Managing Financial Resources in Health and Social Care - Assignment Example

?Managing Financial Resources in Health and Social Care Table of Contents Table of Contents 2 Task 3 1. Principles of Costing and Business Control Systems May Be Adopted in BUPA 3 1.2. Main Heads/ Income for BUPA in Last Financial Year 4 1.3. Regulatory Requirements for Managing Financial Resources 5 1.4. The Systems for Managing Financial Resources in BUPA 5 Task 2 6 2.1. Diverse Sources of Income for BUPA 6 2.2. The Factors That May Influence the Availability of Financial Resources in BUPA 7 2.3. Different Types of Budget Expenditure in BUPA 7 2.4. Decisions about Expenditure that could be made in BUPA 8 References 10 Task 1 1.1. Principles of Costing and Business Control Systems May Be Adopted in BUPA The strategy of any company depends on a number of risks and uncertainties. Emphasising this particular concern, BUPA has engaged efficient risk managers who are bestowed with the responsibility to improve the credibility of the organisation in mitigating risks within the business environment. A proper costing requires sources from its stakeholders including the non-financial staff members. In this process, the staff members associated in different fields of operations can also contribute in the accurate computation of effective costing. Thus, staff members from within and outside the finance department must also be engaged, being stakeholders of the company, in order to identify the accuracy and relevancy of costing in the organisation as per the Principle 1 of NHS Approved Costing Guidance 2013 (Monitor, 2013). BUPA must also adopt this approach throughout the organisation in a consistent manner. This approach will help the organisation to analyze the various accounting method such as cost submission and comparison as per the Principle 2 of NHS Approved Costing Guidance 2013. The costing principle, that is Principle 3, must be very much accurate in terms of its data. BUPA must be conscious of the accuracy of the data such as patient’s data, clinical staff’s performance data and the data of the trial balance or ledger of the organisation. The costing principle of BUPA must be oriented towards the material costs as per the Principle 4 of NHS Approved Costing Guidance 2013. It must focus on the high costs material, accuracy to be required for costing purposes and calculate the expenditure required in the material costs of the organisation. The costing principle must be based on the needs of the patients. In a health care organisation, the needs of the patients must be understood to enable effective costs. This understanding will improve the relation between the health workers and patients and in return create a positive impact on the financial aspect of the organisation following Principle 5 of NHS Approved Costing Guidance 2013. Again as per principle 6 of NHS Approved Costing Guidance 2013, every organisation must adopt a transparent costing system. It provides the organisation with complete assurance and develops the trustworthiness of the resources which will promote the workers with greater service delivery to their patients (Monitor, 2013). 1.2. Main Heads/ Income for BUPA in Last Financial Year The total attributable equity to the holders of the parent company of BUPA Care homes was recorded to be ?333,070,000. The major heads of income for BUPA in the last financial year were the economic capital, operational activities, funding and reserves for financial and taxation expenses. It is worth to be noted in this context that BUPA always maintains a proper capital so that it can be utilised to meet the organisational liabilities in the coming future and thereby preserve the liquidity of the company. Similarly, the other head in the income statement of BUPA can be identified as the funding generated by the company, which signifies the liquidity of BUPA and the availability of funds at any time of requirement. Notably, BUPA prepares its financial statement in accordance with the guidelines prescribed under the International Financial Reporting Standards, which in turn helps to give a true and fair record of the financial ranking of the company (BUPA, 2012; European Commission, 2012). 1.3. Regulatory Requirements for Managing Financial Resources One of the regulatory requirements that can be adopted in managing the financial resources of the organisation relates to the guidelines mentioned under the Companies Audit, Investigations and Community Enterprises Act 2004. This act indemnifies all the arising losses of the company and the responsibilities of the directors of the company thereon. Therefore, BUPA must prepare its accounting statements with the help of qualified and experienced accountants and auditors to ensure maximum efficiency in financial management. As observed earlier, BUPA prepares its financial statements with the assistance of International Financial Reporting Standards so that the fair record of the profit and loss of the company can be traced. It is a regulatory requirement, which has already been adopted by BUPA. The integrated form of financial reporting has further been analyzed at the end of 2012, which further revealed that BUPA was positively impacted by this technique (BUPA, 2012). 1.4. The Systems for Managing Financial Resources in BUPA The first and foremost system needed to be applied for managing the financial resources of BUPA, will be to hire a group of qualified and registered accountants and the employees in the finance department. This strategy may substantially help the organisation to have a proper tracking of the financial position of the organisation. The qualified accountants can also keep the record of every financial transaction on the basis of standard accounting principles. In accordance to the current market scenario, BUPA can adopt the various integrated techniques of IT in the preparation of financial statements. BUPA can further maintain an effective capital budget for the proper management of its financial resources. This capital can also be utilised for the allocation of funds in the growth and developmental processes. To be noted, as per the annual report of the organisation, BUPA possesses ?2.68bn as cash equivalent and financial investment, which are utilised for executing strategies by the organisation and managing its financial resources accordingly (BUPA, 2012). Task 2 2.1. Diverse Sources of Income for BUPA BUPA, being a healthcare organisation, need to comply with a