Report on Financial Management in Health and Social Care (HSC)

This report analyzes financial management within the health and social care (HSC) sector. It begins by examining costing and business control systems, including absorption costing, marginal costing, and activity-based costing, alongside budgeting and cost-benefit analysis. The report then explores the information needed to manage financial resources, such as income and expenditure data, and the impact of external factors like government policies and competitive pressures. It also discusses regulatory requirements, including GAAP and healthcare governance. Furthermore, the report details diverse income sources for hospitals and analyzes factors influencing financial resource availability, such as funding priorities and agency policies. The report also reviews different types of budgets and decision-making regarding expenditure. Finally, it addresses the relationship between service delivery, costs, and expenditure, the impact on individuals, and provides recommendations for effective financial management in HSC.

Managing financial resources
in health and social care

TABLE OF CONTENTS
INTRODUCTION......................................................................................................................1
TASK 1......................................................................................................................................1
AC 1.1 Costing and business control systems..................................................................1
AC 1.2 Information need to manage financial resources..................................................3
AC 1.3 Regulatory requirement for managing financial resources..................................3
TASK 2......................................................................................................................................4
AC 2.1 Diverse source of income in health and social care.............................................4
AC 2.2 Analysis of the factors that may influence the availability of financial resources5
AC 2.3 Review different types of budgets........................................................................5
TASK 4......................................................................................................................................6
AC 1.4 System..................................................................................................................6
AC 2.4 Decisions about expenditure................................................................................6
AC 3.3 Information for monitoring expenditure...............................................................7
AC 4.1 Financial decisions...............................................................................................7
AC 4.2 Relationship between service delivery, costs and expenditure............................7
AC 4.3 Impact on individuals...........................................................................................8
AC 4.4 Recommendations................................................................................................8
CONCLUSION..........................................................................................................................9
REFERENCES.........................................................................................................................10

INTRODUCTION
In the present age, large number of uncertainties exists in the market which may bring
either opportunities or risks for the businesses. Every organisation whether profit or non-
profit needs to have sufficient availability of funds in the business in order to run
successfully. Present project report is based on financial management in service sector.
Health and Social Care (HSC) is a type of service organisation whose main objective is to
provide services to people. Social work, nursing team, residential home provisions and
hospital wards are the types of health and social care services. Present report will explain the
process of costing and budgeting control in managing financial resources of the entity.
Moreover, the report will discuss about the various types of sources through which firm can
generate income. Along with this, present report will explain about the ways that shows how
financial shortfalls can be managed and assist managers to remove any difficulties. This is to
assist HSC organisation to operate effectively and assure long-run survival.
TASK 1
AC 1.1 Costing and business control systems
Cost is the total of all incurred business expenditures that will be required to offer
services to people. HSC incurred cost so-as-to generate incomes through providing services.
Abnormal cost is the total incurred expenditure that arises due to loss, fire, theft and any
abnormal cause. However, normal cost is the cost that is directly related with the production
and services provided at the cost centres.
Income refers to the cash inflows that are generated from the operating functions
(Folland, Goodman and Stano, 2007).While, expenditures is the amount spent by HSC in
order to provide services to the people. In HSC, absorption costing, marginal costing and
activity based costing principles can be implemented that are given here as under:
Under the Absorption costing, firm accumulates both direct as-well-as indirect
business expenditures that are associated with the rendered services. However, marginal
costing is the cost of producing one additional unit by the firm. In this, HSC considers all the
variable expenditures so-as-to determine the total contribution (Hillestad and et.al., 2005). On
contrary to it, in Activity based costing method, HSC allocates overheads on the basis of its
associated activities by using pre-determined cost drivers.
Cost benefit analysis is a systematic approach in which costs and benefits associated
with different alternatives are analyzed so-as-to take advantages of maximized profits and
saved cost.
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HSC prepares budget for every period. It is a financial planning tool that is helpful to
manage the firm’s operations. It is an advanced planning of operational functions in order to
get maximum profits without any financial difficulties. Capital is the amount that is invested
by owner of HSC to offer services to the people which are known as the capital contribution.
It is the source of cash inflow.
However, under the cash outflow, cost control is very necessary as it drives high
profits to the firm. Controlling cost is the way to get maximum profits and to improve the
operational performance to a high extent. Cost centre are the responsibility centres that are
accountable to manage the cost rather than revenues. For instance, research and development
department is dependable to research about the diseases that are increasing at a fast rate. It
makes the firm able to provide services to diagnose the customer disease through extra care.
Marketing department is responsible to give information to the customers about the offered
services by HSC. The duty of service department is to offer a wide range of services at cost
effective prices.
