## Financial Management Quiz

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### Financial Management Quiz

1.  The exchange rate is 0.967 Swiss francs per U.S. dollar. How many U.S. dollars are needed to purchase 1 Swiss franc?
2. The exchange rate is 1.1491 Swiss francs per U.S. dollar. How many U.S. dollars are needed to purchase 9,899 Swiss francs?
3. Suppose one U.S. dollar can purchase 135 yen today. If the yen depreciates by 10% tomorrow, how many yen could one U.S. dollar buy tomorrow?
4. Suppose the exchange rate between U.S. dollars and Swiss francs is SF 0.9645 = \$1.00, and the exchange rate between the U.S. dollar and the euro is \$1.00 = 1.1934 euros. What is the cross-rate of euros to Swiss francs (Euro/SF)?
5. Suppose the exchange rate between U.S. dollars and Swiss francs is SF 1.1716 = \$1.00, and the exchange rate between the U.S. dollar and the euro is \$1.00 = 1.149 euros. What is the cross-rate of Swiss francs to euros (SF/Euro)?
6. You can exchange \$1 for either C\$1.209 or ¥114.09. What is the cross rate between the Japanese yen and the Canadian dollar? That is, solve for ¥ per C\$.
7. In New York, you can exchange \$1 for €0.8026 or £0.6149. Suppose that, in Berlin, £1 costs €1.1814. How much profit can you earn on \$40,116 using triangle arbitrage?
8. Your friend from Germany has decided to come and visit you in the United States. You estimate the cost of her trip at \$6,752. What is the cost to her in euros if the U.S. dollar equivalent of the euro is 1.2031?
9. You just returned from a trip to Venezuela and have 6,696 bolivares fuertes in your pocket. How many dollars will you receive when you exchange this money if the U.S. dollar equivalent of the bolivares fuertes is 0.1507?

Financial Management Quiz

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## Quantitative Financial Plan: Budgets

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### Quantitative Financial Plan

Introduction

A budget is a quantitative financial plan for a specified period of time. The financial plan includes sales volumes, expenses, resource quantities, liabilities, assets and cash flows. The budget provides the details for strategic management (O’Hoyt, 2014). Budgets assist in financial planning of the actual business or production of certain products (Williams, Haka, Bettner & Carcello, 2008) Budgets also coordinate different organizational activities and also control resources, provide transparency and accountability (Bragg, 2010).

Budgets, financial plan are also used to forecast the requirement of future financial needs of the company. The financial performance of a company can also be analyzed by comparing the actual budget from the standard budgeted. The variance analysis provides the management with enough information to reorganize its operations and also to investigate any losses that may not have been anticipated (Bragg, 2010).

1. Cash budget on a monthly basis for six months ending June 30th 2016

The net income is a loss of 26,740 in January 2016 while the balance brought forward for the same period reduces the amount carried forward to a loss of 18896. The highest sales are expected in the months of May and June. The total purchases as a percentage of sales adds up to 80.2% of the total sales. The director’s salary is 2% of the total sales. Loan repayments total to 1.86% of the total sales.

The total expenses are estimated to 88% of the total sales (Garrison, Noreen & Brewer, 2009). That means that the Net income expected is just about 12%. The financial performance trends for the budget are shown on the table below. In February 2016 the total sales would grow by 6.06% whereas in March the same year the total sales would grow by 5.71%. There sales growth would be zero in the months of April and June.

But in May 2016 the sales would grow by 29.73%. The expected cost of purchases is also expected to in February and March by 13.33 and 10.26%. For the remaining months the cost of purchases would increase by 11.43%, 15.38% and 6.67% for the months of April, May and June (Aranya, 1990).

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• Cash budget for six months ending June 30th 2016 with 15% sales reduction in final three months

When the total budget is adjusted downwards by 15% of the total sales for the last three months as forecasted below;

The sales would decrease from 277500 to 235875 in April while in May and June the sales would decrease from 360,000 for both May and June to 306000 for both months. These reductions would result in reduction of net income with approximately the same percentage.

The total net income for April would be a loss of 12,999 from the initial amount of 28626 before the 15% reduction. In May and June it would amount to 76926 and 60886 compared to the net amount after the 15% reduction which amounted to 22926 and 6886 (Garrison, Noreen & Brewer, 2009).

When the sales are reduced by 15%, the total sales in May and June would decrease from 360,000 to 306,000 for both months (Hermanson, Edwards, & Invacevich, 2011). The most notable trend is that the total amounts that would be carried forward would register a higher margin of growth when the sales are decreased by 15% (Anderson and Sedatole, 2013).

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The recommendation to the management is that the forecasted budget presents a profitable future for the company and should be implemented as all the purchases and all other expenses would have been paid off by the second month even when the sales are reduced by 15%. However, the cost of sales is very high and should be reduced (White, Sondhi and Fried, 1997). The net income margin of 12% is too small.

