Financial resources are critical to the success of organizations because, with sound financial backgrounds, the institution can achieve efficiencies in some areas. However, a robust financial background implies having effective and relevant financial management strategies. This is even more essential when it comes to the health or social care sector where there are diverse departments and many personnel. This essay explains some of the aspects related to financial management in the health or social care sectors.
1.1The Principles of Costing and Business Control Systems
In the health or social care organizations, costing applies to the financial process of estimating the amount of money spent while generating services to patients or clients (Field & Brown 2007).
The main principles of costing in the institution are based on the cost-benefit analysis (CBA) in health care. Understanding the concept of costing and business control system in health and social care organization, it gives a comparison to the expected monetary benefit that is derived from several varied health care interventions with the anticipated cost of providing each intervention to establish what is the best or the most profitable option. Underpinning the different internal and external cost that includes institution maintenance, clinical workers or health care workers, and health care treatment to the residents of the institution; which may involve supplies and labor.
In order for the institution to take control of its business, it is also highly important for the company to include basic needs for a health care institution to succeed; such as preventive controls for both patients and health care workers, defective, and security controls.
Preventive controls are the most basic but vital in business. It provides protection that separates staff to the patient. For instance, home care workers often deal with stress and pressure; thus, to prevent health care worker errors, it is imperative for the institution to provide assurance of job safety and security. Moreover, it allows the institution to identify and monitor inaccuracy of information data.
1.2Information needed to manage financial resources
Management defines the process of controlling things while financial resources are the money the organization has at its disposal to spend and is available in different formats such as credit lines, liquid securities, and cash (Field & Brown 2007). The management of financial resources does not occur in a vacuum but instead require certain critical information.
The institution’s responsibility for managing financial resources is gathering and pay respect to the past performance, availability and or shortage of funds that may also occur in the present operational process.
Finance and health care personnel must have great collaboration during financial difficulties and how to maintain financial flow and solvency. Thus, during financial difficulties, the management are able to recover costs, cash flow forecasting possibilities of inaccuracy in cash flow and assets, and other working capital.
On another aspect, it is also imperative to provide accuracy in consumable items such as food, bed sheets, towels, and soaps to mention but a few. The information that arises from the use of consumables is significant in the management of financial resources because failing to establish the pattern may mean not having an appropriate control system.
Administration refers to the process of management, and because there are equipment, technology, and personnel tasked with the administration purposes, the information from the administration is also key to the management of financial resources. Lastly, income streams apply to the organization’s sources of income, and this information is crucial for the management of financial resources because it helps to determine the balance between income and expenditure (HFMA 2015).
1.3The Regulatory Requirements for Managing Financial Resources
Regulatory requirements are the policies and legislations that control the financial operations of the organization. It is the regulatory requirements that function to align the financial operations of the organization with the statutory provisions standards expected. For instance, in the UK, the Health and Social Care Act of 2012, governs all the financial operations in the health sector (HFMA 2015). In healthcare, there are external influences to business costs from a regulatory requirement perspective.
One of the external influences to business costs revolves around changes in policies. When there is a change in healthcare policy, the organization has to embrace changes that will reflect the adaptation to the new policy and the integrations of the new requirements means expenditure (Lindsay et al. 2014). Competitive factors such as the pricing of health care services or diagnostic costs also represent another external influence to business costs in the healthcare sector.
With the competitive factors, the healthcare organization is forced to introduce new technologies or professionals, and this means additional costs (Field & Brown 2007). Legal requirements are the other external influences that add costs in the healthcare sector. The legal requirements imply that the organization has to be regulated by certain bodies and this implies subscription fees and other necessities to be fulfilled.
The financial legislation and codes of practice also have their associated implementation costs, and when the healthcare institution implements them, there are costs incurred. Another source of regulatory cost to the business is an audit. Although internal auditors can undertake auditing activities, sometimes it is a requirement that external auditors have to be used.
In such case, external auditing firms have to be given the job on a fee or contract, and this means additional costs to the business. Lastly, accountability is another external factor that influences business costs. Accountability generates costs in the sense that the organization has to implement systems and establish external associations to oversee accountability (Monitor 2016).
