Analyzing Planning Tools for Management Accounting in Tesco Plc

This report delves into the realm of management accounting, exploring the application of various planning tools within the context of Tesco Plc. It examines the advantages and disadvantages of tools like flexible budgets, capital budgets, and operating budgets, evaluating their practical use and impact. The report further analyzes how organizations adapt management accounting strategies to address financial challenges, including risk management, cash flow problems, and capital management. It provides a comparative analysis of Tesco Plc and Sainsbury's, highlighting their approaches to financial issues and the use of management accounting techniques such as key performance indicators and benchmarking. Ultimately, the report assesses how planning tools are employed to resolve financial problems and improve business performance, concluding with insights into strategic decision-making for achieving higher returns. This report is a comprehensive analysis of management accounting principles and their practical application in the business world.

Management
Accounting
TASK 3 & 4

Table of Content
• Introduction
• Advantages or disadvantages of planning tools
• Use of planning tools
• How organizations adopt MAS
• Analyze how to respond financial issues
• Evaluate how planning tool helps in resolving financial issues
• Conclusion
• References

INTRODUCTION
Management accounting is the process of managing business
operations and all the activities which helps in maximising
overall productivity and performances (Banker And et.al.,
2018). It is essentially required components where managers
done strategic planning for the achievement of desired goals.
Tesco Plc selected for the better understating of management
accounting concepts.

Advantages and Disadvantages of
different planning tools
Budgetary control is described as the mechanism for
designing potential plans to increase financial results
by evaluating the company’s previous budgets.
• Flexible budget
• Capital budget
• Operating budget

Flexible budget
It is a methodology wherein budget is altered as per production
volume changes. This method is used for calculating direct costs
and cumulative expenditures in order to get an understanding of
production.
• Advantages: This tool is of benefit to Tesco Plc in establishing
cooperation within multiple departments and practices.
• Disadvantages: Too many factors at a moment which is hard for
Tesco Plc to control. It continues to evolve and causes
difficulties

Capital budget
This tool helps in preparing for their resources and long-term
investment simpler for the company (Căpușneanu And et.al.,
2020).
• Advantages: The risk involved with various
companies’ processes and strategies can be reduced with the aid
of this.
• Disadvantages: These decisions are unpredictable and
uncontrollable in long-term period.

Operating budget
It is the budget which contains all the operational costs and also the Tesco Plc
Company's operating income that will be imposed within the same period of
time for the company.
• Advantages: With the aid of this budget, the Tesco Plc can track its gross
revenue and expenditures accurately so that they might control their actual
costs along with it all, helping them to better plan and leverage the
organization's resources.
• Disadvantages: The negative effect of this strategy on the company is that it
impacts the practices in terms of effort and money because it may be prepared
by the company but it may not necessarily be expended.

Use of planning tools and their
applications
Budgetary management encourages concrete goals that will
enable the company to accomplish the most successful
corporate objective. The fiscal management mechanisms have
proved to be particularly helpful to Tesco Plc in formulating
the most effective plan that provides a direction toward
meeting its predefined goals. Tesco Plc's main resources
include adjustable schedules, running schedules etc.

Evaluate how organisations are
adapting MAS
Financial issues negatively impact the company and its mission
because it would be unable to accomplish the project
objectives. Some of the financial issues are:
• Risk management:
• Cash flow problem:
• Capital management:

Management accounting
approaches
• Key performance indicators
• Benchmarking:
• Financial governance

Comparison of Tesco Plc and Sainsbury’s
Basis Tesco Plc Sainsbury’s
Financial Issues Key issue with Tesco's money
management is inadequate. The
expenses that occur are large for
the company of which income is
being cut.
Sainsbury's is
facing risk
management issues as
well as unproductive
cash flows.
Approaches To make an obstacle less
working, it is very necessary for
the company to solve this issue.
Sainsbury's uses
benchmarking
methodology to
address the problems.
MAS They also implemented different
management accounting
strategies for handling various
problems which faced by the
Tesco.
In order to control the
business-related risk,
they should take with
account the inventory
management system.

How organizations respond financial
problems
There are many management methods such as key performance
indicator, benchmarking, and much more are used by Tesco,
Sainsbury's, and other large-scale organisations. For them,
such techniques are very useful in constructing the most
beneficial techniques so that they can survive on the sector and
deal with their competitors in an effective manner.

Evaluate how planning tools used
to resolve financial problems
Businesses use several forecasting methods, such as
flexible budgets, capital or operational schedules and many
more (Tan, 2019). Company uses this to resolve any
enforceable potential uncertainty particularly and the amount
of money needed for company activities. Management is
supposed to take actions on resources used during business in
order to achieve high business performance in the sense of
Tesco.

CONCLUSION
From the overall discussion it has been observed that
planning tools helps in controlling budget and useful in
forecasting for the future development. Operational, capital or
flexible budgets are used as effective planning tool which
further helps the managers to make strategic decisions to
achieve higher returns.

REFERENCES
Banker, R. D. And et.al., 2018. Cost management
research. Journal of Management Accounting Research, 30(3),
pp.187-209.
Bulgakova, S.V. And et.al., 2018. Management accounting in
effective structures of an organization. Research Journal of
Pharmaceutical, Biological and Chemical Sciences, 9(5),
pp.1095-1105.

Thank You