Finance is the essential part for entire organization which is required to run operations effectively. Therefore business needs to make optimum utilization of such resources which can be done by financial management. Current research report is based on "Management of financial sources in health and social care". It will be comprises of principles and regulatory requirement to manage financial sources (Baker, and Riddick, 2013). Further techniques and methodology will be described for monitoring and budgeting. Entire report will be focuses on such organizations which operate in industry of health and social care. Suggestion will be made for improvement and modifications which can be implemented by such entities for better financial presentation.
Cost is significant of all industries which are recorded and maintained by techniques of costing. For the efficient cost management following are the principles which are required to be obey by businesses-
Generally in business it is noticed that expenditure of cost is done on the basis of its close reason. Therefore for making strategy for costing it is required for engagement of stakeholders. They include financial and non financial staff.
For the better presentation and reliability it is required by business to use policies and techniques for recording transactions in cost accounting. It is not required to be rigid, modification can be made if it is essential to do so.
Till the expenditure is incurred not cost is charged to cost centre. Hence reliability of data depends on accuracy of input. Financial and statistical information is derived from such data which affects the quality of decisions.
It is concept ion cost accounting that cost is required to met in the period itself in which it occurs. Is previous cost are considered for future operations of business it will be contradictory to principles. If this is done so there will be unnecessary burden on that period which will result to dilution of cost. Further information and transactions should be recorded on the basis of materiality. So it can be focused on essential cost and activities.
In cost accounting transactions are recorded on the basis of double entry system which is used in financial accounting. Cost ledgers and other control accounts are required to prepare on principle of transparency. By this principle reliable results are ascertain from cost sheets and statements.
For the management of financial resources require information can be categorized ion two parts which are as follow-
It is information related to cost and income of business. It is comprises of financial and management accounting information. Financial accounting information contains annual accounts, which are merger of profit and loss account, balance sheet and cash flow statements. In such statement monetary transactions are recorded which shows financial position of business. By this requirement and usage of funds are ascertained. In management accounting information budgetary data, cost and pricing data are included.
This information includes policies and strategies which are used for utilization of financial assets. It includes forecasting and assessment of various factors of business. On the basis of these policies guidance map is created which helps organization of health and social care to attain financial objectives. It includes facts related to trend analysis, modification in policies and competitive factor. Legal and statutory requirements is also included in non financial information.
Usually organization of health and social care operates in public sector and get funded by government. Therefore it is responsibility of management of such businesses to make appropriate use of these resources for earning and providing quality services of public. Funds are provided by local or central authority which is collected by general public in the form of taxes and other payments (Winand, and et. al. 2012). Hence management is under obligation to prepare and publish financial statements of business in regular time intervals. They are required to follow principles and regulations described by ICAEW and GAAP for making their financial information comparable and reliable. There accounts are checked by care quality commission hence it is mandatory for them to complete it.
Manual and software system both can be used for management of financial sources. Most suitable approach for health and social organization will be updated software for financial accounting (Baker, and Riddick, 2013). By this work will be reduced and efficiency of business will be increased. With the help of such software proper record can be maintained by businesses for monetary and non monetary accounting transactions.
For proper integration of accounting concepts in financial accounting, principles of IFRS can be followed.
Revenue is crucial factor for business which had direct impact on income. More the revenue will be, higher the income will be earned by business (Moeti, and et.al., 2007). If entities are able to generate sufficient income from main sources diversified sources of income can be used for enhancement in it. Such sources are listed below-
Stakeholders and Voluntary organizations- Funds by health and social care organization can be raised from investors and lenders. They are such stakeholders which are considered in money providers of business. It includes private financial institutions from which loan can be borrowed. By that amount investment can be made for generation of income.
National and local government- Grants can be used by business as sources of earning of diverse income. Grants are source of finance provided by government for particular purpose of for project of business (Winand, and et. al. 2012). Generally these are provided at free of cost or low rates.
Other services- With main services organization can provide additional services from which they can make enhancement in their income. For say medical camp, private health insurance or other services can be provided by this type of businesses from which additional earnings can be generated.
