Financial Management in Health Care | Cash Budget

Running head: FINANCIAL MANAGEMENT IN HEALTH CARE
Financial Management in Health Care
Name of the Student:
Name of the University:
Author’s Note:

1FINANCIAL MANAGEMENT IN HEALTH CARE
Table of Contents
Question 1........................................................................................................................................2
Question 2........................................................................................................................................4
References........................................................................................................................................7

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Question 1
a) The cash budget has been prepared for the trend period of January 2018, to April 2018,
whereby all income and expenses that the company will be incurring will be considered for
analysis. The amount of money that needs to be borrowed can be calculated with the help of the
cash deficit that the company would be facing in each of the analyzed month or time period. The
cash inflow that the will be $35,000 and the cash outflow in the form of expenses will be
approximately $46,015 (Briggs, Scarborough & Wolstenholme, 2018). Thus in this the company
would be requiring a total of $11,015 as shown below:
Business Cash Budget
Details January February March April
Cash Balance 5,000 $0 $9,810 $11,990
Cash flow from Patient
Consultation $30,000 35,000 $25,000 $30,000
Total $35,000 $35,000 $34,810 $41,990
Expenses
Purchases (Consumable) $15,000 20,000 $15,000 $20,000
Wages $3,200 2,500 $3,000 $2,400
Mark. Expenses $1,225 $990 $1,050 $1,100
Admin. Exp $1,040 $1,100 $1,150 $1,220
Office Exp. $550 $600 $620 $570
Lease Payment $0 $0 $2,000 $2,000
Repayment of Loan 20,000 - - -
Renovation Waiting Room 5,000 - - -
Total Disbursement $46,015 $25,190 $22,820 $27,290
Cash Balance/(Deficit) ($11,015) $9,810 $11,990 $14,700
Add:
Fund (Loan) 11015 0 0 0
Ending Cash Balance $0 $9,810 $11,990 $14,700

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b) The cash or the finance amount would be required for the replacement of aging computer
system can be well calculated with the help of the cash balance that would remain in April so
that the decision regarding purchase can be taken. The cash balance in the month of April would
be $14,700 and the value of computer system is $25,000 so the purchase cannot be done it is
recommended that in order to replace the system they have to take a short term loan to the tune
of ($25,000-$14,700): $10,300.
c) In order to analyze changes or variance between the collection and expenses the same would
be well treated by redrawing financial statements, the effect of financials on the company has
been well analyzed as shown below (Kuroki, Hirose & Motokawa, 2018). The deficit in January
would decrease to $6,205 the same needs be well financed with the help of short-term loan. The
estimated balance at the end of April will be $31,700 (Bollinger et al., 2017).
Financial Budget
Particulars Jan Feb Mar Apr
Cash Balance 5,000 $0 $19,180 $24,390
Cash flow from Patient Consultation $55,000 65,000 $35,000 $40,000
Total $60,000 $65,000 $54,180 $64,390
Expenses
Purchases (Consumable) $30,000 40,000 $22,500 $25,000
Wages $5,700 3,000 $2,400 $2,600
Mark. Expenses $2,215 $1,050 $1,100 $1,200
Admin. Exp. $2,140 $1,150 $1,220 $1,180
Office Exp. $1,150 $620 $570 $710
Lease Payment $0 $0 $2,000 $2,000
Repayment of Loan 20,000 - - -
Renovation Waiting Room 5,000 - - -
Total Disbursement $66,205 $45,820 $29,790 $32,690
Cash Balance/(Deficit) ($6,205) $19,180 $24,390 $31,700
Add:
Fund (Loan) 6205 0 0 0
Ending Cash Balance $0 $19,180 $24,390 $31,700

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d) The financial impact of changing the cash position from receiving it on a two months later
rather on a current basis in the cash inflow section would reduce the cash deficit that the
company is facing shown above. The cash deficit that they were facing in was $11,105 and the
same has well decreased to $6,205 in January (Bathurst & Schwartz, 2017). The cash position in
the end of April would also increase from $14,700 to $31,700. So they need to borrow $6205 in
January and the replacement of the computer system can be well done with the help of the
available cash balance. If the collection is done in the same month from January onwards then
they would be having a better cash flow position for meeting up the various cash requirements
that the company would require. The trend in the cash flows can be well analysed based on the
cash balance that they would be having for the trend period analysed. A higher amount of cash
inflows would be received by the centre and this has been due to the change in the revenue
recognition time period. The change in time period would further allow a better management of
cash flows for the company. The financial impact on the Days Surgery cash position would be
considered on a positive note thereby allowing the company to better manage the business
operations.
Question 2
a) Budgeted Results: The budgeted results for the Clinic has been prepared with the help of
revenue that the clinic would be receiving by selling the band aids. The total expected revenue in
both the month will be $47,850 and the total cost for the band aid will be around $32,440 which
will be leaving the clinic with a net profit of around $15,410.
Budgeted Results (With 10% Effect)
Particulars July
Augus
t

