Delivery in day(s): 5
Unit 14 Managing Financial Resources in HSC Assignment
Finance or liquid funds are just like the blood for the business as without finance they not able to run the business activities as there are lot many routinely expenditures that requires liquid funds to get executed. Whether the business is related to any product or it is related to the Health and social care. There are some different or special sources from where these HSC homes get funds. They also manage their funds in order to support their activities and functioning. Different factors related to managing finance get discussed in the below report.
1.1 Systems used to manage financial resources in health and social care.
Principles of costing
- Cost is related to its cause- Every cost which is incurred is related to a cause. Therefore, there exists a cause relationship. The cost incurred for a cause must be added up in that item only for which the cost is incurred.
- Abnormal costs are charged in costing-Abnormal cost is basically the cost which occurs due to any fire, riot, theft, negligence etc. therefore this kind of cost must not be included in the direct costing of item and also this cost has no direct relationship with the costing of the product (Macinati & Anessi-Pessina, 2014).
- Cost is charged after it is incurred-A cost must only be added up in the item after it has been incurred otherwise it will mislead the costing of product.
- For e.g. if any fire occurs at the go-down than the cost of loss due to fire will be added up in the rest of the items that have manufactured and not with those item who are not yet manufactured (Macinati & Anessi-Pessina, 2014).
- Past costs are not taken into consideration to future costs- Past costing should never be included in the future manufacturing as it will mislead the costing of the product and will not depict the true cost of the product.
- Exception to this point is the advertisement and promotion costing, which is considered as deferred revenue expense and it distributed in a particular span of time.
Business Control System
The procurement procedure refers to a mechanism through which an owner or buyer purchases some sort of product through a systematic way which including searching of supplier and bidding or auctioning for acquiring that product as well (Macinati & Anessi-Pessina, 2014).
The process includes the following steps-
- Evaluating the need of the business
- Searching for the supplier
- Fixation of the price of the product (it can be through bidding or auctioning)
- Closing the deal
Management Control System
It is basically a control system through which the management controls the organizational precious resources in order to fulfil the organizational goals and objectives (Scheil?Adlung & Bonan, 2013). Resources such as human resource, physical, financial resourceand etc. are required to be controlled with the aid of various management tools to achieve the goals as planned by the organization.
Various methods which are used as tools for the Management Control System are
- Performance planning of the employees of the organization
- Raw materials Allocation
Calculation of the cost of one resident per month
Average variable cost = £1,200/month
Fixed cost =£900,000/year
Number of beds =65
Solution- Fixed cost per month = £900,000/ 12
Average cost per month =£1200
Total Cost = Fixed cost per month + Average cost per month
= £75000 + £1200
Average cost = £76200/65
=£1172.31 (Scheil?Adlung & Bonan, 2013)
1.2 Costing of a Residential Home
The various types of cost that a residential home has to incurred can be classified into the following cost such as
Direct cost- Direct cost is the cost which can be directly can be associated with the product or service. In the current scenario, the following are the direct cost of the Residential home-
- Direct cost of the bed of an elder individual
- Direct cost of the food and refreshment of an elder individual
- Medicines and medical equipment cost of an elder individual(Scheil?Adlung & Bonan, 2013)
Indirect Cost- Indirect cost is that cost which cannot be associated directly with a particular product or a service; rather it is apportioned on all the units of the products manufactured.
- For e.g.- the fixed cost of the organization such as electricity bill, water bill
- Salaries of the consultants and nurses or care takers
Variable Cost-Variable refers to the cost which varies each year and constantly changes.
Fixed cost- Fixed cost refers to the cost that remains fixed irrespective of the number of items manufactured (Kastberg, et. al., 2013). Such as-
- Salaries of the nurses and care takers
- Electricity bills.
1.3 Principles of Generally Accepted Accounting Principles (GAAP)
Generally Accepted Accounting Principles generally known as GAAP are basically the common principles of accounting or standards practiced by the Companies/ Organizations while preparing their Financial/ Accounting Reports for any financial year.
The most common GAAP principles are as follows-
- Monetary unit assumption
- Going Concern Principle
- Matching principle
- Full Disclosure Principle (Kastberg, et. al., 2013)
Accounting Principles that are used by the various Health and Social Care Organizations-
- Setting of standards for the quality services
- Transparency in the Accounting work
1.4 Evaluation of various Software and tools –
Open Accounts- this is basically software which is used in the Accounting system and it includes all the finance functions of the whole enterprise. It is best suited from medium to large sized Enterprises.
