Financial Control and Budgeting

Financial Control and
Budgeting

Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
TASK 1............................................................................................................................................3
a) Challenges faced by NHS and the recent developments....................................................3
b) The Usefulness of alternative funding options...................................................................4
c) Identification of the key stakeholders within the social care sector and ways of
communication.......................................................................................................................6
TASK 2............................................................................................................................................7
a) Break Even capacity usage rate of ABC care home ltd.....................................................7
b) Calculation of the Targeted profit at 90% and 95% of the total usage capacity................7
c) Uses of Break Even analysis in short term and long term decision making......................8
TASK 3............................................................................................................................................9
A. Benefits and drawbacks of various budgeting approaches................................................9
B. Discourse of specific difficulties faced when budgeting in public sector organisation...11
C. Formulation of cash budget within a health and social care firm....................................12
D. Awareness on the impact of financial constraints, costs and budget on health and social
care service managers, their clients and stakeholders..........................................................13
CONCLUSION..............................................................................................................................14
REFERENCES..............................................................................................................................15

INTRODUCTION
In the planning of the financial reports, financial management and budget play a significant role.
It allows the firm to assess its performance and capabilities and to see the firm's inflows and
outflows. Budgeting provides the previous years’ report which allows administrators to decide to
solve the issues they have failed to meet their objective (Huikku, Karjalainen and Seppälä,
2018). Financial monitoring allows managers to handle costs in order to optimize income. Such
reports help to executives to assess about the organization in its entirety. Financial management
provides direct power over the company's earnings and expenditures. Budget reports enables
managers to see the progress and take the decisions required to keep the business growing.
The report is based on a case study of the UK National Health Service on the role of legal control
and budgeting in policy making. As well as to consider the significance of control and financial
planning. This case study outlines certain issues which enable managers to recognize how the
challenges facing the National Health Service on their 70th anniversary have been addressed by
help of monetary and budgetary control.
MAIN BODY
TASK 1
a) Challenges faced by NHS and the recent developments.
NHS is an emergency care service located in Great Britain that helps patients across the
world and receive relatively affordable costs for medical treatment. The national health
services are having a problem in handling adequately the money collected by their leaders
for the improvement of the national health service by 2023 to pay an additional 20 billion
per annum. The real concern is that this vast sum of money is spent adequately in the
provision of health services for the citizens who use the UK National Health Service.
Financial management allows National Health Service administrators to find the best way
to use the assets. In the last 20 years the number of people who die from the attacks has
dropped by 8,390 each year and citizens dying from cancer by 634, as per the case study
10,385 fewer people died from heart attacks. The overall productivity growth reported
throughout the last 5 years was 1.4 percent annually who die of some illnesses.

The health problems of people are growing, the elderly disabled people often rise, and
need for the NHS is rising rapidly. The National Health Service must manage its financial
resources adequately in order to fulfil demand. The financial management provides the NHS
with a mechanism to track their spending to support these people with their various chronic
conditions (Nombo, 2016). The latest pattern shifts and the advancement of treatment modalities.
To order to support patients with these chronic conditions, the National Health Services is trying
to incorporate the new innovations. The technology, genomics and drug development is some of
the new innovations to replace old methods and to start revolutionizing care in the medical field.
Financial planning allows administrators to recognize the obstacles the NHS needs to face in
improving service quality, productivity and costs. The statistics from the past budgets enable the
NHS recognize the issues and conduct the test to fix them. The budget increases efficiency and
security, both of the workforce and of people who seek their care, by helping the National Health
Service plan the new procedure.
b) The Usefulness of alternative funding options.
Private Financing Initiates, Money, Financial Dimensions of Agency Collaboration are the
alternate funding mechanisms for NHS. Herein, underneath description of these
alternatives is mentioned in such manner that is as follows:
 Private Finance Initiatives (PFI): The Labour government first introduced PFI in 1992
and was strengthened extensively in the 1997-2010. More than 700 clinics, colleges, jails,
etc. were constructed under the PFI system at the end of 2011. This facilitates the
maintenance of public systems such as new schools, hospitals, council housing, security
contracts, prisoners and road upgrades, through private investors (Guo and Yang, 2018).
The private sector supports public sector initiatives in the private finance program by
offering financial resources and enabling them manage production costs. This assists the
government in raising the burden on donors of the money which they earn immediately.
In nations such as the United Kingdom and Australia these kinds of private financing are
used. Under such schemes, investors, who put their money in public projects, take care of
the capital costs for these initiatives. This began in 1992 when the UK first started
collecting public capital from private banking firms for government projects. It was

