Accounting in the Profession for Retail Industry- myassignmenthelp

Question: Discuss about theAccounting in the Profession for Retail Industry. Answer: Introduction In Australia, there are almost 140000 players in retail industry. The retail industry is full of competitive challenges. The challenge of online retailing is the latest one. The growth of retail business in Australia is dependent upon the growth of the economy. Retailers are required to operate under various regulatory constraints so these constraints limit the ability of retailers to innovate and achieve competitive advantage. As per the estimation of Australian competition and consumer commission, the online retail business owes 6% of Australian retail industry. The retail companies operate in a broad environment. The macro environment includes the technological, economic, political and social influence on the retail business and a retail company is required to expand these influences to compete within the retail industry. The policies of government increase the cost for retailers. Woolworths limited and Wesfarmers limited are the major players of Australian retail industry. There are a number of challenges that are being faced by the retail industry. Corporate governance is the rules and processes by which the company is being carried on. The challenges include brand reputation, corporate governance, globalization, and customer relationship management, and risk management, effectiveness of market, technological changes, value creation, corporate social responsibility and supply chain management. Retail industry is facing the issue of auditing. The retail companies are facing strong competition so the companies are required to control the cost of production and the existing auditing practices are becoming outdated. The companies dealing in retail industry are required to update the auditing practices with the changes in the competition of retail industry. The retail industry is also facing the economic challenge. Retail industry is being affected by the economic changes. For example: if the economy is developing then it will increase the purchasing power of t he people and ultimately the retail industry of the economy grows. Technology is another issue faced by retail industry. The companies operating in retail industry are required to be updated as per the technology. The accounting records of the retail business are to be maintained electronically so the companies are required to use latest software and systems to make the accounting records more accurate and reliable. The retail industry involves many distribution channels which can be a big issue. The increase in the number of distribution channels will ultimately increase the cost of a product and hence, either increases the selling price or reduces the profit margin. Every intermediary will add his share of commission to the cost of the product. But if the retail businesses are planning to achieve competitive advantage then the companies are required to minimize the selling price which can only be done by minimizing the cost of production. Achieving the brand image is easier than m aintaining such brand image. Woolworths and Wesfarmers have already achieved a brand image and are considered as a leader of retail industry. Now, the challenge in front of both the companies is to maintain that position of major players of retail industry (Sewell, et al., 2017). Responses to the Case Questions Delaying Suppliers payment: Cash flow position of a company is linked with the time between when the debtors pay to company and when the company is paying to creditors. As a Chief financial officer, I will prefer to delay the payment to supplier if there is a delay on the part of customers. The CFO of a company is responsible to make a balance between the time taken by the company to pay to its suppliers and the time taken to be paid by the customers. If the supplier already given a time like 30 days period then as a CFO, I will not prefer to prepay the supplier (Price,2016). When the customers are delaying in the payment then in such case the company is required to delay the payment to suppliers. This can be done on the part of the company to shorten the time period between when the company have to pay its sues and when the customers are paying to the company. By the delay of payment, the company is also able to earn interest on such payment. The CFOs main task is the movement of ca sh. The CFO can only release payment when it will receive payment from customers. The companies are not having enough cash that they will make payment to the suppliers even when the customers are delaying the payment. This will mismanage the cash flow of the company. Integrated reporting: Integrated reporting means integrating the organizational planning, strategy and resources for the creation of value for a long period of time. Integrated reporting is used to achieve the vision of the company. Integrated reporting affects the performance system as IR helps the organization in developing a structure which is dynamic and can change as per the changes in external environment. IR integrates the resources of the organization with the objectives and hence affects the performance system. Integration reporting is concerned with the performance of the company and remuneration is linked with the performance of the people working within the company (Bandara, et al., 2017). Some of the employ ees show their performance on the basis of remuneration given to them. Integrated reporting changes the remuneration design in order to achieve superior performance.At risk component: At risk component is that part of remuneration which is variable or which is at the risk of not being paid by the