The main features of the software are
- It accepts various currencies and also understands various languages
- Flexible charts are very convenient even for non- finance users (Kantola, 2014).
Cool Care- This is basically software for the care management. It has number of programmes and facilitates number of services for the better care management. This is maintained by the specialist programmers and advisors. It has quite popularity in UK. It is complete package of data base management system which include storage of data, data retrieval using data mining approach with its main focus on the use of health care information (Kantola, 2014).
- Availability of health related data at one place
- Helpful in creating complete track records of individuals regarding their health and medical history, their prescriptions, record of life and health insurance.
Care Sys- this is software for the management and care services for the residents of a home. This provides fully integrated solution for the problem of the caring. This can be simply used through the mobile with the help of any internet browser (Kantola, 2014).
Role of planning in the management of health and social care budgets.
Funds are an integral part for the establishment of a new Health and Care home. Therefore the need to analyse the various sources of fund is discussed below.
2.1 Different sources of Funds Available-
- The first and foremost thing to be considered before heading for different sources of fund is to make an estimate of the requirement of the fund for the completion of the project.
- The most common method for collecting fund for a residential home is through local and federal agencies of the state which work for providing funds to the Residential homes for the Elderly people (Ozyapici & Tanis, 2016).
- UK Department of Health and Human Services administration is the primary organization for funding the Residential Care home. An application needs to be written to the department and benefits of various grants of their services can be availed.
2.2 Factors that affects the finance availability for Residential Care taker
There are various factors that affect the finance procurement and finance availability for a Residential home for elderly persons.
- Government spending- this procedure refers to the funds released by the government for the betterment of the health and Social care in the state. This spending of the government is highly depended on the Government revenues and expenditure and thereby, it is fluctuates every year (Zelman, et. al., 2014).
- Fiscal policy- this policy of the government refers and guides for the allocation of the state’s revenue for incurring various expenditure for the betterment and development of the state.
- Social deprivation index- Deprivation refers to a term which is used for describing the situation of persons who are deprived from access to certain social activities. This is a quite broad term (Zelman, et. al., 2014).
Social Deprivation Index refers to the analyses of that social group who are unable to access certain social activities in the society. The reason behind could be poor financial position or disabilities in any form etc.
The major deprived area of UK which are attracting major portion of the Government findings are as follows
- Tendering -around St Osyth and Seawick
- Blackpool -By Central Pier
- Blackpool -Around the promenade near North Pier
- Thanet -Cliftonville West
- Blackpool - Near the South Pier
- Private finance- Besides depending on the government there are other various private sources of funds which can be applied for funding the Residential Home Care (Bracci & Llewellyn, 2012).
The various sources of findings are as follows-
Donations through various Businessmen- Various businessmen can fund to the social cause which are in contact of the owner of the Residential home care.
Acquirement of fund through Agent- mostly states have few agents who in lieu of certain commission helps in acquiring funds for the Non- profit organizations (Bracci & Llewellyn, 2012).
2.3 Different types of Budgets relevant for Residential Care Home-
The various types of budgets which can applied for the expenditure of a Residential Care Home are as follows-
- Cost Centre- Cost centre refers to those departments of the organizations which exists for improving the overall efficiency of the products of the organization. Therefore they directly do not contribute to the revenues of the firm but helps in improving the revenue of the organization. For e.g. Research and Development.
On the other hand, Profit centre refers to the centre which directly helps in contributing the revenues of the organization. For e.g. the manufacturing department (Berger, 2014).
- Project Management Budgets- Project management refers to the set of activities for a group of persons for achieving the specified goal with the help of allocated goal. The budget of the project management includes three main components as follows-
- The base cost estimate- this basically refers to the cost estimation of different expenditure
- ?Contingency- this refers to the allocation of amount for any identified risks (Berger, 2014).
- Management reserve- this reserve is made for happening of any uncertain event. Management reserve has to be made in accordance with the risk factor. The more risk means a higher amount of reserve.
- Outsourcing- Outsourcing refers to the business process/ work or contract done through outside agency. In the context of public services, it means to hand over the control of the organization to any other profit organization.
Functions which can be outsourced
Training of the nurses and consultants can be done through panel of medical experts. This process will reduce cost of the organization.
Health specialist professional are available, these are helpful in reducing the overall cost of the organization (Berger, 2014).