When the sales are reduced by 15%, the purchases would increase by 11.43% in April while in May and June purchases would also decrease by 15.38% and 6.67% respectively. Total expenses however would increase by 12.37% in April and 13.74% in May while in June total expenses amounted to 5.67%.

The net income would reduce by 12.2 percent in April while in May and June the Net income would reduce by 278.37% and 69.96% compared to the increase in initial Net Income of 168.73% and a reduction of 20.85% in May and June respectively. The increment of 10.55% after a reduction of 15% compares relatively to the initial increment of 37.84% on the total balance carried forward (White, Sondhi and Fried, 1997).

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• Conclusions and recommendations

To conclude, the growth in total sales would continue to increase throughout the rest of the year as predicted by the trend hence the future of the business is very bright. The company should continue and implement the budget as planned. The total sales amounted to 2.6% of the budgeted sales while purchases were the highest expenses and it amounted to 80.2% of the total sales.

Loan repayments amounted to 1.9% of the sales. The company would remain profitable as long its operational costs don’t exceed the 80.2% range. The reduction in sales by 15% would result in a reduction of 69.96% in net income (Allaboutbudgets, 2015).

References

Anderson, SW & Sedatole, KL 2013. ‘Evidence on the cost hierarchy: The association between resource consumption and production activities’. Journal of Management Accounting Research (25): 119-141.

Aranya, N 1990. ‘Budget instrumentality, participation and organizational effectiveness’, Journal of Management Accounting Research (2): 67-77.

Allaboutbudgets (2015) Forecasting Revenues retrieved April 2016 from http://allaboutbudgets.com/2015/12/09/forecasting-revenues/

Bragg, S 2010. What Are The Advantages Of Budgeting, Accounting tool. Retrieved from <http://www.accountingtools.com/questions-and-answers/what-are-the-advantages-of-budgeting.html > (3 March 2016).

Garrison, R, Noreen, W & Brewer, P 2009. Managerial Accounting. McGraw-Hill Irwin New York.

Hermanson, RH, Edwards, JD  & Invacevich, SD  2011. Accounting Principles: A Business Perspective. First Global Text Edition, Volume 2 Managerial Accounting, 37-73. McGraw Hill. Boston.

White, G, Sondhi, A. & Fried, D 1997. The Analysis and Use of financial statements, Wiley Press. New York. Williams, JR, Haka, SF, Bettner, MS. & Carcello, JV 2008. Financial & Managerial Accounting, McGraw-Hill Irwin. Boston

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## Venture Capital and Private Equity

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### Venture Capital and Private Equity

Background

One major question that clicks into the mind is how the private equity and venture capital is different. Mere because both are used to refer firms that sell their investment in equity financing after they have invested in an organization. For the matter of facts, there exists a significant difference between these two; first, it is the way the firm performs their duties when involved in the two types of investment.

Secondly, the funds are used to purchase a different sizes and types of companies, and thus, claim a different percentage of equity in their invested companies, Cumming, (2013). In a technical way, Metrick, (2011), defines the term private equity as the money or cash invested in a company that becomes a private company through the investment. At the same time, these scholars state that sometimes, this term is used to refer companies that other firms through leveraged buyouts (LBOs).  On the other hand, VC is an investment in business in the concept, start-up or during the early years of their establishment.

The paper will look into the Skylock Enterprise, which is a company that deals with clothing products. Frankly, speaking this is a fascinating company to be part of since established two years ago. Each and every day there a new opportunity present itself to build the great legacy we dream of. This company has grown into an integrated manufacturer of the highest quality clothes. This company operates one big plant located in the United States, seven outlets that provide retail services to our business.

In total, there are 543 employees for this company and walk home with over \$100 million annual revenue, plus other health benefits (notably, the paper will work with US dollar unless otherwise stated). This company has a stellar reputation since its establishment in those two operational years. Its strongest suites being cotton clothes, women’s wear, men’s wear, as well as the children’s clothes.

Despite its good starting, this company is faced with a lot of challenges in the future. Skylock, manager Stanley White sees impending danger as there is a great competition from the large multi-national companies like Nike, Ralph Lauren among others. Great scholars like Ahlers, (2013), competition in most cases theoretically results in lowering the prices of the commodities, hence if this happens it can narrow the marginal revenue of the company.

Thus, this may limit the development and expansion of this great visional company. This makes the manager question whether this company will remain as innovative as it is, or does it need to adopt some changes. Thus, the major question remains, where Skylock Enterprise will focus its effort.

Due to the market condition in the United States, our company is a price taker, and we need to work on the set market price. In particular, we operate in a free market where no firm or entity has the ability to influence the prices in the market, Dix‐Carneiro, (2013). To succeed, we have to work with the price constraint and at the same time deliver the best quality goods. In fact, quality products always win the customer’s heart. This is in accordance with the factors that affect the demand for a commodity one being the quality (which affect the taste), the price among others Mankiw, (2014).