company. At risk component is that portion of the remuneration which can be paid on certain conditions related to employment. At risk component is a larger component of total remuneration because in case of Woolworths, the fixed pay of CEO is only 44% and long-term and short-term incentive pay is 56%. In this way, at risk component is more than fixed pay. Short term incentive pay can be paid as a bonus and long-term incentive pay can be paid by the issuing of shares. Like this both the incentives are based on certain employment conditions. This is the reason that at risk component is a critical part of total remuneration of CEO and senior management. Any person who is having some interest i n the company is known as the stakeholder of the company. Stakeholders: Stakeholders are the people either within the company or outside the company connected with the operations of the company. Stakeholders are the people who are responsible for the achievement of the overall objective of the company. There are two types of stakeholders i.e. internal stakeholders and external stakeholders. Both the stakeholders affect the company because the company is totally dependent upon these stakeholders. Internal stakeholders are the people who are having direct link with the company and the external stakeholders are the people who are not directly linked with the company but these people affect the company. The internal stakeholders of large supermarket company include employees, managers, directors, adjudicators, etc. These stakeholders work within the organization. The external stakeholders include shareholders, investors, creditors, suppliers, government, customers, auditors, competitors , wholesalers and retailers (White, et al., 2017). These are the people who work outside the organization but have a significant effect on the company. Aim of Wesfarmers to sustain rather than making profit: The target of Wesfarmers is to achieve sustainability for long term rather than making profit in short term. The short-term profit always shows unethical or illegal working of a company because a company is not able to earn profit in a short run by ethical principles. The culture of Wesfarmers is to grow and sustain for a long period of time. Wesfarmers is not merely focusing on making profit. When a company is running with the objective of making profit only then it takes the company towards unethical activities because the company is planning to earn money. Wesfarmers is one of the largest retailing company of Australia and the company has achieved this brand image with the help of its ethical culture (Simes and Sebastiani, 2017). The aim of profit cannot take the company towards long run sustainability because the company will reduce the quality of product to gain profit and quality is an important component of sustainability . Product mix decision: It is the responsibility of the accountant to take decisions regarding the buying of stock based on the risk attached with a particular share. The decision related to the purchase of shares should be made according to the risk bearing capacity and the price fluctuations of shares. Customers demand is not a perspective related to the purchase of shares. The accountant is required to prepare a product mix based on the rebate attached to the shares. The performance of the company is attached with the changes in the prices of shares and the rebate linked with the shares. The investment made by the company in the acquisition of stock will affect the overall performance of the company. So, the company is required to make decision as per its purchasing power not as per the demand of consumers. Before making decision about the purchase of shares, the management is required to consider its purchasing power parity and the risk associated with each share. The management sh ould not rely on a single share instead of relying on single share; the management is advised to prepare a product mix of stock. The product mix decision will help the company to bear the loss in one stock by the gain of other stock. Ethical organization: An organization is said to be ethical if it relies on both financial and non-financial measures. The non-financial measures are equally important for the companies. Financial measures only determine the performance of accounting records but non-financial measures cover the performance of all the other aspects of the company (Delgado-Tllez, et al., 2017). Non-financial measures include quality check, employee satisfaction, customer service and public relations. Suitable measure to determine performance: TSR stands for total shareholders return. This measure only measures the performance of the shares of the company. Total shareholders return determines a difference between the increase in the prices of shares and the dividend paid to shareholders to find out the total return to the shareholders.TSR measure is not suitable for the measurement of overall performance of the company because this measure only focuses on the performance of the company based on the prices of shares but this method will not consider all the other factors which contributes towards the performance of the company. As a CFO of a company, I will prefer a balanced set of measure which will consider all the factors and measures the performance of the company in a balanced manner. If I was a junior accounting officer rather than CFO then also the decision will be same. Because as a junior accountant, I was also contributing towards the performance of the company and if the company will use a measure which is only considering the return to shareholders then that will be unfavorable to all the other stakeholders of the company. Is ethical decision differing from audit: The