Competitive tendering is a tender in which numbers of organizations are bidding and
contract will go to the highest bidders. In HSC, forecasting is often used to prepare the
budget. It is a way to estimate the amount of expenditures that can be incurred in the future
period (Drummond and et.al., 2015). High forecasted expenses will make HSC able to
control their spending and to reduce the total cost. Surplus of generated income over the
incurred expenditures is known as profit while excess expenditure will result in loss. On the
other hand, Break-even point is the point at which total revenues become equal to the total
cost. Here, HSC does not have any profit or loss at this point. It seems to be necessary for the
firm to make sales at least at the BEP point because; after that, it will gain profit.
Safeguarding the business assets, custodial operations, securing software through
password and proper documentation of all the activities are some of the preventive measures
that can be applied in the business control system by HSC.
AC 1.2 Information need to manage financial resources
In order to manage financial resources in HSC, managers will require information
regarding business cost. They will be needed to acquire information about people, equipment,
finance, building, and consumable items. HSC have to pay salary to the hired human
resources. Moreover, firm has to purchase equipments like computer and furniture. Finance
will be needed to make payment for the expenditures and other capital requirements such as
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acquisition of building. However, consumable items include payment for using services of
electricity, water and telephone.
Along with this, information regarding business income also will be needed. HSC
managers have to estimate trend of the incomes rising trend will be consider good because it
will give large revenues to the firm. Moreover, management has to determine the impact of
external factors such as changes in policy, competitive factors and imposed legal
requirement. Favourable changes in government labour policy, environment policy and other
will affect HSC favourably and vice versa (Wallace and MacEntee, 2012). Under the
competitive factors, managers need to assess the level of competition, quality and range of
services offered by their competitors. It is because; in the present age, it seems to be
necessary to provide the best quality of services to attract large number of consumers and
compete effectively. In the UK, it is legally necessary for HSC to follow provisions of safety
and quality act, 2015. Thus, these changes also should be considered while managing cash
flows in the business.
AC 1.3 Regulatory requirement for managing financial resources
In UK, Government formulates a number of regulations on HSC to improve the health
status of people. Another legal requirement for HSC is to provide quality services to general
public so that their health can be made better. Health and social care act 2008 and
Regulations 2014 are the legislations made in UK. As per the act, it is necessary for all the
service provider organizations to comply with the provisions and to offer the best value to the
citizens (Hong and et.al., 2013). Further, GAAP are the regulatory requirements for
managing financial resources in HSC. GAAP are the guidelines that must be implemented for
recording the financial transactions by HSC. It would affect the process of preparation and
summarize the financial transactions in financial statements. On the contrary, its code of
practice includes health and safety at working environment, treating patients with dignity and
kindness, making no discrimination, providing health advice and support, keeping
confidentiality and avoiding the use of substances in large quantity that may be unfit for the
health of people.
Audit in HSC refers to the examination and evaluation of patient’s health by expert
professionals. It requires to be done to assess the impact of services provided on the patient’s
health. The main purpose of this audit is to ensure high quality care for the public. Health
care audit is the checking of HSC's current practices against the set standards as well as
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combining both the clinical and non-clinical audit (Doran, Misa and Shah, 2013). Clinical
audit means examination of actual practices against the set standard for clinical care services.
In HSC, a framework has been designed to improve the quality of care by enlarging
the practitioner's accountability. Healthcare governance plays a vital role in improving the
quality standards and in lowering disparities in patient’s health. This in turn delivers and
provides quality health care services that are growing continuously.
In UK, all HSC providers have to comply with the formulated care policies and
procedures. These have been designed for community based, residential and nursing care
services (Quality in new health system, 2013). In addition, Care Act, 2014, care quality
commission policies, Data Protection Act, Immigration and Asylum Act, Disability
Discrimination Act and availability of training resources for all staff levels are some of the
policies that every firm is needed to follow strictly.
TASK 2
AC 2.1 Diverse source of income in health and social care
Hospital's Budget for three years
Particulars Year 1 Year 2 Year 3
Cash revenues
Operational income 15000 25000 48000
Government grants 5000 7000 9000
Donation 10000
Subscription 5000 6000
Total cash inflow 20000 47000 63000
Cash expenditures
Purchase of medicines 6000 12000 23000
Research and development operations 3000 4500 5500
Administrative expenses 4000 4500 5000
Marketing expenses 1500 1800 2200
Total cash outflow 14500 22800 35700
Cash surplus 5500 24200 27300
Inital cash 2000 7500 31700
Ending cash 7500 31700 59000
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Hospitals generate income from wide range of sources. There are two kinds of
hospitals that are public and private owned. Prior are owned by government with the main
objective of providing better public services. They offer services without any cost henceforth;
their major sources of incomes are government grants, subsidies and donations. The UK
Ministry of health provides funds to this type of hospitals. It receives federal, state and
private grant funding (Anderson, Hsieh and Alter, 2016). However, later are owned by
individuals or group of. Their most of the revenues comes from billing charges for rendered
services to the community. In other words, operating revenues is the first and foremost source
of income which they can generate through offering services to the large number of patients.