The Skylock company has excellent structure and one general manager who overlooks all the activities of the enterprise. Figure 1 is a management structure which portrays the general overview of the management team.

Figure 1: Skylock enterprise management structure.

Investment Case

The primary focus of the firm in two years has been in the sales department since it plays an import role in advertising the company’s product. The core aim of this department is to increase the sale by two digit percent. Critical to note, in the two years of operation, the company revenue has risen by 5% and 8.6% consecutively. Thus, we are aiming at increasing this percentage to about 13%, this seems impossible, but through the proper financing of our sales, for appealing the commercial market is more oriented to the direct marketing than mass advertisement Danaher, (2011).

The statistics indicate that the firm used almost the same amount in direct marketing and advertisement. Hence, it will be ideal to adopt the direct marketing. Furthermore, the database used to target our marketing indicates that there has been an increase from 500 to 2500. This database includes suppliers and persons targeted specifically.

Skylock Enterprise also is also planning to produce newsletters and brochures that feature new designs and clothes in the market.  This will be supplied free to opened outlets and any other targeted market, newsletters will also if there is, recent studies carried out by the firm. This will ensure that the customers are in the know what is going on with the company. Involving the company to the progress of an organization creates trustworthy and thus the customers feel more welcomed Mankiw, (2014).

Nevertheless, as compared to the main competitors to our company, we advertise less often. Taking into consideration that most of these firms have been in business for a long time. Thus, we need to advertise more often so that people can know about our existence. The aim is to raise the expenditure by 20% and target some of the new television series, which will quite improve company’s sales. The advertisement will majorly focus on all the brands in our store.

One of the greatest challenges that faces Skylock Enterprise is that it does not have many retail outlets as compared to its competitors. The location of the seven stores is in the main cities in the US. It is vital to operating our own retail shops since most of the larger firms (our competitors) control retailers. This has limited our sales as we solely depend on that seven retail for the entire revenue generation. The risk that the company faces the reputation risk, if it were to be damaged, the customers will become wary of doing business with us.

This will have not only an effect on the losing the customers, but also the revenue, and worst the sponsors and advertisers may turn their back on us. That is the reason we have a technical director that work with research and design team (R&D team) and the quality control department to ensure that all is well. The R&D department, more importantly, needs to be trained well, so as to keep the company with the trending fashions and also the market structure.

A second risk that this company may face is the financial risk. In particular, the cash that is flowing in and out of the organization, and the possibility of sudden financial loss. Our firm extends credit to some of the largest clients, hence, if they fail to pay on time or fails totally, then we are prone to incur a significant financial risk. To reduce the risk, the firm intends to operate at minimum credit services, and if it happens, it will be extended only to the few trustworthy customers, and it will only be a short-term credit. This is as suggested by the great economics scholars like Horcher, (2011).

Value Enhancement

As stated earlier, there are some of the strategies that the company is planning to undertake so as to improve the business performance, especially increasing sales volume. The firm first has prioritized the strategies and noted the objectives of each plan. First is the direct marketing strategy, which aims at increasing the sales, exploring the market and at the same time take the commodities to customers at their convenience places. Danaher, (2011) stipulates that direct marketing is convenient and also increases sales, especially when the products are unique and of high quality.

In fact, this is as a result of the impromptu purchase of the customers. The key measure that will be used to evaluate the success of this strategy is the use of consumption metrics. This is one of the many methods used to measure the content market success Parmenter, (2015). Importantly, they help in understanding the consumption behavior of customers to a particular piece of content. Thus, this will help Skylock to understand which design has high demand. The set strategy primary mandate is to increase sales by 10 percent.

The second strategy that Skylock will take to improve returns is increasing the number of retail outlets in different parts of US cities. This will be a way of ensuring that we expand the channels through which we reach our esteem customers. Furthermore, it is a method of increasing our market (through geographical coverage).  This will increase the sales by about 50-77 percent.

The key performance indicator that will be employed to evaluate the success of this strategy is through data collection and analysis. As stipulated, the core purpose of data analysis is to understand their meaning, so as the firm can understand where the improvement opportunity lies Parmenter, (2015). Analysis will encompass all the sales made through all the Skylock’s retail outlets so as to determine whether the objectives have been fully met.

It is vital to note, before adopting any strategy, the firm will evaluate and decide the frequency at which they will collect relevant data on the achievement of the plan. At the start, the first step will be to assess the market effectiveness, which will be done weekly, and then can go to monthly to reduce the evaluation cost and so on. This is important since it also ensures that the marketing goals are set, KPIs are defined, and people to collect and analyze data are determined.

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Management Structure and Incentive Scheme

The incentive scheme in the firm will be (a must) transparent, for all the staff members understand all the mechanism involved in the calculation. Simply because, a well-designed scheme has a powerful and positive effect, increasing the productivity, quality, and importantly efficacy of an institution Brealey, (2012). Conversely, a poorly designed staff incentive scheme will have a detrimental effect on the overall company performance.