There are numerous options from which sources of finance can be availed but availability of all of them is influenced by some factors. Main factor in it is allocation of central government. According to allocation power is distributed and policies are made which are mandatory for business operated in health and social care to follow (Accountability of public sector managers, 2011). On the basis policies described by central government financial policies are made by business. Political sensitivity refers to controversial issue which affects decisions of business. Public sector organizations are controlled by government hence there issue affect the strategies of management.
Ability of business for negotiation has also great impact on the availability of financial resources (Wirick, 2011). If they are capable they can raise funds by adding risk margin for completion of project but they are incapable to negotiate there will be situation where appropriate funds will also be not arranged. Local demands and rate of utilization also affects the decision of business for selection from available options of funds.
For managing and running business successfully there are various expenses are required to incur. Budgeted expenditure can be segregated into two parts which are running expenditure and long term expenditure.
This amount is spent by health and social care organization to fulfill daily needs. These are day to day expenses which are necessary to pay as without it business cannot be managed. Flexible master budgets are prepared for such expenses in which regular modification is done. Master budget is comprises of all activities which give brief review of operations (Moeti, and et.al., 2007). Cost of staffing, salaries, interest on loans and staff training are included in running expenditure of business. In this less amount is required.
These expenses are planned for growth and development of business. These are planned very carefully as it requires huge amount for investment. Objective behind these expenses is increment in efficiency so more revenue can be earned (Winand, and et. al. 2012). Costs of new asset, capital expenditure, building cost are included in it. Particular budgets are prepared for all expenditures. Planning and evaluation is done so risk can be assessed and objective can be achieved.
Decisions for expenditure by health and social care organization are taken on the basis of following points which are listed below-
Funds available- Expenses are influenced by sources from which funds are availed by business. If business had sufficient profits they will go for debt financing (Moeti, and et.al., 2007). If there are not sufficient profits or there are fluctuations they will choose equity financing.
Locations- Place where business is located has great impact on procedure of decision making. For say if it far from its stakeholders it will increase operating charges of business. That's why place of business is wisely selected.
Guidance of central government- Public sector organization is requiring following guidance of regulatory authority for operations. As per there norms and policies expenditure is determined by business (Organizational structure. 2013). If there are some legal issues in operations or it requires some legal framework then legal policies should be considered.
Hence before decision making of business facts about above described points should be incorporated for proper results. By the evaluation of such points all aspects will be covered and better decisions can be taken.
In business sometimes there are circumstances where management has to face shortfalls in source of finance. Such situation arises by unexpected events like increase in prices, abnormal loss or efficient forecasting (Moeti, and et.al., 2007). Lack of financial resources can be managed by following options-
Appropriate forecasting- Main cause for shortfall is not proper planning of expenses. Forecasting should be after consideration of unexpected and expected threat to avoid risk in future.
Mark up strategy- Funds should be raised by government after additional allocation of expenses. Extra funds can be taken by business for situation of emergency.
Loans and charities- Sources of finance can be generated from loans from approved financial institutions. Charities and donations received by business can be used in such situation. Usage of this option should be according to guidance (Mclean, 2003).
Prioritize expenditures- If there are limited fund with entity, expenditure should be done by them on the basis of requirement. Prioritization of expenses can be done in criteria of essential, optional and not necessary. By this strategy main operations will not be affected.
If there is event of fraud in business it is mandatory to look forward to it as quickly as it can be possible. Initial step for this should be collection of evidence against the fraud. Blame someone without proper proof is ethically wrong. If there is doubt then investigation is required to be conducted against the culprit. Investigation can be done with the help of external and internal audit by team of experts. Members of team should be comprises of person who are expert and knowledgeable in this field and can take decisions without any biasness. Involvement of police is necessary if there is serious fraud (Management accounting. 2014). For more accurate result of embezzlement financial forensic accounting can be used. It is an expertise branch which provides description for engagements on the basis of anticipated disputes or litigation.
Budget is said to be forecasting of expenses and revenue for particular period in future. After implementation it is necessary to evaluate (Different Types of Budgeting Methods, 2010.). Evaluation of budget is known as monitoring of it. The objective behind monitoring is to attain outcome according to desire. For the budget monitoring following techniques can be used by health and social care organizations-
Internal audit- In such technique internal audit is conducted by management itself. Purpose of such audit is to check whether applied policy is according to planning or not. Regular checking is done for the work of subordinates. It is an ongoing process in which is conducted with the work.