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Revenue 47,85
0 47,850
Costs
Vaccines 18,15
0 18,150
Band aids 3,190 3,190
Rent 500 500
Receptionist 700 700
Nurse 9,900 9,900
Total cost 32,440 32,440
Net Profit/(loss) 15,410 15,410
b) Variance and Actual Results Analysis
Actual Results Variance Analysis
Particulars July
Augus
t Particulars July
Augus
t
Revenue 60,00
0 39,000 Revenue 12,15
0 -8,850
Costs Costs
Vaccines 28,00
0 18,000 Vaccines 9,850 -150
Band aids 4,600 3,000 Band aids 1,410 -190
Rent 500 600 Rent 0 100
Receptionist 700 900 Receptionist 0 200
Nurse 14,00
0 9,000 Nurse 4,100 -900
Total cost 47,800 31,500 Total cost 15,360 -940
Net Profit/(loss) 12,200 7,500 Net Profit/(loss) -3,210 -7,910

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The variance analysis states that actual results has been comparatively lower than
budgeted results which resulted in a net loss for the two months that have been analysed. The
results that the Centre has undergone is comparatively low, that has been primarily due to the
low revenue base which was estimated in the budgeted phase and which in turn actually turned
out to be. It is recommended that the budget should be done in a detailed manner which should
include changes and possible variance that could affect the overall net profit or loss (Rajan,
Barroy & Stenberg, 2016).
c)
To,
The Manager,
The Flu Shot Clinic
Sir, we have well analysed the financial budget that has been prepared and the same has
been compared with the actual results in order to find out the degree of variance. In order to
prepare the budget for the next year the current financial performance and the numbers in
response to revenue and expenses should be taken into consideration for analysis and budgeting.
The historical budgeting prepared for the company should be well kept into consideration as to
why the variance have been high and what other forecasting techniques can the management
apply or reducing the variance between the actual and budgeted results. The key
recommendations that should be set for the purpose of preparing the budget are as follows:
 Setting Realistic Goals for the purpose of better incorporation of actual results
 Identifying the various income and expenses.
 Separating the various needs/demands and wants of the consumer

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 Designing of Budget
 Putting the plan into desired course of action
 Seasonal Expenses
 Looking Ahead in terms of long term forecasting.
Thanking You,
Finance Team.

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References
Bathurst, T., & Schwartz, S. (2017, March). Costs in representative proceedings, costs budgeting
and fixed costs schemes. In Judicial Review: Selected Conference Papers: Journal of the
Judicial Commission of New South Wales, The (Vol. 13, No. 2, p. 203). Judicial
Commission of NSW.
Bielefeld, B., & Schneider, R. (2017). Basics Budgeting. Birkhäuser.
Bollinger, L. A., Sanders, R., Winfrey, W., & Adesina, A. (2017). Lives Saved Tool (LiST)
costing: a module to examine costs and prioritize interventions. BMC public health,
17(4), 782.
Briggs, A. D., Scarborough, P., & Wolstenholme, J. (2018). Estimating comparable English
healthcare costs for multiple diseases and unrelated future costs for use in health and
public health economic modelling. PloS one, 13(5), e0197257.
Kuroki, M., Hirose, Y., & Motokawa, K. (2018). Efficient Participative Budgeting Using Service
Effort and Accomplishment Information: Survey Experiment for Local Governments.
Available at SSRN 3140590.
Miller, G. (2018). Performance based budgeting. Routledge.
Rajan, D., Barroy, H., & Stenberg, K. (2016). Budgeting for health. Strategizing national health
in the 21st century: a handbook. Geneva: World Health Organisation.
Speer, S. (2016). Regulatory Budgeting: Lessons from Canada. Policy Study, (54).

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Zemel, S., & Riley, T. (2016). Addressing and Reducing Health Care Costs in States: Global
Budgeting Initiatives in Maryland, Massachusetts, and Vermont. National Academy for
State Health Policy.