Analysis of Financial Systems and Processes in CareTech Holdings Plc

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Managing Financial Resources in Health and Social Care
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Summary
This report has been prepared based on the organisation CareTech Holdings Plc and has been
made in order to presenting to the directors, the NHS and various CCG representatives on the
ways in which financial resources are managed within the organisation. It has mentioned on how
systems are used in CareTech Holdings Plc and the role that planning plays in order to manage
the finances of the enterprise. The report has also illustrated the significance of health and social
care organisations in monitoring budget expenditure followed by evaluating financial systems
and processes that can be used for enhancing financial resource management in CareTech
Holdings Plc.
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Table of Contents
Introduction......................................................................................................................................3
Task 1...............................................................................................................................................4
Task 2...............................................................................................................................................8
Task 4.............................................................................................................................................13
Conclusion.....................................................................................................................................15
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Introduction
One of the most important sectors operating within a nation is the health and social care. In this
report, a detailed discussion will be made on planning and managing finances in the context of a
health care organisation named CareTech Holdings Plc, which is a leading UK based
organisation, which provides specialist social services. It will be discussing about the different
ways in which finances in a healthcare enterprise can be managed and how financial troubles,
shortcomings and other situations can be handled in a health care organisation.
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Task 1
1.1 Explain the principles of costing and business control systems that may be adopted in
CareTech Holdings Plc.
Both costing and business control systems are equally important to a health and social care
organisation. Costs can be defined as any amount of money, which is paid as compensation for
acquiring or purchasing an object (Drury, 2013). Costing is of great importance to organisations
operating in the health and social care sector. The following are the costing principles, which
CareTech Holdings Plc has adopted as per the approval of NHS -
 Stakeholder engagement - Any interested parties of a company are its stakeholders
(Andriof et al., 2017). Through the engagement of stakeholders in CareTech Holdings
Plc, the organisation can be conducting costing in a more effectual, efficient and accurate
manner along with reflecting the idea of stakeholders.
 Data accuracy principle - The data accuracy principle is a costing principle, which leads
to the increase of data accuracy in a healthcare organisation, which enhances the
confidence of its patient-level costs (Wimmer and Powell, 2016). In order to support the
cost results of CareTech Holdings Plc, this principle must be adopted.
 Consistency principle - As per this principle, the accountants of a company require
adopting a constant method that they will use and will be continuing to follow in the
upcoming accounting periods as well (Zhang et al., 2018). Through the adoption of this
principle, CareTech Holdings Plc will be able to improve its quality of services through
better costing.
On the other hand, Chang (2016) defined business control systems as the ones, which assist
companies in protecting itself from careless, uninformed and expensive decisions or behaviours.
CareTech Holdings Plc can be adopting the following business control systems -
 Purchase control system - According to Kondrk et al. (2016), purchase control systems
help in the maintenance, authorisation and input of the purchase orders and requisitions
of a company starting from timely entry to receipt of materials. Through implementing
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this system in CareTech Holdings Plc, frauds can be avoided, costs can be minimised,
and financial activities can be run in a smooth and efficient manner.
 Cash control system - Cash control systems are the systems that can be used in order to
monitor the cash allocation, credit, collection, invoicing functions as well as
disbursement policies of a company (Herrera-Caceres and Ibeas, 2016). CareTech
Holdings Plc, through the cash control system, can be reducing all its vulnerable and
fraudulent activities, along with ensuring adequate cash control.
1.2 Identify the information needed to manage financial resource for CareTech Holdings
Plc in financial ending.
The management of financial resources in a company requires the availability of various kinds of
information. The following are the kinds of information, which are needed for CareTech
Holdings Plc’s financial resource management -
 Profit and loss statement - This financial statement summarizes a company’s income and
expenditure and finally results into the calculation of the total profit it has earned during a
period (Year, 2017). Through analyzing the financial statement of CareTech Holdings
Plc, it can be seen that the revenue of the company has increased by 17039000 while its
net profit has reduced by 5022000 between 2016 and 2017, showing a deterioration in its
performance (Annualreports.com, 2019).
