Explain the Principles of Costing and Business Control Systems

Unit 14 Managing Financial Resources in Health and Social Care Assignment

INTRODUCTION Explain the Principles of Costing and Business Control Systems

This UNIT 14: Managing Financial Resources in Health and Social Care Assignment aims to Explain the Principles of Costing and Business Control Systems involved in managing financial resources health and social care organisations are expected to minimise their financial resources. Managing financial resources can be categorised into different levels. At the micro-level, this UNIT 14: Managing Financial Resources in Health and Social Care Assignment will explain how individuals/organisations will utilise the resources available effectively (to achieve the organisation’s goals) and efficiently (to avoid waste). These Principles of Costing and Business Control Systems will also provide the information needed to managing financial resources in health and social care unit 14. When an individual/organisation wants to start any business, it may be, the primary raw material needed for such management is information. Managing financial resources in health and social care requires a regulatory requirement that explains why an organisation’s information like Life Hope Care Home needs to keep records. Records in Life Hope Care Home must be maintained for decision-making, planning and control purposes over and above legislation requirements. For Life Hope Care Home to be established, the management ought to be guided by certain basic costing principles (Arora 2009). Managing financial resources in health and social care assignment will Explain the Principles of Costing and Business Control Systems.

Task 1 Explain the Principles of Costing and Business Control Systems

1.1 EXPLAIN THE PRINCIPLE OF COSTING AND BUSINESS CONTROL SYSTEMS, HND in health and social care

Cost is the monetary value of a product or a service, whilst costing is the process of calculating how much a product or service is the cost or the actual calculation itself. As a manager in Life Hope Care Home, it is essential to understand the principle of costing to ensure the cost and amount of resources needed to deliver an effective service. Costing also helps managers know how much resources are available at their disposal to prioritise the resources according to the organisational scale of preference. The processes of ascertaining consist of the rules or a principle that governs the procedure ascertaining the cost or output (Cichon, 1999). Managing financial resources in health and social care assignment will Explain the Principles of Costing and Business Control Systems.

The Principles of Costing: There are five fundamental principles of costing. The fundamental principle of costing is related to its cause, as the cost figures are usually collected and analysed according to the nature of the activities and are located based on causal relationships. The fundamental principle of costing is that the abnormal cost will cover incidents unrelated to the actual cost of a product or a service. In addition, the cost will charge after it has been incurred. Thus, it is seen as no cost until the cost has been incurred, and it cannot be charged to a cost centre. Again, one-time costs are not considered to future costs since the future cost will needlessly be over-burdened with the past. The exception to this rule is an advertisement, where expenses are treated as deferred revenue expenses. The fundamental principle, keeping accounts of cost, is also based on double is based double-entry principle. It means that cost control accounts are kept on the double-principle entry principle (Audit Commission, 2004) in The Principles of Costing.

HND Health and Social care Assignments help in the United Kingdom

A Business Control System is a system designed and established to check, record, regulate, supervise, authenticate, and (if necessary) restrict access to an asset, resource, or system. They are designed to provide “corrective action to align actual performance with the established standards and help the organisation achieve their objectives”. The Control system maybe can be corrective or preventive. Corrective control systems are a mechanism used to correct the errors used to that have occurred already, whilst preventive measures reduce the probability of errors or risk. Some of the costing and business control systems are (Nolan, Burgess and Shaw, 2011) managing financial resources in health and social care.

Break-even analysis: This is used in Managing Financial Resources in Health and Social Care to determine how much sales volume a business needs to start making a profit. When starting up a business, no loss or profit. That is why HND in Health and Social Care Explain the Principles of Costing and Business Control Systems.

Cost-benefit analysis; is an attempt to quantify and include cost and benefits to clients and the community—principles of costing analysis decision making about choices. If individuals want to start a business, they might rely on their intuition, a “gut feel”, for the right business or choice. For example, a student studying HND in health and social care for two years and working simultaneously, and someone who works full time without studying HND in health and social care simultaneously, will earn a lot more money than the student studying and working at the same time in the United Kingdom. So the one studying and working is losing money in the short term, but when qualified in the long run, will earn much money (Nolan, Burgess and Shaw, 2011) after completing HND in health and social care in the United Kingdom.

