Financial Management and Budgeting in Health and Social Care

This report provides a detailed analysis of financial management within the health and social care sector, focusing on Anchor Trust and Anchor Hanover Group. It covers the importance of accounting and finance functions, the use of financial ratios to assess organizational performance, and the evaluation of short-term and long-term financing needs. The report also discusses sources of finance, budgetary control processes, revenue management, and double-entry bookkeeping. Furthermore, it interprets organizational budgets, evaluates capital expenditures using investment appraisal techniques, and provides recommendations for financial management improvements within Anchor Hanover Group, highlighting the significance of effective financial planning and control in the health and social care industry.

MANAGING FINANCE IN
THE HEALTH AND
SOCIAL CARE

Table of Contents
TASK-1............................................................................................................................................3
INTRODUCTION...........................................................................................................................3
Importance of accounting and finance management...................................................................3
Financial software and accounting function................................................................................3
Use of financial ratio in Anchor Trust.........................................................................................4
Long and short term finance need...............................................................................................5
Sources of finance........................................................................................................................5
Process of budgetary control and revenue management..............................................................6
Double entry book keeping..........................................................................................................6
CONCLUSION................................................................................................................................7
TASK 2- BUSIESS REPORT.........................................................................................................7
INTRODUCTION...........................................................................................................................7
Interpretation of organisational budgets in Anchor Hanover Group...........................................7
Evaluation of capital expenditures and investment projects using different investment
appraisal techniques.....................................................................................................................8
Recommendation for financial management.............................................................................10
CONCLUSION..............................................................................................................................11
REFERENCES................................................................................................................................1

TASK-1
INTRODUCTION
Accounting and finance are one of the major function with respect to an organization that
enable the firm to make recording, analysing and measuring the performance along with
deploying adequate finance within the different departments. Under this task, the importance of
accounting and finance function along with ratio analysis and fund arrangement will be
discussed.
Importance of accounting and finance management
Accounting refers to the systematic recording, analysing along with interpreting the
financial statement and information (Ibrahimova-Guluzada, 2017).With the aspect of accounting
business keep a track of records of its operations.
Finance means the funds and credit that is being employed in the business (Pretorius,
2020).
Accounting and finance is one of the major part with respect to health and social care.
This is because with the aspect of these functions, Anchor Trust can along with performing its
operation can also able to establish a controlling procedure. With the performance of accounting
function, Anchor Trust can make a track of its income and expenditure. Likewise, finance
function enables the organization to make efficient deployment of funds in the right place. Being
an organization that perform its functions at broader scale, it is thus very important for the
Anchor trust that it can keep a record as well as keep a track over its finance activities. And with
the aspect of accounting and finance function this is being executed. As finance is the blood of
every organization and in case of anchor Trust too with the efficient distribution of finance
across various department it can perform its operations efficiently.
Financial software and accounting function
An application of financial software within the context of Anchor Trust plays an important
role in terms of tracking of financial information along with generation of financial statement.
This means with the enabling of accounting software an organization can make preparation of its
financial statements that could assist it in measuring its financial information (Oladele, 2020).
Financial software also makes the accounting of Anchor Trust more efficient and easy so that

tracking over the finance would become very easy. With regard to Anchor Trust, financial
software also plays an important role with respect to assisting the organization towards decision
taking i.e. it make the analysis and comparison of financial statement easy and thereby enable the
organization to take the most appropriate action.
As financial software are the computer programme that assist the Anchor Trust in
recording the transaction along with keeping recording of it. With the installation and
implementation of financial software Anchor Trust can meet its accounting needs along with
keeping a records over its money and fund movement i.e. with the aspect of financial transaction
the movement of funds would be easy to observe and accordingly corrective actions can also be
assisted.
Use of financial ratio in Anchor Trust
Financial ratio are the interpretation of financial performance of the company with respect
to the analysis of financial statement. There are majorly 5 financial ratios in the context of
company that depict its financial performance:
Liquidity ratio:
These ratio shows the liquidity i.e. ability of the company with regard to making short
term repayment of its liability (Rashid, 2018). In case of Anchor Trust its liquidity ratio i.e.
current assets/current liability is 2.37 (295201/124519= 2.07) in 2020 while it was 1.183
(397914/217396= 1.52) in 2021 (Annual Report & Financial Statements, 2021). This shows that
the liquidity ratio of the Anchor Trust is declining. Hence it would be right to state that the
company is not having enough cash or funds in order to make repayment of short term liability.
Debt equity ratio:
This ratio shows the inculcation of debt and equity within the capital structure of the
company. This need to be balance because a rise in any of the aspect is having a direct and major
impact over the company (Nuryani and Sunarsi, 2020). With regard to Anchor Trust the debt
equity ratio (Total liability/shareholder’s equity) is 1.63 (961664/587804) in 2020 which become
1.79 (1013572/565937). This means that the company’s debt equity ratio is showing adverse
results because the amount of debt is rising with compared to equity. A rise in debt structure in
the company would lead to raise in the expenditure in terms of making payment of interest. This
shows that the performance of Anchor trust is not adequate in regards to this ratio.

