University Healthcare Finance: Financial Resource Management Report

This report delves into the principles of financial resource management within the healthcare sector, focusing on costing and business control systems. It explores regulatory requirements impacting financial resource management, evaluates software solutions, and analyzes various income sources and factors affecting finance availability. The report includes a cash budget example and discusses fraud detection, budget control methods, and the relationship between service levels, costs, and expenditures. It concludes by examining the impact of financial considerations on individuals and potential financial systems to improve service delivery, providing a comprehensive overview of financial management in health and social care.

MANAGING FINANCIAL RESOURCES IN
HEALTH AND SOCIAL CARE

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
1.1Principles of costing and business control systems................................................................3
1.2 Factors need to consider to manage financial resources in organization...............................5
1.3 Regulatory requirements for managing resources.................................................................5
1.4 Evaluation of software for managing financial resources.....................................................6
TASK 2............................................................................................................................................7
2.1 Different sources of income for health care organization.....................................................7
2.2 Factors affecting availability of finance for the business firm..............................................7
2.3 Different type of budget expenditure in health and social care organizations.......................9
2.4 Way in which decision about expenditure are made by the business firms..........................9
TASK 3..........................................................................................................................................10
3.1 Cash budget for the business firm.......................................................................................10
3.2 Steps that can be adopted when one suspect about fraud....................................................11
3.3 Methods that can be used to control and monitor budget....................................................11
TASK 4..........................................................................................................................................11
4.1 Information that is needed to make decision about level of service that will be offered to
service users...............................................................................................................................11
4.2 Relationship between level of service offered cost and expenditure...................................12
4.3 Impact of financial considerations on the individuals.........................................................12
4.4 Financial system that can improve service that will be offered to the customers...............12
CONCLUSION..............................................................................................................................13
REFERENCES..............................................................................................................................14
Table 1Cost for single person in Care home for a month................................................................4
Table 2 Cash budget......................................................................................................................10

INTRODUCTION
Healthcare industry is one of the fastest and most governing industries of the UK. There are
many firms that are operating in the mentioned industry. In the current report, principles of
costing and budget control system are explained in detail. Along with this, in the report,
regulatory requirements that affect management of financial resources are also discussed in
detail. In middle part of the report, budget is prepared and methods that can be used to control
and monitor budget are also discussed briefly. At end part of the report, financial consideration
for individuals is explained and ways that can be adopted to improve service are discussed
briefly.
TASK 1
1.1Principles of costing and business control systems
Principles of costing are as follows.
 Cost is related to cause: According to this principle of costing cost is always related to
the cause due to which it originate. Cost greatly affected by the cause. Hence, firm if
intends to control cost must focus on the reasons due to which it comes in existence
(Higham and Lin, 2011). Nature of varied cost are different from each other and same
are allocated among different business activities on the basis of cost relationship.
 Abnormal cost are charged as cost: Many times in the business incidents takes place like
theft and fire in the warehouse. In order to cover these loss firm incurred an amount
which is expenditure. These expenditures are the abnormal cost for the firm. Normal cost
that related to the production process are used in costing and are considered for
comparing firm performance in terms of cost. However, abnormal cost which comes in
existence due to abnormal incidents are not considered as cost and not charged on cost
centers (Acerete, Stafford and Stapleton, 2011). Care home needs to consider only those
costs that are incurred in respect to providing services to the customers as cost of services
in its books of accounts.
 Cost is charged when it is incurred: In compliance with this principle Care home can
record any expenditure in its books of accounts only when same amount is incurred
actually by the firm. If any asset is purchase for residential home then it will be recorded
as an expenditure only when same amount will be actually paid to the relevant entity.

 Past cost cannot be carry forward in next year: As per this principle cost that is related
to past year must not be carry forward for the next financial year. This is because if pat
year cost is transferred to the current year then burden of cost increases and accurate
performance of the firm cannot be measured.
Business control systems
Some specific business control systems are explained below.
 Cost benefit analysis: Cost benefit analysis is the one of the most important control
method. This is because by using this method it is identified that what amount of sales
firm needs to make in order to cover its cost (Tate, Ellram and Kirchoff, 2010). Hence,
accordingly firm determined its sales target for overall business so that cost can be
covered and good amount of profit can be earned in the business.
 Budget: Budget is the one of the important financial statement because it help firm in
controlling its business cost. By using this tool Care home can successfully control and
reduce its business cost. It can be said that budget have great importance for the business
performance.
 Cost center: Cost center refers to the department on which cost is charged by the
business firm (Binnendijk, Koren and Dror, 2012). In each cost center someone is made
responsible for strong or poor performance of the business firm in terms of elevation in
cost. Hence, it can be said that cost center is the one of the integral part of the business
control system of the firm.
 Outsourcing: Outsourcing is increasingly used by the business firm to control elevation
in its cost. Sometimes it become very difficult for the employees of the business firm to
perform business operation due to its complex nature. In such a case firm make use of
outsourcing service in order to control its cost. By doing so it successfully reduce its cost.
 Forecasting: Forecast is the method that is used under the business control system.
Under this business firm make forecast of cost and accordingly determine targets for the
business. In this way cost is controlled in the business by using forecast method.

