Financial Resource Management and Analysis of CareTech Holdings

This report provides an in-depth analysis of financial resource management at CareTech Holdings Plc, a leading care service provider in the UK. It explores the principles of costing and business control systems, emphasizing the importance of high-quality data, comprehensive cost inclusion, resource allocation transparency, materiality, and consistency. The report identifies essential information for managing financial resources, including income statements, balance sheets, and cash flow statements, alongside regulatory requirements under UK Codes of Ethics, UK GAAP, and IFRS. It evaluates CareTech's budget system, detailing operational, cash flow, and capital budgets, and examines factors influencing financial resource availability, such as organizational size, economic conditions, service types, and geographic location. The analysis also reviews diverse income sources for CareTech in 2016 and evaluates expenditure decision-making processes, highlighting the need for environmental analysis, prioritization, and financial risk assessment. Desklib provides access to similar reports and study tools for students.

Managing Financial Resources in Health and Social Care
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Table of Contents
Introduction................................................................................................................................2
Task 1.........................................................................................................................................3
Task 2.........................................................................................................................................7
Task 3.......................................................................................................................................10
Task 4.......................................................................................................................................14
Conclusion................................................................................................................................17
Reference List..........................................................................................................................18
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Introduction
Maintaining financial position at a standard level is a major challenge to the organizations in
recent competitive era. In the context of health and social care sector in United Kingdom, it
can be mentioned that there are several organizations providing similar type of care services
to the people. The number of organization is increasing day-by-day and due to that the
availability of finance is reducing because this sector is non-profit sector. In this study focus
is made on one of the leading care service providers in UK – CareTech Holdings Plc. The
aim of this study is to analyze the financial activities of the organization based on the various
reports that they have published in the previous financial years.
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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
Costing is a group of activities that the companies perform to control the cost of the business
at the standard level. Organizations like, CareTech Holdings Plc requires performing costing
activities for several purposes, which are as follow:
 Costing is very important for performing the cost-benefit analysis of the business
strategies and decisions
 Costing activities help to control the cost level, which on the other hand create
competitive advantage for the firm (Mohanna and Chambers, 2018)
 The firm also performs costing to understand the cost trend of the business, which on
the other hand helps in forecasting
 Costing is essential for the firm for enhancing the profitability
 Firm can identify and attain the break-even point with the help of costing (Moseley,
2017)
In order to fulfil all the purposes of costing, the management of CareTech Holdings Plc may
follow some costing principles, which have been discussed below:
 As per the NHS standards, the first principle of costing should be the principle of
including high quality data. The costing activities at social care organization must be
done based on accurate, relevant and reliable data. In order to maintain this principle,
the organization must set standards for poor and high quality of data.
 The second principle set by the NHS is the principle of including all data related to
cost of the company at the time of cost accounting (Tsofa
et al., 2017). In order to
follow this principle, the organization needs to consider the full-period costs of all the
activities within the organization.
 The third principle of costing as per NHS is showing relationship between the
resources consumed and organizational activities. This principle aims to provide the
opportunity to the companies to trace in which activity how much cost or resources
have been consumed (MacLeod
et al., 2017).
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 The fourth principle is principle of transparency. The costing activities should be
performed in a transparent manner. It means the cost allocation and calculations must
be transparent.
 The fifth principle is principle of materiality. In this principle, NHS suggests that
good costing practice must be focused on the materiality (Mohanna and Chambers,
2018).
 The sixth principle of costing is about the maintenance of consistency in the costing
activities in terms of cost comparison within as well as across the firms.
The term business control system indicates the development of a particular framework
through which the organizational activities can be run and controlled properly. The business
control system at CareTech Holdings Plc may include the budget system, audit system and IT
system. Each of these systems takes care of different areas of the business. For example,
using the budget system, the management at CareTech Holdings Plc may develop better
financial plan, which will help in efficient allocation of cost and resources. On the other hand,
the audit system takes care of the financial risk and security of the company (Tsofa
et al.,
2017). With the help of this particular system, the company can maintain the accuracy and
transparency in the financial activities of the business. On the other hand, the IT system helps
the company maintaining proper communication and efficient organization of the business.
1.2 Identify the information needed to manage financial resource for CareTech Holdings Plc
in financial ending
In order to maintain and manage the financial resources properly, the management at
CareTech Holdings Plc needs the information associated with different financial statements
like, income statement, balance sheet statement and cash flow statement. The information
available in the income statement like, the amount of revenue of the firm, total cost of sales
and finance cost and finance income are very important for maintaining standard income
level of the business or standard fund flow in the business (Al-Hassan
et al., 2018).
