Managing Financial Resources in Health and Social Care: A Case Study of CareTech Holdings Plc

This report examines the financial management practices of CareTech Holdings Plc, a leading provider of health and social care services in the UK. It explores the principles of costing and business control systems, identifies the information needed to manage financial resources, and analyzes the diverse sources of income available to the company. The report also discusses the regulatory requirements that must be satisfied, evaluates the systems for managing financial resources, and examines the impact of financial considerations on individuals using the health and social care service. Finally, it suggests ways to improve the health and social care service through changes to financial systems and processes.

Managing Financial Resources in Health
and Social Care
1

Contents
Introduction......................................................................................................................................3
1.1 Explain the principles of costing and business control systems that may be adopted in
CareTech Holdings Plc................................................................................................................4
1.2 Identify the information needed to manage financial resource for CareTech Holdings Plc in
financial ending............................................................................................................................6
1.3 Explain the regulatory requirements need to be satisfied while managing financial
resources in CareTech Holdings Plc............................................................................................7
1.4 Evaluate the systems for managing financial resources in CareTech Holdings Plc..............8
2.1 Discuss the diverse sources of income available to CareTech PLC in the financial year in
2016..............................................................................................................................................9
2.2 Analyse the factors that may influence the availability of financial resources in CareTech
Plc...............................................................................................................................................10
2.3 Different types of budget expenditure in health and social care organizations...................11
2.4 Decisions about expenditure within a health or social care organization............................12
3.1 Management of financial shortfalls......................................................................................13
3.2 Actions to be taken in the event of suspected fraud.............................................................14
3.3 Budget monitoring arrangements in a health or social care organization............................15
4.1 Information required to make financial decisions relating to a health and social care service
....................................................................................................................................................16
4.2 Analyse the relationship between a health and social care service delivered, costs and
expenditure.................................................................................................................................17
4.3 Evaluate how financial considerations impact upon an individual using the health and
social care service......................................................................................................................18
4.4 Suggest ways to improve the health and social care service through changes to financial
systems and processes................................................................................................................19
Conclusion:....................................................................................................................................20
References......................................................................................................................................21
2

Introduction
The report prepared in the following assignment deals with the various issues faced by an
organization operating in health and social care industry. In order to prepare the report a case
study relating to Care tech Holdings has been taken and the issues faced by the organization in
managing its resources will be analyzed and solved accordingly. The Basic principles of costing
along with the regulatory requirements associated with managing the financial resources will be
discussed in this report. The diverse sources of income for health and social care company
together with the factors which affect the availability of financial resources will be discussed in
this report. The report will also include a description relating to various expenditure issues
together with the financial; shortfalls faced by the company and the solutions will be provided.
The information required for making financial decisions and the financial considerations which
can impact the company will be provided in this report.
3

1.1 Explain the principles of costing and business control systems that may be adopted in
CareTech Holdings Plc.
Cost accounting can be represented as the branch of accounting which has been evolved for
overcoming the limitations of financial accounting. The term can be defined as the process of
accounting cost of company by ascertaining, distributing, allocating and classifying the various
aspects of costs. Thus it includes classifying and recording the various cost items concerned with
the operations of company (Hayes, 2015).
The importance of costing lies in the fact that it helps in:
 Controlling the costs – The various cost items of the company can be identified and
classified separately and they can be analyzed for the purpose of reducing them. Thus the
system helps in controlling the excessive cost of company.
 Determining the profitability of company – The various types of profitable and non-
profitable activities can be separated and identified in order to ascertain the profitability
of company.
 Making decision related to economic aspects – The economic decisions of the company
can be taken after careful evaluation and analysis of the cost activities of company.
Principles of costing – There are six principles of costing which includes stakeholders,
consistency, data accuracy, causality and objectivity, transparency and materiality.
 Stakeholders – The sound costing system of the company should enable and encourage
the use of costing system for clinical and non-clinical stakeholders of company. The
costing information should be of use for the stakeholders of company.
 Consistency – A good costing system must be consistent across all the services which
will enable in cost comparison within and across the organization (Glasby, 2017).
 Data Accuracy – The good costing system should be developed with high quality of data
and this will help in building more confidence.
The business control system of the organization consists of the control system which helps in
controlling the economic and other activities of the company and this includes budgetary control
4

system, computer control system, auditing system, internal control system and physical control
system.
Cost benefit analysis in Caretech Holdings – The cost benefit analysis conducted in the
company will help in making cost evaluation for different activities and identifying the benefits
concerned. The same will allow the business managers to concentrate on those activities which
can provide additional benefits to the company.
5