Thus, the main objectives of this scheme will be achieved, which is increasing performance level, change the attitude and/or change the behavior of the staffs. Key to note, the introduction of incentive program results in an increase in revenue as well as boost the company’s reputation (which is one of our risks).

Staff incentive is paramount for the development of an institution and at the same time exciting. Some of the most benefiting parties of this strategy are the shareholders (owners), clients, employees as well as the creditors Brealey, (2012). To start with the owners, this includes even the Venture Capital and Private Equity investors, since the firm’s performance increases drastically through these measures. This aligns with the objectives of the owner, that is, to improve the achievement to a certain degree, and also reducing the standard financial performance. In other words, reducing the financial risks.

In addition, incentives should be directed to the management team of the institution. This is because the success of this organization and its reputation entirely depend on the managers. In other words, they have been delegated the duties of ensuring the firm’s objectives are met. Sometimes, this separation of management and ownership can be problematic as owners may lack means to make the managers perform their best to achieve the firm’s goals.

Further, the managers give the employees some duties, and they are supposed to make a decision and take actions. Thus, it is vital to ensure that incentives are designed in a way that even employees execute their duties are the top management will want.

The incentive scheme will motivate the whole team to work on achieving the organization’s goal. This will, on the other hand, increase the revenue return which in turn increases the cash the stakeholders receive for their capital contribution. To sum all up, the best strategic plans that Skylock Enterprise can adopt for their success have been well illustrated. This will make them more competitive, build a high reputation, and more importantly, increase their revenue, of which it is the core principle of establishing a business.

References

Ahlers, R., Schwartz, K. and Guida, V.P., 2013. The myth of ‘healthy’competition in the water sector: the case of small scale water providers. Habitat international, 38, pp.175-182.

Brealey, R.A., Myers, S.C., Allen, F. and Mohanty, P., 2012. Principles of corporate finance. Tata McGraw-Hill Education.

Cumming, D.J. and Johan, S.A., 2013. Venture capital and private equity contracting: An international perspective. Academic Press.

Danaher, P.J. and Rossiter, J.R., 2011. Comparing perceptions of marketing communication channels. European Journal of Marketing, 45(1/2), pp.6-42.

Dix‐Carneiro, R., 2014. Trade liberalization and labor market dynamics. Econometrica, 82(3), pp.825-885.

Horcher, K.A., 2011. Essentials of financial risk management (Vol. 32). John Wiley & Sons.

Mankiw, N. G. R. E. G. O. R. Y. (2014). Principles of macroeconomics. Cengage Learning.

Metrick, A. and Yasuda, A., 2011. Venture capital and other private equity: a survey. European Financial Management, 17(4), pp.619-654.

Parmenter, D., 2015. Key performance indicators: developing, implementing, and using winning KPIs. John Wiley & Sons.

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## Budget: Financial Plan

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### Budget: Financial Plan

Introduction

A budget is a quantitative financial plan for a specified period of time. The financial plan includes sales volumes, expenses, resource quantities, liabilities, assets and cash flows.  The budget provides the details for strategic management (O’Hoyt, 2014).  Budgets assist in financial planning of the actual business or production of certain products (Williams, Haka, Bettner & Carcello, 2008) Budgets also coordinate different organizational activities and also control resources, provide transparency and accountability (Bragg, 2010).

Budgets are also used to forecast the requirement of future financial needs of the company. The financial performance of a company can also be analyzed by comparing the actual budget from the standard. The variance analysis provides the management with enough information to reorganize its operations and also to investigate any losses that may not have been anticipated (Bragg, 2010).

1. Cash budget on a monthly basis for six months ending June 30th 2016

The net income is a loss of 26,740 in January 2016 while the balance brought forward for the same period reduces the amount carried forward to a loss of 18896. The highest sales are expected in the months of May and June. The total purchases as a percentage of sales adds up to 80.2% of the total sales. The director’s salary is 2% of the total sales. Loan repayments total to 1.86% of the total sales.

The total expenses are estimated to 88% of the total sales (Garrison, Noreen & Brewer, 2009). That means that the Net income expected is just about 12%. The financial performance trends for the budget are shown on the table below. In February 2016 the total sales would grow by 6.06% whereas in March the same year the total sales would grow by 5.71%. There sales growth would be zero in the months of April and June.

But in May 2016 the sales would grow by 29.73%. The expected cost of purchases is also expected to in February and March by 13.33 and 10.26%. For the remaining months the cost of purchases would increase by 11.43%, 15.38% and 6.67% for the months of April, May and June (Aranya, 1990).