The choice of a business in decision making might be concerned with profit-earning capacity and income flow and may also take cash flow analysis or a complete financial appraisal of the project. Some cost-benefit analysis should be made when going into a business-like. Is the project beneficial financially? Is the business the best option, and should it be undertaken? These all answers you will understand after reviewing Managing financial resources in health and social care assignment will Explain the Principles of Costing and Business Control Systems.

Budget: A budget is a plan expressed in monetary terms, this covers income, expenditure and capital investment (buying fixed assets).  This is the amount of money or resources that any organisation or health service has got aside to complete a set objective.  The budget, therefore, helps to ensure the organisation’s objectives are achieved. This helps the business to utilize resources efficiently. It also prevents the business from going over their acquired resources wasting resources. For example, in reference to the case study, £500000 has been set aside to open Life Hope Care Home. Budget compels planning and decision making about the organisation. Budgetary planning and control system forces management to look ahead, to make decisions, to set out detailed plans for achieving the targets for each department, operation and ( ideally) each manager, to anticipate problems and give the organisation purpose and direction (Walton A &MCKibbin  J. 2012).

Capital:  capital is a major part of all kinds’ business activities, which are decided by the size, and nature of the business concern.  This comprises both fixed and non-fixed assets that is used to establish a business. For example, the capital in establishing a Life Hope Care Home can be employees, money, and many more. This is very important in every business especially in Health and Social Care. It gives the business a solid foundation to be able to operate successfully. Capital may be raised with the help of various sources. If Life Hope Care Home maintains a proper and adequate level of capital, it will earn high profit and can provide more dividends to its share holds (L. Fung).

Income: the income of health and social care are the revenues that come into the business. For example, donations from other co-operate organisations, volunteers, credit supplies, and more. A business’ income helps the business to grow. Expenditure:  Expenditure may be defined as money spends or liability incurred for some benefit, service or receiving property. Some of the examples of expenditure are – payment of rent, salaries, purchase of goods, purchase of machinery, purchase, of furniture, etc. Expenditure may be classified into: (Nolan, Burgess and Shaw, 2011).

Capital Expenditure: Those expenditures that are incurred for acquiring fixed assets like building, machinery, furniture etc., are referred to as capital expenditures, and are shown in the balance sheet as assets (Nolan, Burgess and Shaw, 2011).

Revenue Expenditure: That expenditure which are incurred in the current year and the benefit of which is also taken in the same accounting year. These expenditures do not result in the income of the firm. All revenue expenditure is termed expenses. In health and social care, expenses can be the cost of providing drugs to patients. Paying creditors for goods and services used (Nolan, Burgess and Shaw, 2011).

Cost Centre:  cost centre is a location and a function, an activity or an item of equipment. Each cost centre acts as a collecting place for certain costs before they are analysed further. In a production department, the department itself, a machine within the department or group of machines, a supervisor’s workgroup, a workbench and so on. Production ‘service’ or ‘back-up’ department such as the stores, maintenance production planning and control department one of the suitable cost centres. Shared cost (rent, rates, electricity or gas bills) may require cost centres of their own in order to be directly allocated shared cost items may be charged to separate individual cost centres or they may be grouped into a larger cost centre, for example, factory occupancy cost, for rent, rates, heating, lighting, building repairs, cleaning or maintenance of a particular factory.  Charging cost to a cost centre simply involves two steps which are first identifying the cost centre for which an item of expenditure is a direct cost and allocating the cost to the cost centre, cost centres should always be managed by someone who can provide a basis for allocating responsibility for the cost ( BPP Learning Media 2013).

In relation to an organization engaged in the health and social service sector, the aforesaid concepts are highly relevant and imperative for appropriate delivery of services and maintaining the sustainability of operations. The organisation needs to understand the aspects of costs, income and analyze the leverage of cost and expenses in any current or future venture so as to judge its sustainability. The organisation also needs to draw up budgets and forecast the needs of capital, ways of incurring expenditure and generating income. Finally, the organisation in the health and social care sector needs to implement effective cost control to optimally utilise resources and enhance efficiency while delivering adequate services to the satisfaction of the service users (Nolan, Burgess and Shaw, 2011).

