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Managing financial resources

University: Buckinghamshire New University

  • Unit No: 11
  • Level: Diploma
  • Pages: 15 / Words 3730
  • Paper Type: Assignment
  • Course Code: N/A
  • Downloads: 49474

Role Of Financial Resources In Health And Social Care

Managing financial resources in health and social care plays crucial role as healthcare professionals have to carry out various activities in welfare of the society. By satisfying financial needs it is possible to perform better in the market and in turn issues faced by users in healthcare can be resolved. Through proper management of this resource firm can improve its overall performance and supports to gain competitive advantage. Furthermore for effective management of finance different type of information is required by managers linked with profitability and efficiency of the entity (Austin, Stevenson and WeiSkillern, 2006). Whereas government of the country has developed some laws for management of finance which firms have to comply strictly so as to satisfy needs of government and other regulatory authorities. Further the sources of income present with healthcare organizations are limited and company has to consider them for satisfying its financial needs in efficient manner. In the present report organization chosen is Sarrim University hospital care that operates in health and social care and offers different type of services to people having some disability etc. Firm has adopted different techniques for managing its financial resources and that supports in every possible manner. Various tasks have been covered in the report which includes different type of cost, sources of income, concept of financial shortfall etc. And also you can learn about the textile industry management.

Different type of cost for business and approaches to control them

Various type of cost are present that are linked with operations carried out by entity and affects overall management of financial resources. Such costs are discussed below:

Fixed cost: It is the type of cost that does not changes with the alteration in level of output. Such cost in healthcare involves depreciation of the building, insurance on building, Employees hospital insurance, Rent, electricity etc (Berwick, Nolan and Whittington, 2008). These costs does not changes with overall operations carried out by Sarrim hospital and remains same in every condition. Furthermore to monitor this cost monitoring techniques are effective as it is the duty of finance manager in healthcare to ensure that fixed cost does not increase in specific period of time. Break even point is also effective control technique where cost and revenue are equal and is the point which every firm wants to achieve.

Variable cost: It is another type of cost incurred by healthcare organization that changes with the alteration in level of output and does not remains constant. In healthcare variable cost is linked with Employer's payroll tax, indirect materials, machine lubricants. These are some of the major variable costs that firm has to incur. For controlling this cost healthcare enterprise can set targets where fluctuating costs such as advertising and employees salaries can be reduced before targeting costs such as rent and utilities. Furthermore monitoring of variable cost is also effective way to control it (Detmer and et.al., 2008).

Direct cost: It is the cost incurred by healthcare organization to render services to its patients. This cost takes into consider the expenses linked with medicines and other machines used in carrying out major operations. In order to control this cost firm has to make changes in major operations for instance the machines are increasing electricity expenses of the firm so it is required to adopt advanced machines that can save electricity cost (Dussault and Dubois, 2003).

Information required to manage financial resources

Different type of information is required by Sarrim university hospital for effective management of financial resources and in turn supports to improve overall performance in the market. Data linked with business cost is required such as equipment, finance, building etc. These are some of the major expenses that healthcare firm has to incur. So information is required regarding equipment in relation with their maintenance, purchase etc. Furthermore salary paid to employees and other expenses linked with them is also required. Financial data is also required by entity such as sources of finance and other major expenses of the enterprise. On the other hand information linked with external factors present in the market is also needed by finance manager which involves competitive factors, changes in policy etc (Ferlie and et.al., 2005).

Policies issued by regulatory authorities affects financial requirement of the entity for instance if tax rates and other duties paid by healthcare are increased then it increases overall expenses of the organization. So timely information is required in relation with change in policies and services offered by competitors as on the basis of this firm can make changes in its operations so as to serve customers better. Furthermore information linked with income streams is required so that healthcare firm can know what are the effective sources present that can satisfy financial needs of the enterprise and is cheap. Data linked with trends is needed so as to determine what type of tools are required for imparting services and possible changes that can be done so as to support users present in healthcare (Fitzgerald and et.al., 2002).

