Financial Resource Management in Health and Social Care: Care Tech Plc

This report provides a detailed analysis of financial resource management at Care Tech Holding Plc, a health and social care provider. It covers key aspects such as cost analysis, revenue generation from various services like adult learning, mental health, and residential services, and expenditure management. The report examines the company's financial performance, including its income statement and balance sheet, and discusses the impact of factors such as planning and strategies on financial availability. Furthermore, it explores the regulatory landscape, including compliance with bodies like the Care Quality Commission, HM Revenue and Customs, and accounting standards like GAAP and IFRS. The report also recommends best practices for managing financial resources, including the use of open systems and specialized software like Caresys, to improve efficiency and maintain compliance within the health and social care sector. The report concludes with a discussion of the challenges and opportunities for Care Tech Holding Plc in managing its financial resources effectively.

Managing Financial
Resources in Health and Care

Table of Contents
INTRODUCTION...........................................................................................................................2
LO 1.................................................................................................................................................2
1.1................................................................................................................................................2
1.2 ...............................................................................................................................................3
1.3................................................................................................................................................4
1.4................................................................................................................................................5
LO2..................................................................................................................................................6
2.1................................................................................................................................................6
2.2 ...............................................................................................................................................7
2.3................................................................................................................................................7
2.4................................................................................................................................................8
LO3 .................................................................................................................................................9
3.1................................................................................................................................................9
3.2..............................................................................................................................................10
3.3..............................................................................................................................................10
LO4................................................................................................................................................11
4.1..............................................................................................................................................11
4.2..............................................................................................................................................11
4.3 .............................................................................................................................................12
4.4..............................................................................................................................................13
CONCLUSIONS............................................................................................................................13
REFERENCES..............................................................................................................................15
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INTRODUCTION
For an organisation, managing finance is a task of key importance. The financial
management means to know the resources of revenue and areas as well as activities where the
revenue generated is expended. This management includes proper allocation of resources and
monitoring the movements to enhance the revenue. By applying planning tools to control the
cost and to reduce them to generate or increase profits of the organisation. In the present report, a
discussion about managing the financial resources of Care Tech Holding Plc is done, a public
company in health and social care industry. This task is done by using costing and business
control systems. Also, a planning tool is applied for income sources and expenditure, monitoring
of budget expenditure is carried out and efficient systems and processes for managing financial
resources are recommended.
LO 1
1.1
The cost to Care Tech Holding Plc can be bifurcated as administration, financial, taxation
and depreciation expenses incurred in a financial year. Income to the company is in form of
charges for services of adult learning disabilities, mental health, adult residential services, foster
care, learning and children services.
Cost benefit analysis for company is a process of quantifying costs and benefits of
projects or program (Alles, Brennan and Vasarhelyi, 2018). The one which are undertaken and
those of other alternatives in order to have a single level comparison for unbiased evaluation.
There are six best costing principles approved by NHS which can be implemented in
Care Tech Holding Plc. The principles are as follows:
Consistency: This principle is about following consistent approach in the organisation. It
states that a consistency shall be adopted in all the departments and for unit measurement of cost.
Stakeholder engagement: Under this principle, the organisation can estimate its cost by
inclusion of non- financial departmental cost (Management of financial resources, 2018). The
non-department cost includes cost of clinical and non- clinical staff.
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Materiality: This principle states that the organisation shall accurately record costs
related to material procurements and other activities so that a correct calculation of cost can be
done.
Transparency: Costing done of by organisation shall be unambiguous or black and
white and transparent. It shall be easily identified in documents when an audit is conducted.
Data accuracy: a right cost can be reached when a proper record of different data is kept.
A proper recording system of information shall be followed.
Causality and Objectivity: this principle entails that coasting must be based on an
understanding of causality for minimizing its subjectivity. An analysis of causality shall be done
before measuring the cost, this will lead to reduction of causality.
The methods for controlling the cost are
Cost centred approach: This principle provides an approach to manager which states
that, they must keep cost within the limits of budgets. So that the profits do not be washed out if
cost crosses the budgeted limit.
Pre patient cost consumption: Fee per patient can be set after valuation of cost per
patient. This is calculated by dividing total of variable and fixed cost for a period by number of
patients in that period.
IT Control system: An appropriate system of information technology will keep
complete information properly recorded and processed.
1.2
For a health care unit the financial performance is depicted with preparation of balance
sheet and income statement for the organisation. To prepare a proper and accurate information
related statement, data related to revenue actually generated, actual cost and expenditure incurred
are required.
