Introduction
Management of financial resources in a health care is of key importance in achieving effective and efficiency. To manage resources effectively system are required. This section of this report explain how system can be used to manage financial resources in caretech plc
1.1 Explain the principles of costing and business control systems
Costing refers to the process of assigning cost to an element of business which might be services, product unit or department (Deberck 2013). According to Glasgow (2008), costing is a system of identifying different cost incurred and assigning them to their cause element. In health and social care setting, costing play a very important role as it help identify different cost incurred in delivering services , assigning them to relevant cost object hence improving the pricing criteria. Developing an effective costing system is therefore important for Caretech Plc. To develop, an effective system, care Tech should follow the Six key costing guideline for NHS organization as developed by Monitor; the industry regulator. These principles are;
Stakeholder engagement- caretech plc should identify and involves of the stakeholder in it costing. Stakeholder may includes, staffs, patients, industry regulator and management.
Consistency-the costing system adopted by caretech plc should be consistent. It should produce the same result when applied over and over again
Data accuracy- Caretech plc should ensure that data used in it costing system are accurate, this result to consistency and accuracy in costs.
Transparency-the process of costing should be frank, open and honest.
Materiality-this principle requires that caretech to establish a costing system with ability to traces all the cost to material and activities. Costing can only be effective if the activities or material causing them are identified with certainty
Causality and objectivity-the system should also be able to establish causality between activities and costs incurred (monitor 2015) To make easier for costing services and product, cost is normally classified in different category including fixed cost (cost that do not change with level of activities e.g. rent), variable cost (cost that depend on level of activities e.g. medicine) and semi variable cost (cost that vary with level of activities up to a certain point upon which they remain constant) (Deberck 2013).
Business control system refer to policies, principles and procedure established to enable managers evaluate and monitor performance of organizations resources (Glasgow 2008). There are several business control systems that Caretech holding need to adopted to manager it financial resource better. These include Financial accounting system- this is a system to monitor and evaluate all financial transaction including income and expenditure. This system helps to determine the effectiveness of organization by showing it profitability, liquidity and financial position (Glasgow 2008). Information from this system is usually used to prepare financial statement such as cash flow statement, income statement and balance sheets.
Cost management system- This is a system designed to enable identification and assignment of cost to different activities or element (Glasgow 2008). In caretech plc, this system would enable it to price it services accurately and competitive. Other systems that may help caretech plc include payment system, procurement system, and budgeting control system among other.
1.2 Identify information needed to manage financial resources
Caretech plc needs different type of information for it to manage it resources effectively. The organization need to know it assets such as furniture and fitting, vehicles building cash in hand and bank etc. This information is usually easily accessible as they are contained in different statement. For instance, the total asset of caretech plc can be easily known by analysing it balance sheet (e.g. it totals assets equal to 313 020 000 as per 2013 balance sheet). By getting this information the organization would in a better position to allocate them effectively so as to achieve its objective. Equally, the organization also needs information relating to it income and expenditure. This will help determine it profitability as well as help track and manage it expenditure properly. This information can be generate by it various system including the financial management system and costing system, The organizations also need information relating to regulation of financial management in health and social care such as taxation. This would enable it to manage it financial resources in a manner that is compliance with different regulation and requirement. All the information requires for the management of financial resources is easily available both from internal source such as from financial management system cash flow management system etc as well as from external environment. For instance information relating to corporate tax is easily accessible from homeland revenue
1.3 Explain the regulatory requirements for managing financial resources
There are several regulations that caretech has to comply with in managing it financial resources. This regulation set principle, procedure and system that are meant to protect service user, to ensure organizations fulfil their financial obligation toward government etc. The applicable regulations to care tech include; 1. Payment of taxes by HM revenue 2. Requirement By monitors relating to licensing and price tariffs 3. Financial statement preparation requirement by financial reporting council 4. Requirement to safety and quality of services by CQC.