1.2 IDENTIFY INFORMATION NEEDED TO MANAGE FINANCIAL RESOURCES

Financial resources such as revenues, assets, cash flow Etc., are highly significant in delivering the services of an organisation engaged in the health and social sector. In this relation, the financial resources in health and social care must be managed appropriately for maintaining sustainability and efficiency in operations (Broadbent and Cullen, 1993). The management of financial resources regarding an organisation engaged in the health and social care sector is highly dependent on efficient utilisation and coordination of the information on business costs (Nolan, Burgess and Shaw, 2011). that is why the health and social care assignment Explain the Principles of Costing and Business Control Systems.

The information on business cost in relation to health and social care includes the following:-

People – People includes information on service users, employees, suppliers, etc. each people has a considerable cost involved and management of financial resources requirements suitable coordination of the information on these people. The information on service users includes the cost and kind of services required to provide, the information on employees include the salaries and wages which needs to be given and the information on the suppliers include the discounts which can be availed, cost charged while procuring equipment’s, etc. This information needs to be coordinated and utilised effectively for the efficient utilisation of financial resources in the health and social care sector (Nolan, Burgess and Shaw, 2011).

Equipment – Equipment includes all instruments which are required to deliver services by the organisation engaged in the health and social care sector. The equipment is highly imperative since they facilitate in delivery of appropriate services and most importantly such equipment is highly expensive and forms part of the capital expenditure. Hence, the information regarding equipment helps in the management of financial resources in terms of ascertaining capital expenditure and forecasting the kind of services that can be delivered to maximise revenue (Broadbent and Cullen, 1993).

Finance – Finance is an essential resource that is the bloodstream of the organisation engaged in the health and social sector. Finance is required in every activity carried on or to be undertaken by the organisation. Hence information regarding finances in terms of inflow and outflow would help inefficient management of resources and service delivery without any hindrances (Nolan, Burgess and Shaw, 2011).

Buildings – Buildings are important assets that facilitate the centre of delivery of health and social care services. The information regarding the condition of the building, cost of the building, maintenance of the building help in effective management of financial resources and efficiently handle all expenses relating to the building which is essential for the delivery of services (Broadbent and Cullen, 1993).

Consumable items – Consumable items are required for maintaining day to day activities and delivering health and social care services. The information on consumable items would help in effective management of financial resources and maintain stock of such items so that the service delivery is not challenged under any circumstances.

Administration – Administration is the part of the management wherein the daily affairs and requirements of the operations are addressed. The information on administration helps in the effective management of financial resources by timely addressing all operational requirements of the organisation (Nolan, Burgess and Shaw, 2011).

Income Streams – Income streams are referred to the cash flows generated from various operational avenues which lead to the income of the organisation. The information about the income streams helps in understanding the total revenues which would be accumulated and in turn effectively manage the financial resources of the organisation engaged in health and social care (Paramasivan and Subramanian, 2009).

1.3 EXPLAIN THE REGULATORY REQUIREMENTS FOR MANAGING FINANCIAL RESOURCES

The management of financial resources needs to be undertaken under the compliance of different mandates stipulated in various frameworks, guidelines and legislation in relation to the health and social care sector. The basic financial need is the improvisation of an efficient risk management system which acts as an important tool to comprehend the existing risk, anticipate the future risks and prepare an action plans to mitigate the same (Thomas, 2001).

The regulatory requirements which affect the business cost or management of financial resources are as follows:-

Changes in policy: The Changes in policy influences the business cost or the management of financial resources. The change in the policy by the Government or the regulatory agency may be tantamount to new measures of compliance and incurring of additional expenditure while delivering health and social care services Hence changes in the policy may result in additional efforts towards compliance which may result in increasing the outgo of financial resources (Thomas, 2001).

Competitive factors – The competitive factor include the aspects of services that are provided by other service providers or organisations in the health and social care sector. The competitive factors are equally important since the cost of compliance, mitigation of risk, adherence to laws and code of conduct may result in incurring additional expenditure which in turn may reduce competitive strength in the health and social sector (Thomas, 2001).

