MOD006934 - Managing Finance in Health and Social Care Organisations

This report provides a financial critique of the Princess Alexandra Trust, analyzing its financial position, operating income, and asset growth from 2019 to 2020. It examines the demographic reach of the Trust and assesses the viability of entering a relationship with the NHS, highlighting the potential for brand value enhancement and service expansion. The report also discusses budget expectations for NHS Trusts, including incremental budgeting, frequency of budget reports, and the importance of linking budgets with medium-term plans. Alternative budgeting techniques like Performance Based Budgeting (PBB) and Zero Based Budgeting (ZBB) are explored, along with the concepts of incremental drift and efficiency targets. The role of target setting, variance analysis, and reporting of broad variances are also discussed, emphasizing the importance of understanding and managing costs within NHS organizations. Desklib offers similar solved assignments and study tools for students.

MANAGING FINANCE IN
HEALTH AND SOCIAL
CARE ORGANISATIONS

INTRODUCTION
Health and social care organisation equally needs appropriate financial management in
place as other organisation in an attempt to manage their risk and money, so that their financial
goals can be achieved within the set time period. The purpose of this report is to highlight how
finance has been managed within Princess Alexandra Hospital and NHS trust. The report will
include explanation of Trust’s overall financial position with reference to the financial outcomes
and changes in it year over year (Porter, Kaplan and Frigo, 2017). With the help of notes to
accounts, various drivers of changes, strategic factors like technology, practical factors like drug
costs, etc. will be highlighted. The emphasis will also be placed on studying the viability of
entering into relationship with Trust by considering profit margins and pricing of the trust, and
on the basis of this PAH’s affordability to enter into contract with other company will be judged.
Furthermore, this report will highlight good practices expected from budgets with respect to
NHS will be discussed in detail.
MAIN BODY
Financial critique of the Princess Alexandra Trust
The financial position of the Princess Alexandra Trust denoted the fact that operating
income of the organisation is 41744000 whereas, the same was in the previous financial year
24790000. There is a significant increase in the operating income of the organisation. This is
precisely stated and reflected that the organisation could increase its income in the business.
Total income from the activities is also achieved at a value of 246747000 and in the financial

years 211910000. This is also significantly increased in favour of the organisation. Total current
asset of the company is 55546000 and 24583000 in the previous financial year. Non current asset
of the organisation is also addressed as 125730000 in the year 2020 and 117310000 in the year
2019 (Tatham, Ali and Hillier, 2021). On the basis of the overall financial position reflected in
the books of accounts of company this can indicate that the business entity is growing rapidly in
the year 2020. The overall financial position of company has become more strengthened in
favour of the organisation. The financial position of the organisation denoting the increased trend
in respect to its income and the net profitability of the business organisation. The overall
financial situation is well established at the organisation and allow the entity to establish the best
form of overall growth and business expansion practices at the organisation.
The demographics related to the Princess Alenxendra Trust denoted the fact that the
organisation is catering its services across the United Kingdom. The demographic is certainly
associated with the United Kingdom. The organisation catering its services to all the people
based in United Kingdom. The demographic location of the organisation allow the stakeholder to
take a health care treatment at a locations like Bishops Startford (Goode And et.al., 2020). This is
a significant part of the organisation that it is well capable to deliver the best and advanced level
of health care treatment to all its patient. In England and the United Kingdom due to the
demographic location of the organisation people like to prefer to come and visit the hospital.
This become essential for the fact that the demographic location favour the hospital management
to ensure the best level of overall growth and development as an organisation.
The Princess Alenxendra Trust is well capable to delegate its health care practices to all
types of people. The patient at different age background and gender can come at a hospital and
entertain the best form of health care facilities and treatments. This is significant for the hospital
to allocate the most advanced form of medication so that patient can come along and entertain
the best level of treatment. The population size of the hospital cover all types of patients
comprises with all age, gender and such like factors (Sarkar, Pradhan and Singhal, 202). The size
of the organisation also favour in delivering all different practices at the organisation so that best
and most advanced form of medication treatments at a hospital. The role of the hospital is very
significant as irt delegate all types of medication like facilities which motivate to patient to come
and entertain the best form of medication and health care benefits.