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• Cash budget for six months ending June 30th 2016 with 15% sales reduction in final three months

When the total budget is adjusted downwards by 15% of the total sales for the last three months as forecasted below;

The sales would decrease from 277500 to 235875 in April while in May and June the sales would decrease from 360,000 for both May and June to 306000 for both months. These reductions would result in reduction of net income with approximately the same percentage.

The total net income for April would be a loss of 12,999 from the initial amount of 28626 before the 15% reduction. In May and June it would amount to 76926 and 60886 compared to the net amount after the 15% reduction which amounted to 22926 and 6886 (Garrison, Noreen & Brewer, 2009).

When the sales are reduced by 15%, the total sales in May and June would decrease from 360,000 to 306,000 for both months (Hermanson, Edwards, & Invacevich, 2011). The most notable trend is that the total amounts that would be carried forward would register a higher margin of growth when the sales are decreased by 15% (Anderson and Sedatole, 2013).

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The recommendation to the management is that the forecasted budget presents a profitable future for the company and should be implemented as all the purchases and all other expenses would have been paid off by the second month even when the sales are reduced by 15%. However, the cost of sales is very high and should be reduced (White, Sondhi and Fried, 1997). The net income margin of 12% is too small.

When the sales are reduced by 15%, the purchases would increase by 11.43% in April while in May and June purchases would also decrease by 15.38% and 6.67% respectively. Total expenses however would increase by 12.37% in April and 13.74% in May while in June total expenses amounted to 5.67%.

The net income would reduce by 12.2 percent in April while in May and June the Net income would reduce by 278.37% and 69.96% compared to the increase in initial Net Income of 168.73% and a reduction of 20.85% in May and June respectively. The increment of 10.55% after a reduction of 15% compares relatively to the initial increment of 37.84% on the total balance carried forward (White, Sondhi and Fried, 1997).

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• Conclusions and recommendations

To conclude, the growth in total sales would continue to increase throughout the rest of the year as predicted by the trend hence the future of the business is very bright. The company should continue and implement the budget as planned. The total sales amounted to 2.6% of the budgeted sales while purchases were the highest expenses and it amounted to 80.2% of the total sales.

Loan repayments amounted to 1.9% of the sales. The company would remain profitable as long its operational costs don’t exceed the 80.2% range. The reduction in sales by 15% would result in a reduction of 69.96% in net income (Allaboutbudgets, 2015).

References

Anderson, SW & Sedatole, KL 2013. ‘Evidence on the cost hierarchy: The association between resource consumption and production activities’. Journal of Management Accounting Research (25): 119-141.

Aranya, N 1990. ‘Budget instrumentality, participation and organizational effectiveness’, Journal of Management Accounting Research (2): 67-77.

Allaboutbudgets (2015) Forecasting Revenues retrieved April 2016 from http://allaboutbudgets.com/2015/12/09/forecasting-revenues/

Bragg, S 2010. What Are The Advantages Of Budgeting, Accounting tool. Retrieved from <http://www.accountingtools.com/questions-and-answers/what-are-the-advantages-of-budgeting.html > (3 March 2016).

Garrison, R, Noreen, W & Brewer, P 2009. Managerial Accounting. McGraw-Hill Irwin New York.

Hermanson, RH, Edwards, JD  & Invacevich, SD  2011. Accounting Principles: A Business Perspective. First Global Text Edition, Volume 2 Managerial Accounting, 37-73. McGraw Hill. Boston.

White, G, Sondhi, A. & Fried, D 1997. The Analysis and Use of financial statements, Wiley Press. New York. Williams, JR,  Haka, SF,  Bettner, MS. & Carcello, JV  2008. Financial & Managerial Accounting, McGraw-Hill Irwin. Boston

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## Financial Position Reporting: Balance Sheet

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### Financial Position Reporting

Balance sheet

The balance sheet captures the current financial position of the NGO. Net assets should balance with the liabilities and equity since the each of the asset is funded by the resources contributed by members and other sponsors. The statement should provide a snapshot of the assets, liabilities, and net assets as the specified date. Gabel’s statement of financial position gives detailed information about the financial position of the company as indicated by the figures. It has the assets section, the liabilities section, and the equity section.

Each fixed asset should have its book value minus the depreciation to get the current net value. By giving the value of the asset in a different line with its total depreciation value makes the balance sheet untidy and crowded making it hard to analyze (Elizabeth, 2010). The net of the fixed asset is the one used to analyze the current financial position of the organization. It is therefore important to indicate the net of the fixed assets to avoid confusion. Deductions and accruals should just indicate the total amounts instead of individual amounts since the receipts will be attached to the statement to avoid congesting the statement.

Since the company is a non-profit, the balance sheet should only indicate the assets and the liabilities. The assets and liabilities are the values used to indicate the financial position of the organization and not the equity hence the net income and equity are not inclusive.

Also, it is important for the accountants to indicate the previous year’s balance sheet values for comparison purposes. The current values should be shown against the previous year’s or, at least, the past three years to make the analysis of the statement viable. When the values of two periods are shown,  it makes it easy for analysts to make comparisons and understand the changes that may have taken place to get the current balance sheet values.