Legal requirements – The legal requirements are the mandates stipulated under various legal provisions for the delivery of suitable services by the organisation engaged in the health and social care sector. The legal requirement is required to be adhered to while delivering the services and in this relation, compliance with legal requirement needs measures to be initiated in terms of reporting and other activities which attributes cot and utilisation of financial resources (Thomas, 2001).

Financial legislation and codes of practices – The financial legislation and codes of practices are referred to as laws that provide directives towards accounting and efficient management of financial resources while maintaining ethics in operations. Compliance with such legislation helps in managing of financial resources (Thomas, 2001).

Audit – Audit is regarded as the scrutiny and examination of the records and documents to ensure that the operations and the management of the organisation are conducted as per the requirement and the mandates. The audit helps in effective management of financial resources, reduces wastage and prohibits unethical practices (Thomas, 2001).

Accountability – Accountability is regarded as the responsibility shared by the stakeholders of the organisation while delivering adequate services to the service users. The accountability ensures that the person responsible for the delivery of the services and other operational and management activities carried out properly (Thomas, 2001).

1.4 Evaluate Systems forManaging Financial Resources ina Health or Care Organisation

The financial management system has been implemented by the organisation engaged in the Health care sector for efficient management of financial resources. The financial management system includes the processes and the instruments to efficiently administer the financial resource allocation, optimum utilisation of financial resources, etc. The financial management system facilitates the health and social care service providers to monitor the aggregate costs undertaken by the organisation.

The system for managing financial resources in relation to the health care organisation includes:-

Sources of Income – The sources of income include the avenues of realisation of revenues such as grants from governmental agencies, non-governmental agencies, subsidies, revenues from service users, etc. The sources of income help in realising the revenues and allocating them efficiently among various costs and services. Thus, sources of income help ineffective system for the management of financial resources. The setting of budgets – Setting of budgets refers to the process of forecasting income and expenses. In relation to the organisation engaged in the health and social care sector setting budgets is an important system for managing financial resources. The budgets would ensure an outline of revenues and expenditure and any deviation from the predefined forecast would help in understanding the deficiencies in the system (Almgren, 2007).

Administration of Budgets – Administration of budget means monitoring the budget and implementation of the same. The administration of the budget would help in controlling and monitoring the expenses, revenues and other forecasts. This would help effectively in maintaining an efficient system for managing financial resources.

Cost centres –Cost centres are those departments or functions within the organisation to which the cost is charged. The cost centres help in identifying the allocation of cost and the expenses incurred by the respective department in terms of the entire expenditure incurred by the organisation.

The setting of budgets – Setting of budgets refers to the process of forecasting income and expenses. In relation to the organisation engaged in the health and social care sector setting budgets is an important system for managing financial resources. The budgets would ensure an outline of revenues and expenditure and any deviation from the predefined forecast would help in understanding the deficiencies in the system (Almgren, 2007).

Administration of Budgets – Administration of budget means monitoring the budget and implementation of the same. The administration of the budget would help in controlling and monitoring the expenses, revenues and other forecasts. This would help effectively in maintaining an efficient system for managing financial resources.

Cost centres –Cost centres are those departments or functions within the organisation to which the cost is charged. The cost centres help in identifying the allocation of cost and the expenses incurred by the respective department in terms of the entire expenditure incurred by the organisation.

Accountabilities –Accountability is regarded as the responsibility shared by the stakeholders of the organisation while delivering adequate services to the service users. The accountability ensures that the person responsible for the delivery of the services and other operational and management activities carried out properly (Almgren, 2007).

Audit – Audit is regarded as the scrutiny and examination of the records and documents to ensure that the operations and the management of the organisation are conducted as per the requirement and the mandates. The audit helps in the effective management of financial resources, reduces wastage and prohibits unethical practices.

The advantage of the aforesaid financial resources is the fact that these resources help in maintaining a robust system of forecasting, monitoring, implementation and scrutiny to manage the financial resources of the organisation even better.  These resources also help in better service delivery in terms of health and social care services by making available all necessary requirements timely so as to cater to effective service to the users. However, the disadvantage of these resources is the fact that these resources are not absolute in terms of effective financial resource management and there are various other factors that need to be considered. The demerit also includes the fact that financial resources needs constant monitoring in terms of implementation and misuse of such resources are also possible (Almgren, 2007).