- Associated Cost of Outsourcing- the cost of outsourcing in our health care organisation will be organising the outsourced activity to bring uniformity in activities. Various activities which are outsourced to the external parties are collided. This involves the human resource to maintain the effective communication with the external parties to check whether the job is done or not according to the desired level (Berger, 2014). Additional training cost to the team which is doing the outsourced work. To get the work up to the desired satisfaction external workforce is to be trained accordingly which is a related cost to outsourcing
- Advantages of outsourcing - professional Consultant- through outsourcing, knowledge of the consultant increased and increases in the advance knowledge regarding the health care. Reduces Cost- with the aid of outsourcing, the cost of the consultants and health care experts reduces to great extent, the training cost comes down which ultimately helps in increasing the revenues of the organization (Brock, et. al., 2012).
2.4 Decisions regarding Expenditure in a Residential Home Care
The Various expenditure of a Residential Home Care is the cost of bed, cost of food and medicines, cost of medical experts and care takers. Expenditures in the various aspects has to be carefully examined and analysed, in order to make proper utilization of funds available for the Organization.
Proper allocations of the fund in the order of the priority- the funds must be carefully appropriated and proper look at various aspects such as important things must be funded more amount such as medicines and medical consultant must be given more fund etc (Brock, et. al., 2012). Reduction of cost- As far as possible the cost must be reduced and therefore the expenditure must be curbed.
(LO3.1)Your friend is worried about what might happen if her income falls below her home’s expenditure levels so you provide her with some advice by:
3.1 Prepare a cash budget
Budget:A report that get prepared in order to manage the funds and also helps in making estimations and forecasting the procedure of activities as well as requirements of the funds and resources. It is an effective evaluation tool helps in evaluating the overall performance of the organisation as they attain their desired results or not (Davies, et. al., 2013).
Importance of budget: -
- It helps in managing the unwanted expenditure as well as lead towards saving the funds.
- It helps in preparing for the emergency situations
- It get focused over the forecasting and estimating the requirements
- It helps in reducing the debt troubles.
- It makes in-depth understanding over the usage of the finance.
- It helps in evaluating and measuring the overall performance by comparing the actual results and budget results.
- It provide adequate set path in order to process the activities that helps in attaining the set desired results.
- It helps in getting control over the liquid funds
- It make effective monitoring over their liquid funds.
- It helps in organising or managing expenditure and savings
- It get prepared for the expected as well as unexpected expenditures.
- It build adequate level of communication among the departments over the usage of the monetary funds (Davies, et. al., 2013).
- It helps in preparing for the upcoming adverse events or risks.
- It helps in determining the requirement of the debt or finance in the near future and helps in getting adequate set of money from the market.
- It helps in maintaining adequate balance between the income and expenditure.
Cash Budget for three months ending Dec 2016
Opening cash balance
(i) Cash inflows
Government grants and allocations
Self generated income
(a) Total cash inflows plus opening cash balance
(i) Cash outflows
Bank loan repayment
Semi annual insurance
(b) Total cash outflows
(a) -(b) Closing cash balance
(Davies, et. al., 2013)
Credit purchase will not be considered for the above cash budget as it will not affect the cash position of the business
Cash budget helps in making the forecast of the upcoming cash requirement in the health care organisation to maintain the adequate liquidity position in the business.
- Helps to know the requirement of cash & adequate treatment of excess funds–Both shortage and excess funds can put a negative impact on the organisational viability. Cash budget helps in forecasting the short term and long term requirement of a health care organisation and a excess funds need to be parked adequately and in a appropriate manner (Toffoli, et. al., 2011).
- Creates responsiveness- Managers of health care home while looking over the cash budget statement can set a goal and targets and it creates responsibility of the management leaders to put the step accordingly like how to manage liquidity position, how to meet the working capital requirements, what will be the sources to attain funds example whether it should strive for attaining government grants or self sourced funds.
- Tool for comparison -It is an important tool to compare the actual cash budget statement with the actual performance. This helps to find the deviation and if deviations are widely adverse then measures or steps are taken accordingly (Toffoli, et. al., 2011).
- Correction and revision of future plan- When there is indication of deviation in the performance the existing policies are need to be changed as in our case cash budget of the three months ending Dec 2016 indicates there is continuous increase of buffer cash in our health care home. Therefore it is widely needed to park the excess funds generated in suitable investments.