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Income Statement

The statement is used to give information regarding the operating activities of the organization from one date to another. It gives information pertaining the revenues and expenses during a particular time, and it’s useful to forecast future activities. For NGOs, activities are measured as received and used contributions. The statement is divided between temporary, restricted, unrestricted, and permanently restricted activities.

Recorded revenues should be classified into one of the four activities based on the donor’s intent. Expenses should be divided into the program, administrative, and fundraising expenses. Revenues are either in the form of activities, membership dues, program revenues, special event and investment income. By categorizing revenues and expenses in the different classification, it provides for better analysis as well as being in line with the global accounting standards.

Gabel’s statement does not give columns for the different activities under income and expenses. By generalizing the revenues and expenses and indicating their categories randomly makes it hard for analysis and is not in line with the required reporting standards. It is also important that the statement also records prior year values for comparison purposes. Categorizing each activity and expense into the section they fall helps stakeholders identify gaps in the company for improvement.

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Statement of cash flows

Statement of cash flow is used to record the cash inflows and cash outflows over a specified period. The statement is divided into three sections: cash flows from operating activities, cash flows from investing activities, and cash flows from financing activities (Ron, 2013). The total amount from the three sections gives an explanation of how the cash flow from the beginning of the period was converted to the balance at the end of the operating period.

Gabel’s statement should show the net cash for each of the sections and sum up the amounts resulting from same activity instead of detailing each activity. The statement is supposed to provide an overview of the cash flows to make it easy for reporting.

Accrual accounting

NGOs have a stringent requirement of using the accrual method of accounting as per the Generally Accepted Accounting Standards (Elizabeth, 2010). The accrual method records revenues when earned and expenses when they have been incurred. By using the accrual method, an organization can indicate its current financial position in a pronounced manner than the cash accounting method.

As an NGO, it is possible to get donors that offer to donate at a later period and when the amount is recorded, it gives the organization a stronger financial position. If Gabel uses the accrual methods, it can recognize pledges of donations and income when they have been made and record cash when it has been received making the income higher than if it used the cash accounting. Cash accounting only considers income when cash has been paid and expense when the amount has been disbursed making it hard to present the current financial position of the organization.

As long as a transaction is to take place and all the necessary conditions have been met then it should be recorded in the financial statements. With addition of statement of activities to the three financial statements, the company should apply accrual accounting to all its recordings not only to meet the required regulations but also to enable stakeholders have a correct view of the current financial position of the firm.

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Recommendations

1.    Gabel’s Company should increase its campaigns to reach to more people hence increase its chances of donations. Though the company has net profit, it has a lot of activities it requires to attend to and perform using its wide assets base. Through fundraising campaigns, more donors will be attracted to pay and if they are followed up, they may end up increasing the contributions amount hence increasing the net realized income.

2.    Another method the company can use is to increase member’s contributions and subscription fees as well as holding part of dividends to investment in rentals. The amount contributed by members can be added up at a small percentage with respect to individual member’s contribution and set of activity. If each member’s contributions is increased by a small margin, the total amount will subsequently increase helping to cover up for the administrative and other expenses to have a high income at the end of the period.

3.    The company should also dispose of some of its unused assets before they lose their value. The amount generated can then be used to invest in some of its productive investment activities. There is a lot of available assets that may be disposed of to increase the net income. Some of the depreciating assets should be sold and a portion of the land rented out or even sold to raise extra income for the company to facilitate its daily operations.

References

Elizabeth, 2010. How to assess non-profit financial performance. Retrieved from:  http://www.nasaa-arts.org/Learning-Services/Past-Meetings/Reading-5-Understanding-Financial-Statements.pdf

Ron, 2013. Cash flow statement for NGOs. Retrieved from: http://smallbusiness.chron.com/purpose-cash-flow-statement-nonprofit-organization-11283.html

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## Managing Financial Resources in a Health Care Organization

#### Managing Financial Resources in a Health Care Organization

Abstract

Financial resources are critical to the operations of organizations in the sense that they promote efficacy through acquisition of human resources, equipment, and technology among other vital organizational elements. However, the management of financial resources is also a challenge as many cases of misappropriations are reported all over the world. In the health care sector, the management of financial resources is even greater considering that the sound financial resources management improve the quality of care given to the patients and save healthcare expenditures.

Unit 14 Assignment

Introduction

Financial resources are critical to the success of organizations because with sound financial backgrounds, the institution can achieve efficiencies in a number of areas. However, a robust financial background implies having effective and relevant financial management strategies. This is even more important 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). In this regard, costing includes aspects such as estimating the money to be paid to healthcare workers for service deliveries and the amount spent on equipment used to deliver healthcare services among other activities that require expending financial resources (Field & Brown 2007).