Task 2 Explain the Principles of Costing and Business Control Systems

2.1 Analyse the factors that may influence the availability of financial resources in health and social care organisations

The factors which influence the availability of financial resources in the health and social care organisation include the following:-

Availability of resources – Availability of resources in terms of funding priorities is a pivotal factor that affects the organisation. The organisation makes available the resources to the organisation and allocates them accordingly. However, the priorities in terms of allocation and availability of resources affect the availability of funds for the entire organisation.

Private finance – Private finance is also an effective way of raising finance and is one of the strong sources that affect the availability of resources in the organisation. The increase or decrease of private finance may increase or decrease the level of availability of financial resources for the organization (Shim and Siegel, 2000).

Government policies – The Government policies towards operations also impact the availability of resources for the organisation. The policies of the government need to have complied and adverse mandates on raising finance or disclosure may reduce the origins of finance for the organisation.

Inter-agency partnerships – Interagency partnership is referred to as the coordination among different agencies within the health and social care sector. The effective coordination among the relevant agencies allows better management of financial resources and ensures better availability for the organization (Shim and Siegel, 2000).

Type of service – The type of service includes the kind of service delivered by the organisation to the service users. In case the delivery of services greater blockage of funds or utilisation of working capital then the availability of financial resources would be low for such services (Thomas, 2001).

 In relation to an organisation engaged in the health and social care sector, the aforesaid facts help in determining the availability of financial resources. The organisation needs to comprehend its priorities in terms of allocation of financial resources, align its sources of finance to support its financial needs, comply with the government policies, ensure coordination among inter agencies and deliver appropriate service as per the financial needs (Thomas, 2001).

2.2 Review different types of budget expenditure in health and social care organisation

Budget is the forecast of the economic inflow or outflow which helps in comprehending the future course of action in terms of income or expenses. In relation to the health and social care organisation, the types of budget can be explained in the context of:-

Cost centre – It is the allocation of expenditure to be charged as per department. The budget is drawn up for each department in the organisation so as to understand the level of expenses and revenues attributable to each department and monitor the deviation in terms of actual performance and forecasted performance (Hammonds, 2006).

Project Management – Project management refers to controlling and monitoring of the entire operational project initiated by the organisation. The budget takes into consideration the expenditure in relation to the project and forecasts a possible trend of expenses for the entire project based on certain estimates. The organisation can compare the actual expenses with the budgeted expenditure to understand the deviations address the same effect in relation to the project.

Outsourcing contract – The outsourcing contract is an agreement executed to allow the entire job or activity to be performed by some other department or person outside the organisation. The budget helps in understanding the expenses or benefits for outsourcing and therefore case of any increase or decrease in the expenses can be addressed as a result of the budget with regard to the outsourcing contract by the organization (Wiseman, 2010).

2.3 Evaluate how decisions about expenditure are made within a health and social care organisation

Decision making is an important part of the organisation engaged in the health and social care sector. The merit of decision making is that decision making helps in addressing the challenges existing in any particular situation and assist in successfully overcoming them. The decision making also allows to take resolute steps towards the achievement of the objectives of the organisation in terms of delivery of services effectively and fulfilling the needs of the service users, among other things. However, decision making may also lead to adverse consequences since decisions taken hastily and without considering all factors, may result in increasing problems for the organization (Stretch, 2007).

While considering decisions regarding expenditure in the health and social virement method is useful. This method facilitates the movement of financial resources among budgets allocated for different departments of cost centres for optimum utilisation of resources. The factors in this regard are:-

Environmental analysis – The environment and the effects towards sustainability are considered while deciding regarding expenses with regard to health and social care organisation. The movement of funds among budgets in terms of virement method is also done considering the environmental impact and it is ensured that decisions of the organisation should not adversely affect the environment.

Accountabilities – the decisions of the organisation also take into account responsibility or accountabilities of the persons handling operations. The decision of the organisation in relation to expenditure which affects the accountability of the persons handling operations are considered comprehensively and it is ensured that accountability is allocated judiciously among the person is concerned (Stretch, 2007).