Payment of taxes by HM revenue -The government through the HM revenue and custom collect money inform of taxes from individual and corporation to fund it activities.HM revenue and custom is responsible for administering the system in UK including setting tax level and different type of taxes The Tax requirement as set by HM revenue and custom affects caretech plc as it is required to pay different taxes including corporate tax which is paid out company profit, capital gain tax which is paid when an organization make some gain by disposing it investment among other type of taxes, remittance of Pay as you earn taxes among other.
Requirement by monitor-Monitor is the health and social care industry regulator. It set regulation for health and care organization relating to prices traffic, competition and licensing. Care Tech plc being a company under health and social sector is thus required to complies with licensing requirement, adhere to pricing guide and anti-competition rules as developed by Monitor (Monitor 2014)
Requirement by Financial reporting council- When preparing and reporting financial statement, Caretech plc is required to comply with several reporting standard as contained in international financial reporting standard (IFRS) and UK GAAP. IFRS set standard for preparing financial statement and While UK GAAP establishes Accounting standard and principle (Glasgow 2008, Deberck 2013). These standard are meant to ensure accuracy, consistency, objectivity and transparency in management of financial resources
1.4 Evaluate systems for managing financial resources in a health or care organisation
For effective management of organization adequate systems are required. System refer to a set of procedure, polices and principle that guide how thing are done in an organization (Glasgow 2008). Manager relies on system for monitoring and evaluating different activities with and organization For a healthcare provider like catetech, system to monitor and evaluate activities relating to financial transaction, medical treatment, social cares are needed. For the management of financial resources caretech plc requires several system including 1. Financial accounting system 2. Costs control and management system 3. Payment system among other Financial accounting system
Financial accounting system refers to system designed to help manager monitor and evaluate all the financial transaction in the organization. According to Glasgow (2008), successful organizations must have a sound financial accounting system as it help in keeping track of all income and expenses. As noted by this statement, the importance of financial accounting system can never be overlook. Without proper financial accounting system, an organization may be losing money to untrustworthy employee or overspending without if realizing. Although financial accounting system is of much benefit to organization, running the system effectively requires competent workforce. Organization can therefore spend a lot of money on training and retraining staffs.
Costs control and management system Caretech plc also needs a cost control and management system. This is a type of system which help the organization in identify, assigning and controlling cost in an organization. This system benefits an organization in several ways.
• it facilitate for competitive pricing
• It help in tracing cost to specific cost object
• It help in understanding cost behaviour making it easier to manage and control cost.
However, systems can contribute to ineffectiveness in organization if not well designed. Again, running the system require competent personnel (Glasgow 2008). Conclusion From the discussion in this section, it can be concluded that for a healthcare organization to succeed in managing it financial resources effectively it has to put in place system do so. The systems should cover all the financial activities taking place in the organization including transaction, assets, capitalization, sale of assets etc.
2.1 Discuss the diverse sources of income that may be encountered in health and social care
For a health and social care organization to successfully offer services to its clients a source of income is required to help fund it expenses. There are a number of income sources available for caretech plc and other similar organizations. One of the sources of income is fees charged on clients. In 2013, care tech generated income from four types of customers which are Adult Learning Disabilities which generated 73.9M, mental health which generated 6.5M, young people residential services which generated 19.6M and Foster care which generated 14.3M. In additional to income for direct sales of services and good, caretech can also generate extra income from investment activities. Also NHS organization receive some grant and funding from the government directly or it agencies such as CCG, NHS and local councils Another source of income for Caretech plc is from sale of shares/equity. Being registered as a limited company with share capital, the sale of equity to potential investor has be one of the major source of income for Caretech plc as shown in it balance. According to it 2013 balance, the company generated 8,000 from sale of ordinary share at premium price and 2,200,000 at par value.
