Discuss About The Financial Liquidity And Profitability Management

Performance indicators and Balanced Scorecard Method

Discuss About The Financial Liquidity And Profitability Management.

In the given case, Mr. Tech is a newly appointed accountant in a local retail company which sells electronic items like computers, laptops, mobile phones, tablets and other electronic items like television, cameras and home appliances. It has expanded its product line and since then it has been finding a number of complaints from the customer with respect to various issues in hand. In order to improve and raise the overall performance, the company’s CEO is considering to use a number of performance indicators to track the performance and for the same, Balanced Scorecard Method has been considered as a useful framework (Anon., 2010). It is the performance matrix used to identify and improve the internal business functions and thereby outcomes. The detailed metrics and its components are mentioned below:

Strategic Priorities	Objectives	Measures Save Time On Research and Writing Hire a Pro to Write You a 100% Plagiarism-Free Paper. Get My Paper
Financial	Being financially strong	Asset Utilization	Cash Flow
Profitability	Net Margin Increase
Reducing wastage
Increase in Sales	Product penetration
Market Penetration
Customer	Resolve customer complaints	Building win-win relationship	Improving product quality
Solving the grievances	Giving excellent warranty services
Social media management	Dedicated team for this
Internal	Operational Excellence	Inventory management	No stock out planning
Focus on online market	Timely response to mails
Delivery of right items
Training of staff	Attention to customers
Learning and Growth	Managing workforce	Better working conditions	Feasible working hours
Optimum wages
No child labour
Health and safey measures
Environmental aspect	Discharge of waste water to correct areas
Reuse of resources

The above matrix covers almost all the aspects to prosper the business and it includes all the areas which needs to be focused be it financial or customer or internal or learning and growth. The Financial growth is the most important indicator and it can be improved through sales  and cash flow and incurring less cost and using market penetration strategies. Customer base can be increased by resolving their complaints on priority, delivering quality products and on time with warranty services, internal excellence can be achieved by having better inventory management services and training of staff to deliver excellent services to customers (Bizfluent, 2017).

In the given case, the company attracts most of its customer by introducing the new styles and designs in the market and with low prices and therefore the company is always seeking to deal with the vendors who can provide quality products at low prices (Anon., 2017). SMART is one of such vendors from China who seeks to have collaboration with the company. SMART has demonstrated good electronic products and has a variety and sells well designed functions at lower prices but the company is weak in terms of meeting the social responsibilities and the obligations.

Supplier is having major problems and issues with respect to labour conditions, use of the child labor in the factories, payment of lower wages to the employees and the non safety in terms of the health hazards. The company is also contributing big time in terms of the environmental degradation as it discharges waste water in the local rivers and consumes a large amount of water and electrical energy (Alexander, 2016). It is taking no measures to improve the environmental situation despite repeated complaints from residents whose houses are flooded by dirty water. Therefore, it can be said though the products may be profitable and adding to the top line and the bottom line but the supplier’s reputation and practices are not environmental friendly and are not in line with the company’s strategic development of working for the betterment of the society. It may benefit in financial terms by working with SMART but it may also result or land the company in several civil penalties and fines due to other governance factors and defaulting in social responsibilities.

Importance of social and environmental responsibility

Post the above explanation, the CEO of the company did understand the importance of the social and environmental friendly suppliers, however, to explain the positive and negative impacts the company might have using the above products has been explained with the help of the Life Cycle Analysis. LCA is the systematic analysis and study of the product’s environmental impact during its lifetime. It includes production, use and disposal phases (Chron, 2017). It helps to understand the social and environmental implications that the product might have and it also gives the suggestions to minimize the same. It can be detrimental as well as positive which has been explained below.

The 2 stages selected here is Production phase and the disposal phase and the 4 possible social and environmental impacts are:

1. Non renewable raw materials being used which may have a serious impact on the society and their regeneration might be a cause of worry. This will away include rampant use of resources and their non sustainable use(Anon., 2012).
2. Packing of the electronic material like computer and laptops involve the use of lot of cardboard and Styrofoam which can be hazardous considering its impact on the environment.
3. When the computers and other electronic materials are being used and useful life is over, a lot of electronic waste is being generated which may be difficult to be disposed and in such a scenario, this electronic waste is a worry and causes pollution and other environmental impacts(Dichev, 2017).
4. When the goods are produced and transported to factories and warehouses, it needs to be transported thousands of kilometres and that may majorly impact the society and environment in terms of the air pollution and carbon emission it causes.