Table 1 Cost for single person in Care home for a month
Total cost Number of months per month
Variable cost 1200
Fixed cost 900000 12 75000
Total cost /month (1200+75000) 76200
Number of beds 65
Cost per bed Total cost/Number of beds 1172.308
Cost for a single resident per month is computed to 1172.308. Hence, one need to
pay mentioned amount in order to take service of the Care home.
1.2 Factors need to consider to manage financial resources in organization
 People: firm needs to estimate number of people that it will expect to serve in the
upcoming time period. Accordingly it can estimate working capital that will be required
in the business. On the basis of estimation resources will be managed.
 Equipment and consumables: Some specific equipment’s and consumables are needed
in the care home to take care of patients (Giniat, 2011). On the basis of estimation firm
will need to allocate separate amount for equipment and consumables and will arrange
finance to ensure that firm will not face problem of scarcity of finance.
 Trends and income stream: Care home require to estimate likely trends related to the
business. On the basis of estimation of trends future finance requirement can be estimated
and accordingly same can be arranged in the business. Firm also need to estimate cash
inflow that will take place from different sources of income. On the basis of estimation it
can allocate funds for varied activities.
There are various types of cost that Care home can incur to provide treatment to
the services that are discussed here as under:
Direct cost: Expenditures that directly can be traced, allocated or fully attributed
to the services rendered to the clients are called direct cost such as cost of medicine,
treatment and others.
Indirect cost: Unlike direct cost, indirect cost cannot be traced directly to a
specific product like building rent, depreciation of equipment and machinery and so on.
Fixed cost: As name implies, this expenditures does not changes with the
variability in number of patients like managerial salary, depreciation, rent and others.

Variable cost: In contrast to the above, this expenditures changes in the same direction
with the increase or decrease in patients like medicine cost, treatment facilities, kitchen
staff wages and so on.
1.3 Regulatory requirements for managing resources
There are some rules and regulations that firm needs to follow in order to manage its
financial resource. Firms needs to pay tax on time. Failure to do so may lead to imposition of
penalty on the firm. Tax payment lead to cash outflow in the business. Hence, firm must prepare
plan to manage its financial resources in advance. UK Care home can enter in to any sort of
contract without and it must respect its terms and conditions (Tang, Tao and Bekedam, 2012). In
case of noncompliance with same penalty may imposed by regulatory authority which may be of
huge amount. In such a case firm may face problem of scarcity of finance in its business. It can
be said that regulatory requirements affect the management of financial resources in the business.
Hence, firm needs to prepare a proper plan in respect to use of resources in the business. Firm
must charge fair price form the customers. If same will not be done then penalty may be imposed
on the firm due to which firm may face problem in managing its financial resources. It is very
important for the firm in order to provide fair information to the customers about the prices that
are charged by the different resident care homes. Along with this it is also very important to
prepare financial statements in accurate way. By following all these regulatory things firm have
to manage its financial resources.
 Care quality commission: It is a rule that Care quality commission have to do
monitoring, inspection and regulation of health and social care services of relevant
institutions. The results that are obtained by CQC in respect to care homes is uploaded on
its website (Antón, Earp and Young, 2010). Residential care centers in order to create
their positive image make investment on various equipment and upgrading facilities that
are provided to the old people. This affects firm financial condition. Hence, Care home
needs to manage its financial resources in order to order to ensure that it will not face
problem of scarcity of fund in its business.
 NHS commission: As per rules NHS have to monitor healthcare firms and in this regard
it prepare its own commissioning groups that monitor level of services that are provided
by the healthcare organizations to the people. Relevant firms upgrade their service and