Regulatory requirement for managing financial resources

For effective management of financial resources various regulatory requirements are present that firm has to follow strictly in order to satisfy need of government. Care quality commission has developed some guidelines whose main purpose is to ensure that healthcare enterprise is delivering quality services within the firm and sufficient funds are left with management to deliver quality services in future also. Through this organization can increase its overall performance in the market and in turn acts as development tool. Furthermore one of the major requirement is development of effective system for risk management with the main motive to manage credit activities of the enterprise. The firms must necessarily oblige with the need of credit license and must comply with terms and conditions developed by NHS and financial advisory board of UK (Haugh, 2005). Sarrim hospital must have enough resources so as to meet its expenditure and in turn this can help to work for the welfare of patients. Healthcare sector regulator monitor has introduced some laws in relation with management of funds within the enterprise. So firm has to comply with the guidelines issued by the authority so that inadequacy of finance may not arise in future due to which users present in healthcare has to suffer a lot. Furthermore by complying with all the guidelines healthcare firm can satisfy need of its stakeholders. Guidelines issued by the regulatory authorities are in favour of healthcare organization so that firm may not have to face financial and credit risk in future and this can help to increase overall performance (Hollingsworth, 2003

Traditional variance

In UK’s health and social care sector, traditional variance analysis is essential for management control function. In order to determine the causes of shortfalls, variance investigation is made by the management. Saarim University Hospital also does variance analysis which is focused on comparisons of actual and budgeted expectation. It is calculated for each department in the hospital and reports are shown monthly to annual reports. Traditional variance is determined by looking at the portion of each item variance caused (Kutzin, 2001). The variance for the given case is calculated here under:

Traditional variance= Actual cost –Budgeted cost
=35700 (A)

From the above analysis, it can be stated that the traditional variance for this health and social care organization is adverse. Thus, the actual expenditure is more than expected/budgeted expenditure.

Flexible budget variance analysis

The traditional variance analysis approach has certain limitations as it ignores the variation in the volume and its impact on the cost. Thus, a flexible budget is one that is adjusted according to the volume. Thus, alternate budgets for different sales volumes can be prepared that demonstrate the cost for particular sales volume (Luthans and Youssef, 2004). The three types of variances have been calculated under this section including price variance, quantity variance and volume variance.

Different sources of income in health and social care

There are various sources of income in health and social care which are as follows-.

Public- The revenue generated from public in regard of providing health care services so that care home can generate income. The public which are coming to care setting for receiving treatment and thus provides money in return (Mathauer and Imhoff, 2006). Such money is used by organization for development purpose and invested in other areas to attain results. Money received from public in small amount help care setting to provide best services to patients.

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Charity- The income received from charity or donation helps in implementing in business so that it can be further utilized to improve the financial conditions of care home (The Role of Healthcare IT in Supporting Financial Health of Providers, 2014). Charity and donations assists care setting to enhance the services and thus help patients through rendering best services. Donations received from big houses helps care home to render best facilities to their patients and thus satisfy their needs and wants in order to gain best results.

Voluntary- Also, there are various voluntary organization both at national and local level that helps in maintaining the financial resources of care home and improve the conditions of patients (Perlin, Kolodner and Roswell, 2004). Such voluntary organizations assists firm to maintain a balance sheet and thus help businesses to keep a record of sources of incomes and expenses. Voluntary organizations helps business to provide cash resources and thus assist them to maintain financial statements to attain results.

Factors that influence the availability of financial resources

There are various factors which influences the availability of financial resources in health and social care organization which are as follows-

Funding priorities- It affects the availability of financial resources as health and care home have various funding priorities in order to invest the financial resources and attain results. Care setting sets its funding priorities that helps them to attain desired goals.