For preparing the profit and loss account, information related to revenue, cost and
expenses is required. The revenue in a health care unit is generated in form of fees charged from
the patients. The revenue of Care Tech is from fees charged for various health care services
provided which are children and learning, mental as well as adult residential services. The total
revenue generated by company in year 2016 was Euro 149 million. The cost and expenditure of
organization was 94.7 which gives a gross profit of 54.3 million Euros (.Coles and et.al., 2015).
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A balance sheet represents the equation of assets and liabilities of the organisation. The
total assets of company in year 2016 were 265321000 Euros which consist of non-current assets
valuing 35301000 euros. The current assets include trade and other receivables of 229753000
euros and cash as well as cash equivalents of 267000 euros. The total liabilities were 156427000
euros. Total liabilities consist of current liabilities of 7272000 euros and non-current liabilities of
149155000 euros. The equity of company consists of share capital of 321000 euros, share
premium of 81750000 euros, merger reserve of 9023000 euros and retained earnings 17800000
euros making a total of 108894000 euros.
The information need for managing financial resources in Care Tech Plc is classifieds as:
Direct cost: theses are the cost which is directly associated with production or operation
of specific activity. These are added in the cost of that particular activity.
Indirect cost: it is the cost which is not associated with a particular activity for care tech
plc rather is incurred on more then one activity of the organisation. This cost are apportioned on
por rata or percentage usage.
Fixed cost: this cost do not change with level of production or activity operation , this
remains constant for a financial year.
Variable cost: this cost change with change in volume of manufacturing and with
change in activity operation.
All this cost determination is essential in order to have accurate idea about how much expenses
ins incurred on which activity and production.
1.3
For an organisation, to keep due diligence is must for the management of financial
resources and safety of patients. Care Tech being-in health and social care industry has to meet
certain statutory requirements. These regulations are Care Quality Commission (CQC),
Company’s Houses, Health Sector Regulator Monitor, Accounting Standard as of GAAP and
IFRS and HM revenue and customs.
Care Quality Commission: this unit checks on social and health care organisations
weather or not they are complying with national standards. They provide public with information
of their findings after inspecting a health and social care organisation.
HM revenue and customs: this is a national body for laying and collection of revenue in
the form of tax from public and businesses operating in country. A person have to pat income tax
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on income earned by him/her. For a business tax payable is corporate tax, capital gain,
inheritance, indirect tax, VAT, service and environments tax. Care Tech is entitled to pay all the
taxes which are applicable to it, to revenue or HMRC department.
GAAP(generally accepted accounting principles) and IFRS(international financial
reporting standard): these both are the regulations provided for creating a unanimity in
accounting of different businesses in the nation (Odolinski and Smith, 2016). GAAP is an
accounting standard which care tech has to follow while recording the transactions of financial
information. IFRS this are the standard providing the manner in which financial statements shall
be presented by a business. Care tech have to comply with these standards to avoid legal
complications.
Healthcare Quality Monitor: this is a standard made especially for businesses operating
in the preview of NHS. It gives licence to business willing to operate in health and social care
sector. And keeps a watch on business for ensuring safety of patients, price determination, and
support patients with financial difficulties. Care Tech being one of them have to follow all
regulations deliberately.
1.4
A health and social care business provides many services and use different products and
services to provide such services to its patients. To manage financial resources in such business
is complicated and shall be done with utter care and diligence. The activities involve in
managing financial resources can be buying of resources for business, financial accounting, cost
management, payments, revenue generation and recording and compliance with governmental
regulations and standards.
Revenue sources must be identified and properly managed. The revenue to Care Tech is
from fee charged to patients for providing treatment to them (Kang and et.al., 2017). For regular
generation of revenue company shall focus no keeping per patient cost low or maintain the
present level of cost.
Cost and expenditures includes all revenue and capital expenditures. The managements
shall focus on reducing the cost and lowering expenditures.
There are different methods which can be used for systematic management of financial resources
in health and social care business. The best practised financial system in this industry are as
follows:
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Open system: related to revenue generation and cost and expenditure incurred by the
company. After, collection of all the relevant data the software starts to evaluate the information
relate de to income and expenses. Then it provides company with relevant interpretation of data
for taking decision regarding selling, improvisation in health and other services.
Caresys Software: this is a software which considers all the financial and non-financial
services provided by a health and social care business. It includes modules related to time and
attendance, staff, HR, behavioural support, income and billing, care planning, equipment
maintenance and finance.
The open system can be used in care tech Plc and this will assist the management to keep
record of all the financial data of the business. The more beneficial software for the business is
considered as Caresay as this is particular designed for heath care organisation, but with
application of one of this the cost will increase as this software cost a large amount and skilled
people are required to operate the software. Another drawback which can be attached with
implication of software is that it consist of items related with health care organisation and any
new item which might be found in Care health Plc might not be found in such software.
