Financial Management: Health and Social Care - CareTech Holdings

This report provides a detailed analysis of financial resource management within the health and social care sector, using CareTech Holdings Plc as a case study. It covers key principles of costing, business control systems, regulatory requirements, and diverse income sources. The report explores factors influencing financial resource availability, different types of budget expenditure, and decision-making processes related to expenditure. Furthermore, it addresses the management of financial shortfalls, actions to be taken in cases of suspected fraud, and budget monitoring arrangements. The analysis also examines the relationship between service delivery, costs, and expenditure, evaluating the impact of financial considerations on individuals using health and social care services and suggesting improvements through changes to financial systems and processes.

Managing Financial Resources in Health
and Social Care
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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
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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.
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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
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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.
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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.
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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.
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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).
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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.
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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.
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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)
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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).
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