3.2 Explain what she can do if she suspects fraud.
Fraud and intentional errors are the major problem of the non profit organisation where huge government money is infused through government grants and public donation. In our case of health care homes there is a regular inflow of money through various above discussed sources and generally the expenses are not segmented or directed towards a particular goal. So there always exists a vulnerability of threat of leakage of incomes of the health care homes. If she founds frauds in the health care organisation the following major steps to be taken in the following manner (Sorensen & Iedema, 2010).
- Create investigation and find the persons behind the frauds in the organisation
- Don’t overreact to the frauds by instant firing of employees, get the things to sort down first take the proper time and follow a proper organisation chain. Instant overreacting some time harm more than what frauds did to the organisation
- Do not set aside the fraud in normal way even under reacting will harm to the organisation as employees who are responsible for fraud become more lenient in giving further loss to the organisations by frauds and error (Sorensen & Iedema, 2010).
- Take action against the faulty and set example- Employees can be warned for the issues dealing with frauds and if it is a serious issue strict actions of rusticating of the faulty employees. This will not only teach him a lesson but also set an example for the other employees of organisation to restrain them from involving themselves in any of such fraudulent activity.
- Set the manuals of do’s and don’ts which is developed after experiencing the occurrence of frauds in the health care organisation which in turn helps the organisation in setting up the guidelines for future control
3.3 Suggesting and evaluating some methods/systems she can use to monitor and control her budgets
The methods and tools she can use in the heath care home to overcame the possibilities of over budget and under budget scenarios
-By investigative detail plan formulation
By making an effective and efficient budgetary plan it helps in deciding in advance the financial activities of the business. It further prepares the managers of the health care home for the contingencies when all the future possibilities are covered up in the budgets (Ifanti, et. al., 2013).
-By making an environment of effective coordination in organisation
A comprehensive system of an effective coordination should be created between various functional departments so that there is no mismanagement in the functioning of the organisation. For example there should be coordination between kitchen department and inventory purchase department such that there is no excess and shortage in purchase of the inventory
-Motivation of employees in the budget formulation activities
Budget created the set target for the organisation which motivated the employees to perform accordingly. This motivation totally depends on how far the employees are involved at the time of setting up the feasible targets or budgets (Ifanti, et. al., 2013).
-By getting the person responsible for the budget execution participate in the budget formulation
-By getting the budget approved from various departments
Total employee involvement is the main focus while doing the budget preparation activity, such that it is prepared after taking into consideration the concerns or issues of various departments of the health care home (Ifanti, et. al., 2013).
-Making cuts and adjustments in the existing formulated budgets
4.1 Information needed to make decisions about the level of service she will offer to service users and funding organisations.
Management accounting is used to make a better understanding of the managerial aspect of organisational accounting. The motto of such accounting is redesigning the existing framework of the organisation that helps in plan and policy formulation for the future projections in an effective and efficient manner (Carruth & Carruth, 2010).
In our organisation the management accounting principles are used to develop the ability to execute the polices formulated in plans, for instance for a decision taken on outsourcing the irrelevant activities of health care organisation can be checked using management accounting characteristics of cause and effect analysis
Current and projected demand of the services-
Before initiating a business, the careful consideration regarding the demand and requisite in the market regarding the health and services must be analysed so as to keep pace with the, market requirement.
The health care services are basically the necessity of the masses and importance of Health Care Organizations cannot be neglected therefore generally these are the demand of the Health Care can never be diminished or reduced (Carruth & Carruth, 2010).
Forecasting of the demand of the Health Care Services requires analysing of the following situations-
- Figuring of the number of the elders in the society
- Number of the health Care Centres in the organizations.
- Standard Budget- this budget refers to the standard estimate of the expenditures and revenues for a year, these are set by the Organization (Carruth & Carruth, 2010).
- Actual Budget- this is the actual occurrence of the figures of revenue and expenditure.
The careful analysis of the actual budget with the standard budget must be taken place to control the excessive expenditure.
- Role of Regulator
Various standards are set by the regulator for the control of the expenditure and revenues in a Health and social care. these must be strictly adhere to (Carruth & Carruth, 2010).
4.2 Analyse the relationship between the level of service she will offer, her costs and her expenditure.
Level of service provided by the health care homes while making its cost expense analysis will cover various factors which are to be taken into consideration while determining its effectiveness. Some of these factors are listed below-
- Creation of adequate transparency with the stakeholders of the organisation- This helps to create trust in polices of the organisation among its stakeholders. Further it also covers the legal regulations and requirement of the law of the land.