due to this reason cash outflow takes place in their business. Hence, it can be said that
regulations affect the financial resources management of the business firm.
 Internal and external auditing: In order to ensure that better quality of services are
provided to the customers healthcare centers carried out internal audit of business
operations. Due to this reason to some extent cost of business operations increased. Many
new equipment’s are purchased by the firm to indicate that to the external auditors that it
is fully committed towards providing better services to the customers (de Belvis and
et.al., 2012). Hence, all these things elevate financial burden on the business firm. It is
clear that regulations affect the management of financial resources of the business firm.
1.4 Evaluation of software for managing financial resources
In residential care home business Cool care software is commonly used by the firms. This
is because in this software firm can easily do analysis of its financial performance. Moreover, it
can identify the payment that it require to make to and received from others in specific duration.
Hence, on the basis of estimation of future requirements information made available by the
software firm can easily identify the way in which it can manage financial resources. Care Sys is
another software that is used by the business firms. This software is used to manage varied
business operations like financial, operational and management etc. Open account is another
software in which accounting can be do in easy way. In mentioned software one need to enter
values. Accounts and statements prepared automatically. Account payable, receivables and asset
budgeting statements are prepared automatically which is used to make cash management
decisions (Dienye, Brisibe and Eke, 2011). Care Sys and Open account software’s have more
features then cool care. This is because in case of Cool care only brief overview in respect to
receipt and payment can be obtained. But in case of Care Sys in detail one get information about
all payment and receipt transactions. In case of Open accounts there are about 18 features related
to accounting in comparison to the Cool care software which have limited features. Hence, both
mentioned software are better than Open account.
Apart from this, Skynet Applied System can be used by the Care home to maintain a
comprehensive accounting record regarding business expenditures. It helps care home specialist
and managers to access any kind of information anytime for the decision-making purpose (Care
home Accounting Software. 2014). Further, Care Control System Ltd can be utilized by the
organization for recording, integrating and summarizing the financial records for making better

decisions. Sage 50 account is also the best software that provides facilities to the care home to
track huge accounting for tracking business performance.
TASK 2
2.1 Different sources of income for health care organization
Different sources of income for the health care firms are given below.
 Voluntary: There are many people who give donation to the healthcare organizations for
the welfare of the people. Newly opened firm can receive amount voluntarily from the
people and by using same it can fund its operations.
 Public: Firm can receive funds from the government as grant for its business activities.
This is another source of income that is commonly available to the healthcare
organization. There is no cost of this source of finance and due to this reason it is
preferred by all sort of firms. UK government provides grant to the hospitals to render
best treatment facilities to the citizens and improve their life standards to a large extent.
 Private: Under the private sources, Care Home can go for gathering money through
applying bank loan. Funds can be borrowed from the bank and financial institutions at the
prevailing rate of interest either fixed or fluctuating. Hence, it will be the legal obligation
to the business to make timely payment of interest obligation to the lenders and repay
whole sum at the maturity date as per the repayment schedule.
Further, historical years profits that are available to the Care home can also be used for
the expansion without any financial cost.
 Customers: Firm is giving services to the people in its residential care home. From them
it is receiving revenue in its business. Thus, it is a primary source of income for the
healthcare firm (Boley, Paschke and Shafiq, 2010). Newly opened healthcare center must
try to improve its services because by doing so it can attract number of customers in its
business. This is the major source of income of the business firm.
2.2 Factors affecting availability of finance for the business firm
There are many factors that affects the availability of finance for the firm that is operating
in the health and social care center. Some of the factors that are affecting finance for the business
firm are explained below.

 Government funding: Government spending refers to the amount that is spend by the
government for welfare of the people. Government spending or public expenditure is the
integral part of the fiscal policy under which relevant entity make heavy investment in the
different sectors that have strategic importance for the business firm. When there is a
recession in the economy government increase its public expenditure on healthcare sector
(Ko, Jeon and Morales, 2011). Under this relevant firms receive funds from the
government which is invested in the business and to make available services at cheaper
cost to the people. UK government make investment of 138 billion GBP on medical
services and 133 billion GBP on public health services as capital expenditure in the FY
2015. This amount is spend on providing medical services like varied checkups at
affordable price to the general public and helping firms in buy machines that are
equipped with latest technology and are available at higher price.
 Social deprivation index: Deprivation refers to the extent to which services are not
provided adequately some of the areas of the UK. Social deprivation index is computed
to measure deprivation in different areas of UK. Deprivation is measured on the basis of
the data that is collected by the bodies like NHS. In this regard ratings is given to the care
centers that are located in the different areas on the basis of level of services provided by
them to the people. In this way overall conditions of availability of services in the
specific geographic area is measured and areas in which it is not available in adequate
quantity are identified (Kuhlmann and Annandale, 2012). Those healthcare centers that
are present in the areas that are deprived from the services received grant from the
government. Hence, results revealed by the social deprivation index affects availability of
finance to the health and social care firms
 Priority of the project: If health care firm is operating in the specific project that have
due priority from the government side then according to requirement it receive a heavy
amount of fund from the government. Thus, it is the factor that influence the availability
of finance to the business firms.
 Private funding: Many times private firms like venture capital makes an investment in
the firm. Through venture capital firm company receive huge amount of fund in its
business. Hence, it can be said that it is the factor that to large extent affect availability of
finance for the business firms.