becoming more common to collect private investors ' capital for public health projects of
this kind until 1997. It has some benefits such as:
1. Extra investment- Additional funding will launch further initiatives–adding social and
economic gains. The PFI offers private sector funding for initiatives that may prove
problematic to fund by rising lending and taxes.
2. Dynamic efficiency- Development and a great design for programs, better standard of
production and reduced maintenance costs are best paid for by the private industry.
The PFI bid process induces rivalry at the bidding stage.
 Agency Partnership- Agency Partnership is the relationship where one party normally
has the judgment-making power, while the other side can only assist with fund-raising in
order to make the other side more efficient and more successful. The government also
makes the financial support, choice available to develop the agency in partnership with
the private sector in order to look after the resources. As well as manage the money and
help government projects to accomplish their primary objective of providing medical care
for the individuals. In the above case study, the National Health Service of Great Britain
was listed as having the choice to collect funds from the private industry input into the
department. It has some benefits such as:
1. Effective- This funding option is more effective and can be used at lower cost. In the
aspect of above organisation, this can be used.
2. Cost effective- In addition, this source of finance takes lower cost and time in process
of acquiring funds.
 Resources: It is a method of raising the fund directly for government programs from the
various resources accessible to the private sectors as well as the federal funds and
surpluses. In order to fulfil their needs to treat full patients, the National Health Service
requires the form of private funds to help them stabilize from the multiple chronic
illnesses. Such kinds of private funds give the government the benefit of focusing solely
on the welfare of those needing medical facilities (Ouassini, 2018).
There are some private finance strategies which are adopted by the national health
services ' for raising capital to minimize the number of people who die from medical
problems like the assault on Hearth, heart attack and much more. The case study above

indicates that the National Health Services are funded over the last 30 years through
central tax, but the NHS needs to take steps in widening their initiatives and seeking to
implement emerging technology in the field of medical research.
c) Identification of the key stakeholders within the social care sector and ways of
communication.
Stakeholders: Stakeholders are persons or groups of people directly involved in the
success and benefit of the company and often decide the appropriate steps. In certain
cases, the government may be shareholders, the creditors who made their investments in
the companies and the interested parties in the business who take advantage of the
company's revenue.
The social care stakeholders may be private industry donors, donors, workers, personnel
and the National Health Services personnel, and people who are in the public's programs for
therapy. It can be conveyed and even reported in the office articles to the main shareholders in
their financial statements and general sessions. The data which main shareholders need is the
quarterly report that shows the progress of the business, in whose creation the national health
services have spent a considerable amount of money. The budget reports provide shareholders
with a map for expenditures, whether the money they spend is used correctly or not (Henttu-Aho,
2016). These data are often needed in the sense of the previous year for workers to assess their
performance. Such budgets assist the managers in giving the organization the appropriate role.
The theory of the agency says that the government collects its fund by establishing an agency
with private industries, whereby power over the entity is not given by the private firm to collect
funds. In decision making, corporate management plays a significant role. It helps managers to
coordinate their workers better for the firm's development. This also allows companies to decide
fully how to help the business to expand. Corporate governance allows the corporation to better
control its resources and use its resources wisely and consistently.
TASK 2
a) Break Even capacity usage rate of ABC care home ltd.
Break Even Capacity: It can be defined as capacity of an organization's willingness to operate
at the point that makes little benefit from the profits obtained from its services to both clients and

patients. Also break points illustrate the ability of the companies to cover their costs. Breakeven
is reached when only fixed expense and income can be retained by the company. On the basis of
given data set, this can be find out that the ABC caring homes Ltd.’s brake even capacity is 50.6
percent. This indicates that caring houses work to the fullest advantage.
Total Fixed Cost 45000x12 540000
Contribution
Revenue
Total Cost
[(150+180+120)x12x60x90%]
372000
356400
61560x 90% 11400
Break Even Point 540000/11400 47.36
b) Calculation of the Targeted profit at 90% and 95% of the total usage capacity.
Targeted profit: Targeted income is the amount that the company wants to gain with forecasts
of costs associated with the manufacture of the commodity in a financial year. It allows
executives to budget as per the business's specifications (Zielniewicz, 2016).
Total Fixed Cost 45000x12 540000
Contribution
Revenue
Total Cost
[(150+180+120)x12x60x90%]
372000
356400
615600x 95%/90%
Profit 109800
c) Uses of Break Even analysis in short term and long term decision making.
Breakeven point is a business method used by executives in order to determine whether to begin
manufacturing and sell goods by a corporation or not. It allows to assess the sales level with
balanced costs and revenues. The point of equilibrium is also known as the point of breach. This
is useful for developing flexible budgets that display costs and benefits of different activity rates.
This analysis also helps to establish pricing policies by explaining the effects on costs and
income of various market systems. The principle of benefit planning is helped to carry out. The