 Balance sheet - This financial statement provides information regarding the capital
structure, the liabilities and the assets of a company (Reid and Myddelton, 2017).
Through the analysis of CareTech Holdings Plc’s balance sheet, it can be evaluated that
the equity and assets held in the company has improved by 52534000 and 33677000
respectively while its liabilities have decreased by 18857000 between 2016 and 2017,
which show improvements in its performance (Annualreports.com, 2019).
 Cash flow statement - The changes and position of cash of an organisation can be
evaluated from the cash flow statement (Reid and Myddelton, 2017). For instance,
CareTech Holdings Plc’s cash flow statement indicates an improvement in its cash
balance by 2094000 from 2016 to 2017 (Annualreports.com, 2019).
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1.3 Explain the regulatory requirements need to be satisfied while managing financial
resources in CareTech Holdings Plc.
For managing the financial resources of a health and social care organisation, several regulatory
requirements are required being met as they help it in ensuring its integrity, accountability,
openness and fairness and the effectiveness of its processes and systems. In order to manage
CareTech Holdings Plc’s financial resources, the following regulatory requirements are required
being met -
 Monitor - This regulator is responsible for the regulation of the financial resources of all
NHS funded service provides in the UK (England and Care Quality Commission, 2014).
For example, the financial resources of CareTech Holdings Plc are required being
managed as per the requirements set by the Monitor. The Monitor also issues license to
the organisation associated with its healthcare services along with setting guidelines for
it.
 Financial Reporting Council - The independent regulator that plays the role of
promoting companies’ corporate governance and reports for promoting investments is the
Financial Reporting Council or FRC (Council, 2015). The requirements of the FRC
related to financial reporting, auditing, transparency, integrity and such other aspects are
required being abided by CareTech Holdings Plc as well.
Among other regulators, the NHS Litigation Authority, the Company House, and the HMRC also
play a considerable role.
1.4 Evaluate the systems for managing financial resources in CareTech Holdings Plc.
In addition to regulatory requirements, information, costing and business control systems,
various systems are also necessary for managing financial resources in healthcare organisations.
The systems that CareTech Holdings Plc requires having for managing financial resources are as
follows -
 Control systems on assets - This system is beneficial for providing control on the fixed
assets of an organisation, both tangibles and intangibles. Through this system, CareTech
Holdings Plc can be maintaining its assets for confirming their value and their existence
along with its safekeeping.
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 Control systems on investment appraisal - The investments that a company makes are
managed and controlled through this system. For example, in CareTech Holdings Plc, a
control system on investment appraisal helps it in ensuring that it provides the best
advantage available to it.
 Budgetary control system - Through the budgetary control system, a company is able to
ensure the minimization of its budgetary variances and ensure a strong budgeting system
(Otley, 2015). Through the means of this system, CareTech Holdings Plc will be able to
monitor the finances and the financial resources possessed in it.
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Task 2
2.1 Discuss the diverse sources of income available to CareTech PLC in the financial year
in 2017
There are different sources from which an organisation with the health and social care sector can
be deriving income. The following are the sources of income that CareTech PLC had during the
last financial year -
 Revenue - There are different services through CareTech PLC acquired revenue in the
last two years. For example, CareTech PLC had total revenue of £166018000 in the year
2017 from sources such as adult services, child services, specialist services, adult
learning disability services, foster care, young people residential services and learning
services (Annualreports.com, 2019).
 Equity and stock - Equity and stock are also a good source of income for an organisation
as well. For example, CareTech PLC had an income of £204201000 during the year 2017
from its equity and stock, and serves as a good source of income (Annualreports.com,
2019).
 Loan - Loan is also a good source of income for CareTech PLC. The company earned
£145872000 in 2017 from long-term loans and £7662000 from short-term loans
(Annualreports.com, 2019).