2.3 Different type of budget expenditure in health and social care organizations Cost center: Cost center is basically a part of organization on which cost is charged.
Cost is charged on the varied departments. On other hand, there is a profit center which
is a part of the firm in which revenue and cost is assigned. Hence, profitability of each
part of organization is measured in proper way. Expense tracking is very important in
managing cost centers because by doing so it can be identified that expense of the cost
center is increasing at rapid, medium or low pace (Sohrabi and McIlraith, 2010). The
main advantage of this approach is that by taking appropriate decision elevation in cost
can be curbed on time. Disadvantage is that lots of time is spend on tracking expenses on
daily basis. Project management: It is the method that is used to initiating a group of activities,
preparing a plan, executing same and controlling expenses in respect to them in order to
achieve objective at minimum cost. Three important elements of project are
communication, resources and people. There must be better communication among the
team members. This thing promote coordination among the employees. Resources are
limitedly available to the business firm. Hence, same must be allocated among different
activities in systematic way. People are another important component of the project. As
according to their skill set firm must try to make their best use at the workplace. The
main advantage of recording of cost is that by doing so cost can be controlled in the
business. Disadvantage is that curtailment of cost may create problem for the business
firm Outsourcing: Outsourcing means a process under which firm entrust other to perform its
business activities. Healthcare organizations can outsource its accounting and financial
department activities to other firm (Barlow, Roehrich and Wright, 2010). Main advantage
of outsource is that is lead to reduction in cost. Disadvantage of outsource is that
company data goes in other hand which may be misused by other firm.
2.4 Way in which decision about expenditure are made by the business firms
 Command: This is the first stage of decision making under which one take decision at his
own level. In this stage one needs to decide that which expenditures of the firm must be
controlled and the approach that must be followed to do so. In this style, Care home
mangers and administrative committee will not involve their staff members in the policy

and strategic formulation and can be done either through the use of outside forces or
imposing decision making liability over others. It does not promote subordinates and staff
members as they are not invited and require to follow the rules and policies strictly by
full adherence.
 Consult: In this stage one consult with the stakeholders and take opinion from them. In
this process, policy formulators invite suggestions from the team members and also
consult things with the experts and specialist to get superb opinion and advices. It is a
great way to generate creative and unique ideas and will be helpful for the growth of the
Care home.
 Vote: After doing detail discussion vote is given by the stakeholders and on that basis
final decisions it taken. This process put greater efficient at the top priority who voted
after making discussion on the topic. However, on the contrary, person who are not agree
with the decisions will be dissatisfied and arise the need of consensus.
 Consensus: This is final stage because in this stage consensus is obtained from all
stakeholders before making final decision in respect to cost control. In this process,
brainstorming sessions are conducted till the time each and every individual honestly
agree with the prospective decision. It is really helpful to satisfy all the stakeholders to
combat critical business issues.
From the analysis, it is clear that consensus is the best technique of decisions making,
therefore, Care home must apply the same for the strategic and policy formulation in the
business.
TASK 3
3.1 Cash budget for the business firm
Table 2 Cash budget
Particulars October November December
Bank balance 14000 10200 19533
Allocation from local government 150000 155000 170000
Self-generated income 20000 38000 46000
Total income 184000 203200 235533
Cash purchase 50000 60000 65000
Payment to suppliers at one month
credit 18000 24000

Rent 20800
Labor cost 56000 60000 54000
Other expenses 14000 10000 15000
Repayment of bank loan 10000 10000 10000
Kitchen up gradation 23000
Insurance 6000
Total 173800 164000 168000
Net balance 10200 19533 65533
Interpretation
From the cash budget, it can be seen that Care Home generates revenue especially from
the grants from the local government and self-generated income. It shows a rising trend
continuously as it got increased from 150,000 to 170,000 and 20,000 to 46,000 respectively.
However, on the other side, under the payment, care home incur expenditures regarding cash
purchase, credit purchase, labor cost, other expenditures, service reduction, kitchen upgradation,
insurance charges and so on. Total payments got decrease in November to 164000 and thereafter,
it got improved to 168,000 due to exceeded other expenses, high cash as well as credit purchase
from the suppliers. In all the period, Care home will have positive or surplus cash fund to carry
out their regular operations. By taking actions like quality treatment, cost controlling measures
etc. will enable Care home to maximize their revenues and minimize cost results in greater cash
availability.
There is a great importance of budgeting because by using same cost can be controlled in
the business (Greer and Rauscher, 2011). In order to manage budget shortfalls firm can manage
its expenditures and under this it can shift unnecessary expenses for the next month. Firm can
upgrade kitchen in the month of December. It can purchase capital items like bed and other
things in different months with two month gap. By doing so occurrence of negative net balance
can be prevented.
3.2 Steps that can be adopted when one suspect about fraud
When one suspect about fraud he must check reliability, validity and sufficiency of
financial information. In this regard contact can be established with the auditor. Auditor by using
his knowledge and expertise through applications tests can measure validity and sufficiency of
the financial information (Moro Visconti, 2013). In this way it can be identified whether fraud is
done at the workplace. If it is done then in which area figures are manipulated and by following