understanding of the connection between cost volume and profit contributes to the desired
benefit. Evaluation of a correlation between cost and amount of income often allows
management to determine whether to shutting down or lose the business (Htun, 2019).
TASK 3
A. Benefits and drawbacks of various budgeting approaches.
The effective process related with planning about future expenses and making an
assumption that specific amount can be earned by making these expenditure is known as
budgeting. The concept of making budgets can be beneficial for companies in order to identify
the most productive activities and also eliminating the ones which can reduce the overall
profitability (Heydari, 2018). In general term, this can be described as an accounting device used
to manage organisation's profits and expenses. Drawing out strategies using various methods and
creating possible predictions dependent on historical evidence is important for corporate
organisations. There are several forms of financial planning strategies that businesses use to
devise an expenditure plan in an acceptable way. In large and small company’s effective budgets
have a greater role as it supports to manage and engage the available monetary as well as other
resources to give higher productivity. Thus manager is needed to implement the most suitable
strategies while designing budget for the year that are most suitable to the company’s operation.
Some of these techniques are elaborated underneath:
Incremental budgeting: It is mechanism used to build incremental expenditure plans.
This sort of budget is designed by using the details from the previous cycle or by using the
existing situation and results as a basis for making current budget numbers. This is considering to
be main component of financial accounting and is often used to allow minor adjustments in the
organizations budgets. The addition of any substance in previous year budget does not requires
to follow any sort of mathematical equation because changes are made as per convenient to reach
a specific target. The main benefits and drawbacks are listed below:
Advantages:
 This is really a convenient and efficient method for companies to use, either small or big.
Method of calculation throughout this financial planning is very easy and will enable
administrators report correct amount in the accounting reports.

 It's used in most organizations for growing rivalry and creating the importance of equity
amongst operational divisions
Disadvantages:
 In this approach the top-level managers ignore creativity and little cost savings.
 This promotes massive investment to obtain favourable or beneficial variances.
Zero based budgeting: It is primarily used as a forecasting method in financial
accounting, in which expenditure with a zero value is constructed from start. In this system
managers insure that costs for the relevant duration are justified (Scott, 2017). The requirement
for this kind of budgeting strategy is the foundation for the future and proper classification about
each operation support to reduce the chances contingency. Some of its major advantages and
disadvantages are discussed underneath:
Advantages:
 Zero-based budgeting allows administrators to assign expenses according to specific
needs to the company's divisions.
 As growing cost in this strategy is explained because it can enable management to resolve
the limitations of incremental expenditure plan.
Disadvantages:
 In this process, vast quantities of workers are needed to devise budgets which is not easy
for every organisation to engage more and more worker in budgeting process.
 This required some time to shape the budgets because it would be a time-consuming
operation.
Activity based budgeting: According to this budgeting strategy, activity based cost is
being used to shape financial plan for every specific activity. Under the framework of this
technique expenditure or money were assigned as per their criteria of growing operation
undertaken by the organization. It main merits and demerits are listed underneath:
Advantages:
 It approaches measures each and every expense driver because it takes into account all
the measures involved in the respective activity of company.
 In this financial planning strategy all unwanted tasks are removed.
Disadvantages:

 Within this method the process of evaluating budget is quite complicated and not easily
understandable.
 To carry out this method of budgeting, effective and sufficient expertise is necessary and
businesses are expected to employ trained staff representatives for this reason.
Rolling budgets: This kind of budget usually include certain addition on previous budget
as per the requirement of company (Downes, Moretti and Nicol, 2017). This mainly include
making suitable changes within the activities which can give higher results for company and
additional alteration into these activities does not make any burden. Some of its advantages and
disadvantages are discussed underneath:
Advantages:
 This is a balanced schedule, where adjustments are made due to results from the
preceding year.
 With the aid of this financial planning strategy, evidence of each and every cost may be
calculated.
Disadvantages:
 The method of implementing rolling budget is indeed a time intensive procedure that
takes a significant period of time to effectively execute all of the operations.
 The main disadvantages of this techniques are that many time companies make
assumption over negative activities and implement changes by thinking that it will
provide good result in future.
B. Discourse of specific difficulties faced when budgeting in public sector organisation.
As public service executives carry out budgeting exercises they need to address
increasing forms of problems and challenges (Naseri and Hosseini, 2017). This is really
necessary for all forms of companies to prioritize accordingly so that fiscal capital can be utilized
wisely and consistently. The major difficulties faced by the management of public company at
the time of preparing budgets are:
1. Public sector organisations have as their primary aim the protection of community. They
should not rely on making income, but administrators are expected to ensure sure they
allow good use of the overall public monetary capital.
2. Expenditures plan of public sector firms are presented to the general population because
they want so, so that the administrators face a problem that is linked to the quality of the

sum reported in the report. When it's not correct then that will cause challenges with the
managers and the whole organization.
3. Public sector administrators tend to consider whether the expenditures plan have a greater
level of flexibility in order to make any adjustment as per the government opinions.
However, in the private industry budgets are not needed to be flexible because once one
budget is created then no modifications can be produced.
Thus, it has been determined that manager dealing in public industry are intend to meet
with large number of regulation and laws imposed by governance of a country. Whereas, the
manager in private company are not liable to make each and every standard of governance at the
time of preparing budget for specific period related to specific activity (Derfuss, 2016).
C. Formulation of cash budget within a health and social care firm.
Money Budget is a system under which all activities belonging to money are
reported (Moynihan and Beazley, 2016). This is really necessary for companies to build a sort of
expenditure such that the administrators can retain sufficient cash records. The foregoing is a
cash estimate for a health and social care agency over a span of six months and all expenses
reported in the expenditure are focused on hypotheses:
Particulars Jan Feb March April May June
Opening balance 180000 169600 182000 183000 200300 187100
Receipts
Received from trustees 15000 16000 18000 20000 22000 16800
Received from investors 17000 14200 17500 16000 12000 14000
Receipt from delivering health
care services 26000 28000 25000 27500 26400 23800
Total A 238000 227800 242500 246500 260700 241700
Payments
Salaries to staff 68000 24000 55000 45000 42000 54000
Equipment purchased 20000 26000
Repair 400 1800 4500 1200 5600 1400
Total B 68400 45800 59500 46200 73600 55400
Closing balance (A-B) 169600 182000 183000 200300 187100 186300
The above table, in beneficial in analysing that balance of cash at the end June month is
186300. All the money earned from various sources is reported in the refunds and the sum
payable is documented in the payments. Payments will be withdrawn from transactions towards
the end of every month and afterwards the closing amount will be evaluated. Receipts are

reported in the financial expenditure only as monetary payments. Any trade contributing to credit
is not applied to the cash bill. It will direct management in evaluating whether the business is
financially healthy or not for that period.
D. Awareness on the impact of financial constraints, costs and budget on health and social care
service managers, their clients and stakeholders
Costs: Total resources incurred by hospitals and social care agencies to provide programs
to consumers are defined as charges. Controlling expenses is extremely essential for corporate
companies, so that higher income may be gained from pleasing customers (Johnson and Pfeiffer,
2016). Price greater or smaller all leave influences on consumers. If a business increases its
costs, therefore consumers ' interest in the organization that decrease because they do not favour
those businesses that offer services at higher prices because opposed to others. Setting low rates
will also have a detrimental effect on the company as top-level consumers may believe the
businesses cannot suit their position and this is why they move to another firm. To cope with this
effect, it is really necessary to establish the correct prices for the services that it provides to the
consumers, or the company. Justification of consumers can help to calculate reasonable costs for
the services provided by a health and social agency.
Budget: The strategy that is developed in the phase of budgeting is regarded as the
budget in which potential and past expenditure data is documented. It is basing mostly on data
from the previous year. This is extremely necessary for corporate companies to evaluate the
expenditures in order to provide the owners with fair and accurate client details. This leaves
effect directly on creditors since, if it is not correctly developed, it is not feasible to forecast
potential requirements and assign funds to corporate activities. In order to maximize their
involvement in the business, agency administrators are expected to take responsible decisions
and efficiently build budgets such that shareholder confidence can be obtained.
Financial constraints: This can be described as the shortage of financial capital and
considering the lack of funds people and organizations could not afford anything in this case.
This is really necessary for all companies to evaluate most of them so that the company
operations can be conducted in an acceptable way at the moment of the result. It will influence
the service operators as they need to be more conscious of the problems at the moment and make
appropriate choices to solve them. Less funds for operating operations are one of the key
financial restrictions and in this scenario the administrators have to behave smartly and consider

