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Principles of costing and business control systems

How systems are used to manage financial resources in Hsc?

Cost is always linked to the cause and it si clear from the association that cost is directly linked to the case. The collection, as well as evaluation of the figure is done in tune to the relationship. Further, abnormal cost is chargeable in costing. The cost that happens due to abnormal activities such as fire, theft, etc is termed as abnormal cost. The normal cost that is linked to production or services is charged to the cost centers.

The principle of business control system lies in the fact that the recruitment process enables the selection of the staff that is competent and employs that person only. This ensures that the business is performed in an efficient manner.

  1. Information needed to manage financial resources

Financial resources can be managed by having all the relevant details of the inflow and outflow of cash. This will shed light on the progress and the way in which the funds are treated. Further, an exposure to the overall operations of the company is needed to manage the financial resources because then only it can be ascertained the quantum of financial sources needed. The budget is an important element that helps in knowing where the funds are flowing. It is only through budget that the different department can be tamed in a proper manner.  For, example if the figures are  available then the financial resources can be managed in an effective manner.

1.3 Computation of Annual Budgeted annual Expense for the year 2018


Amount ($)

Amount ($)

Expected Fees


Marketing Expenses

 - Fixed Advertising Expenses


 - Variable Advertising Expenses



Financial Expenses

 - Interest Paid


 - Bank Charges



Administration Expenses

 - Accounting Staff Cost


 - Stationary


 - Depreciation of Office Equipment


 - Depreciation of Motor Vehicle


 - Rent


 - Travelling Expenses


 - Work Cover


 - Superannuation


 - Telecommunication





  • Regulatory requirements

In the given case the company is required to adhere with Health and Social Act 2012. All the financial regulations of any health company are guided by this act. A company is required to abide by the accounting standards in order t mage its financial statements. Also it is necessary for the heath companies to abide by the quality standards so that no compromises with the general population are made. Following the regulatory requirements helps the companies prevent fine and penalties and also they help in cost savings and improved opportunities (Field & Brown, 2007).

  1. Evaluate systems for managing financial resources

In order to evaluate the systems for managing financial resources in a health care organisation it is important that the system meets with the expectations of both the company and the people requiring its services. The systems are regulated in such a manner that the resources are allocated among all the health centres so that they can be used wherever needed. It is important to take into consideration management policies also. Proper allocation leads to cost reduction, which helps to provide better care to large group of people.

Managing financial resources in a health care organisation

M1.  The alternative system that the health care can follow is that of the proper software and recording that will help in management of financial resources. Once the entry is properly done and recording happens in a correct manner, the resources will be automatically in the desired manner. Hence, the use of technology and proper recording is the alternate system

M2.  The number skills are an important consideration because the proper evaluation can be done with the help of numbers. The number skills help in prediction together with the analysis. Ratio computation can be done with the help of numbers that can shed light on the performance of the health care.

D1. Budget planning and information technology can be best described as the system for the evaluation of the financial resources. Budget planning is undoubtedly, the best system that will help in the proper evaluation by dealing with the numbers of the organization. The best system for assessment of financial resources is as follows. First is the investment management system that can allow an organization to maintain its portfolio, thereby facilitating in reflecting the number of risks surrounding the organization. Besides, the company can also introduce a central treasury department that can allow it to manage all its investments. The second method is funding management system that can be implemented in an organization so that it can gain access to several short-term and long-term sources of finance in order to maintain its requirements of liquidity position and investments. Therefore, a company can undertake such system within its framework to ensure interest cover and gearing ratios are maintained within required limits (Ferris et. al, 2010). The most suited system will be funding management system because it altogether covers the requirements of an investment management system and key ratios like gearing and interest cover can also be maintained, thereby enhancing organizational efficiency.

Dividends are one of the major sources of income that may be encountered in health and social care. The company has been planning toward increasing the dividend per share along with the earnings. The company resulted in growth of over 3.5% in the year 2013, because of which its dividend increased from 4.29% to 4.68%. This increased the dividend to 7 per share for the company (Deegan, 2011). Subject to the approval of shareholders, the final dividend for 2014 would be 6.5 per share. Also other major sources include bank loans and share in profits.

