

INTRODUCTION
Financial management in a business refers to
strategic planning, organization, directing &
controlling the financial undertakings of
business. The financial management also
includes application of management principles
in the business.
They also play an effective role in decision-
making and also have an effective role in fiscal
management. Present report is explained
taking Sainsbury for financial management.

FORMAL AND INFORMAL APPROACHES IN SUPPORTING
THE DECISION MAKING PROCESS.
Formal Approach
In the organizational context formal approach comprises of the
systems, structures and the processes that helps them in business
decision making.
It is an approach where the step-by-step structure is followed by the
organization for making more deliberate and thoughtful decisions
by adequately structuring the information and defining alternatives.
The formal approach is used by the organization in formalizing
relationships between the processes and staff of Sainsbury.

TECHNIQUES USED IN
DECISION-MAKING
Decision tree – It refers to business tree which is a graphical
representation of the business options available and possible
outcomes of every option. The decision tree is used as statistical
analysis.
Pareto analysis – It is technique that is used for making choice
between multiple options. In this different options are ranked on
their importance. It involves the business to take decisions
regarding the projects that is having highest ranking.

CONTRIBUTING FACTORS IN
DECISION-MAKING
Business Nature
This is an important factor to be considered by the organization before taking any
decisions. This is important for analyzing the reliability of business decisions as the
chosen decision may not bring same results for the business as compared with other.
Economic-financial factors
This includes the economic trend of the market. It involves considering inflations,
customer behavior and like factors in its decisions. Financial factors include the
resources available with the company for making decisions.

STAKEHOLDER MANAGEMENT AND MANAGEMENT OF
CONFLICTING OBJECTIVES
Stakeholder management
Stakeholders have significant influence on the success or failure of the work.
Management of stakeholders is concerned with harnessing positive influences & to
minimize effect of negative influences .
It is mainly concerned with identifying stakeholders, assessing the interests and
influence, developing communication management plan and engaging & influencing
the stakeholders.

MANAGING THE CONFLICTING
OBJECTIVES OF SHAREHOLDERS
Organizing Finance
It helps management in effectively managing the financial resources for carrying out
the operations of company. Proper organization helps company in proper allocation
of resources among different operations so that there is interruption in processes.
Maximizing shareholder's wealth
Investment are made for earning adequate returns over their funds. The stable and
good performance of Sainsbury helps in maximizing wealth of shareholders by
increasing the share prices.

MANAGEMENT ACCOUNTING
TECHNIQUES IN COST CONTROL
Role of managerial accountants
Management accountant is concerned with collection, recording & reporting
the financial information from the several units and departments of organization.
They are also required to observe & analyze the resources available with the
business for proper allocation of resources. They are required of performing several
tasks for ensuring the financial security of company considering all the risks related
to business.

BENEFITS AND LIMITATIONS OF FORMAL & IN FORMAL
APPROACHES
Formal approach helps company in organizing and collaborating the
activities carried in organization.
This approach helps Sainsbury in setting clear targets and in
coordinating the each activity of different functional as well as
hierarchical departments. Decisions are made considering all the
information and data which makes them more effective and reliable.
Limitation of formal approach is that decisions take time in
formation and implementation as defined structures is required to be
followed.

USE OF FORMAL APPROACH & INFORMAL
APPROACH FOR SUPPORTING THE DECISION-
MAKING.
The formal and informal approaches are used by Sainsbury for considering
resources that are critical in decision-making.
The approaches are used for satisfying the needs & objectives of company
by an informed decision-making process. Formal & Informal approach
builds healthy relations within organization that helps company in
effective decisions with the collaboration and acceptance from all the
departments.
This makes the managers to consider the proper terms and information and
also considering the past cases which makes the decisions more reliable.