Priorities – While deciding on expenses, priorities are an important factor since the expenses are allocated importance and on this basis, financial resources are allocated. The importance or relevance of expenses of the organisation facilities in the allocation of financial resources and decision is taken to incur expenditure on the basis of such priorities.

Task 3 Explain the Principles of Costing and Business Control Systems

3.1 Explain how financial shortfalls can be managed.

The meaning of financial shortfalls can be considered as the loss of money while on the other hand; sometimes the financial shortfall involves the disparities in the budgeted figures and the capital investment issues. It can also be considered as the liabilities of an organization that reduces the number of financial resources of an organization.

 The financial shortfall, however, can be best ascertained by the preparation of the financial statements (Spencer, 2010). The financial statements would enable an organisation to highlight the differences while on the other hand, also ascertaining the reasons for the shortfall. The major reasons behind the financial shortfall are the unrealistic assumptions pertaining to income generation. In addition to this, the financial shortfalls are also due to the lack of proper supply of financial information and market information influencing the financial decisions (Kutz, 2003).

A health and social care organization can take certain steps to manage the issue concerning financial shortages. Those steps are provided below:

Priorities:

This process is considered a priority inversion. This process is generally followed by an organization for the purpose of evaluating different expenditures incurred by the organization and setting their priority on the basis of their importance. This process helps in the formulation of a proper plan for the purpose of management of the process of the shortfall.

Virement:

Virement is considered as a process of transfer of funds, as an administrative operation from one part of a budget to another part. Virement is important during budget monitoring. This process can help in reducing the financial shortfall by transferring funds to a department that has anticipated a budgeted deficit in financial resources (Kutz, 2003).

Reserve funds:

Reserve funds are created by the managers of different organizations, by transferring a certain amount of funds to a separately constructed reserve from the total profit generated at the end of a financial year. Maintenance of reserve funds can help an organization in availing financial resources during a liquidity crunch.

Alternative external income sources:

There can be an alternative sources of income developed by a health and social care organization, such as provision of health insurance benefits. These sources of income generate additional revenue for an organization, which would help in minimizing the scarcity of financial resources during the hour of need (Kutz, 2003).

3.2 Explain the actions to be taken in the event of suspected fraud

In general terms, the meaning of fraud is considered as committing deception, omission, perversion of truth etc. The concept of fraud also includes the utilization of unfair advantage, causing the injury of a certain forms. Fraud can be committed wilfully or it can be a simple mistake or omission.

Frauds can also be committed with the financial data present in the spreadsheets of a health and social care organization. In the case of spreadsheets fraud can be committed by simply changing the data or formatting and organizing the spreadsheet to hide data. Cells within the spreadsheets can be merged to hide data or a blank column can be inserted within the spreadsheet to form a gap in between the results projected there. Proper internal spreadsheets controls must be in place to identify the frauds committed (Clikeman, 2013).

The factors that would encounter fraud for any organisation would involve the following:

The preparation of the budget and the reviewing of such budget with the actual figures

Herein, the company would review and compare the budget with the actual results while ascertaining the misappropriations and the reason behind the misappropriation (Spencer, 2010). In addition to this, the company would also be able to determine the reasons behind the fraud as well.

Preparation of the financial statement

The financial statements of the company would enable them in ascertaining the value of the fraud while on the other hand, indicating the area of the fraud (Wieland, 2011). In addition to this, this would also enable ascertaining the exact reason for such fraud and arranging for the ascertainment of the truth.

Auditing the operations of the company

One of the best means for ascertaining fraud is the auditing of the operations of the company by charter professionals (Xenakis, 2015). This auditing by the chartered professionals would enable the company to determine the specific areas of fraud. While on the other hand, provide legal assistance for dealing with the fraud.

The actions that are generally taken when a fraud is detected are provided below:

Conducting an enquiry upon the incident, Formulation of appropriate processes that would be capable of managing the fraud, conducting a process of detecting the persons responsible for the fraud, Understanding the operations that developed the incident and reporting the same to the management, Formulation of control systems to eliminate further frauds committed in future (Xenakis, 2015).