Agency objectives and policies- Such function affects the financial resources of business because the agency might have varied objectives and policies where they have to invest their money while different agencies have varied functions and policies in order to invest the resources (Scott and et.al., 2001).

Private finance- Care home can receive private finance from different banks or financial institutions which affects the resource availability. Through obtaining private finance it affects the care setting because it has to give interest on it.

Geography- It depends on the health and social care home that where they are working means in rural or urban areas. Because it assists that working in the rural areas business receives funds from government and thus it affects the financial resources.

Types of service- There are various types of services which are provided by health care home like mental care, trauma patients etc. which affects the availability of financial resources. It influences the financial resources of health care home because it provides varied services to patients (Sloper, 2004).

Different budget expenditure

There are various budget expenditure in health and social care sector so that best results can be gained-

Personal budget- It states that the expenses incurred by firm in order to maintain the firm and carry out daily operations like labor cost. Therefore, it is essential for businesses to formulate personal budget so that health care home can identify the expenses which are incurred by them. Personal budget helps in maintaining the records of daily operations like labor cost in order to prepare the financial budget.

Operating budget- It includes the products and services and maintaining budget for the same. It helps in development of the firm and maintain a record for the products and services rendered in a financial year to patients (Starfield, Shi and Macinko, 2005). While, operating budget helps in maintaining the budget of related products and services maintains a record of them.

Sales budget- It operates in maintaining the sales and services of firm so that proper record can be maintained. The prime focus of sales budget in maintaining the sales expenses estimation of the particular financial year. Preparing sales budget assist care home in maintaining the sales and services of business.

Project management- It helps in maintaining the project management cost so that care home can be developed. Thus, it is essential for firm to develop project management and thus attain desired goals.

So these are some of the budget expenditure that firms prepares in order to determine its overall financial position in the market and in turn acts as development tool for the entire firm (Swan, 2009).

Concept of financial shortfalls

Financial shortfalls can be defined as lacking of funds to allocate in various activities and departments within the organization. The Saarim University Hospital is suffering from the financial shortfalls. These shortfalls are creating many challenges in front of it such as Financial priorities, reserve funds, alternative external income sources; implications for individuals within the service. The Saarim Hospital is a health and social care hospital which serves customers with its services and finance is very important in it (Walshe and Rundall, 2001). There is issue of identifying the priorities to allocate fund in a health care sector is a crucial task as all the activities are very important here. So choosing a preference and allocating fund to any activity is a crucial task. In the duration of shortfall all the reserve funds are finished as they are utilized earlier to face the shortfalls. The Saarim hospital is not able to collect funds from the external resources as the goodwill of the hospital had spoiled due to shortfall. Financial shortfall can effect the Hospital badly as if there will be lack of funds it will not not be able to provide Medicare facilities to its patients. The Efficient doctors of hospital will leave the hospital as they were not getting the adequate salary. The Medicare facilities are very costlier and the hospital cant not be afford that and loose its customers. To manage Financial shortfall the Saarim Hospital can take some steps such as cost reduction, efficient budget allocation and allocating scarce resources effectively.

Different type of frauds

The frauds can be of different types in a health care hospital such as financial fraud, theft of equipments, Theft of medicines, inefficient allocation of resources, adulteration in raw material, use of expired medicines and use of faulty equipments. The cash fraud can be done by the finance managers by showing sales less from the actual figure. The cash fraud can be prevented by arranging the timely audit of accounts in the Hospital. If the proper attention and recording is not done,the medicines can be stolen by the hospital staff itself. So the hospital has to adopt a proper inventory management to preventing the theft of medicines. The equipments of the hospital should be also taken care otherwise they can also be stolen (Whitehead, Dahlgren and Evans, 2001). The adulteration of raw material is possible if the supplier of raw materials supply the defective raw material. In this case the Hospital can terminate the contract with supplier and can buy raw material from other suppliers. If the Doctor is responsible for using the expired medicines in the hospital, he should be terminated from the hospital. If supplier provides faulty equipments to the hospital, the equipments testing should be done in the hospital. The hospital can also take some important actions against these frauds by proper taken care of inventory and timely audit of cash accounts, terminating the employees who creates nonsense. The Saarim hospital can stop these type of frauds by monitoring the activities of the hospital and taking timely actions.