variety of area-specific tasks through which it can duly increase its income. For instance, it has already been observed that the organisation has the potential to increase its fee for healthcare services, depending upon the type and quality of assistance demanded by the patients. However, charging fees more than the market prices shall be considered as unethical for BUPA being a social institution. It can rather more preferably opt for funds from the private charity organisations or grants from the local government. Most of the investments of BUPA are managed by the Treasury department in London that attempts to looks after all the breaches so that the cash investments are well managed. The organisation therefore must make the financial estimates reasonably and assure the fair allocation of funds in the varied departments of the organisation. The financial statement must further act in accordance with the Companies Act 2006 so that the organisation can earn fair and equitable profits along with the opportunity of growth and development in the healthcare sector. The other sources of income for BUPA can be identified in the forms of income generated through the ordinary dividends of the BUPA Group undertaking concerns such as Surgichem Limited and Greenacre Residential Retirement Homes Limited among others (BUPA, 2012). 2.2. The Factors That May Influence the Availability of Financial Resources in BUPA There are certain internal as well as the external factors, which can affect the availability of adequate financial resources to BUPA. Few of the internal factors may be the internal sources of funds and the reserves obtained through the effective management of its income and expenditure. Among these options, effective management of the organisation’s income and expenditure can be regarded as the factor, which can determine the availability of the resources along with the future scope of growth and development of the organisation. On the other hand, the externally influencing factors to the same aspect in BUPA can be identified as the credit worthiness of the organisation, its sales revenue and its assets and liabilities. The commercial factor like the pricing and cost-effective utilisation of resources can also be considered as few of the noteworthy influencing factors of financial resources in BUPA. Information technology can further be regarded as another influencing factor to affect the availability of financial resources in BUPA that helps in mitigating the problems arising in the technological department of the organisation and in turn ensures effective restoration of its financial resources (BUPA, 2012). 2.3. Different Types of Budget Expenditure in BUPA The various types of budget expenditures in BUPA include IT, developmental activities and promotions for attracting funds among others. The master budget is the type of budget in BUPA where an integrated financial plan is developed for a specified time period. This master budget includes all the costs, production, overheads and the operational, cash flow and the capital budget (Ivan & et. al., 2009). The operational budget is usually prepared to estimate the incomes and expenditures of the organisation for a short period i.e. annually. This budget will assist BUPA in estimating its daily expenses and incomes and thus, assure for the effective utilisation of the funds. In the similar manner, the cash flow budget is the monthly financial plan in order to identify the incomes, expenditures and the other costs. Conceptually, capital budgeting is the financial management of the capital within the organisation and also making decision regarding the proper utilisation of the capital. It will help BUPA in assessing the cash flow to be required for the development of the organisation and will also help in incurring costs for providing better services to its patients (Baker & English, 2011). 2.4. Decisions about Expenditure that could be made in BUPA The healthcare sector can arrange for the short, medium and long-term planning for making effective decisions about its expenditures. The other ways of decision making about the expenditures can be the cost benefit analysis and the determination of the financial risks. The cost benefit analysis is a key factor in the process of cost estimation of a particular project (Levitan, 2010). The cost benefit analysis also encourages the organisation in learning its financial position and decides on the allocation of funds to the appropriate departments (John Wiley & Sons, 1992). The financial risk can also lead BUPA in taking effective decisions regarding its expenditures. Correspondingly, the occurrence of the financial risks may ignite the fear of losses to the company, which essentialise a considerable focus on the effective decision making concerning its expenditures (Christoffersen, 2003). References Baker, H. K., & English, P., 2011. Capital Budgeting Valuation: Financial Analysis for Today's Investment Projects. John Wiley & Sons. BUPA, 2012. BUPA Care Homes (CFG) Plc. Director’s Report. [Online] Available at: http://www.BUPA.com/media/594193/BUPA_care_homes_cfg_plc_2012.pdf [Accessed November 10, 2013]. BUPA, 2012. Preliminary Results Announcement For The Year Ended 31 December 2012. Strong International Performance Drives Profit Growth. [Online] Available at: http://www.BUPA.com/media/588781/results_announcement_and_financial_statements_for_full_year_2012.pdf [Accessed November 10, 2013]. Christoffersen, P. F., 2003. Elements of Financial Risk Management. Academic Press. European Commission, 2012. International Financial Reporting Standard 1 First-time Adoption of International Financial Reporting Standards. Objective. [Online] Available at: http://ec.europa.eu/internal_market/accounting/docs/consolidated/ifrs1_en.pdf [Accessed November 10, 2013]. Ivan, I., & Et al., 2009. Quantitative Methods in Audit and Control. Journal of Applied Quantitative Methods, Vol. 4 (4), pp. 406-533. John Wiley & Sons, 1992. Cost-benefit analysis in health care expenditure decision-making. Health Economics, Vol. 1 (4), pp. 213-216. Levitan, B., 2010. Cost-Benefit Analysis. A Basic Analysis. [Online] Available at: http://www.mmu.ac.uk/bit/docs/Cost-Benefit-analysis-toolkit-v2.pdf [Accessed November 10, 2013]. Monitor, 2013. Approved Costing Guidance. Introduction. [Online] Available at: http://www.monitor-nhsft.gov.uk/sites/default/files/publications/ToPublish12July2013ApprovedCostingGuidance.pdf [Accessed November 10, 2013]. Read More