Costing And Financial Management In Residential Care

Types of Costs in Residential Care

I. Depicting principles of costing and business control systems:

Costing is the collection of data that are utilized by the managerial personnel of an organisation to determine the total expenditures in the process of maintaining and delivering a particular service. It assists the managers in estimating the available resources and prioritises them in accordance with the preference. Various types of costs are fixed cost, variable cost, semi-variable cost, indirect cost, and direct cost (Mitra 2016).

On the other hand, the control procedures of business are a crucial tool that is utilized by various organizations to analyse the business activities with its completion level. Some of the reactive as well as proactive measures are also associated with the control measures to assist the organization. The control system includes cash and bank control, budget system, purchasing control, expenditure and personnel control.

Calculation of one resident per month:

Average variable cost per month = £1,200

Therefore, total variable cost of 65 residents = £1,200 * 65 = £78,000

Total fixed cost per month = £900,000/12 =£75,000

Therefore total cost = £153,000

Therefore, cost per resident per month = £153,000/65 = £2353.85

II. Information needed to manage financial resources:

Various information that are needed to manage the financial resources are –

• Balance sheet: It gives the details regarding the liabilities, assets and the stakeholders’ equity over a particular period of time. It also reveals the performance and the growth of any organization during the period.
• Income statement: It reveals the loss or profit that is achieved by an organization during a particular period of time. It shows the details regarding the earnings of the company and the expenditures made to earn that profit.
• Statement of cash flow: It reveals the changes in cash equivalent or cash that is outflow and inflow of cash over a particular period. it gives the details regarding the financing, operating and investing activities of the entity and whether they are able to generate sufficient cost to meet their obligation or not (Abdelhak, Grostick and Hanken 2014).  

III. Depiction of relevant regulatory requirement for managing financial resources:

The organisation is required to register their business with the houses of company under a name of the business for complying with the regulatory policies and legislation of the government to assure the fairness and proper management of the entity. However, in case of single ownership, business does not require any formal registration the needs to inform the HM Revenue & Customs (McNeil, Frey and Embrechts 2015). All the limited companies are restricted by law that is, the Company Act for publishing their financial statements regarding their financial performances, financial position and changes over the particular period of time.

IV. Evaluation of computer software, Open Accounts, Cool care and CareSys:

For handling the financial resources under the residential care organization, they must be efficient and effective for implementing the procedures with minimization of cost. The employees must be aware of various systems, files and must have proper authorization for accessing those systems. The employees must be trained regularly so that they can carry out their work with efficiency and can improve their skills. They shall be trained regarding the operation of newly installed software for accounting practices and procedures as well as maintaining the records (Shortliffe and Cimino 2013).  

I. Depicting the difference in sources of income for new care home: 

Relevant sources of income could be identified for new care home, which is essential in supporting its overall expenses. Sources of income like government grants, primary care trusts, donations, property development, service income, and money paid for care. These identified sources of income could effectively help in improving the overall revenue generation capacity of the health care centre. Moreover, government grants could be the main source of revenue for centre. Fincher (2014) mentioned that identified revenue source is essential for companies to identify the relevant factors, which might hamper its cash inflow in future.

II. Impact of factors for availability of finance:

Control Procedures in Business

The flowing factors could have different influence on availability of finance for the new care home.

Government spending:

Majority of the funding for care homes is mainly provided by government spending and thus any change in the overall spending could hamper their cash inflow. In addition, decline or increment in government spending could mainly hamper the overall cash inflow of the new care centre (Owyang, Ramey and Zubairy 2013). The UK government mainly provide maximum of the funding for health care centre, which could help the new care unit for increasing their relevant income.  

Social deprivation index:

The social deprivation index scheme is mainly developed by UK for supporting its backward classes or regions. Moreover, if factors of social deprivation index changes regarding health and care, then the new care centres could not get relevant income from government (Olson, Herman and Zanna 2014).

Private financing:

Furthermore, private financing mainly consists of donations, which plays a vital role for the new care centre to generate relevant cash inflows. In addition, any increment or decline in private financing could mainly help in improving cash inflow of the company.

There are relevant budgets, which could be identified for residential care homes are depicted s follows.

Cost centres:

The overall cost centre mainly prepares planning budgeted, which mainly help in fulfilling the requirements of cost centres. The cost centre mainly needs budgets like production budget, capital budget, cash budget, and expenditure budget (Iqbal et al. 2014).

Project Management budgets:

Project management is mainly essential for identifying relevant expenses, which could be needed for different activities. In addition, these budgets are mainly conducted to minimise the cash gap between expenses and funds availability. Moreover, project budget like direct material budget, labour budget, overhead budget, capital budget, and direct budget is mainly prepared under project management budgets (Schwalbe 2015).

Outsourcing:

Relevant budget could be identified for outsourcing relevant activities, which might in turn help outsourcing budgets to conduct effectively. Sales budget, revenue budget, expenditure budget, and capital budget needs to be conducted for compensating the outsourcing requirements of companies (Hou et al. 2016).