2.2 Analyse the factors that may influence the availability of financial resources in health and social care organisations
There are several factors both within and outside the organization that affects the availability of finances in an organization. For care tech plc the factors may i8ncludes Reputation – the reputation of an organization influences to a larger extent it ability to attract customer, investors and lender. When the reputation is very positive, the organization finds it easy to attract client meaning more revenue. Equally, Good reputations also make it easy to attract equity and body investors as well as lender such as Bank Creditworthiness- according to businessdictonary.com (2015), credit worthiness refer to the current and future ability of an entity to meet al it financial obligation (debt). If an organization has history of defaulting on its financial obligation it makes it hard for it to attract lenders. On the other, an entity with good history of meeting it financial obligation easily attracts lender and donation. Size of the organizations- the size of an entity also influences the availability of resources. Organization with large balance sheet, can easily secure large amount of loan from lender as asset base is one of key consideration by lender. Equally, the size of an entity define it scope of offering services. A large organization can offer more services that a smaller one meaning more revenue. Government funding policies- for healthcare organization under NHS system, the government do fund them to enable offering of quality services. The amount available from government depends on the government policies. The policies can increase or decrease the amount allocated to healthcare sector including those for funding NHS organization. The availability of financial resources as discussed above is depended on several factors, both internal and external. The best thing is that majority of this factors can be easily controlled by the organization. For instance, organizations are responsible for their own reputation, creditworthiness. This therefore mean caretech can work on the entire controllable factors to ensure financial resources is easily available or accessible whenever need.
2.3 Review different types of budget expenditure in health and social care organisations
Budget is simply an estimate of income and expenditure of a certain period of time for an entity. For an entity like caretech plc, putting a budget in place is of key important as it help plan appropriately for income as well as expenditure to achieve financial effectiveness and efficiency. Budget always have two sides. One side explain how income and the estimate of income anticipated to be earned. The second side deal with how income will be spent. For an entity like caretech plc it is possible to find different type of budget. Some of common budget plan includes The overhead budget-this is a type of budget that explain how income will be spend to overcome all the overhead/expenses of the entity Resources budget- resources are required for effective operation of an entity. Resources budget, explain how income will be spend on to acquires such resources. Human resources budget-manpower is the most essential assets of an organization. HR budget are developed to ensure entity get the best manpower. The budget cover cost such as training cost, payroll, selection and recruitment cost among other Marketing and communication budget- in most cases organization like caretech plc operates in a competitive environment. They therefore have to communicate and reached to their target customer. Marketing and communication budget make this possible by allocating financial resources to cover marketing cost such as advertisement cost, communication cost among other. When all this and others budget are consolidated they form the master budget. Master budget is one that covers all activities, in all unit of the organization (Bryans 2007)
2.4 Evaluate how decisions about expenditure are made within a health or social care organisation
Before spending any money, it is important that proper and logical thinking is put in the process. To achieve this, different type of analysis is always done. One of such analysis is the cost-benefits analysis. In cost benefit analysis, the cost of associated with a certain project or program are identified and compared with benefits that will be gained by spending on those projects (Martin, Charlesworth, and Henderson 2010). Money should only be spending where benefits are more that cost. Another type of analysis is environment scanning which is done through SWOT and PESTEL analysis. SWOT and PESTEL analysis are different type of scanning the internal and external environment of the organization to identify factor that present threat and opportunity to an entity (Martin, Charlesworth, and Henderson 2010). These two analyses help an organisation set priorities as far as spending is concerned. However, conducting these analyses may cost more money and time. Not all activities are equally important to an organization. When making expenditure decision, it is important to identify activities that are more important. Expenditure should be done on priority of activities. Equally it is important that emotionalism is avoided when making expenditure decision. The expenditure should at all time based on facts and logics but not emotion.
Finally, when making expenditure decision it is also important to decide on accountability and reporting of the project. Money allocated on a project should be spent on that project. However, that might not be the case as people may want to embezzle fund for their own benefits. It is therefore important to chosen a reporting and evaluation plan. Conclusion Planning should at all time be the first step in management of financial resources. In planning, an entity identifies it different sources of finances as well as plan on how to effectively spend on those income. If proper plan are in place, financial resources will be used effectively and will contribute to achievement of goal.