On the other hand, the information in the balance sheet like, amount of total assets, total
liabilities, net assets, total equity, inventory and many financial position related information
keeps the management aware of the finance base of the company. If the balance sheet
statement of the firm shows low amount of net asset, management can arrange the required
amount of funds to improve the financial position. It means the information helps to manage
the financial resources (MacLeod
et al., 2017).
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Apart from the information in the financial statements, the financial resource management
also requires the information related to the cost level of the business in terms of arranging
human resource, equipments, consumable items; information regarding the income trend of
the business in last few years and the existing financial policies of the company. All the
information helps to understand the loopholes or gaps in the financial performance. This is
important for efficient management of financial resources.
1.3 Explain the regulatory requirements need to be satisfied while managing financial
resources in CareTech Holdings Plc
The term regulation indicates the rules and policies that are needed to be followed to perform
a particular task. In the context of finance, there are financial regulations that CareTech
Holdings Plc needs to follow for systematic accomplishment of the financial activities. In the
organization like, CareTech Holdings Plc, the financial activities must be performed as per
the regulatory guidelines provided under UK Codes of Ethics, UK GAAP and IFRS. As per
these regulatory guidelines, there are some rules that the organization needs to follow in order
to manage the financial resources efficiently. These rules are as follows:
 Maintaining transparency – In order to manage the financial resources proper level of
transparency is required in the financial activities. It helps to understand the financial
position in a better way (Davies, 2017).
 Fairness – The management must maintain fairness while representing the
information in the financial statement, so that actual position of the company can be
understood.
 Audit – Auditing is important for every organization for ensuring that the financial
activities and resources have been managed properly (Rubin and Patel, 2017).
While managing the financial resources, the company must maintain the regulations provided
by MONITOR, NHS and HMRC in order to maintain systematic income flow in the business
and proper management of financial resources.
1.4 Evaluate the systems for managing financial resources in CareTech Holdings Plc
In order to manage the financial resources, CareTech Holdings Plc has emphasized on the
budget system. In order to prepare the budget, the company maintains the following steps:
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(Source: Created by author)
If the above diagram is considered, it can be stated that in order to prepare the budget the firm
follows a systematic procedure. The budget system of the company develops a financial plan
by analyzing the financial performance of the business in the last year. At the same time, the
plan development also requires proper analysis of the internal and external business
environments. In order to execute the plan, the company has formed a particular audit
committee, which is responsible for effective implementation or execution of the plan.
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Task 2
2.1 Discuss the diverse sources of income available to CareTech PLC in the financial year in
2016
If the annual report of the company is considered, then following sources can be identified
through which CareTech Holdings Plc has earned or generated income:
 Revenue generated from child care services
 Revenue generated from mental disability care services
 Revenue generated from normal adult care services
 Revenue generated from physical disability care services
Considering the income statement of the company, it can be stated that the main source of
income for the company is its revenue from different types of care services. However, the
firm has generated funds by issuing share capital and availing long-term loans. These three
sources are the external sources of income. Apart from that the company has also used the
retained profit, which is the internal source of funds for the business.
2.2 Analyse the factors that may influence the availability of financial resources in CareTech
Plc
Several factors may affect the availability of financial resources at CareTech Holdings Plc.
These factors are discussed below:
 Size of the organization – This one of the biggest factors behind the availability of
financial resources in the business. If the firm is large, it generally has wider sources
(Davies, 2017).
 Economic condition of the country – This is another factor that affects the availability
of financial resources. If the economy is advanced and strong, financial resources are
easily available.
 Type of services – Availability of financial resources also depends in this factor. If the
organization provides variety of care services, availability of sources increases.
 Geographic location – geographic location is also an important factor in this context.
If the organization is situated at the urban area, availability of funds is more (Al-
Hassan
et al., 2018).
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2.3 Review different types of budget expenditure in CareTech Plc
A budget is a financial plan that is developed in order to make the financial activities
systematic. The major roles that budget plays are as follows:
 Budget helps in developing effective financial plans
 Budget helps in controlling financial activities
 Budget helps in fulfilling the gaps in the financial performance of the firm in the last
year (MacLeod
et al., 2017)
There are mainly three types of budget that are prepared by the management of CareTech
Holdings Plc. These budgets are described below:
Operational budget – This type of budget is prepared in order to develop financial plans for
the operating activities. Some of the operational budgets are – purchase budget, sales budget,
cost budget or expenses budget, inventory budget and production budget. Each of the
operation budgets takes care of financial activities of different operating departments of the
firm (Moseley, 2017). These operating budgets are very important for maintaining smooth
flow of income in the business.