1.4 System Evaluation for Management of Financial Resources
Collectively, the institution shall utilize Financial Management System (FMS) to manage the institute’s finances. Financial Management System (FMS) according to Anderson (2007), FMS is an efficient software and methodology that enables the management to control its allocation on expenses, income, and assets. Additionally, as its goal to maximize profits and ensure the institution’s sustainability, it allows the health care facilitator to monitor the institution’s total expenditures freely.
Thus, by adopting this process in managing the financial resources, the management will be able to timely record all the budget line items such as salaries, utilities, equipment, and other expenses needed in the health care institution. Furthermore, by practicing the financial management system, it shall assist the management to produce financial records on time.
The institution is able to produce reliable analysis on budgets and costs with the data produced through the utilization of Financial Management System. For instance, the institution is able to decide on budget allocation on products and services through the financial reports produced by FMS.
2.0 Planning and Management on Social and Health Care Budgets
2.1 Diverse Source of Income in Health and Social Care
Understanding budget and planning have its internal and external sources of income. Like other health care institutions, the institution utilizes resources such as customers, government institutions, private sectors, and corporation. The institution may encounter income non-stabilization due to funding mechanisms that influence the institution’s profit, which is similar to other health care homes. However, through the utilization of a diverse source of income, the institution is capable of sustaining its needs. For instance, contributions to tax, loans, social insurance, grants from different government and private sectors.
Charity donations from private sectors individuals, who are interested in aiding elderlies and disables, are another diverse source of income that helps sustain the institution. Additionally, these types of the collection do not negatively influence the institution’s finances since the latter are not generated from the main financial source unlike insurance, tax for payments and health and patients’ payments.
2.2The Factors That May Influence the Availability of Financial Resources in Health And Social Organizations
Despite the presence of various sources of income in the health and social care, there are factors that determine the availability of the financial resources. One such factor is the availability of resources. In some cases, only a few sources of income may be available while in other cases, the health or social organizations may be swarmed by the various sources (Ball et al. 2013). Therefore, the more the financial sources are available, the more the financial resources are likely to be available.
The institution is mainly influenced by varied risks on financial resources and the payments from service providers, service seekers, and business corporations. Under availability of resources, the funding priorities also determine the availability of financial resources in the sense that where health or social care are not given priority, then financial resources will be limited and vice versa.
Moreover, similar to other home care institutions, the operating system of the institution faces similar challenges when raising funds because of the level of income and due to the institution and limited administrative capacity (Erxton & Marel, 2011). Thus, the availability of financial resources depends on the capacity of the state to pay for the service.
The second factor that may influence the availability of financial resources in health and social organizations relates to agency objectives and policies regarding financing. If the potential contributors of income establish that the objectives and policies related to finance are sound or advancing health or social, they are likely to channel their contributions to the organization (Field& Brown 2007).
2.3The Different Types of Budget Expenditure in Health and Social Care Organizations
In health and social care, budget refers to the estimated financial data relating to the different departmental and operational activities in the organizations based on the trends. On the hand, expenditure applies to the actual finance spent on different aspects while the organizations deliver care (Broadbent & Cullen 2003).
The institution is mainly concerned with its budget expenditures including operating budgets, personal budgets, and sales budget. Operating budget are the expenses with significant influence to the incurred expenses within a financial year; this includes labor costs. Personal budget, on the other hand, receives a major impact due to the growing competition and the level of the financial resources dependency caused by demand on technology and other human resources utilization.
Lastly, when it comes to sales budget the actual estimation of the sales and services provided by the current financial year and reported. Mainly, the focus of the budget is to provide estimation in the sales expenses, the estimated amount of services and products during the budget year, and the estimated on the accrued revenue by selling the institutes services and products.
2.4How the Decisions about Expenditure Are Made Within a Health or Social Care Organization
There are various reasons to make decisions in health and social care. The institution’s decisions are based on understanding the needs of residents, altogether with its detailed analysis. Thus, ensuring the financial resources are well managed is one of the utmost priorities in making decision within the health care institution. Moreover, with the help of internal and external financial analysis, the institution is capable of deciding on the estimated accrued expenses for monitoring of current and future expenditure (Herman, 2008).