Major sources of income in health and social care

The company has used a major of its resources in executing merger which involved purchase of twenty eight properties. These assets were previously leased by the company, but now the company has acquired them which have blocked major of the financial resources of the company. Also credit rating plays an important role in flow of finances (Laux, 2014). In case the credit rating of the company falls, the credit limits decline which lead to shortfall of resources. Therefore, it is important that the management examines the credit rating efficiently in order to avoid lack of financial resources.

The major types of budget expenditure in health and social care organisations are Comprehensive, problem solving and planning budgeting. The comprehensive budgeting take into consideration all the aspects of the organisation, it helps is planning the resources and cutting the expenditure in cases of lack of financial resources. The problem solving budgeting helps to identity the parts of the organisation facing problems, and further helps to sole them the planning budgeting helps the company in there expansions strategies. Also helps the organisation to use the capital as per the company goals.

In order to evaluate the decisions about expenditure in the health and social care organisation, the company should opt for cost benefit analysis. This type of analysis helps the company understand the benefits it is getting form the expended money. If the worth or result of expenditure is not at par with the requirements the company can cut off such expenses. This type of analysis helps the management distribute the resources efficiently, as they know which expense will provide them with the highest benefits (Davies & Crawford, 2012).

The factors that influence the availability of funds and barriers to funding in are associated with both internal and external environment. The combined influence of such factors can create barriers for an organization in funding. For example, a business entity can be surrounded by factors like charitable activities, payment of taxes, etc. The most major factor that can influence the funding of a business entity is its strategies and objectives. In other words, if the higher management is planning on making a strategic alliance for the development and growth of the enterprise, it can face funding issues for the future flow of operations (Choi & Meek, 2011). In addition to this factor, the fiscal budget of the government can also influence finance availability. Under this policy, guides for the allocation of revenue of the entire State are taken into account by the government for incurring expenses for its development and enhancement (Leo, 2011).

Types of budget expenditure in health and social care

Size of working capital – if the working capital is huge and the operations are effective then the health care organization will have sufficient funds. Realisation is another added advantage that helps in enhancing the funds availability.

Assets owned – if the organization has surplus of assets then the organization will be able to get more business and hence, the financial condition will be strong in this scenario

Bottlenecks – if the organization fail to get the smooth supply of resources like medicines, machines, etc then it will spoil the smooth functioning.

Skilled workforce – if the skilled workforce is absent then it might become difficult for the organization to operate and render seamless service.

In order to manage the financial shortfalls, it is important that the company studies its cash flow properly. The organisation should read into expenses of each of the department and evaluate where unnecessary expenses are being made. The organisation should reduce the allocation of resources to such departments (Needles & Powers, 2013). The budgets made should be strictly followed. The management should provide incentives on savings and penalties on extra requirement of resources. Since the company has used most of its resources in the merger. It has a lack of funds. The management should properly plan the cash flows in order to meet with the financial shortfalls (Carmichael & Graham, 2012).

The frauds in a health care organisation are mostly settled by the accountability act or the health insurance portability. Fraud is akin to a confederate theft which may lead the individual for an imprisonment of about ten years according to the penal code. In the event of occurrence of fraud the one should first report the information to the required official and thereafter deal with the criminal in the court of law (Peirson et. al, 2015). A fraud in the health care community is very serious matter as it involves both individual and government.

Budget monitoring is very affective in the addressing of a strategic and effective planning. IT also helps to predict the cash flows of the organisation. The main focus of the assessment procedures inclusive of the monitoring systems and budget monitoring are also being met on regular basis. It helps to fill the gaps in the budgeting system thus allowing it to make a well coordinated internal budget (Parrino et. al, 2012). It also tracks the performance of the organisation in the different areas by the capital expenditure and some other developments processes which are in progress.