Cash flow budget – Cash flow budget develops the financial plan for cash flows of the firm.
While developing the cash flow budget, the management takes care of the cash related
activities. This type of budget is very important for maintaining standard level of liquidity in
the business (Rubin and Patel, 2017).
Capital budget – This particular budget is developed in order to make right capital investment
and capital generating decision. In order to prepare the capital budget, the management of the
firm needs to analyze the capital investment options from different points of view. This
particular type of budget is critical to develop and understand (MacLeod
et al., 2017).
2.4 Evaluate how decisions about expenditure could be made in CareTech Plc
In order to make decision regarding the expenditure, the management needs to concentrate on
the following factors:
 Environmental analysis – The organization needs to perform internal and external
environmental analysis. This helps to understand how much the company needs to
spend and how much the company can spend for its operations (Tsofa
et al., 2017).
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 Focus on priorities – The management needs to identify the priority areas for the
organization. This helps to understand which expenditure is essential and which is
not.
 Financial risk analysis – This is also important for making expenditure decision. The
management must exclude the expenditure that involves high risk (Mohanna and
Chambers, 2018).
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Task 3
3.1 Explain how financial shortfalls can be managed
Financial shortfalls refer to the situation when the financial liability of a company surpasses
the cash amount available to the company. This creates an issue for the company to manage
its financial affairs. In order to improve the financial performance, Tech care Plc is required
to manage the financial shortfalls occurred in the company business. There are different
causes of financial shortfalls:
Lack of cost control
Financial shortfall occurs when there is absence of cost control. The managers of the
company are unable to control cost incurred by the company.
Changes in the technology
Changes in technology lead the companies to incur a huge amount in employing those
technologies to the business.
Several measures are required to be adopted to manage the financial shortfalls. The measures
are explained as follows:
Managing the cash flow
By managing the cash flow of the company, Care Tech plc will be able to reduce its financial
shortfalls. By preparing a proper cash flow statement, the management of the company can be
able to evaluate the inflow and outflow of cash in the company. This helps the management
to control the cash flow in to the business. The company can receive the debtor balance as
soon as possible; it should concentrate on the management of cash flow more than profits.
The company should identify its breakeven point and should preserve some cash reserve.
This helps the company to manage the flow of cash and resolve issues of financial shortfalls.
Credit facility management
Effective management of credit facility can help the management of Care Tech Plc towards
reduction of the financial shortfall in business. Credit facility is the service provided by the
company to its customers to pay for products and services availed later. However, this facility
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should be provided to the customers based on some restrictions, otherwise the company could
face bad debts that can create financial shortfall for the company.
Market analysis
Market analysis can help the management of the Care Tech Plc towards effective
management of financial shortfalls. Proper market analysis can help the company to identify
the demand of its products and services. This helps the company to produce the commodities
accordingly and the control their cost of production. By proper control of production, the
company will be able to manage the financial shortfalls and control cost effectively.
Reserve funds
Reserve funds refer to the part of profit that is reserved by the company that is utilized at the
time of meeting several financial requirements. Reserve funds are very necessary to be
maintained in order to fulfil unanticipated financial requirements. Care Tech Plc can maintain
the reserve funds to meet immediate financial requirement and can overcome the issues of the
financial shortfall.
3.2 Explain the actions to be taken in the event of suspected fraud
Fraud is defined as the intentional suppression of any relevant information in order to deceive
one for gaining personal advantage. This is referred as the criminal activity and people
committing fraud can be punished to imprisonment for a long period and payment of several
penalties. The Fraud Act 2006 is established by the government of the United Kingdom to
save and provide redressal to the people who have been a victim of fraud.
Fraud by fake representation is an activity for committing fraud by making representation of
fake information for deceiving people.
When one is unable, provide relevant information to seekers that they are lawfully required to
disclose, it is also considered as fraud.
The Red flag refers to the indicator that points out that here is something wrong being carried
out in the business (Bryson, 2018). It signals the issues related to the financial statements
prepared by the company. The red flags help the company to identify and resolve the issues
in the financial statement of the company. Red flags points put different types of financial
fraud, explained as follows:
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