1.2 Identify the information needed to manage financial resource for CareTech Holdings
Plc in financial ending.
The different types of information which are required to take decision for allocating financial
resources consist of:
Business costs – The business costs will be related with the items concerned with cost of sales
for the company including wages, bills, overtimes, interest on loans and overdrafts. The same
will also include the information related to cost of people, equipment’s etc.
Income streams – The income flow of the company will be of significant importance for the
business managers to take decision regarding the level of activity to be performed in future
periods (Hayes, 2015).
In context of Caretech Holdings revenues for the year ending 2016 amounted to £149 million
with an operating profit amounting to £30.5 million which has increased significantly by 71%
from the last year. The cost of goods sold has amounted to 94 million which has also increased
significantly in ten current years 2016.
6

1.3 Explain the regulatory requirements need to be satisfied while managing financial
resources in CareTech Holdings Plc.
The regulatory requirements refer to the various pronouncements and legislation which must be
complied by the company during the year and these includes the various types of legislatives and
ethical codes of practices. The follow up of these regulatory requirements is important for the
company so as to ensure and build the confidence of various investors and avoiding any type of
civil or criminal penalties. The same includes:
Accounting standards (IFRS and GAAP) – The accounting standards will be required to be
followed in order to prepare the accounting information of company. The same will be subject to
provisions applicable for company as required by International Financial Reporting Framework
and Generally Accepted Accounting Principles (Glasby, 2017).
HMRC and CQC – The HMRC and CQC (Care Quality Commission will be the regulatory
bodies which will be taking control of the activities to be undertaken by Caretech Holdings
Limited. Then CQC will make regular inspection and routine checkups for ensuring the
compliances. There will be various other reporting and regulatory requirements associated with
the company.
7

1.4 Evaluate the systems for managing financial resources in CareTech Holdings Plc.
The system can be defined as the set of various processes, methods and routines which are being
carried out to perform the operation or solve a problem. The system will include the set of
regulate activities to be performed for achieving an objective. The various types of systems
which can be used in Caretech Holdings are as under:
Accounts payment and procurement system – This will refer to the system which is required
for managing the payments and accounting work of company. This will require involvement of
accounting team of the company.
Cost and management accounting system – The cost and management accounting system will
be concerned with identifying the cost information of company and reporting it appropriately and
assisting the management in decision making functions. The various kinds of management
reports will be extracted in this system.
Budgeting system – The budgeting system of the company will be associated with recognizing
and preparing the budgets for company in order to allocate the resources and planning the future
activities of business (Hayes, 2015).
8

2.1 Discuss the diverse sources of income available to CareTech PLC in the financial year
in 2016.
The various sources of income include the different categories which are described below:
Internal or external sources – The external sources of income will refer to the revenues
generated from selling goods and services to the outsiders however the internal sources of
income will represent the revenues generated within the company.
Short term or long term sources of income – The short term sources of income includes the
incomes generated within a year for the company however the long term sources includes the
revenues generated in a long period of time generally more than one year.
Private sources of income – The private sources of income for Caretech Holdings will include
annual subscription fees or donations received from individuals or private institutions and this
will be subject to some limitations. The income for Caretech Holdings will be in the form of
revenues generated from providing adult and children mental services (Glasby, 2017).
Public sources of income – The public sources of income for Caretech Holdings will include the
donations from government, grants received, public sector funding from councils, central
government, CCG, NHS. The same will also include the charitable donations from public. The
foster care services for Caretech Holdings will help in generating enough revenues for the
company by providing mainstream foster care services.
9

2.2 Analyse the factors that may influence the availability of financial resources in
CareTech Plc.
The various factors are described below:
Funding priorities – The funding priorities for Caretech Holdings will be based on required
amount of funding and the nature of services to be provided by the company in health and social
care. The suitable option of funding will be analyzed and selected by the company.
Inter-agency partnership – The relationship existing between the agent and the company will
also impact the availability of funds for the company as the company with good reputation will
be able to generate sufficient funds and vice versa (Ginter, 2018).
Government policies – The government policies relating to various sources of funding and
social and healthcare organization will also have a significant impact on the availability of funds.
The fiscal policies and political policies will be reviewed then.
10

2.3 Different types of budget expenditure in health and social care organizations
Budgets are important in CareTech Holdings PLC as it helps the company to know its incomes
and expenses for the period. By managing its revenues and expenses the company can ensure it
will not run out of finances. Caretech prepares its budgets by forecasting for the future and is
able to manage its plans for the period much more effectively. It ensures that company is able to
meet its financial obligation timely and helps the company to achieve its goals and objectives
effectively (Harker, 2012).
The company prepares sales budget which guides the sales team about their revenue targets,
resource budget which tells about the requirement of the resources for the period, labour budget
which gives the cost of the labour for the year, materials budget helps in estimation of material
requirements for the period and overheads budget helps in forecasting overhead costs for the
year.
(Image: 1)
(Source: Crawford, 2014)
11