2.2 Analyse the factors that may influence the availability of financial resources in
CareTech Plc
According to Quadlin (2017), several factors affect the financial resource availability within an
organisation both directly and indirectly. The factors that affect CareTech PLC’s financial
resource availability are the following -
 Size of the organisation - Depending on the size of an organisation, the government of a
country provides funds for its development. For example, as per the size of the
organisation, CareTech PLC can be acquiring funds from the government for providing
training to its staff or improving its services.
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 Types of services provided - The kind of services that an organisation provides also
influences its financial resource availability. For example, CareTech PLC provides
extensive nursing services, which is one of the foremost reasons for which the
organisation can ensure its financial stability as well as higher financial resource
availability.
 Economic conditions - According to Folland et al. (2016), the economic situation of a
nation has a direct effect on the spending of its government for its organisations. This in
turn has an effect on CareTech PLC’s financial resources availability.
2.3 Review different types of budget expenditure in CareTech Plc.
According to Arabnejad and Barbosa (2014), budget expenditures are of various kinds. The
common budget expenditures of CareTech Plc include -
 Cash flow budget - This budget estimates the cash expenses and receipts of a company,
which are anticipated to be occurring within it. Through this budget, CareTech Plc plans
the ways of overcoming and avoiding its short-term cash shortages.
 Capital expenditure budget - It is the kind of budget in which the timing and amount of
fixed asset purchases in a company are estimated and recorded. CareTech Plc uses this
budget to manage its financial resources and organizing its activities for the upcoming
years related to asset purchase.
 Master budget - Such a budget aggregates all the lower-level budgets of an organisation,
produced by its several functional areas along with including its cash forecast, financing
plan and budgeted financial statements. It is also a budget expenditure of CareTech Plc.
2.4 Evaluate how decisions about expenditure could be made in CareTech Plc
Decisions in a company are required being made through applying various tools and techniques
and considering several information. The following are the factors that CareTech Plc considers in
its decision-making -
 Environmental analysis - The various forces, which have an effect on the operations of
an organisation, can be evaluated through environmental analysis (Shabanova et al.,
2015). By conducting, environmental analysis with the means of PEST and SWOT,
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CareTech Plc will be able to understand the factors that will be affecting it and make its
financial decisions such as expenditure related decisions effectually.
 Focusing on priorities - It is necessary that a company focus on the areas that are its
priorities. For example, CareTech Plc must be focusing on the areas of expenses, which
act as its priority, which will be helping it in making effectual decisions.
 Eliminating emotionalism - Through the means of elimination of emotionalism, one be
more realistic and can be controlling spending as well. By eliminating emotionalism,
CareTech Plc can be making effectual decisions on its finances without being influenced
by sort of emotion.
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Task 3
3.1 Assuming there was financial shortfall in CareTech PLC; explain how this situation
could be managed.
The situation with which liabilities in a firm exceed its assets is known as financial shortfall. In
case of financial shortfalls occurring in CareTech PLC, the following ways can be used to
manage the situation -
 Priorities - Prioritising also helps a company in managing its shortfalls. Through
prioritising its payments and its creditors, CareTech PLC can overcome its financial
shortages.
 Reserve funds - Reserve funds are the savings accounts and other liquid assets put aside
by an organisation for meeting future costs and liabilities arising unexpectedly (Kulikova
et al., 2017). The reserve funds of CareTech PLC can also be used in times of occurrence
of financial shortage.
 Virement - Transfer of money from a specific department of a country to another is
called virement (Porter and Recipients e-mail, 2017). Through this method, the
management at CareTech PLC will be able to transfer funds in times of financial
shortages from surplus departments to shortfall departments.
3.2 Explain what action you would take if you suspect occurrence of financial fraud in your
organisation.
The concealing, violating and deception of a company’s financial transactions for personal gain
is termed as financial fraud. In case of occurrence of financial frauds in CareTech PLC, the
following actions can be taken -
 Taking an immediate note of the concerns
 Noticing the red flags
 Conveying the suspicions to a suitable person who can be taking the necessary actions
against fraud
 Dealing the matter in a prompt way
 Any sort of letters or notes found anonymously must be considered seriously
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