Long and short term finance need
With respect to Health and social care organization including Anchor Trust, short and long
term needs may vary. This can be understood as short term finance would able to meet the short
term needs including daily operation. However long term needs including setting up of branches
or expansion of its services will be meet with the aspect of long term finance.
As per the need of the business funds will be required like in order to perform day to day
operation, short term funds would be the best choice because they are available at the floating
rate of interest. However, in case of long terms investment like making expansion of its services
long term funds like issuing of shares or debentures or the taking of bank loan would be the best
choice because they are available at fixed rate of interest.
Thus as per needs, funds are implemented and required within the organization. in addition
of this it is also to be noted that the short and long terms funds differ with respect to the period of
their repayment i.e. short terms funds are usually for short duration i.e. 6 months to 1 years but in
case of long terms finance, the period is 3-5 years.
Sources of finance
Bank loan:
It is one of the major source of finance that enable funds to the organization. Through
bank loan, funds can be arranged for long duration at fixed rate of interest.
Advantage:
It is easily available and company make control of it. It is also a flexible mode of fund
arrangement because there are no tough rules and regulation with respect to bank loan
arrangement.
Disadvantages:
It requires a high credit rating with regard to company. Likewise, the rate of interest is
also high in comparison of other modes of funds. Also the formality in terms of rules and
regulations are tough and long along with strict eligibility criteria.
Issuing of debentures:
With the issue of debentures funds can be easily arranged along with affixed rate of
interest (Piemonte, and et.al., 2019).

Pros:
There is an involvement of low risk factor along with low controlling right with respect
to the company’s structure. No fluctuation in the rate of interest and fixed time with respect to
repayment.
Cons:
It involves no flexibility with respect to interest payment because the company need to
make payment of its interest at fixed rate. Also, with the issuing of debenture the debt structure
of the organization raised which may affect the company.
Process of budgetary control and revenue management
Budgetary control:
Budgetary control refers to a process under which budgets with respect to the
organization are made that will assist the organization tom make comparison with respect to its
actual and budgeted performance (Mohd Ali, 2021). This will lead to have an identification of
deviation which will be corrected with the taking of corrective action. In case of Anchor trust
this process begin with the preparation of budget on the basis of past performance and analysis.
After that the actual outcome are being compared with the budgeted one which will lead to the
finding of differences that will be corrected with the taking of suitable corrective actions.
Revenue management:
It refers to a process that include the prediction of consumer behaviour and accordingly
make it complied with respect to organization and its pricing that will lead to the delivery of
services at best price (Gallego and Topaloglu, 2019). With regard to Anchor Trust this process
begins with aspect to collection of data i.e. the market data. This is being followed up with
interpretation of data and making its forecast. Accordingly pricing and distribution strategy is
determined and the plan will be implemented. This will lead to the raising of revenue along with
enabling of services.
Double entry book keeping
As per this system a corresponding entry with respect to every transaction is being made
i.e. debit and credit. The main base behind this system is the fact that every transaction has two
affects over the ledger accounts (Izoulet, 2021).

The rules are:
 Debit the receiver and credit the giver.
 Debit all expenses and credit all income.
 Debit what come in and credit what goes out.
An application of double entry book keeping plays an important role with respect to maintain
and recording of financial transaction because the financial transactions are recorded on the basis
of consideration of these three rules. This is because these rules are the base that lead to the
recording of transactions. Since every transaction has double effect so with the implication of
this concept, the recording of accounting transaction become easy. Likewise, with the
implication of these rules, recording of transaction in the accounting software are performed.
This will also lead to make the accounting adequate and consistent.
CONCLUSION
From the above task it can be concluded that accounting and finance is one of the major part
of the business. Likewise, with the analysis of financial ratio, the financial health of the company
would be determined. This is also understood from the report that in order to sustain and run the
business the company need funds which will be arranged on the basis of evaluation of its pros
and cons.
TASK 2- BUSIESS REPORT
INTRODUCTION
This business report will lay emphasis upon interpretation of organizational budgets in
Anchor Hanover Group, evaluation of capital expenditures and investment projects using
different investment appraisal techniques, and Recommendations for financial management of in
Anchor Hanover Group.
Interpretation of organisational budgets in Anchor Hanover Group
Management of fiancé in health and social care is one of the most important part of an
organization and for this interpretation of budget is important as it can directly help in