Moreover, research grants, cafeteria services, parking income and charity are the sources
through which hospitals can generate income.
On contrary to it, voluntary hospitals are maintained by charitable organisation hence;
such donations are the main source of funds. They provide facilities at some service charges
hence; this will lead to enhance their incomes. Furthermore, subscription scheme in which
people can be entitled to take free services if they make payment of subscription amount and
local authority's contribution are the other revenue sources.
AC 2.2 Analysis of the factors that may influence the availability of financial resources
Many sources are out of manager’s control and affect the availability of finance
source to a great extent. Funding priority, agency policies and objectives, private finance,
outsourcing, inter-agency partnership, government policies, geography and type of services
are the some of the factors. Donors will provide funds to highly reputed hospitals who are
offering quality services. Therefore, hospital management has to make an adequate balance
between their revenues and expenditures. Hospital's goodwill and audited published
statement plays a major role in it. It is because financial statement shows hospital's
reputation, credit worthiness, assets and liabilities that have an direct impact on its borrowing
ability (Alsaeen and et.al., 2016). Moreover, hospital's credit risk management policy also
affects the ability to generate sources from financial institutions.
AC 2.3 Review different types of budgets
Cost centre: Various cost centres such as purchase, marketing, sales, research and
development, human resource development are some of the cost centre. Purchase department
make purchase of goods and services while sales department is liable to generate selling
income (Theologis and et.al., 2016). Research and development are responsible to do
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research to find out current diseases and solution of it whereas HRD have duty to manage
hospital personnel by designing rules and regulations.
Project management: In this, project such as construction of hospital building can be
managed. It will manage proper availability of funds for investment, monitoring and
execution of control to complete project within set time (Bresnen, 2016).
Outsourcing contracts: Catering, lab services, human resources and information
technology are some of the outsourcing contracts in hospitals. Hospital need to evaluate costs
and benefits on different contracts and select best among these.
TASK 4
AC 1.4 System
In budget preparation, revenues must be forecasted through different diverse source of
incomes such as government grant, subsidies, billing charges, donations and subscription.
Financial resources can be managed by preparing budgets. Moreover, budgets can be
administrated by segregation of duties among different personnel. It is because segregation of
duties will distribute accountability in different staff member in which all the member will be
accountable to manage the allotted work. Further, by fulfilment of all the responsibility by
Cost centres also helps to manage overall cost in HSC (Hignett, Otter and Keen, 2016). It will
be helpful to control research and development expenditures, marketing expenditures and
labour cost and purchase payments. This in turn, overall expenses can be managed results in
high profitability. In addition to it, auditing requirement will provide huge assistance to
analyse and evaluate the correctness of financial statements. Therefore, effective and reliable
information will be available helps to manage financial resources.
AC 2.4 Decisions about expenditure
Expenditures decision can be taken on the basis of internal and external
environmental analysis. Moreover, effective use of funds is the best way to control spending
in HSC. First of all, priorities can be set out in short, medium and long term planning.
Resource allocation should be based on the designed priorities. Further, making person
accountable for the allotted function also is a good way to manage expenditures (Holt-
Lunstad and Uchino, 2015). Further, cost benefit analysis helps to drive more profitability on
the incurred costs. Along with this, capital proposal can be evaluated on the basis of
investment appraisal techniques such as payback period, accounting rate of return and net
present value (Leff and et.al., 2015). It will help to determine most viable or profitable
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project in which investment can be made. In addition to it, risk analysis can be carry out to
manage financial risk associated with the collection of funds and the facilities of project
management can be taken to complete the project within set time by regular monitoring and
controlling.
AC 3.3 Information for monitoring expenditure
Internal audit can be carried out to monitor business expenses. Further, it can be
monitor through assessing movement in cash inflows and outflows. Further, budget is an
effective way to set standards and compare it with the actual expenditures. Therefore, it is
very necessary that expenditures should be properly recorded in spreadsheet. Through using
spreadsheet, HSC managers can easily determine the deviances that exists between actual and
standard expenditures (Munizza and et.al., 2015). It will guide managers to take remedial
actions to eliminate adverse variances so that actual and target expenditures can be equalised.