The expenses and value added services expenses incurred are taken into a strategic, operational planning to ensure financial resources sustainability. Moreover, the institution assures that decision making shall include varied project management capabilities, estimations on financial risks, and calculations of the cost benefits and more. The advantage of this factor is that it enables the organization to distribute its financial resources in the right ways. Its disadvantage is that it can confuse the long and short-term objectives and create financial shortfalls.
3.0 Importance of Monitoring the Budget Expenditure
3.1How Financial Shortfalls Can Be Managed
Financial shortfall refers to a situation whereby the amount of finance available is lower than the amount that is needed to fulfill a given organizational function (Armit & Oldham 2015). In other words, it means having fewer amounts than what is required. One of the obvious reasons for financial shortfalls in health or social care concerns embezzlement or misappropriations. This can take place when those charged with financing and budgeting divert the financial resources for their personal or other uses (Iacobuci 2013).
Second, financial shortfalls can be caused by poor forecasting and budgeting techniques that may engender discrepancies between what is budgeted and what takes place in reality (Field & Brown 2007). The lack of costs controls can also be a source of financial shortfall because not all departments may observe the projections guidelines. Lastly, changes in the external environment such as currency value as well as changes in technology and employee aspects can also lead to financial shortfalls (Broadbent & Cullen 2003).
In this case, the institution does not consider cost-cutting nor inappropriate decision making without strategic, operational analysis; while, the institution focuses on the generated wastage during operations. In this stance, wastage reduction within the operational process shall enable the institution to gain performance improvement charted by covering the shortage. Additionally, to reduce shortage, the institution anticipates the future financial requirements; thus, all planning are based on strategic analysis. Strategic planning and analysis includes assessment of satiation of the market and tends to gauge the level of future shortage in resources.
3.2The Actions to be Taken In The Event of Suspected Fraud
Fraud is defined as an intentional act to gain financial rewards unfairly. This can be done by hiding the identity and manipulating the financial spreadsheets that contain financial information of the healthcare organization (Field & Brown 2007). So to speak, to handle fraud and other related frauds within the institution, the management has considered a separate department that will be responsible for the investigation and evaluating the situation.
The institution understands that most of the frauds are brought about by misinformation and miscommunication on the rules and process of the operation. Therefore, a good investigation and justification of evidence when analyzing improper behavior will lead to an immediate solution.
Since the institution had instilled a group that will handle fraud cases, they are also responsible for providing accurate data analysis on the fraud cases. This analysis may include the incident inquiry, determining the culprits, the development and how the fraud incident was handled, a detailed incident report, and recommendations on preventing similar fraudulent activity.
3.3Evaluations of Budget Monitoring Arrangements in Health or Social Care Organization
Budget monitoring according to Scheiber et al. (2001), is a process of evaluating the organization’s ability in fulfilling the financial goals and objectives in accordance to the institutes’ budget preparation.
Example of the organization budget for the year 2016
|Sources of income
To monitor the budget, the organization has adopted different strategies. One of the strategies is the establishment of cost centers which are departments created specifically to evaluate the budgets and financial practices of the organization (Armit & Oldham 2015). Through the cost centers, the organization is able to discern the wasteful practices and the spending trends and consequently adopts the relevant practices.
Accountabilities represent another approach used to monitor the budgets, and this means the integrations of systems that facilitate transparencies and responsibility on financial matters (Broadbent & Cullen 2003). The organization also uses regular audits to identify variances in budgets and promote compliances with the established standards.
4.0 Systems and Process for Managing Financial Resources
4.1The Information Required To Make Financial Decision Related To Health and Social Care Service
When making financial decisions related to health and social care service, there is certain information that is of significance. Information on expenditure which is the amount spent on different areas is important because it shows the organization what it needs to spend to realize its objectives or obligations (Lingg et al. 2016). Budget information is also important because it provides the estimations of the income and expenditures as well as their trends.
