UNIT 15 FINANCIAL MANAGEMENT Unit code M5080527 Credit

UNIT 15: FINANCIAL MANAGEMENT Unit code M/508/0527 Credit value 15

UNIT 15: FINANCIAL MANAGEMENT �Learning Outcome 3: Evaluate the role of management accountants and accounting control systems.

THE BASIC SYLLABUS � 1 Apply different approaches used to support effective decision-making. � 2 Analyse financial management principles which are used to support effective financial strategies. � 3 Evaluate the role of management accountants and accounting control systems. � 4 Evaluate ways in which financial decision-making supports sustainable performance.

LEARNING OUTCOMES LO 3: Evaluate the role of management accountants and accounting control systems M 3: Critically evaluate the role of management accountants and accounting control systems to support a culture of ethical financial management. D 3: make justified recommendations on how the role of management accountants and accounting control systems can be improved to support financial decision making in order to achieve long term financial sustainability.

OVERVIEW �The role of the management accountant is to perform a series of tasks to ensure their company’s financial security, handling essentially all financial matters and thus helping to drive the business’s overall management and strategy.

ROLE OF MANAGEMENT ACCOUNTANTS �The role of management accountant include collecting, recording and reporting financial data from several units of an organization, observe and analyze their budget and suggest their funding and allocation. This includes estimation of cost of raw material, labour, manufacturing, sales and advertising, social media networking, lobbying and company’s internal operation cost.

ROLE OF MANAGEMENT ACCOUNTANTS �A management accountant need to coordinate with all concerned departments to make an overall analysis of company’s functioning capital and availability of funds and then he or she has to report all the information to senior management and board of directors. Thus a CFO is a source of information required by directors and CEOs to take decisions.

ROLE OF MANAGEMENT ACCOUNTANTS �A management accountant’s functions are time bound since he or she has to make predictions, budgets and report within a stipulated period so that they can be implemented at the time of need. A timely forecasting is needed with taking consideration of market uncertainties. The budget need to be according to the available working capital and exposure to market risks thus a certain amount of accuracy is very necessary. Before reporting the owners, a management accountant has to ensure accuracy of all information gathered to help in correct decision making.

ROLE OF MANAGEMENT ACCOUNTANTS �A management accountant need to be aware of everything, be it political situation that affect market, inflation, other exposures in market, competition, cost of labor, raw material, internal operations, coordination among different departments within a company as well as its interaction with rest of the business world and social media. Thus, he should be master of everything. He needs to outline challenges in advance to make his organization ready for cash crunch or any other risk. He needs to inform company owners in advance so that they can take financial decisions with consideration of available funds and requirements.

ACCOUNTING CONTROL SYSTEM �Methods or procedures that form the complete internal control system of an organization. This system is concerned with: � (1) ensuring compliance with accounting policies and procedures, �(2) protecting the organization's assets, and � (3) preparing reliable and timely financial reports.

ACCOUNTING CONTROL SYSTEM

ACCOUNTING CONTROL SYSTEM �Internal controls are systems and procedures designed to ensure that all employees perform their duties ethically and honestly. Accounting controls deal specifically with the integrity of internal financial information and the accuracy of financial reports provided to outsiders. Establishing effective accounting control procedures early in your small business helps to create a culture of ethical financial management.

ACCOUNTING CONTROL SYSTEM �Control of cash is one of the most important aspects of an internal accounting control system. Allow only a few trusted employees to make cash deposits, and require these employees to make deposits as soon and as frequently as possible. Keep records of all deposits--both internally generated records and bank deposit slips--and compare them to your bank statement each month.

ACCOUNTING CONTROL SYSTEM �Hold cash in a secure location when it is on hand. Keep prepared deposits in a locked safe until the deposits are made, and secure cash registers with individual authentication so that you know who accessed which register at which times. Require approval from a select few employees for all cash disbursements, including payroll, accounts payable and refunds to customers.

ACCOUNTING CONTROL SYSTEM �Assign separate cash handling and accounting duties among various staff members, and even various departments, if possible. For example, do not allow the person who makes bank deposits to be the only one running the cash register, and do not allow the person who places supplies orders to sign off on checks to suppliers. Make sure that cash reporting responsibilities are spread out enough to prevent theft by collusion. This can be done by giving some responsibility to front-line employees, some to front-line managers, and some to upper-level managers.

ACCOUNTING CONTROL SYSTEM �Obtain third-party accounting audits, from time to time, to get an outsider's look into your financial control systems. Only work with auditors who have no material connection to your company or employees. Remember that you need auditors to discover the truth about your financial picture, even if it is bad news. Using a third-party auditor to discover financial mismanagement within your company can save you from undergoing costly litigation or financial turmoil in the future.

CULTURE �Culture illustrates the accepted norms and values and traditional behaviour of a group. One definition of culture by Deal and Kennedy is “the way a we do things around here”. However, culture also evolves over time. The culture of each country has its own beliefs, values and activities. In other words culture can be defined as an evolving set of collective beliefs, values and attitudes.