3.1Explain how financial shortfalls can be managed
Financial shortfall occurs when the financial liability or obligation of an entity is due, but the entity lack the ability to pay for it (pathfinder international no date). Financial shortfall can have severe consequences for an organization as it may increase it cost. For instance, failure to repay a loan from bank may attract additional interest and penalties. Equally it can leading to bad creditworthiness of the entity making it hard to get finances in future from investor and lender. It is therefore important that caretech plc has in place mechanism to manage any financial shortfall.
There is several way of managing financial shortfall. One, an entity can seek additional of financial in it operation from Shareholder or equity holder by selling additional share. The advantages of this method are that the money need no to be repaid back only dividend is paid. Another way is to negotiate early recipts of contract or grant revenue. An entity can negotiate the release of grant or contract fee with it partner even before the contact obligation are fulfilled. Although this is a less costly method of managing financial shortfall it can lead to a cycle of shortfall especially where money released for contract is spend on a project that is not related to the contract from where the money come from. When the time of executing the contract comes, an organization may lack money to meet it obligation despite having received the contract fee. Thirdly, financial short fall can be managed by selling product on cash basis as compared to selling on credit. Or the time allowed for credit payment can be shortened to ensure money is received at the shortest time possible after sale. Additionally, increasing the effort to collect due receivable can increase cash at hand or bank enabling organization to met it financial obligation.
3.2 Explain the actions to be taken in the event of suspected fraud
According to serious Fraud office (SFO, 2015), Fraud refers to a criminal activity of abusing position, false representation or prejudice for personal or financial gain. Fraud may be committed by managers, staffs or business partner. In an organization setting fraud may fall under one of the two categories .
Type of fraud
Removing asset from business- this is where manager, staffs or partner fraud the organization by steal it assets. This type of fraud may occurs when cash is stolen, manipulation of payroll for personal gain, collision with supplier and customer, manipulation of bank reconciliation among other
False misrepresentation of financial statement- this type of fraud occurs when figure and facts in financial reporting are manipulated for personal gain. This type of fraud is always committed by auditor and accountant (SFO 2015).
Step to take in case of suspect fraud
In case an organizations suspect fraudulent activities, it need to take several step to authenticate the fraud. These steps include conducting an in-depth inquiry to confirm the existence of fraud. Inquiry should be involves all relevant people involved in the activities that lead to the fraud, the next step carrying own investigation to get facts, then consult widely and then report the case to police for independent investigation and possible prosecution of culprits (Bradford 2010). Staffs are under professional obligation to report any fraudulent activities. As a staff in case I suspect fraud activities I would report the case to the management of the organizations for further investigation. I would also make sure I give them all the detail I have concerning the Fraud.
As a manager, there are several thing I would do in case of fraudulent activities is reported to me. I would be very responsive to employees concern to stop the fraudulent activities before my organization loss more money. This would also encourage employees to report any future case. I would also ensure thorough investigation is done on the fraud to get all the fact before a major decision is done. If investigation reveal a fraud exist, I would then report the case to board of director to top management as well as to police for further investigation. I would facilitate the investigation by police by giving them all the necessary information and also encouraging my employees to do so.
3.3Evaluate budget monitoring arrangements in a health or social care organisation
According to USA (2010), budgetary monitoring is continuous process that aims at ensuring the action plans are achieved in term of expenditure and income. It is a process of ensuring the planned expenditure is being spent according to the plan and income is being earned as planned. There are several steps in budget monitoring as shown by the figure below Budgetary monitoring The budgetary monitoring involves four stages. In the first stage, income and expenditure for specific period are forecasted, budget prepared and approved by the relevant person. In the next stage, the actual performance of budget implementation is measure and the result compared to the Budgeted performance. The third stage involves conducting variance analysis to identify the nature of the difference between budgeted performance and actual performance. The final part involve taking corrective action to ensure the gap between actual performance and budgeted performance is closed or reduced especially for the next budgeting period(USA 2010, pathfinder international n.d).