3.3 Evaluate budget monitoring arrangements in a health or social care organisation

Budget is the forecast of the amount to the expenditure that will be incurred in the future for a particular period. It reflects the future plans of the company and the estimation of the expenses that will be incurred to show the growth prospect of the company and the investment of the company into the various projects and the future development plans. The company prepares the income budget and the expenditure budget. The budget is the estimated amount that will be incurred but it is on the company to ensure that if there is any deviation from the estimated forecast. There can be various modules that can ensure that the budget and the actual expenditure are going in the same direction and are not complementary with each other (Xenakis, 2015).

Budget monitoring is regarded as an activity, which is conducted by an organization to assess the performance of the financial operations relating to the organization. The guidelines regarding the process of monitoring the budget are approved by the senior management of an organization. In the present health and social care organization, the monitoring of the budget is done in various ways.

Cost centres:

Cost centres are regarded as those departments of an organization, who do not contribute to the profit of the organization; however, they indirectly help in enhancing the profitability of the organization. The organization incurs costs for running the cost centres.  The purpose of the cost centres is to provide the required support to the management of the company to properly utilize the resources of the company and indirectly back the profitability. Examples of cost centres for the health and social care organization are the human resource department, the accounting department, and the research and development department. They help in maintaining accountability and tracking the expenditure in a proper way. This helps the management to conduct the process of monitoring budgets (Donovan, 2006).

Accountability:

The managers and other departmental heads of the health and social care setting are held accountable for the performance of the actual performance is not in compliance with the budgeted results. The process of monitoring of budget involves a comparative study of the budget and the actual performance to find out the deficit or surplus. Holding the persons responsible for their performance on the basis of the results of the comparative study strengthens the process of monitoring to a greater extent.

Audit:

Conducting Audit at regular intervals also helps the organization in conducting the process of monitoring the budget prepared by the organization. Auditing helps in highlighting the areas of improvement and assessing the overall performance of the organization and comparing the same with the budgeted performance level to understand the performance gap (Donovan, 2006).

Task 4 Explain the Principles of Costing and Business Control Systems

4.1 Identify information required to make financial decisions relating to health and social care service

The operation relating to making appropriate decisions relating towards managing the financial operations, relating to a health and social organization is a matter of prime concern for its management. For the purpose of making financial decisions essential information relating to financial performance and operations conducted in the past and the future financial requirement of the organization (Kimmel, Weygandt and Kieso, 2007). There are different financial documents that provide the necessary information to the management for the purpose of making valid financial decisions for the concern, the contribution made by such financial documents towards financial decision making is inevitable. Some of those essential financial documents have been discussed below:

Budget:

A budget is considered as a document, which is prepared for the purpose of predicting the future requirements relating to revenue and cost. This report helps the management in understanding the future financial needs of the organization and sets the targeted level of performance for achieving such requirements. The cash budget is prepared for providing information regarding the future liquidity needs of concern and at the end of the budgeted period, the management compares the actual performance with the budgeted performance in order to find out the areas of improvement. The information regarding the future financial requirements, as provided by the budget prepared helps the management in managing the financial resources.

Sources of income: The information relating to the various sources of income will help the management of a health and social care organization to understand the level of income that the organization will be able to earn from the various sources. This will help the management in understanding the capability of the sources of income to cover the financial requirements of the organization, on the basis of this information the management will take initiatives to develop those sources, were required to cover its financial needs (Kimmel, Weygandt and Kieso, 2007).

Cost control:

Cost control is regarded as a technique, which is applied by the management of a concern to control the overall cost incurred by the same for running its activities. This procedure also helps the management in managing the financial resources of the concern. The document relating to cost control provides information regarding the capacity of the management to control the cost of the organization in order to protect the revenue (Kimmel, Weygandt and Kieso, 2007).

4.2 Analyse the relationships between ahealth and social care service delivered, costs and expenditure

It is important to conduct an assessment of service delivery, cost and expenditure applicable for the health and social care sector. The expenditure and cost of availing of services will decide the prices of the services provided to the patients and their accessibility. It is hence, considered as an essential factor and should be evaluated carefully (Xenakis, 2015). The relationship between cost, expenditure and service delivery in the health and social care segment can be evaluated by taking into account certain factors.  It is the prime motive of every health and care setting is to provide maximum quality of services to the patients for the purpose of satisfying them.