ethical behavior of a company is very significant for dealing with their stakeholders. If the company involve in the unethical behavior then it will force the government to interfere in the operations of the company. The companies which are operating legally always rely on ethical decision-making. Ethical decision-making helps in making the audit process easier. The internal as well as external audit is performed to identify whether any mis happening taking place in the company is. To avoid the chances of fraud and misstatement in the financial records, every company is suggested to make the decisions ethically (Tan, et al., 2016). The auditors sometimes rely on the statements given by the managers and employees. In this situation, the audit and the ethical decisions differ. How Balance scorecard framework leads to resolving ethical and sustainability issues: Balance scorecard is a performance measurement tool which helps the organization to improve the performance of various functions within the organization. Balance scorecard determines the actual situation of the company and provides guidelines for further improvement. Balance scorecard is classified into four areas. Balance scorecard determines the performance of the company by considering four major perspectives (Maniora, 2017).This is the reason that this measure is known as balance measure because it takes into account all the material components of the company. The four perspectives include customer perspective, internal process perspective, learning and growth perspective and financial perspective. The components related with customer perspective include time, cost, service and quality. The company is required to serve its customers with a quality product and the price should be reasonable, time ly delivery and smooth service of such product to the customer which includes after sale service also. Internal process perspective majorly covers the whole internal organization. It includes human resources, production, structure of the organization etc. Learning and growth perspective focuses on the learning, turnover and job satisfaction of employees. This perspective is basically related with employees. Financial perspective is linked with the cash flow statement, profit and loss account, and return on investment and return on capital employed. Balance scorecard is used by the companies to achieve sustainability. Sustainability can be achieved if the organization focuses on the overall improvement of the company. With the help of balanced scorecard, a company can be in touch with every department. A company cannot achieve sustainability be focusing on the performance of one or two department rather the company is required to improve all the departments (Campbell and Price, 2016) . Balance scorecard is the one and only measure which is focusing four perspectives together. In this way, balanced scorecard eliminates the issue of sustainability form the company. Balanced scorecard not only focuses on enhancing the performance of the company but it also focuses on the ethical issues of the company. Balanced scorecard suggests the company to adopt corporate social responsibility within its culture. Corporate social responsibility means the company is required to take care of the people living in the society because these people are the customers and ultimately reason behind the profit of the organization. If the organization will follow the policy of corporate social responsibility then it helps the company to avoid the ethical issues. This is how; balanced scorecard helps the company in removing sustainability and ethical constraints. Conclusion After proper analyzing the case, some solutions are derived for the various issues faced by the companies dealing in retail business. The retailers are facing the issue of how they can achieve competitive advantage. The retailer can achieve the competitive advantage by reducing the cost of production. The competition in the retail industry is high and one can differentiate itself by providing goods at reasonable cost. For the issue of lag in suppliers payment then in such situation the company is advised to delay the payment but only to maintain the balance between the time when the company should pay and the time when the company is being paid off. For another issue of performance measurement tool, the company should use a tool which will measure the overall performance of the company. Balanced scorecard is recommended to the company because this will measure the performance by considering four perspectives of the company and it will also help to resolve the issue of sustainability and ethics. For the declining performance issue, the management of the company is suggested to design a product mix as per the rebate on each stock rather than considering the demand of consumers. The companies can tackle with the issue of delaying the payment of suppliers by pre-deciding a specified time which can be of 30 days or 45 days within which the company will receive the payment from its customers and transfer such money to its suppliers to avoid any legal action by ACCC (de Villiers and Sharma, 2017).For the issue of ethical operating of the companies, the companies are suggested to focus on non-financial measures rather than financial measures because the non-financial measures will determine the customer relationship management and supply chain management. Customer relationship management involves the dealing of the business with its customers. These both are the critical aspects of retail industry and if the company can improve the performance of these two aspects then it will take the company towards long-term sustainability. 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