In short, costing in the healthcare organization relates to estimation of financial expenditures. On the other hand, the business control systems apply to the different systems that collect and use information to evaluate the performances or efficiencies of the business operations of the organization such as those relating to finance (Broadbent & Cullen 2003).

There are different principles of costing and business control systems that are adopted to improve efficiency. One of the principles is integrity that means personnel charged with handling financial resources should act ethically (CIMA 2016a). Due diligence is another principle of costing and business control system and it means being keen to avoid errors. When undertaking costing and business control systems, employees are expected to be transparent hence this also a principle desired (CIMA 2016a).

There are also different elements related to the principles of costing and business control systems. One of the elements embodied in the principles of costing and business control systems concerns costs. Under costs, the organization estimates the entire expenditure spent on different activities and uses the costs to inform the development of an appropriate costing control system (Field & Brown 2007).

The second element present in the costing and business control system regards income that is the amount of money the organization is able to raise because of the services it provides. This element is critical to the establishment of the business control system because the amount of income determines the type of business control system to be adopted (Broadbent & Cullen 2003). The third element used in the costing and business control systems entail costs benefits analysis.

This means evaluation of the benefits and demerits associated with different costing and business control systems adopted. Another element of the costing and business control system relates to expenditure and this refers to the analysis performed with a view to determining the financial effect that the implementations of the costing and business control systems have on the organization (CIMA 2016b).

In the same vein, the element of budget is also associated with the costing and business control systems and the budget element is used to establish whether the costing and business control systems are affordable to the organization. Lastly, the element of capital is also vital to the principles of costing and business control systems since it is the capital that is used to allocate resources to the costing and business control systems in the organization (Broadbent & Cullen 2003).

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. In the health or social care sectors, business costs arise from different components that also act as the key information necessary for the management of the financial resources.

One of the sources of information of business costs in healthcare regards the people. Under people, this means the service users, employees, and suppliers and the information originating from the people is essential to the management of financial resources (CIMA 2016b). Equipment refers to the entire tools and technology used in the healthcare facility to deliver services and because the organization spends a great deal on equipment, information from the equipment line is valuable when it comes to the management of financial resources (Field & Brown 2007).

The core of financial resources in the organization is the finance that encompasses all the funds that the organization has and handles. This information is necessary if effective financial resource management is to take place. Buildings are the housing resources that the healthcare organization has and the information from building is important in the management of financial resources because how buildings are used can provide indications of the financial flows (CIMA 2016a).

Consumable items are those items that are used recurrently such as paper, 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 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 in 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 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 at 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).

1.4Systems for Managing Financial Resources in a Health Care Organization

Systems for managing financial resources refer to the processes that healthcare organizations can use to manage their financial resources. There are different systems for managing financial resources on health care organizations. Sources of income are among the systems for managing financial resources in healthcare organizations. The sources of income entail the different ways that that the healthcare organization generate its income. For example, government funding and voluntary donations are sources of income to the healthcare institutions (Field & Brown 2007).

The advantages for using this system of financial resource management are that it readily identifies misallocated funds and promotes accountability in financial resources. Its disadvantage is that it focuses only on the income sources (Field & Brown 2007). Setting of budgets is another system that can be used to manage the financial resources of the organization and under budget setting, the healthcare facility outlines the different requirements and how the costs should be catered for (Broadbent & Cullen 2003).

For example, the healthcare organization can peg the yearly costs that are expected to run the different activities in the organization. The advantages of this system are that it establishes the variances and identify the effective departments. On the other hand, setting budgets prevent flexibilities in terms of operations and therefore its demerit. Like setting of budgets, administration of budgets is also another system that can be used to manage the financial resources.

Administration of budget is a system of managing the financial resources of the organization whereby a detailed financial plan for a given period is prepared (Field & Brown 2007). This is usually done on annual or quarterly basis. The advantages of administration of budgets are that it facilitates the control of financial resources on a daily basis and tracks the costs associated with supervisory and non-production aspects.

However, its main limitation is that it is time consuming (Broadbent & Cullen 2003). Another system of managing financial resources in healthcare organizations is the creation of cost centers, which are departments, charged with calculating revenues and costs of the healthcare institution (Field & Brown 2007). The advantages of cost centers include facilitating quick control of financial resources and they are motivational to the managers and employees.

However, they can be a source of pressure to the staff members hence the disadvantage. Accountabilities are systems that use transparency principles as a way of managing the financial resources in the healthcare organization. The advantages of accountabilities are that they promote responsible use of financial resources in the organization and they improve the image of the organization. Nevertheless, implementation of accountabilities means extra spending and more costs to the organization.

Finally, auditing can also be a system for controlling financial resources through the identification of gaps in usage of financial resources. The advantages of auditing are that it can help to detect hidden malpractices and can also be used to establish the trends in the financial spending. In the same vein, auditing requires investments of time and other resources hence the disadvantage (Field & Brown 2007).