All this has a direct impact on the health of the animals and human beings as soil, water as well as air is being polluted.

Mr. Tech has decided not to pursue the business with the SMART supplier as it not socially and environmentally feasible and the company may suffer in future on account of this but the shareholders are of a different view and they are attempting to block the proposal by giving the justification that the only aim of the business is to earn profit and not dealing with SMART may be detrimental to the interests of the company. However, there have been numerous occasions in the past where the businesses have been hampered and closed or got into the legal proceedings and incurred fines and penalties due to inappropriate social and ethical behaviour (Anon., 2017).

A global brand which may be performing high on the profitability scale might not be the same in terms of sustainability and environmental contribution. Some of these include Chevron, an American giant which has been criticized big time in the recent times for its over use of the fossil fuels and the shales gas use. Being non-renewable source of energy, the gases are scarce on the planet and also lead to huge pollution and therefore the company has been rated one of the worst in terms of sustainability. Another major company is BHP Billiton which faced a fine of $ 5.2 billion on account of bursting of the dam at a mine in Brazil last year. This not only resulted in impacting the environment heavily but also killed 17 people. The disaster was due to bursting of iron ore situated in Samarco. Adani Enterprises, also faced criticism from all the corners round the world due to its plan of helping Australia become the largest coal mine (Goldmann, 2016).

The impact of technology advancement in the implementation of social and environmental responsibility

Mr. Tech does not reports on the different aspects of performance in the Annual Report to the public. However, the CEO finds that competitors do report the same regularly in their financial reports. The company Mr. Tech should report the different aspects of the performance as the decision of the investors and shareholders and all the other stakeholders are based on the different aspects and not only the profitability and the sales. The information on the product, its manufacturing, the major suppliers and all the other necessary information like the risks associated with the products should also be disclosed and reported (Messinger, et al., 2017). This will not only help the company to be best in terms of reporting practices but will help the company to outdo the competitors in terms of best practices. There is an increased focus on the corporate governance and the disclosures and notes on accounts in the financial statements showing all the relevant information, assumptions and accounting estimates so that the people or the users of the financial statements are informed.

The information that can be reported in the financial statements is the risk with the production and manufacturing of the electronic products, the social and environmental risk that it poses and the measures that the company is taking to cut off these risks or to lower the impact of this. This is in line with the corporate governance which has been emphasized in the recent times and all these details should be a part of the corporate governance report (Kewell & Linsley, 2017). The information should also be given with regards to the use of the products and its impact on the users like the warranty and guarantee, overuse, etc. since most of the products are electronic and electrical products.

References

Alexander, F., 2016. The Changing Face of Accountability. The Journal of Higher Education, 71(4), pp. 411-431.

Anon., 2010. Story of stuff project, The story of electronics. [Online]
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[Accessed 26 April 2018].

Anon., 2012. Dell 2020 Legacy of Good Plan, Dell. [Online]
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[Accessed 26 April 2018].

Anon., 2017. Dell recycling, Dell. [Online]
Available at: https://www.dell.com/learn/au/en/aucorp1/dell-environment-recycling?s=corp
[Accessed 26 April 2018].

Anon., 2017. Life cycle of a computer, University of Michigan. [Online]
Available at: https://sustainablecomputing.umich.edu/knowledge/life-cycle.php
[Accessed 26 April 2018].

Bizfluent, 2017. Advantages & Disadvantages of Internal Control. [Online]
Available at: https://bizfluent.com/info-8064250-advantages-disadvantages-internal-control.html
[Accessed 07 december 2017].

Chron, 2017. five-common-features-internal-control-system-business. [Online]
Available at: https://smallbusiness.chron.com/five-common-features-internal-control-system-business-430.html
[Accessed 07 december 2017].

Dichev, I., 2017. On the conceptual foundations of financial reporting. Accounting and Business Research, 47(6), pp. 617-632.

Goldmann, K., 2016. Financial Liquidity and Profitability Management in Practice of Polish Business. Financial Environment and Business Development, Volume 4, pp. 103-112.

Kewell, B. & Linsley, P., 2017. Risk tools and risk technologies.. The Routledge Companion to Accounting and Risk, 15.

Messinger, B. L., Rogers, D. N. & & Hawker, C. D., 2017. Use of Automation and Process Improvement to Achieve a Six Sigma Level of Nonanalytic Quality. The Journal of Applied Laboratory Medicine: An AACC Publication.

several civil penalties and fines due to other governance factors and defaulting in social responsibilities.