CULTURE �Culture is a key component in business and has an impact on the strategic direction of business. Culture influences management, decisions and all business functions from accounting to production. You may now be thinking predominantly about national culture but this is only one aspect, business culture is its own unique dimension that includes getting off on the right foot, meetings, negotiation, formalities, social media use, internships and work placements and other elements which are highlighted on this website.

CULTURE �Business culture is related to behaviour, ethics, etiquette and more. A business culture will encompass as organisation’s values, visions, working style, beliefs and habits. Corporate culture is the personality of the organization: the shared beliefs, values and behaviours of the group. It is symbolic, holistic, and unifying, stable, and difficult to change. �Made up of both the visible and invisible, conscious and unconscious learnings and artefacts of a group the culture is the shared mental model. This model is taken for granted by those within the group and is difficult for outsiders to decipher.

CULTURE �It is important to remember that the corporate culture is not the ideals, vision, and mission laid out in the corporate marketing materials. Rather, it is expressed in the day-to-day practices, communications, and beliefs. According to Borgatti (1996) a strong culture: � Is internally consistent � Is widely shared, and � Makes it clear what appropriate behaviour is. �Resulting in an organization with a vision that everyone understands to which everyone is committed.

ETHICAL FINANCIAL MANAGEMENT �In today's modern world of business, individuals in management accounting and financial management constantly face ethical dilemmas. For example, if the accountant's immediate superior instructs the accountant to record the physical inventory at its original costs when it is obvious that the inventory has a reduced value due to obsolescence, what should the accountant do?

ETHICAL FINANCIAL MANAGEMENT �Ethics, in its broader sense, deals with human conduct in relation to what is morally good and bad, right and wrong. To determine whether a decision is good or bad, the decision maker must compare his/her options with some standard of perfection. This standard of perfection is not a statement of static position but requires the decision maker to assess the situation and the values of the parties affected by the decision.

ETHICAL FINANCIAL MANAGEMENT �The decision maker must then estimate the outcome of the decision and be responsible for its results. Two good questions to ask when faced with an ethical dilemma are, "Will my actions be fair and just to all parties affected? " and "Would I be pleased to have my closest friends learn of my actions? "

ETHICAL FINANCIAL MANAGEMENT �Practitioners of management accounting and financial management have an obligation to the public, their profession, the organization they serve, and themselves, to maintain the highest standards of ethical conduct. In recognition of this obligation, the Institute of Management Accountants has promulgated the following standards of ethical conduct for practitioners of management accounting and financial management.

ETHICAL FINANCIAL MANAGEMENT �Adherence to these standards, both domestically and internationally, is integral to achieving the Objectives of Management Accounting. Practitioners of management accounting and financial management shall not commit acts contrary to these standards nor shall they condone the commission of such acts by others within their organizations.

ETHICAL FINANCIAL MANAGEMENT �Financial Manager shall recognize that Financial Managers hold an important and elevated role in corporate governance. They are uniquely capable and empowered to ensure that the Corporation’s, its stockholders’ and other stakeholders’ interests are appropriately balanced, protected and preserved. Accordingly, this Code provides principles to which Financial �Managers are expected to adhere and advocate. The Code embodies rules regarding individual and peer responsibilities, as well as responsibilities to the Corporation, the stockholders, other stakeholders and the public

REFERENCES � CMA Intensive Program at Mercu Buana University Jakarta, o. , CMA Preparatory Program, S. , 1 st CMA Preparatory Program in Abu Dhabi, U. , CFO Forum, I. , 5 th CMA Preparatory Program, C. , 23 rd CMA Preparatory Program, U. and 5 th CMA Preparatory Program, C. (2018). Management Accounting: Roles and Challenges ahead – On Target. [online] Cmawebline. org. Available at: https: //www. cmawebline. org/ontarget/management-accounting-roles-andchallenges-ahead/ [Accessed 25 Mar. 2018]. � All Business Schools. (2018). What is the Role of the Management Accountant? | All Business Schools. [online] Available at: https: //www. allbusinessschools. com/accounting/common-questions/role-ofthe-management-accountant/ [Accessed 25 Mar. 2018].

REFERENCES �Business. Dictionary. com. (2018). What is accounting control system? definition and meaning. [online] Available at: http: //www. businessdictionary. com/definition/accounting-controlsystem. html [Accessed 25 Mar. 2018]. �Smallbusiness. chron. com. (2018). Accounting Control Procedures. [online] Available at: http: //smallbusiness. chron. com/accounting-controlprocedures-3938. html [Accessed 25 Mar. 2018]. � Bragg, S. (2015). Accounting Controls Guidebook. 3 rd ed. Colorado: Accounting Tools Inc. � Business Culture. (2018). Business Culture. [online] Available at: http: //businessculture. org/business-culture/ [Accessed 25 Mar. 2018].

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