LO2
2.1
Care Tech is a health and social care business, it provides treatment and health care
services to people who needs care and treatment. The business provides a range of crevices
which generate different level revenue for business. The services provided and revenue
generated from them are mentioned below:
Adult Learning Services: this is a group of services provided to adults with learning
disabilities, services to people living in their homes, residential care or independent supported
living services (Hensher, 2015). The revenue generated from this service was 84.4 million euros.
And underlying EBITDA was 26.4 million euros. This service generate second highest revenue
for the firm.
Mental health services: as name suggest this is a care for mental health of people. The
revenue generated by this service was 5.7 million euros and EBITDA was 1.7 million euros. The
contribution is very small by this sector.
Adult residential services: this is the highest revenue generating service for the business.
The revenue was 9.1 million euros for 2016 and EBITDA was 28.1 million euros.
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Young people Residential services: for relatively small number of children Care tech
provides helpful solution and offer of their needed care. The revenue was 39.0 dan EBITDA was
11.8 million euros.
Foster care: this is the best care solution foe looked after children. Most children are
favoured by a family support. Revenue was 8.7 and EBITDA was 2.2 million euros.
Learning services: revenue was 11.2 and EBITDA was 1.0 million euros.
Children services: this services are for physically and intellectually disabled children.
This is third highest revenue generating activity of business. Revenue was 58.9 and EBITDA
was 15 million euros.
2.2
A business is always surrounded by many factors which influences availability of finance
in or to business. These can be payments for tax, charitable activities, free health check ups. The
primary factor for influencing the business's finance are planning and strategies of care tech
(Reniers, and Van Erp, 2016). If higher management is planning to make strategic alliance for
growth and development of business it will affect the availability of financial resources with the
company, as some resources will be allocated for execution of that strategic alliance.
Care Tech have also rented into a merger with another company. The merger costs a lot
but it has left the company with a merger reserve of 9023000 euros.
With this it can be stated that with merger the reserves have effected adversely. The
factors which get effected with the merger are :
Reserves: the amount in merger reserve have increased to an immense level this
increased the valuation of the organisation and with a high level of reserves and surplus the
capital get enghanced and this lead in improvement in valuation of Care health PLc.
Balances sheet: another effect is on balance sheet the net worth of the organisation gets
a boost with addition to merger reserve. With a high level of capital the capacity of the
organisation to get more increased which are required for conducting day to day operations of
firm.
2.3
To control and monitor cost in Care tech following the types of budgets can be prepared:
Cost Budget :
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Fixed and variable cost budget: in this budget the company will list out the fixed and
variable cost which is necessary to incur for carrying out business operations. Fixed cost does
changes with change in outputs while variable cost changes with change in output. The fixed cost
budget provided information about the expenses which are fixed in nature and do no change with
level of output. This is essential to determine the level of cost which is fixed and how much fund
is required to meet those expenses.
With preparation of variable budgets the forecast is prepared as what level of activity is
set to be achieved and what is cost required attain those level of output.
Administrative cost budget: Administrative cost is indirect cost on availing of services.
Salary to clinical and non clinical staff, managers, cost of stationary items are included in this.
With this budget all the cost related with operation of all activities are estimated which pays an
crucial role for care health plc as the monitoring can be done when actual cost is more than
budgeted.
Master budget: this budget is prepared for sales, services provided, material used and
overheads. This budget is prepared on quarterly or monthly basis. Budgeted income statements
and budgeted balance sheet are also called as pro forma financial statements. With this budget
overall activities and cost and expenses related to them are forecasted and the organisation need
to achieve that target without any lag.
Marketing expenditure budget: this is an expenditure for marketing of healthcare
services provided by the organisation (Ramazani and Jergeas, 2015). A budget is prepared to
assess weather or not the marketing strategies adopted by the business is efficient enough or not.
This budget is helpful for Care health plc as this clearly state the targeted expenses which need
to be incurred on marketing for achievement of all targets.
Project management: this is a budget for reflation of projects work undertaken by Care
Tech. The project which can be taken be this business are setting a camp in remote area of
calamity, providing free check-ups, a project with government etc. this budget provides
management with information about hoe funds will be utilised and expended over time of
projects.
The budgets prepared for each project separately and states -in how much amount it must be
completed in order to complete is successfully with earning profits.
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Outsourcing contract budget: Outsourcing is long-term strategic decision for a
company. The health and social care organisation outsource certain services provided by them or
information to be provided to public. A budget is prepared to evaluate the extent to which
outsourcing services have complied with contract terms.
All these budgets forecast the need and scope of planning and evaluation for the
organisation.