Viability of entering the relationship with PAH
The Princess Alenxendra Trust is entering the relationship with the NHS. This
relationship or strategic alliances would allow the organisation to expand its business operations.
The NHS is a national level of trust operated in the United Kingdom which would favour ghe
organisation to maximize its practices at a national level. Currently the trust is delegating its
services at a some part of the United Kingdom. Due to the alliances formed the trust would be
capable enough to delegate its practices at a national level. This would also support the
organisation in establishing the positive brand value in the market (Barauskaite and Streimikiene,
2021).
IN context to the health care sector the brand value become a significant part of the
patient decisions making. The impact of the health care services is directly related to the health
of the market. People do not take any risk or do not want to take any risk in context to the health
care practices. The approach of the people allow and direct to approach only the well-known
hospitals and the organisations. Brand value becomes most significant element in taking the
decision-making about the cure practices and the health care treatments undertaken by the
patient. This relationship would favour the PAH to improve its brand value as the NHS is a
national level of trust and involved ion the services from last ,many years (Keers and van
Fenema, 2018). The well-known and positive image of the NHS would also support the PHS to
approach the patent positively. This is a great opportunity for the trust to attract new customers
along with sustaining the existing customer base of the organisation. Also this alliance would
further support the organisation in expanding its services. This would allow the organisation to
introduce services and practices that would all;ow the organisation to undertake the best form of
growth and development possibilities in the respective market. This relationship will favour and
benefit the PAH at a huge level to approach the best level of coverall growth and development as
an organisation.
Budget expectation of good practices with an NHS Trust
Budgets, incremental budgeting, frequency and layout of budget reports
Budgets: Budget is an estimate of income and expenses for a specified time period in future.
Basically, it is planning how you are going to spend or earn money in a particular time period in
future.

Incremental budgeting: An incremental budget is one which is prepared using or making some
marginal changes only to a budget of previous period or actual performance.
Frequency and layout of budget reports: Budget frequency refers to a time period after which a
new budget is prepared, or in other words, how often a budget is prepared. For e.g. weekly,
monthly, yearly etc.
A budget should contain expected revenues, expenses, net profit as well as cash flows so that you
can find out whether you would have enough funds for capital expenditure.
A budget should be prepared at least yearly. Ideally the yearly budgets should be divided in 12
monthly budgets. Blank columns should also be provided alongside the estimated numbers so as
to to put actual numbers for that period, in order to measure and control deviations as early as
possible.
Does PAH report on time and in an understandable format
Link to medium term plan: Medium term plan generally involves goals and objectives needed to
be achieved requiring several years but not more than five years. However budgets are prepared
in NHS Trust on an annual basis. Therefore, it is a best practice to link yearly budget with the
medium term plans of the Trust. In order to ensure that the budgets are prepared on time and
understandable format, it is necessary for the Trust to report to the financial management at the
end of the budget period regarding achievement of the budget aspects. PAH reports in an
understandable format as all the items are listed appropriately and coupled with description and
amount of each item.
Alternatives such as PBB / ZBB: There are various alternative techniques available to prepare
budgets in PAH. The two of this are Performance based and Zero based budgeting techniques.
Performance based budgeting has the goal of improving efficiency and effectiveness of public
expenditure by creating a linkage between results and funding of the public sector organisation.
For this systematic performance information has been utilized (Jeanne, 2017). PAH can see the
impact of this budgeting techniques through the improvements in expenditure prioritization and
efficiency and effectiveness in services offered to their patients. In contrast, Zero based
budgeting doesn’t give consideration to previous year’s budget by considering it irrelevant and
initiate from scratch to determine the items and their amount in the budget in order to determine

overall costs of inputs required to attain desired level of activity. Therefore allocation of
resources and funding has been done from zero level.
Incremental Drift and efficiency targets: In NHS, the concept of incremental drift has been
introduced in budgeting due to the requirement arises as there is a pay scales for paying staff
members including incremental points. So, there will additional staff cost arises when the
employee moves from lower point to incremental point and this what known as incremental drift.
So, the impact of incremental drift can be avoided while preparing budgets by defining pay scale
at mid points. And accordingly financial benefits can be obtained in short term. Inclusion of
efficiency targets in budgets are helpful enhancing profitability by controlling costs. The targets
acts as a basis and motivation to
NHS targets and activity change: A good budget allows for setting targets on the basis of
changing level of activity for various departments of NHS. This would be helpful in allocating
funds and resources to various activities performed within NHS. Target setting enables NHS in
establishing priorities and providing direction in order to convert paper based business objectives
into actuality. By determining level of activity from time to time for each departments, the
resource allocation can be done in such a way to enhance overall efficiency and effectiveness in
target achievement (Jørgensen and et.al., 2019). Also, target setting by keeping in mind the
changing level of activity will be helpful in assigning responsibilities to the managers of different
departments of NHS.
Variance analysis with reference to the application of marginal costs concept: The concept of
marginal costing involves the identification of additional costs incurred in carrying out the
operation of the company. Thus, the two concepts that is, marginal costing and variance analysis
are somewhat linked with each other in way marginal costing allows for determining how much
variance in actual performance has occurred as against the set budget. And through variance
analysis, by indicating the difference in budgeted cost and actual cost, it becomes easier to
identify what additional cost has incurred. In this way, variation in the actual performance can be
analyzed through the determination of marginal cost and accordingly business performance can
be protected from the impact of severe variances in costs.
Reporting and explanation of broad variances: Broad variances in budget occurs due to
controllable and uncontrollable factors. The controllable factors are within the scope of NHS to