2.4 Decisions about expenditure within a health or social care organization.
Expenditure can be of two type’s revenue or capital which is short-term or regular expenditure
and long-term fixed assets expenditure. While making decisions about buying land Caretech
carries out a cost-benefit analysis and whether the expenditure is a priority or not. Whereas in
making day to day expenses the company analysis the expenditure and carries out cost control
for reducing it. While carrying out the above analysis helps in saving financial resources but if
the firm directly makes the decision then the firm can end up making an ill-planned decision and
lose money. If a firm buys land after making a proper analysis, then the firm can increase its
value of investment if it does not then maybe such an investment could be delayed and financing
costs could have been saved. The firm has managed its assets by purchasing them when they
were required at low financial costs and thereby saving money. Therefore, decisions about
expenditure should be made with proper analysis as it helps the firm in saving costs (Ginter,
2018).
12

3.1 Management of financial shortfalls
Financial shortfall is a situation when the liability of the Caretech exceeds the cash reserves
available with it. Shortfalls arise because of poor financial management practices. It can be
temporary or can continue for a longer period. To manage the situation Caretech can improve its
cash flow analysis, control its costs if there are a lot of expenditures the company should make
priorities, maintain reserve funds for such circumstances and have an alternative source of
income from external sources. By following these procedures, the company can prevent a
financial shortfall (Acharya, Engle and Richardson, 2012).
13

3.2 Actions to be taken in the event of suspected fraud
Any activities that are carried out by Caretech or its employees which are dishonest or illegal and
are aimed to give an advantage to that individual or company are considered fraudulent
activities. For checking the fraud, the company usually has a proceduresetup in its audit
procedure which brings s forward the fraud and another one is internal control mechanism which
also helps in finding fraudulent behavior. After the detection of the fraud, the company must
consult with its attorney. After the discussion, the company must report the activity to the
government authorities and work with them for resolving the issue.
14

3.3 Budget monitoring arrangements in a health or social care organization
Budget monitoring is a regular process through which the budgeted plans are achieved. It is
important because it helps to run Caretech smoothly, help to achieve the targets, helps in
decentralization, assign duties and removes the ambiguity of information, helps in coordination
among departments and it helps the management to initiate corrective action (Raj, 2018).
Budget monitoring is extremely important in Caretech. Caretech should have a special
committee for forecast which will make forecasts which are closely related to the external
environment which will make the budget monitoring process easy as the targets would be more
accurate, the company should also outline resource usage for different products and prevent any
overuse by effective monitoring, the company should do its work on time by effectively
monitoring its schedule and finally company should define the scope of its work accurately
(Arnold, 2015).
The Caretech should produce regular monitoring reports which compare actuals with budgeted
expenditures. Make sure this report is available to everyone so that the concerned department can
correct the mistakes. The project should be reviewed by the audit committee and remedial action
be suggested in case of deviations.
(Image: 2)
(Source: FeedYeti, 2018)
15

16

4.1 Information required to make financial decisions relating to a health and social care
service
Caretech needs to make financial decisions (borrowing or allocation of funds for investment
decisions) as this will decide the future investment of the company. It will guide the future of the
company as investments are made for long-term and they give result after a year or maybe more
(James, 2012).
These decisions are made by the board of directors with consultation with the expert committee
and certain managers to get ground level information because they are extremely important.
When the management is making financial decisions they look into a number of financial reports
including cash flows, balance sheet, budgets, revenue records and other important ledgers. The
company also uses ratios payback period, liquidity ratio, interest coverage ratio and profitability
ratios which guide the financial decision-making process. This helps the company in serving
their clients and providing best residential care homes.
17

4.2 Analyse the relationship between a health and social care service delivered, costs and
expenditure
Quality of care means the degree to which healthcare services for individuals and people increase
the probability of preferred fitness results and whether they are in line with present professional
acumen. There is a positive relationship between cost and quality of care. If Caretech improves
the quality of Caretech costs will increase (Bowling, 2014). Quality of care includes a number of
steps that are to be taken these include –
To improve the quality of care there is a requirement of a continuous cycle of improvement that
is regular staff training, proper supervision, and proper following of standards and procedures.
This includes complying with external regulations laid down by CQC and to take corrective
action is necessary. The behavior of staff by putting the service of users in the center of their
work and their attitudes towards the user that is treating them with respect and dignity. This can
be ensured by giving proper staff training and effective communication.
By following the above processes, the company needs to spend more money for staff training
and motoring whether the activities are being carried out in the manner this will increase the
monitoring expenses and training expenses.
(Image: 3)
(Source: Wolf, 2018)
18