References

Armit, K. and Oldham, M., 2015.    The Ethics of Managing and Leading Health Services: a view from the United Kingdom. . Asia Pacific Journal of Health Management, 10(3), pp.118–121. Retrieved, 2016 from Ebscohot.com

Ball, R., Eiser, D. and King, D., 2013. Assessing Relative Spending Needs of Devolved Government: The Case of Healthcare Spending in the UK. Regional Studies, 49(2), pp.323–336. Retrieved, 2016 from Ebscohot.com

Broadbent, M. and Cullen, J., 2003. Managing financial resources. Oxford: Butterworth-Heinemann.

CIMA, 2016a. . [online] CIMA Financial Management Magazine | Chartered Institute of Management Accountants. Available at: <http://www.fm-magazine.com/> [Accessed 15 Nov. 2016].

CIMA, 2016b. HELPING PEOPLE AND BUSINESSES TO SUCCEED. [online] CIMA. Available at: <http://www.cimaglobal.com/> [Accessed 15 Nov. 2016].

Field, R. and Brown , K., 2007. Managing with plans and budgets in health and social care. Exeter: Learning Matters.

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## Financial Resources

Introduction

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

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.

References

Anderson GF.,2007, In search of value: An international comparison of costs, access, and outcomes. Health Affairs, 116:163-171

Armit, K. and Oldham, M., 2015.    The Ethics of Managing and Leading Health Services: a view from the United Kingdom. . Asia Pacific Journal of Health Management, 10(3), pp.118–121. Retrieved, 2016 from Ebscohot.com

Ball, R., Eiser, D. and King, D., 2013. Assessing Relative Spending Needs of Devolved Government: The Case of Healthcare Spending in the UK. Regional Studies, 49(2), pp.323–336. Retrieved, 2016 from Ebscohot.com

Broadbent, M. and Cullen, J., 2003. Managing financial resources. Oxford: Butterworth-Heinemann.

CIMA, 2016a. [online] CIMA Financial Management Magazine | Chartered Institute of Management Accountants. Available at: <http://www.fm-magazine.com/> [Accessed 15 Nov. 2016].

CIMA, 2016b. HELPING PEOPLE AND BUSINESSES TO SUCCEED. [online] CIMA. Available at: <http://www.cimaglobal.com/> [Accessed 15 Nov. 2016].

Erxtin,F. and Marel, E. V., 2011. “What is driving the rise in health care expenditures? An Inquiry into the Nature and Causes of the cost Disease.” SciencePO ECIPE

Field, R. and Brown , K., 2007. Managing with plans and budgets in health and social care. Exeter: Learning Matters.

Herman, L., 2008, What Do We Really Know About International Trade in Health Care Services? Brussels: European Centre for International Political Economy (ECIPE)

Iacobucci, G., 2013. NHS cash props up private health sector as recession cuts private patients’ spending. Bmj, 346(may22 16). 24(1)-p13-18. Retrieved, 2016 from Ebscohot.com

Lindsay, C., Commander, J., Findlay, P., Bennie, M., Corcoran, E.D. and Meer, R.V.D., 2014. ‘Lean’, new technologies and employment in public health services: employees’ experiences in the National Health Service. The International Journal of Human Resource Management, 25(21), pp.2941–2956. Retrieved, 2016 from Ebscohot.com

Lingg, M., Wyss, K. and Durán-Arenas, L., 2016. Effects of procurement practices on quality of medical device or service received: a qualitative study comparing countries. BMC Health Services Research, 16(1). Retrieved, 2016 from Ebscohot.com

Mann, R., Beresford, B., Parker, G., Rabiee, P., Weatherly, H., Faria, R., Kanaan, M., Laver-Fawcett, A., Pilkington, G. and Aspinal, F., 2016. Models of reablement evaluation (MoRE): a study protocol of a quasi-experimental mixed methods evaluation of reablement services in England. BMC Health Services Research, 16(1), pp.2–9. Retrieved, 2016 from Ebscohot.com

Monitor , 2016. Monitor. [online] About – Monitor – GOV.UK. Available at: <https://www.gov.uk/government/organisations/monitor/about> [Accessed 15 Nov. 2016].

Pflueger, D., 2015. Accounting for quality: on the relationship between accounting and quality improvement in healthcare. BMC Health Services Research, 15(1).pp1-10. Retrieved, 2016 from Ebscohot.com

Scheiber GJ., Poullier J-P., and Greenwald, L., 2001, Health care system in twenty-four countries. Health Affairs. 10:22-38

Turner-Stokes, L., Sutch, S. and Dredge, R., 2011. Healthcare tariffs for specialist inpatient neurorehabilitation services: rationale and development of a UK casemix and costing methodology. Clinical Rehabilitation, 26(3), pp.264–279. Retrieved, 2016 from Ebscohot.com

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