Cost-benefit:

The quality of services depends upon the expenditure incurred for the purpose of providing such services to the service users. The cost-benefit assessment is done in order to understand the cost and benefits applicable to the particular type of service provided to the service users. For this purpose, the cost incurred for improving the quality of a particular service provided is considered and the same is compared with the benefits availed from such improvement. IF it is found that the cost of expenditure incurred for the improvement is higher than the benefit then the same will affect the proper delivery of services by the health and social care organization.

Pricing policy:

The pricing policy is applied for setting service prices and affects the quality of service delivery. It can be considered that a higher expenditure incurred for the purpose of providing a service will lead to a higher price set for such service. This also affects the accessibility of the service by the service users. The cost of a particular service is also related to the pricing policy, as the same affects the pricing policy adopted by a health and social care organization for the delivery of a particular service, a higher expenditure incurred for service will increase the price for the same (Xenakis, 2015).

Purchasing arrangements:

There are different types of purchasing arrangements, such as cash payment, online bookings etc. The convenience of the purchasing arrangements for the service provided by a health and social care organization as set by the same would affect the smooth delivery of services provided by the organization (Nolan, Burgess and Shaw, 2011).

4.3 Evaluate how financial considerations impact upon an individual using the health and social care service

The way health care service is delivered by an organization affects the behaviour of the individuals, who are service users. Two of the major factors that are required to be considered in this regard are quality of service and accessibility to the service. The quality of health care service will affect the health and wellbeing of the service users. Better quality of services provided to the individuals will enhance their efficiency to eliminate disease and will ensure better health and wellbeing of the service user. On the other hand, better accessibility will enable the service users to get better and timely medical support when it is necessary. The increase in the quality of services provided by the health and social care settings in the UK has enhanced the overall cost of providing quality healthcare services. The increase in spending will make it difficult for the service users to avail the required health care services in time. The advantage of the increase in spending can be considered that the quality of the services provided will also increase with the rise in cost. However, the same will reduce the accessibility of the patients to avail of the services significantly (Nolan, Burgess and Shaw, 2011).

4.4 Suggest ways to improve the health and social care service through changes to financial systems and processes

There are a number of approaches, through which, health and social care services at a health and social care setting can be improved, in the context of financial systems and processes. The main issue with the organization is considered as misrepresentation of financial data and the same can arise due to improper maintenance of accounts, inappropriate data collection, inability to develop an appropriate control system etc. This issue can be prevented by adopting certain policies which have been recommended in the following paragraphs.

The health and social care organization must develop accurate accounting principles that will conform to the prevalent legislations and regulatory requirements that direct the procedure of dealing with financial data and processes. The approaches towards accounting adopted by the organization must be accurate enough to eliminate any form of misrepresentation of information. Appropriate financial control systems must also be established within the organization. The organization must also ensure that the alterations made by the same and the new policies adopted should not be the reason for the dissatisfaction of the patients in regards to the availability of services promptly and accurately (Cichon, 1999). The process relating to the collection and storage of data must also be improved, there must be a centralized and secured database that will store all the information and disseminate the same to different departments, when necessary. The organization must also avail improved technology in the form of software that will be capable of collecting and storing information regarding patients and the same should also be able to provide the same when required for the purpose of further investigation. The centralized system will also record the financial information relating to the organization and the same will help in making efficient financial decisions (Cichon, 1999).

Conclusion Explain the Principles of Costing and Business Control Systems

The importance of management of financial resources has been clarified most appropriately in this paper, and along with the same, the use of different systems to manage financial resources in a health and social care organisation has also been covered. An understanding of budgeting and the essentiality of planning budgets has also been highlighted appropriately. The paper has discussed the various sources of income regarding health and social care undertaking and various budgeting concepts associated with health and social care organisations. Monitoring budgets prepared by the organisation is an important activity for management, and the same is highlighted in this paper along with its essentiality. In the final phase, the paper has to Explain the Principles of Costing and Business Control Systems the influences created by the management of financial resources upon the services provided by health and social care organisations.

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