Conclusion Fraud and financial shortfall are the major issue that might be faced in the process of managi8ng financial resources. However they can be avoided through proper monitoring and planning of the budgeting process.
4.1 Identify information required to make financial decisions relating to a health and social care service
For care tech plc to make sound financial information it requires accurate and timely information. This information can be easily accessed by analysing different financial statement. There is a number of information that is important for making financial decision. Information relating to assets Assets are one of the important components of any organization. Information relating to assets is thus important as it facilitate proper management. This information can be accessed by analysing the balance sheet. For instance by look at balance sheet of Caretech plc, one can clear see the value and type of assets the organization have. I.e. from it 2013 balance sheet caretech had the following type of asset and their values Asset it value (000) Property, plant and equipment 238,568 Other intangible assets 30,980 Goodwill 31,120 Current assets Inventories 515 615 Trade and other receivables 8,054 Cash and cash equivalents 3,783 Information relating to profitability For a profit making organization like caretech plc, it is important to have information relating to profitability of the organization. This information is usually contained in the income statement where the total expenses and income are list. In 2013 the total operating expense for caretech plc was 22, 405,000 which was covered by gross profit of 45,574,000 which mean the organization made net operating profit Information relating to cash flow Caretech organization needs information relating to timing of cash income and cash spending. This information helps the organization to avoid possible financial shortfall. Information relating to timing of cash flow is available in the cash flow statement.
4.2 Analyse the relationship between a health and social care service delivered, costs and expenditure
There is a direct connection between health and social care services and cost and expenditure. As noted by Broadbent and Cullen (2003), for an organization to deliver quality services, it has to invest in people, facilities and equipment. This basically means that quality services mean increased investment. There is also a connection between demands for services and cost incurred to deliver those services. As demand for services increase, there is always an increase in total expenses incurred by the organization. However, despite this increase, the Unit costs are in many cases is reduced due to economy of scales (Broadbent and Cullen 2003)
4.3 Evaluate how financial considerations impact upon an individual using the health and social care service
When making financial decision there some financial consideration that are always taken in to account. They include sources of finance to fund expenses, priority in expenditure, profitability of services etc. These considerations do have impacts on the health and social care services user. When making decision organizations have to take into consideration of source of finance to fund the expenditure. The available sources may affect the servicer directly or indirectly. For instance an organization may chose to fund it expenses by increasing prices for it services. These mean that servicer user has to be high prices to meet cost incurred in serving them. In many case, financial resources available is always scare to fund all activities in an organization. This mean funding is to be done in priority basis. It is logical to fund project or program that benefit the largest population i.e. servicer user as well as organization. This mean that project to cater for small population are always given last priority despite them being important to servicer user. The quality of services may therefore be improved in one section or unit of an organization which received funding while in some section it might remain low. For a profit making organization like caretech plc, It is only those revenue generating stream that are profit make sense to the organization. A service that is making loss may thus be closed despite offering crucial and essential services to customer. The profitability of different services or revenue stream therefore determines the availability of services. Some service may be easily accessible while other may not be accessible due to their inability to make good profit for the organizations.
4.4 Suggest ways to improve the health and social care service through changes to financial systems and processes
Proper management of financial resources require system to be put in place to enable manager, monitor and evaluate the performance. However, most of the financial systems are designed to enable evaluation at the end of a specified period. This makes it hard for manager to evaluate performance in real time. This can be improved by integrating ICT in the different financial management system such as const control system, financial control system. As noted by Taylor and Toft (2003), ICT as part of financial management system enable real time recording and reporting of transaction and performance which enhance decision making process. Management of financial resources also requires very competent professional. Care organization like caretech plc can therefore improve the management of their resources by training their workforce and also by ensuring only competent staff are hired. Conclusion It is with no doubt that system and process adopted in management of finances do have an impact on delivery so health and social care services. They determine the competency of workforces, prices to be charged for services, quality of services as well s availability of services.