Relevant expenditure in residential care home is mainly conducted based on priority of the care centre. In addition, majority of the direct expenses, which relate directly to the health of service users, is conducted by residential care home. Moreover, the expenditure decision could mainly be conducted by utilising financial risk, and cost benefit analysis. This method could mainly help in identifying the relevant expenses, which is needed by the residential home care to ensure continuity of its productivity (Xu 2015).

Calculation of Cost per Resident per Month

Table 1: Depicts the future cash flow

(Source: As created by the author)

The above table mainly depicts the relevant future cash flows, which might be conducted by residential care in its business process. In addition, the cash inflow in first month is relatively negative, while other months cash inflow is positive. The negative cash inflow was mainly comprehended by bank balance. The short falls in the budget could be comprehended by keeping additional balance in bank. Moreover, the short falls could only be detected if cash inflow from local government, service reductions, and self-generated income is reduced. However, any decline in income could increase cash outflow, which raises the chance of cash short falls. The short falls could be comprehended by reducing expenses and cash outflows of the company, which is essential for supporting the reduced cash inflow (Carroll 2016). Moreover, the short fall could be supported by conducting bank overdraft, which might be an effective source to reduce cash shortage in operations.

Frauds are relevantly of different types, which could be conducted by employees or individuals to fulfil their personal gains. However, the use of a suitable panel comprises of heads from the management, which could effectively help in punishing the culprit according to rules. The termination of the employees could be conducted by the panel by evaluating its overall appointed terms and conditions. Wicaksono (2017) stated that fraudulent activities could be reduced if adequate punishment is been drafted by the management with strict outcomes.

Relevant budget control could be conducted by using cost control measures and analysing financial records, which could help in pin pointing irregularities in operations. Furthermore, the use of cash flow statement and income statement could be an effective method, which might help in monitoring overall budget prepared for the residential care. In addition, variance analysis method could also be used in monitoring budget, which has helped in supporting activities of residential care (Castelnuovo et al. 2014).

Decision making process in the residential care is essential, as it might help in depicting the relevant services, which could be provided to its service users. In addition, residential home could accommodate health care and child testing facility. This accommodation of childcare could effectively help the residential care to generate higher revenue as government grants. Moreover, relevant information could be identified by surveying or using paid survey to identify the current demand of the consumers. The derivation of demand could effectively help residential care to identify relevant services, which could be provided to service users and funding organisations (Pettigrew 2014).

Managing Financial Resources in Residential Care

The overall relationship between the level of service and expenditure could only be identified with the help of cost-benefit analysis, pricing policies and purchasing arrangements. The relevant cost benefit analysis could mainly help the residential care to identify relevant costs associated with the service, which could help in depicting service charges. Moreover, quality services should also be used by the new care centre, which will in turn increase its expenses (Mcintyre, Meheus and Røttingen 2017). As it could be understood that high quality service providing centres needs high expenses, thus a positive relation between expenses and level of services could be identified. This indicates that if level of service increases expenses of the care centre also increases and vice versa.

Financial consideration is essential, as it could help the new residential care to support individuals who are not able to afford health care services. The financial consideration mainly depicts the quality of services and access to service, which could be provided by the residential care. The financial consideration of service users needs to evaluated, residential care aims in targeting nearby areas. Thus, high quality services could attract additional costs of selecting the recruiting process, which will be borne by companies. Harris and Fitzgerald (2015) mentioned that identification of expenditure condition of service users could effectively help care homes to design their services.

The overall improvement in service could be implemented by using adequate data storage system and control process. These two systems could mainly help the new residential care to store relevant data for each case that comes up in the centre. In addition, the online data collected procedure could effectively help the doctors to reproduce documents of the treatment method for same case previously targeted in the care centre. This could mainly help in improving the overall service quality and promptness of the employees. The implementation of the relevant method could mainly help in boosting quality of the services, which is been improved by using financial systems and processes. Demirguc et al. (2015) mentioned that data storage method is used by maximum of the hospitals and care centres to promptly and effectively provide relevant services to its patients.

Reference:

Abdelhak, M., Grostick, S. and Hanken, M.A., 2014. Health information: management of a strategic resource. Elsevier Health Sciences.

Carroll, N., 2016. Cash Reserves and System Membership: Does System Membership Improve Not-For-Profit Hospitals’ Access to Internal Capital by Reducing Optimal Cash Balances?. Journal of Health Care Finance, 43(2).

Castelnuovo, B., Parkes, R.R., Kakaire, T., Sempa, J., Reynolds, S. and Lamorde, M., 2014. Monitoring Antiretroviral Therapy in Uganda: Budget Impact Analysis of Two Strategies for Viral Load Monitoring Versus Immunologic Monitoring. Value in health: the journal of the International Society for Pharmacoeconomics and Outcomes Research, 17(7), pp.A667-A667.

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Fincher, R., 2014. Class and gender relations in the local labor market and the local state. The Power of Geography (RLE Social & Cultural Geography): How Territory Shapes Social Life, p.93.

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