Capital information is another component that is important because it gives the picture of the assets that the company has and how such assets can be used. The health or social care organization must also understand its sources of income so that financial decisions reflect the available income to the institution (Pflueger 2015).
Cost-benefit-analysis information is also essential in the making of financial decisions in the sense that it facilitates the adoption of the best decisions with the greatest impacts. It is also imperative that the financial information is analyzed for reliability and validity before making the financial decision so that issues of malpractices are avoided (CIMA 2016a).
4.2The Relationship between a Health and Social Service Delivered, Costs and Expenditure
The institution focuses on the development of health care services to its clients; this includes issuing provisions in providing utmost satisfaction and quality to its clients. Service delivery refers to the health or social care component that describes the interaction between the organization and the patients/clients whereby the organization provides services, and the clients/patients derive value from the services.
Expenditure talk about to the amount of money that has been spent while the cost is the amount to be disbursed in order to obtain something (Mccan et al. 2015). From a cost –benefit analysis perspective, the service delivered is usually connected to the cost and expenditure in direct ways. Where the quality is of service delivered is high, the costs and expenditure are also the same and vice versa.
Concerning pricing policies, service deliveries of premium prices are often linked to high costs and expenditure. Additionally the expenditures within the health and social care sector, according to OECD (2001) have been spent on elderlies, patients with terminal and complicated diseases.
Therefore, the health and social care point of collaboration and connection should be improved for the purpose of achieving a suitable saving arrangement for the organization’s resources. For instance, the institute can save the cost wastage if the primary focus and objective are primarily based on improving the quality health care services even accompanied with issues.
Unnecessary hospital admissions can be undermining to the institute’s operational revenue; thus, it is reasonable to avoid such tendencies for the purpose of reducing cost expenditures. Modification and technological enhancement can be considered as significant barriers to cost reduction. Ideally, to provide quality service to its clients, the Institute is obliged to keep all the institutes’ structure in order; however, this requires funding and expenditures.
For this matter, the institute must consider reviewing the needed enhancement and technological upgrades that will is capable of withholding on a long-term basis. Furthermore, the institute must have purchasing arrangements to determine the efficiencies of the services delivered and eliminate unnecessary costs and expenses (Lingg et al. 2016).
4.3How Financial Considerations Impact Upon an Individual Using Health and Social Service
Financial considerations impact upon an individual using health and social services in two primary ways. For starters, financial consideration affects the quality of care given because where there are budget constraints, some services, technologies, or expertise have to be overlooked, and this lowers quality (Mann et al. 2016). In this stance, the institute must have strategies in obtaining an improved and modified health care and social service since it is undeniable that the industry is facing an upsurge of cost and expenditures.
Critically, the since the industry demands technological advance to provide quality service to its clients, there are significant changes in the growth of public health care institutes even with the declining quality service. Correspondingly, private sectors are more focused on improving the quality service; thus, this includes high expenditures that lead to a costly service for its clients. Then, with the high cost of service, this does not only impact the revenue but the customers who may consciously consider that the term quality service is based on the price they need to pay.
4.4Ways to Improve the Health and Social Care Service through Changes to Financial Systems and Resources
Health and social care services such as the National Health Service (NHS) are facing various problems such as huge and unsustainable budget deficits on a yearly basis (Iacobucci 2013). The reason for the persistence of this problem is that the organization uses irrelevant resources and systems in some areas yet such resources or systems are expensive. To overcome this challenge, it is worth considering certain recommendations.
The financial decision makers should shift huge parts of the budgets to preventive strategies as opposed to treatment strategies. Another recommendation is that such organizations should adopt evidence-based practices in services delivery. Studies have shown that where preventive measures are stressed, health and social services considerably reduce their budgets (Turner-Stokes et al. 2011). The benefits of these recommendations are that they eliminate the need for treatments, which increase costs and encourage the use of true and tested approaches to service deliveries that eliminate wastes.
In conclusion, the benefits of effective financial management are varied and evident. Nonetheless, management of financial resources in health and social care organizations continues to be a problem. At the heart of the problem are ineffective financial systems, lack of compliance with the code of ethics, and financial malpractices. Health and social care organizations should thus develop approaches that address these factors.
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