effective ways to solve the same. It lets them influence by improving their work responsibilities
(Macinati and Rizzo, 2016).
All the factors mentioned above that have an effect on clients, consumers and executives,
and it is really necessary for a health and social care organization's highest authority to reflect on
the adverse effects of these factors in order to make effective judgements for the nearby future.
To raising the adverse effects of these elements, managers should build preparation in
preparation so that they would cope with them easily if any confusion exists in the future.
CONCLUSION
In the end of this report, it has been concluded that financial management and controlling
of budget us crucial for each type of business organisation as it support in making better and
efficient use of all resources of business to grow profit margin. Different kind of budgeting
method are effective in making suitable financial plan for a respective year increasing in
attaining of company goals with at most satisfactions. There are all kinds of things that the
highest leader has to address to maximize consumer and investor value. For industries,
Breakeven level is often used to calculate the products that need to be marketed for order to raise
all the costs that are incurred in producing them. Public sector company executives have to
address different forms of obstacles such as concentrating on the money allocation programs
when implementing budgets.

REFERENCES
Books and Journals:
Huikku, J., Karjalainen, J. and Seppälä, T., 2018. The dynamism of pre-decision controls in the
appraisal of strategic investments. The British Accounting Review. 50(5). pp.516-538.
Nombo, D. O., 2016. The impact of budgeting and budgetary control measures, on non-profit
organizations: a case study of the Catholic relief services in Dodoma region (Doctoral
dissertation, The University of Dodoma).
Guo, X. and Yang, Q., 2018. On the Integration of IT system with the budgetary control system:
insights from the case of Wanhua chemical. Wireless Personal Communications. 102(4).
pp.3687-3697.
Ouassini, I., 2018. An introduction to the concept of Incremental Budgeting and Beyond
Budgeting. Available at SSRN 3140059.
Henttu-Aho, T., 2016. Enabling characteristics of new budgeting practice and the role of
controller. Qualitative Research in Accounting & Management.
Zielniewicz, A., 2016. The Swiss “Success Story” of Sustainable Public Finance: Debt
Restrictions and Budgeting Processes in the Swiss Confederation. In Fiscal Rules-Limits
on Governmental Deficits and Debt (pp. 267-297). Springer, Cham.
Htun, M. T., 2019. EFFECTIVENESS OF GOVERNMENT BUDGETING IN YANGON
REGION (Doctoral dissertation, Yangon University of Economics).
Heydari, A., 2018. The role of internal organizational factors in implementing the budgeting
system based on performance.
Scott, I., 2017. Public ethics and corruption in Hong Kong. In Public Administration in Southeast
Asia (pp. 283-294). Routledge.
Downes, R., Moretti, D. and Nicol, S., 2017. Budgeting and performance in the European
Union. OECD Journal on Budgeting. 17(1). pp.1-60.
Zor, U., Linder, S. and Endenich, C., 2019. CEO characteristics and budgeting practices in
emerging market SMEs. Journal of Small Business Management. 57(2). pp.658-678.
Naseri, H. and Hosseini, M., 2017. Identification and ranking of effective factors on operational
budgeting of Municipality of Golestan province. JOURNAL OF MANAGEMENT AND
ACCOUNTING STUDIES. 5(03). pp.76-80.
Derfuss, K., 2016. Reconsidering the participative budgeting–performance relation: A meta-
analysis regarding the impact of level of analysis, sample selection, measurement, and
industry influences. The British Accounting Review. 48(1). pp.17-37.
Moynihan, D. and Beazley, I., 2016. Toward next-generation performance budgeting: Lessons
from the experiences of seven reforming countries. The World Bank.
Johnson, N.B. and Pfeiffer, T., 2016. Capital budgeting and divisional performance
measurement. Foundations and Trends® in Accounting. 10(1). pp.1-100.
Macinati, M .S. and Rizzo, M .G., 2016. Exploring the link between clinical managers
involvement in budgeting and performance: Insights from the Italian public health care
sector. Health care management review. 41(3). pp.213-223.

1