identifying overall recommended ways in which financial management of organization can be
done.
Organizational budgets interpretation can be done by closely reviewing details of
financial budget so that improvement within ways in which money is spent by the organization
can be improved. Interpretation organizational budget of Anchor Hanover Group involve: cost of
maintenance, expenditure of care homes, safety cost, etc. From the Annual statement it was
identified that operational cost of organization in 2020 was £ 460,451,000.
Annual maintenance cost of Anchor Hanover Group of year 2020 is £1,122 million on an
average. Within this, Retirement housing to let cost is £1,150 m whereas Residential care homes
maintenance cost is £945 million.
In addition of this it is also to be noted that with regard to budgeting and its concerned
revenue while making it compared it was observed that there is a rise in the percentage of
revenue in comparison of its cost and expenses because in 2020 it was 522215 while in 2021 it
raised to 528222. However, while making an analysis of total expense or income it was observed
that Anchor Trust was facing a loss situation because in 2020 the profit earning was 31525 while
in 2021 a loss occurred i.e. (13332). In addition of this it was also noted that the cost of
expenditure of the organization is being raising. Thus with the help of budgeting it would be
analysed that the income of the organization was declining while making a measurement of
actual performance with the standard. This also means that with the analysis of budget,
organization would not only make an analysis of its income and expenses but it will also enable
to make measurement of its performance that whether it is performing well or not.
Hence it would be right to state that with the aspect of budgeting in the context of
company the expenditure and costing is being raising in comparison of the income. This shows
that the organization is pursuing the situation of over budgeting because of the earning of profits
below the standards. Thus, it need to take adequate measures so that the profit of the company
would raise and as a result organization would lead to maintain good budget.
Evaluation of capital expenditures and investment projects using different investment appraisal
techniques
Investment appraisal techniques are kind of appraisal techniques that are used for analysis
of profitability of investment over life of an asset for considering its affordability and strategic

fit. There are many different kinds of investment appraisal techniques that can be used for
analysis of profitability of investment over an asset, such as: payback period, internal rate of
return, net present value, accounting rate of return, and profitability index. These techniques can
directly be used for evaluation of capital expenditures and investment projects.
Payback period:
It refers to the period which shows that in how much time the invested capital will be
return back with regard to company (Gorshkov and et.al., 2018). It directly helps in explaining
how long it takes a project to recover the cost of project. Covid-19 directly affected financial
results of Anchor Hanover Group and directly impacted financial results of the company in terms
of cost such as PPE purchase, government job retention schemes etc. Due to these expenditures,
government programs, maintenance of critical health and safety checks and our repairs and
maintenance programs, it has been predicted that due to these shortfall activities recovery time
period required by Anchor Hanover Group is 5 years.
Internal rate of return:
It helps in bringing discounted future cash inflow and outflow related to the project. For
this value in use is calculated. Value in use is calculated on the basis of future cash inflows and
outflows which is derived from continuing use of the CGU and from its ultimate disposal
discounted which is equivalent to group capital. It can be calculated with the help of trial and
error method. IRR is the rate at which NPV value is zero (present cash influence- present cash
outflow=0)
Net present value:
It is sum of discounted future cash inflow and outflow related to the project (Gaspars-
Wieloch, 2019). Sum of total discounted future cash inflow and outflow of Anchor Hanover
group identified in annual group are
Accounting rate of return:
Expression of net accounting profit arising from the investment as percentage of capital
investment is known as accounting rate of return (Fellingham, Lin and Schroeder, 2019).
Accounting return of rate= £40.3m/£160m*100-25.18%
Profitability index:
It helps in defining how much an organization will earn per dollar of investment. It can
be calculated by= future cash inflow / cash outflow