The information is required for financial decision making

The information helps in making effective responsibility for decision making so that care home can develop proper information (Wright, 2004). The top management of firm is required to make responsibility for making appropriate decision making so that set results can be attained. Also, the information available helps the business to maintain proper budget and thus attain desired results. The information available can help in making the appropriate decision and attain desired results. Furthermore, sources of income also help in developing the budget so that results can be attained. The information required for the profitability of the firm so that business decisions can be maintained. However, it is essential for business to develop the information for the liquidity position so that proper decision can be made (Christensen, Grossman and Hwang, 2009).

Furthermore, the profitability position of the business should be maintained so that business can set its priorities so that proper information can be provided to business. The information provided by business helps in maintaining the record so that major financial decision can be taken. Also, business adopts various financial resources so that effective decision can be made. The financial decision making helps firm to adopt proper financial decisions so that care home can attain desired results. It assist corporation to maintain financial decisions so that firm can attain profitability and develop decision in business. Also, information is helpful for company to develop certain measures that helps in preparing financial budget and thus assist care home to grow and attain results (Curtis, 2012).

Explain the concept of cost, expenditure and service delivered

In health and social care organization their exist direct relationship between cost, expenditure and overall service delivered (Van Lerberghe, 2008). For satisfying need of patients more cost is allocated in various activities of the enterprise and this increases overall expenditure of the entity. Furthermore the rise in level of cost supports in delivering services to the patients and in turn satisfied their need in efficient manner. For Sarrim hospital it is required to control cost in different activities for welfare of its organization and funds must be allocated in activities that can help in improving level of services imparted. If unnecessary admission in hospitals are avoided then cost of expenditure of the company will decrease to an extent (Enthoven, 2014). One of the major barrier in healthcare enterprise linked with reduction is constant changes and modifications carried out in the technological resources. Furthermore main expenses is due to cost spend on elderly patients and patients who are having some kind of disability or any other type of illness. Employees working in the health and social care enterprise cooperates with each other so as to deliver effective services to the customers and this directly increases cost of rendering services to the patients. More allocation of cost increases quality of the services which is the ultimate objective of every healthcare company. By controlling all the major expenses and cost firm can easily manage its financial resources but it is required to ensure that cost allocated will provide long term benefits to the enterprise or not as sometime it is possible that firm has to suffer high loss due to ineffective services and its competitors gets advantage through this (Swayne, Duncan and Ginter, 2012).

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Financial condition of individual impact on health and social care services

The financial conditions of individuals impacts them using health and social care services. For example if any person belongs to a lower class, he can not afford the best Medicare facilities, expensive medicines and expense of special wards so they use only Government hospitals for their treatment (Francesca, Ana Jérôme and Frits, 2011). The lower class people are not enough educated so they are not aware of the disease and its cure. They ignore small disease and uses domestic cures for their treatment inspite of medical checkup. They use the free governmental health care camps and the free medicine provided by the government. But if any person belongs to a higher class his first priority will be the expensive and worlds best Medicare facilities hospital. The Higher class people are educated so they give importance to hygiene and routine checkups. These Routinely checkups keep them fit and aware from the disease. If any big diseases occurs to higher class persons they hire the best doctors to cure.


From the above report it has become easy to understand the importance of managing financial resources in health and social care. Different type of information is required by finance managers for effective management of resources such as on the profitability and liquidity position of the healthcare enterprise. Different type of costs are present such as fixed, variable that needs to be controlled by the management and various measures are present through which expenses can be reduced to extent and healthcare enterprise can work in welfare of patients that are suffering from disability or any other disease.


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