Furthermore, training program also helps to increase staff efficiency so that assets utilization
capacity can be improved results in lower expenditures. Along with this, curtailment of
unnecessary expenditures helps to control HSC cost and monitor expenditures as well.
AC 4.1 Financial decisions
Financial decisions involve investment decisions, long term finance decisions and
working capital decisions. The basis of these decisions is financial information available in
the prepared accounts such as budgets, income statement and balance sheet. Further, financial
need for different department also must be consider while taking financial decisions in HSC.
Working capital will be needed for the daily functions such as service offerings. It is also
based on the amount of income generated and set priorities (Cartwright and et.al., 2015). It is
because incomes will be initially available to the highest priority sector and than other
financial need can be eliminated. Management have responsibility to analyse and examine the
expenditures and revenues reported in income statement so as to take good quality of
decisions. Furthermore, HSC have to analyse various projects who same similar risk through
capital budgeting to determine most suitable project. Risk and reward relationship exists in
different type of funding also make manager able to determine most appropriate finance
sources to mitigate their financial need. This in turn, HSC can survive effectively without any
financial hazards.
AC 4.2 Relationship between service delivery, costs and expenditure
HSC have to maintain a good balance between cost and revenues while maintaining
quality standards for the services. There is a relationship exists between service delivery,
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costs and expenditures that can be analysed through cost-benefit, pricing policies and
purchasing arrangements. Costs refers to the value of resources in order to produce something
may be fixed, variable and semi variable. Fixed cost that does not get changes with the
production changes such as rent of hospital building (Curtis, 2005). Variable cost that directly
changes with the production changes such as drugs, consumables and medicines. However,
semi-variable cost combines both the fixed and variable behaviour such as civil servant salary
bill. Costs is the sum of total expenses while separate component of cost will be termed as
expenditures such as purchase, salary, rent, insurance and others. Moreover, capital
expenditures may be incurred for acquisition and construction of building, machinery and
equipments. HSC provide hospital, nursing, home care services to wide range of consumers.
Cost benefits analysis will asses total costs associates with different services to determine
most profitable alternative among available proposals. In the HSC's pricing policy, they
charges some high prices for higher cost and vice versa. Furthermore, under the purchasing
arrangements, bargaining with suppliers helps to reduce expenditures and cost as well. This
in turn, it will results in high fee charges.
AC 4.3 Impact on individuals
In HSC, service quality is the most important factors that affect patients to a great
extent. It is the responsibility of HSC to take care of the patients who have some panic
conditions due to any kind of diseases. Medical benefits, service delivery mode, quality of
medicines, health insurance services, service at patient's residences are some of the factors
that contribute to providing best value to the patients (Foot, 2014). It will help to improve
health of the people through taking extra care. Furthermore, prevention of all the diseases,
detection and treatment of illness, increasing life expectancy, reducing disparities, avail cure
services where needed are helpful to increase access to services (Mortimer and et.al., 2015).
However, lack of insurance coverage, high cost and lack of medical facilities are some of the
barriers in service access.
AC 4.4 Recommendations
All the health and social care providers should combines all this elements to improve
the quality standards that are safety, timely services, effective, patient-centred, efficient and
equitable. Safety standards ensure that health professionals is not overlooked and treatment
will be provided in a safe environment (Ivbijaro and et.al.,, 2015). Another quality drive
factor is services must be delivered in timely manner. Effective services include diagnostic
tests, preventive services, therapy and others as per customer need. Patient-centred means
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services must be provided through complying with physical and emotional comfort, patient's
values, coordination and preferences. Efficient means best value based services should be
provided for the money spent by the consumers. Equitable means services should be provided
through analysing the consumer needs rather than their personal characteristics such as age,
gender and status (Berwick, Nolan and Whittington, 2008). Thus, financial managers should
analyse available resources whether sufficient or not to fulfil patient needs. They have
responsibilities to control cost so that services can be offered at reasonable rates. This in turn,
poor families also will be able to take benefits of health care services. It will lead to improve
their health status, and HSC organizations will be able to get large customer satisfaction
results in accomplishing their targets in a great manner.
CONCLUSION
Present report concluded that HSC can serve best value to the patients through
improving quality and range of services. Moreover, the report inferred that budgetary control
is a best way to manage revenues and control costs results in achievement of set targets.
Further, internal control system, audit requirements and reliability and accuracy of the
financial statement helps to detect suspected fraud. This in turn, financial statement will
exhibit true and fair position of HSC organizations. Furthermore, the report advised that HSC
should provide qualitative services through combining both the necessary elements that are
demanding by the consumers. This in turn results in a way that high customer satisfaction can
be gained and set targets can be achieved effectually.
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