= £43.1m/20.0m = 2.155
Thus, with the approach of investment appraisal technique it would be easy to determine that
whether the project is profitable or not or whether the organization need to continue it with or
not. Since as per the analysis of the investment project technique it would be easy to determine
that the Anchor Trust is having a neutral to low performance because of the raising of
expenditure and lowering of sales and profit. Likewise, with respect to its financial performance
in terms of outcome of its investment appraisal techniques also shows that the company’s
performance is not mark up to standard. As the aim of every project is to make the maximisation
of its profit and return i.e. the positive result in terms of its investment of funds. And since the
outcome of the Anchor Trust is not showing an adequate result which means that making an
investment with regard to project is of no worth. However, with the adequate selection of project
on the basis of making a comparison of its income and expenses and determination of IRR, NPV
and other determinants the organization would be able to grab higher rate of return in terms of
making improvisation in its structure along with earning high return with the deployment in most
appropriate project.
Recommendation for financial management
Financial management is one of the major task that includes the management of finance in
terms of fund management, fixed asset management, revenue recognition and various other
aspects. An adequate management of finance would lead to smooth operation of company’s
operation along with accomplishment of its objectives.
 In case of Anchor Trust, as the financial structure and position of the company is showing
a negative or adverse situation so it is being recommended that the organization need to
be adequate with regard to its business plan i.e. performance of its activities as per
business plan is recommended.
 Likewise, it is also recommended that the organization need to be cautious with regard to
its cost and expenses management because with the raising of expenses its profit and its
entire financial structure is getting disturbed (Arofah, Purwaningsih and Indriayu, 2018).
 Being a vast organization and making operation of its activities at broader scale it is
being recommended that it need to make cautious with respect to its day to day operation.

This means that it need to observe and control the daily expenditure so that along with
managing its expenses it can further make improvement in its capital and cost structure.
 Making an evaluation of financial position with the analysis of its financial statement or
through ratio analysis is also recommended so that it along with knowing its financial
position it can also take adequate measures in order to make it improved.
 In order to ensure adequate financial management, it is also recommended that the
Anchor Trust need to be careful with respect to the right source of funding along with
making an efficient control over its overheads. This means that the capital structure of the
company need to be financed well as well as its overhead will also be managed so that
adequate returns will be grabbed and financial structure of the company would be
strengthening up.
CONCLUSION
From the above task it can be concluded that budgeting is one of the important aspect with
regard to an organization that enable the measurement of performance in terms of its actual and
standard. Likewise, an adequate consideration towards the aspect of capital expenditure as well
as investment project is also need to be determine so that along with earning adequate return
company would be able to minimise its expenditure.

REFERENCES
Books and journals
Ibrahimova-Guluzada, A., 2017. Outsourcing of financial accounting function
research (Doctoral dissertation, Kauno technologijos universitetas).
Oladele, F., 2020. ROBUST ACCOUNTING AND FINANCIAL INFORMATION.
Rashid, C.A., 2018. Efficiency of financial ratios analysis for evaluating companies’
liquidity. International Journal of Social Sciences & Educational Studies. 4(4). p.110.
Nuryani, Y. and Sunarsi, D., 2020. The Effect of Current Ratio and Debt to Equity Ratio on
Deviding Growth. JASa (Jurnal Akuntansi, Audit dan Sistem Informasi Akuntansi). 4(2).
pp.304-312.
Piemonte, and et.al., 2019. Transition Finance: Introducing a new concept.
Mohd Ali, B., 2021. Organization Budgetary Control System. Organization Budgetary Control
System (February 28, 2021).
Gallego, G. and Topaloglu, H., 2019. Revenue management and pricing analytics (Vol. 209).
New York, NY: Springer.
Izoulet, M., 2021. The Invention of Double-Entry Bookkeeping. Available at SSRN 3853815.
Arofah, A.A., Purwaningsih, Y. and Indriayu, M., 2018. Financial literacy, materialism and
financial behavior. International Journal of Multicultural and Multireligious
Understanding. 5(4). pp.370-378.
Fellingham, J.C., Lin, H. and Schroeder, D., 2019. Entropy and Accounting. Available at SSRN
3371246.
Gaspars-Wieloch, H., 2019. Project net present value estimation under uncertainty. Central
European Journal of Operations Research. 27(1). pp.179-197.
Gorshkov, and et.al., 2018. Payback period of investments in energy saving. Magazine of Civil
Engineering. (2).
Pretorius, P., 2020, July. Finance function as a business system. In INCOSE International
Symposium (Vol. 30, No. 1, pp. 1606-1620).
Online references
Annual Report & Financial Statements 2021. [Online]. Available through
<https://anchorv3dev.s3.eu-west-2.amazonaws.com/documents-pdfs/ANCHOR_HAN
OVER_RA_2021_FNL_SIGs_compressed.pdf>
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