External audit- Monitoring in this technique is done at the end of the work. It is done by external parties of business. Purpose of external audit is to provide results without any partiality and personal influence on work of organization (Glasby, 2012). Report of external audit is more reliable in comparison of internal audit.
Indicators for key performance- It is method of benchmarking in which completion of work is done in divided into steps. Guidance is provided by supervisors for operations so employer can met the criteria and standards determined by them. This is done for quality assurance of work.
Combination of these techniques can be used by business for better monitoring of budgets and its evaluation (Moeti, and et.al., 2007).
For making decisions procedure of business information of management account of previous year is required. By such information trends are determined for operation. On the basis of such trends forecasting is done for future periods. Management accounts are comprises of financial statement and documents of managerial policies. Previous budgets and variances are required by business (Frredman, and Media, 2014). With this information more accurate planning can be done for projects in which previous mistakes will not be repeated and good points will be again considered. Essential standards of Care Quality Commission (CQC) are required to be incorporated while decision making for financial sources. Regulations have defined in such standards for quality and safety of work in industry of health and social care. Decisions of sources of finance should be taken on the basis of government initiatives and pay wards so it will more compatible to objectives of business. Political dictate and modification in legal policies are needed to know by organizations so there should not be contradictory to legal terms.
Health and social care organization are included in public sector so they are required to behave ethically. They are obliged for having transactions with their stakeholders. While preparation of financial statements they are required to present true position of business without any biasness (Brigham, 2013). They are required to follow compliances of regulatory authority so they could be more reliable and can be eligible for maintaining healthy relationships with their stakeholders. There are using funds provided by government which is of general public. So they are accountable to make optimum utilization of it in reasonable manner so organization can be able to generate profits. Health and social care businesses are mandatory to publish that how much fund is required and how it will utilized in business. Overall transparency should be maintained by businesses with stakeholders.
Alteration in financial consideration of business had direct impact on consumers who are using the services of health and social care organizations. If there is alteration in mode of services provided there convenience will get affected (Banks, 2008). Financial changes in business affect the prices which are required to pay by consumers for consumption of services. For examples if for saving the funds any services are withdrawn, then demand of business will get reduced.
Staffing levels is said to be situation if there are right people of right position at right time. Only enough staff is not sufficient it is also required that they should have adequate knowledge and skills according to work (Bandy, 2011). If staffing level of organization is altered it can have positive or negative impact based on the services provided by new staffs in comparison to old staff. It is only a myth that reduction in level of staffing had threat health and safety. If inefficient staff is fired better work can be done by organization.
For the improvements in operations of health and social care can be done by reassessment of expenditure in business. Reconsideration should be done on the basis of priority of expenditure or on the basis of benefits provided by it (Baker, and Riddick, 2013). By this procedure unnecessary expenses will be eradicated and total cost will be reducing which will maximize profit of the business. Amount should be invested in various business projects by assessing value of money with integration of investment appraisal techniques. By this risk in the project will be identified and managed and there will be assurance of earning.
To give better performance by business guidance of management consultants can be used. By it quality of work can be increased and better outputs can be attained. For controlling cost and making better pricing decision for business unit costing can be used. This technique is beneficial for those organizations that are in production of identical units or services. For management of financial burden social and health care business should select options for sources of finance after consideration of social and financial environment (Arnold, 2005). Raising fund from appropriate sources will be beneficial in reduction of financial costs. For monitoring of budget, performance models can be used for attain outcomes according to planning.
Present report was focused on financial management of health and social care organizations. From the report it can be concluded that financial resources is mandatory to manage for smooth operations of business. By the planning and monitoring of budget, attaining of financial objectives will be getting easier (Accountability of public sector managers, 2011). Cost and expenditure has direct relationship in business which affects capacity of earning. For the effective management, cost is required to be planned which can be adjusted against financial burden. Cost accounting similarly follows principles defined by IFRS and GAAP as financial accounting for better presentation and reliability of cost statements. For the better decision making of business health and social care organizations should incorporate all management and financial information (Moeti, and et.al., 2007). By this all aspects will be evaluated and appropriate decision can be taken for business.