4.3 Evaluate how financial considerations impact upon an individual using the health and
social care service
Financial consideration is the payment made to health care provider such as Caretech. This can
include payment for mental illness services, learning disability services and eating disorders. The
government budgets for healthcareareunderfunded so the service providers carryout mean testing
and assess the level of need this excludes the rich and only include those poor individuals who
really require medical attention.
This requires institutions to check the asset level of the individuals, their eligibility and carries
out financial tests to ensure the ones getting the service truly deserve it. The impact of financial
consideration aims at helping only the ones really in need thereby at times middle class who need
help are excluded. The organizations that are funded by the government are required to carryout
these checks to ensure that they are carrying the policy of helping the ones in need. This has an
impact on individuals as they have to rely on private clinics for treatment and this raises theirs
out of pocket expenditure on healthcare. Further, this system reduces the effectiveness of
healthcare as everyone is not able to get the same better healthcare opportunities. E.g. two
individuals one belonging to the middle-class other living closer to the poverty line cannot afford
to get a particular disease treated and they choose government service provider for this. Then
according to the rules, they will choose the poorer individual and the individual from middle
class has to stay without treatment or has to get a bank loan for this. It can because serious
problems as these days’ treatment costs can take away the entire life’s savings.
(Image: 4)
(Source: MBJ, 2018)
19

4.4 Suggest ways to improve the health and social care service through changes to financial
systems and processes
The financial system covers financial transactions by making changes in financial systems the
quality of care provided by Caretech and other health providers can change. The government can
provide health care services to its citizens by either providing them by opening government
hospitals or by using voucher or insurance scheme. If the government pays health care service
providers on the basis of results delivered by them, it can improve the effectiveness of healthcare
(Kennedy and Bartlett, 2014). The government can also start benefit cap for each individual or
healthcare institution. The government can fund health care programmes for increasing
innovative ideas. It can make payment to the drug companies according to the cost of medicines
and ensure transparent payment system for all these services. This will improve the quality of
healthcare and improve the performance of health care providers,
20

Conclusion:
The above report concludes that Caretech Holdings have to apply management skills in order to
deal with the funding requirements and management of company. The various types of costing
and management accounting system shall be introduced in order to generate adequate funds for
company. The reporting requirement will help in allocating the resources to suitable departments.
Thus it has to be ensured that adequate and appropriate funding policies have been applied in
Caretech Holdings Limited.
21

References
 Acharya, V., Engle, R. and Richardson, M., 2012. Capital shortfall: A new approach to
ranking and regulating systemic risks. American Economic Review, 102(3), pp.59-64
 Arnold, D. 2015. 5 New Ways to Track Project Budgets Accurately. [online]
Workamajig.com. Available at: https://www.workamajig.com/blog/5-new-ways-to-track-
project-budgets [Accessed 8 Jun. 2018].
 Boulware, L.E., Cooper, L.A., Ratner, L.E., LaVeist, T.A. and Powe, N.R., 2016. Race
and trust in the health care system. Public health reports.
 Bowling, A., 2014. Research methods in health: investigating health and health services.
McGraw-Hill Education (UK).
 Cascio, W., 2018. Managing human resources. McGraw-Hill Education.
 Crawford, J. 2014. 8 Tips For Maximizing Your AdWords Budget. [online] Marketing
Mojo. Available at: https://www.marketing-mojo.com/blog/maximizing-your-adwords-
budget/ [Accessed 8 Jun. 2018].
 FeedYeti 2018. Budget monitoring. [image] Available at:
https://feedyeti.com/hashtag.php?q=BudgetMonitoring [Accessed 8 Jun. 2018].
 Ginter, P.M., 2018. The strategic management of health care organizations. John Wiley
& Sons.
 Glasby, J., 2017. Understanding health and social care. Policy Press. Harker, R., 2012. NHS funding and expenditure. Standard Note: SN/SG/724
 Hayes, P., 2015. Managing financial resources. Good Practice, (11), p.21.
 James, B.D., Boyle, P.A., Bennett, J.S. and Bennett, D.A., 2012. The impact of health
and financial literacy on decision making in community-based older adults. Gerontology,
58(6), pp.531-539.
 Kennedy, B. and Bartlett, R., First Data Corp, 2014. Healthcare system and method for
right-time claims adjudication and payment. U.S. Patent 8,788,293.
 MBJ 2018. Health Care. [image] Available at: http://msbusiness.com/2018/03/alabama-
based-encompass-health-acquire-camellia-healthcare/ [Accessed 8 Jun. 2018].
22

 Raj, S. 2018. Importance of planning. [online] Skynetplanet.com. Available at:
http://www.skynetplanet.com/importance-of-planningbudgeting-monitoring/?i=1
[Accessed 8 Jun. 2018].
 Wolf, A. 2018. Health Care. [image] Available at: https://www.plewall.com/post/worlds-
largest-health-care-is-here/ [Accessed 8 Jun. 2018].
23