2.4
Environmental analysis: An analysis about internal and external environment factors
which affect the Care helth PLc directly or indirectly. These factors influence the availability and
expenditure level of financial resources of organisation. This analysis helps in taking decision
on hoe much amount to be incurred in which area of activity.
Accountabilities: Accountability means to take responsibility of your actions. This
ensures that a person is competent to do activities which he/she has been asked to perform. This
also ensures to put interest of clients and patients first. Accountability in employees of care
health PLc reduces the expenditure as goals are achieved on time effective with no wastage of
funds.
Priorities: to set the priorities in an organisation about giving preferences to some
activities over others. By setting priorities a health and social care business can estimate amount
to allocate and spent on a particular activity. This helps in managing the fund of business as with
setting up the priorities activities are determined which need funds on a prior basis and
allocation can be done accordingly.
Short, medium and long-term planning: by deciding the term of planning for an activity
helps in evaluation of funds required to be spend on that participial activity. Short and medium
term planning can be done for low level expenditure, for expenditure on activities which will
continue over a long period long term planning for expenditure is done. This planning help care
health Plc to determined the expenses which are need to be done immediately and which needs
funds after sometimes, so funds are arranges for activities which have urgent requirement and
funds are arranged for future activities.
Cost-benefit analysis: This is the only method of economic elevational that can
effectively indicate weather a health care treatment or intervention is worthwhile. By this
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evaluation care tech organisation can fox the amount of expenditure on a treatment and stop
funding of those activities which are not to be continued.
Financial risk: The activities which involves higher risk and low return shall not be
persuaded and expenditure on such treatment or intervention shall be given after proper
evaluation of risk and retunes allocated with that activities, otherwise it can cost a huge loss to
the business.
Project management: To evaluate the amount and level of expenditure to be spent on a
project is very necessary. An investment in a not profit and non operating project will give no
returns. So to mange projects and evaluation of their current positions and future success shall be
done for accurately knowing the returns involved with it.
LO3
3.1
Financial shortfall: this means a shortfall in amount to meet financial obligation or
liability exceeds the amount of cash available with organisation. The techniques to overcome this
situation can applied are as follows:
Setting up priorities: evaluate and identify the most important and crucial activities and
those which are not required for daily operation of the business. By cutting unnecessary activities
the fund blocked with them can be utilizes for other essential activities.
Virement: this is a process of transferring items from one financial account to another.
In this process the non productive items are transferred to account of not non-performing assets
to accounts which attracts less resources and requires less attention.
Using reserve funds: reserve fund is an account which contains highly liquid assets set
aside by business to meet any future financial obligation or cost (Chen, 2017). Care tech Plc can
use its reserve account balance to meet its financial obligation required for running of daily
operations.
External income sources: Care Tech can invite outsider investment institutions to invest
in its business to overcome financial shortfall. The company have make itself preventable and
assures investors about retunes and overcoming such shortfall. The company can also borrow
funds from banks and outsider loaner.
Implications for individuals within the service: this means Care Tech shall hire
experts in the field of finance add accounts. This will help business to assess actual
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position of shortfall. The experts will evaluate the situation will suggest measurement to
eliminate or reduce such shortfall of finance.
3.2
Suspected fraud: Fraud is a course of misrepresentation, an intended isolation, skipping
or prevention of truth to take advantage unlawful benefit. To suspect a fraud means to have an
intention of commencement of fraud by someone in the organisation. The course of action to
suspect a fraud in organisation is as defined below:
Analysing financial information for reliability: this is to check that the trustworthiness
of financial statements of organisation (Leung, Lau, and Tsang, 2014). It refers analysing of
financial information its verification for its trustworthiness, and if there is a deviation in financial
statements the organisation will collect it as an evidence for the suspected fraud.
Validity and sufficiency: to confirm the suspected fraud evidence shall be valid and
sufficient. The validity is checked as- does the evidence relate to the portion of ability, reflect
the four attribute of ability and address the key competencies. Sufficiency is checked as- does
the evidences cover the full range of execution known in the portion of ability, cover the full
range of performance identified in the unit of competency and show competence in different
contexts.
Reporting: ones the evidences are collected the fraud shall be reported to higher
authorities or to top level management. The fraud can also be reported to police if the amount
involved on fraud is substantial and fraud committed is a criminal offence.
Evidence of fraud: this means to submit all the evidence with you to the authorities who
are proceeding with the case of fraud.
Financial fraud: charging more fees form the patients and reflecting the lesser amount
in records was an act committed by certain employees. It is a financial fraud committed in the
care health plc. This was determined after an auditing of the books of account was done, the
hight authorities collects all evidences and confronted the responsible employee but they denies
the fact, upon this management is taking culprits to court as they have strong and clear proofs
against them.
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