avoid any such variances to occur to a great extent. Appropriate reporting of variances is
necessary along with the explained reason for the occurrence of the variance in order to
minimize their impact on business performance (Jørgensen and et.al., 2019). PAH has a well
system of reporting variance where its financial management team undertakes to conduct yearly
audit of all the departments and its activities and determine their actual figures of income and
expenses in order to compare it with the budget figure, which accordingly results in
identification of variances. Further, it is reported to the defined body authorized to take note of it.
Training / Knowledge / confidence of budget holders
Capability to control costs: PAH must ensure that they have trained, knowledgeable and
confident team of budget holders to make sure that reliable, relevant and authentic budget could
be prepared. The managers or budget holders should have such level of capability to control
costs and other factors which are responsible for creating variances in budget. Their confident,
knowledge, training and experience are the factors through which it can be ensured that budget
has been prepared appropriately. In PAH NHS, the budget holders (operational directors and
managers) are responsibly carrying out their duty of ensuring that the Trust is following the
budget that has been set out for it.
Options for budget setting within OT (Occupational Therapy) department
OT department within NHS is one of the most important department of NHS. It concerned with
the recovery and improvements from the injury or condition of the patients. The budget set for
this department should include items like number of staff needed against the number of patients
admitted on daily basis, hours served for single patient, requirement of equipment for one time
and long term one, beds needed, time required for recovery, successful and unsuccessful services
provided, etc (Talley, 2020). It allows for understanding the trends in the performance of the
trust. The budget should be construction and management of budget should be such which serves
the purpose of financial planning by considering the actual volume of performance. Budget
setting allows for the identification of causes of the occurrence of sub-variances and this is very
crucial for the healthcare concern, so that maximum care and best level of treatment can be
extend to the patients.

Motivational aspects of budget setting in PAH compared with HCA
The Motivation behind setting budget is to affect employee’s performance and attitudes and
motivate them through setting targets on the achievement of which both budget holders and
employees are awarded within PAH. On the other hand, HCA prepare budget to treat surpluses
and deficit arising out of their operational activities, where favorable variances allows for setting
higher targets for higher performance in future while unfavorable variances allows to overcome
the hurdles that is depriving HCA from achieving their targets. The modern budgeting techniques
like rolling budget allows for overcoming the challenge of static projection for the business
variables over a certain period of time by continuously projecting business limitations and needs
as the factors affecting a business gets updated.
CONCLUSION and RECOMMENDATION
The PAH is aiming to form an alliance with the NHS. This partnership would empower
and support the organisation to establish a positive brand value that would support the business
entity to expand and maximise the overall growth and development of the organisation. The
alliance is very favourable as the NHS is a national; level of organisation that will favour and
allow the organisation to undertake the best level of growth opportunities.
Recommendation:
 The PAH should, promote these alliances at all the potential channels and platforms.
 Company should look forward to maximises its services.
 Stakeholder engagement should also be done continuously (Svare, Gausdal and
Möllering, 2020).

REFERENCES
Porter, M. E., Kaplan, R. S. and Frigo, M. L., 2017. Managing healthcare costs and
value. Strategic Finance, 98(7), p.24.
Jeanne, W., 2017. Understanding healthcare economics: Managing your career in an evolving
healthcare system. Productivity Press.
Jørgensen, R., and et.al., 2019. Communities of practice in healthcare: A framework for
managing knowledge sharing in operations. Knowledge and Process Management, 26(2),
pp.152-162.
Chanchaichujit, J., and et.al., 2019. Transforming and Managing Healthcare Projects.
In Healthcare 4.0 (pp. 161-194). Palgrave Pivot, Singapore.
Talley, B., 2020. Economics and Finance of Healthcare. Transformational Leadership in
Nursing: From Expert Clinician to Influential Leader, p.277.
Tatham, A. J., Ali, A. M. and Hillier, N., 2021. Knowledge of Glaucoma Among Patients
Attending Virtual and Face-to-Face Glaucoma Clinics. Journal of Glaucoma. 30(4).
pp.325-331.
Goode, E. F. And et.al., 2020. 243P UK experience of the management of pregnancy associated
breast cancer: A national retrospective review of practice. Annals of Oncology. 31.
p.S337.
Sarkar, D. K., Pradhan, A. and Singhal, A. K., 2020. 10. DECODING THE ROLE OF CANCER
STEM CELLS IN PROGRESSION OF BREAST CANCER: A PILOT
STUDY. European Journal of Surgical Oncology. 46(6). pp.e3-e4.
Barauskaite, G. and Streimikiene, D., 2021. Corporate social responsibility and financial
performance of companies: The puzzle of concepts, definitions and assessment
methods. Corporate Social Responsibility and Environmental Management. 28(1).
pp.278-287.
Keers, B. B. and van Fenema, P. C., 2018. Managing risks in public-private partnership
formation projects. International Journal of Project Management. 36(6). pp.861-875.

Svare, H., Gausdal, A. H. and Möllering, G., 2020. The function of ability, benevolence, and
integrity-based trust in innovation networks. Industry and Innovation. 27(6). pp.585-
604.