- Setting accountability– It creates responsibility accounting of the managers who are responsible for maintaining the service quality in its adequate cost. As with great authority comes the great responsibility, it motivates the managers by making them accountable for every response that makes them perform accordingly (Laux & Leuz, 2010).
- Creating cost benefit analysis-To put over check and regulation over the expenditure of the health care homes it can be done by analysing the tool of the cost benefit analysis in the organisation. It helps in analysing various possible alternatives by comparing the cost and benefits associated with it. It further puts a check over financial feasibility of the organisation that whether it is feasible to infuse the fund in an alternative by checking over the availability and sources of funds (Bedos, et. al., 2014).
- Pricing policies – As in our case of health care homes pricing policies are carefully decide while looking the objective of the organisation which is major factor in determining its prices of services to old age people. As the objective and type of organisation is non profit organisation generating profits is not the sole motto of the organisation, generally prices covers the cost of organisation and without or with small margin added to the cost (Bedos, et. al., 2014).
4.3 Evaluate how financial considerations will have an effect on the individuals in your friend’s residential home.
“Financial management may be defined as that area or set of administrative function in an organization which relate with arrangement of cash and credit so that organization may have the means to carry out its objective as satisfactorily as possible."
Some examples of financial consideration or inclusions in health care sector
- Finding out need and requirement of capital expenditure
- Service quality and measures- the quality of the services such as services of carers, nurses and expert consultant etc. must be provided as according to the financial receipt from the patients (Leung, 2016).
- Reviewing of the budgets of the health care- by making changes in the existing cost budgets, according to benefits and fulfilment of the needs of the users of health and safety homes. For example- increasing cost budget for the medicines while decreasing some part of advertisement cost will improve the overall quality in fulfilling the basic objective of Health care.
- Staffing of requisite team- health care organization needs the appropriate team and staff for management of the health care requisites of the patients of these Organizations.
- Reduction in irrelevant services- various irrelevant services of the Health care organization such as paying high salary to, advertisement department which is not necessarily required by the organization. Such activities must be eliminated; a focus must be on the prior activities (Leung, 2016).
4.4 Suggest ways in which your friend might be able to improve the service she will offer through better financial systems and processes.
Financial processes or systems in health care
Example in current organisational structure
Reassessment of expenditure
As health care organisation generally make adjustments in budgets for the future forecasting to make the correct analysis of the organisation picture all expenses must be justified for the new period. Expenses budgets should be created after seeing the fact that what expense is relevant for the upcoming period
In or case of heath care homes every function for instance there are some wasteful expenditure in the health care organisation which should be analysed for its needs and cost.
Assessing value for money
Money available to health care organisation which is received from government grants, donations and its own sourced fund should be properly and effectively utilised to attain the maximum benefits out of the incurred cost
Cost and unit estimation per head
Cost per old age people stay in the health care homes
Appointing the management consultants helps in reducing the expenses of the organisation
Proper mangers in health care group can lead the organisation to an effective manner
Prioritising of work
Setting out sequence of important work in the order of its importance help in getting the important task done first and irrelevant task on the last part
Taking care of the health and living of the old people first and getting the advertisement of the health care on later part
(Bedos, et. al., 2014)
In the end it is concluded that Health and social care homes also need to manage their funds as with the use of these funds they perform various tasks that make inclusion of salaries, maintenance and other necessary expenditures. In order to manage their funds they effectively prepare cash budgets and required other budgets also in order to manage the spending of their liquid funds.
Bedos, C., Loignon, C., Landry, A., Richard, L. & Allison, P.J. 2014, "Providing care to people on social assistance: how dentists in Montreal, Canada, respond to organisational, biomedical, and financial challenges", BMC health services research, vol. 14, no. 1, pp. 472-472.
Berger, S. 2014, Fundamentals of health carefinancial management: a practical guide to fiscal issues and activities, Jossey-Bass.
Bracci, E. & Llewellyn, S. 2012, "Accounting and accountability in an Italian social care provider", Accounting, Auditing & Accountability Journal, vol. 25, no. 5, pp. 806-834.
Brock, D., Hinings, C.R. & Powell, M. 2012;1999;, Restructuring the Professional Organization : Accounting, Health Care and Law, 1st edn, Routledge, Hoboken.
Carruth, P.J. & Carruth, A.K. 2010, "The Financial And Cost Accounting Implications Of Medical Tourism", The International Business & Economics Research Journal, vol. 9, no. 8, pp. 135.