Evaluating decisions about expenditure in health and social care

Companies must give due focus towards the changes in governmental policies when it is preparing for future budgets and plans. It can allow it to develop more clear and concise forecasts for the future. It is also recommended that a company must adopt the excellence and equity model that can allow it enhance its organizational effectiveness. Furthermore, empowerment of employees to be creative and innovative inside the organization can facilitate the growth of the industry (Brigham & Daves, 2012)

It has been observed that the financial controllers of Jatikpos Care Home use the financial statements inclosing the income statement, cash flow statement and also some other information relating to inventories in order to understand the scenario before taking any type important decision. If the financial controllers do not have enough knowledge then it will result into losses which may have an adverse impact on the organisation. Apart from the financial departments, there is a Human Resource department whose job is to keep a record of the employees and details relating to them such as address and to in which department do they belong. Management of financial resources can be done through various systems that can allow an organization to implement the same for the purpose of enhancing operational effectiveness (Petersen & Plenborg, 2012). In a healthcare organization, financial resource management can be done by Care sys system that facilitates in considering all non-financial and financial affairs in the organization. Moreover, it comprises of modules associated with behavior support, care planning, time and attendance, human resourcing of staffs, equipment maintenance, etc. In addition, an open system can also be utilized in such scenario that facilitates the collection of financial information at one place by importing all tax and financial related details into the system (Bodie et. al, 2014). Moreover, after collection of such information, the system starts assessing the expenses and income of the organization. Nevertheless, this system plays a key role in making relevant decisions associated with selling and buying, enhancement of customer services, etc.

The health care and the social service are associated to each other in relation to the cost as well as the expenditure incurred. It provides the information about the cost incurred by the health care services which is further used in analysing it. There is a positive correlation between the employees and the service that they provide. The number of employees that were employed and the patient turn outs over the year has increased significantly which resulted in the increase in expenditure. The organisation growth is clearly depicted in the financial statements of the organisation which shows substantial increase in revenue, increase in the number of patients as well as mergers and acquisition.

The services offered by the organisation are influenced by both organisation and financial considerations. The financial considerations include the income of individual, their living standard, the type of disease and the other cost that will be included while delivering service to the patient.  However, we can say that financial consideration can be summarised in one word called affordability. The organisational factor is the availability of the equipment that will be required in the various diagnostic procedures in the treatment of the patients.

There are many ways to improve like maintaining the general accounting principles and handling the financial systems and processes adequately. The system should be accurate so that there may be no misinterpretation of data and also it will be better if the organisation will employ a good controlling system.  No matter what, it should be seen that the changes are not affecting the present patients and they are not facing any problems. The organisation should also improve the data storage facilities and thus it should employ the use of new data collection software which makes the work easy.


It must also be noted that a business entity must find ways of decreasing its finance costs. Besides, the establishment of close relationships with the government can also assist a company in ensuring that their voice is surely heard when it has decided to implement physical policies. Overall, a rigorous and coherent financial management system can assist a company attains its goals in an effective way.


Bodie, Z., Kane, A. and Marcus, A. J. (2014) Investments. McGraw Hill

Brigham, E. & Daves, P. (2012)  Intermediate Financial Management.  USA: Cengage Learning.

Carmichael, D.R. and Graham, L. (2012)  Accountants Handbook. Financial Accounting and General Topics, John Wiley & Sons.

Choi, R.D. and Meek, G.K. (2011)  International accounting. Pearson .

Davies, T. and Crawford, I. (2012)  Financial accounting. Harlow, England: Pearson.

Deegan, C. M. (2011)  In Financial accounting theory. North Ryde, N.S.W: McGraw-Hill

Field, R. and Brown, K. (2007) Managing with Plans and Budgets in Health and Social Care. Learning Matters  [7 April 2018]

Ferris, S.P., Noronha, G. & Unlu, E. (2010) The more, merrier: an international analysis of the frequency of dividend payment. Journal of Business Finance and Accounting. [online]. 37(1), pp. 148–70. Available from [7 April 2018]

Laux, B. (2014) Discussion of The role of revenue recognition in performance reporting.  Accounting and Business Research. [online]. 44(4),  380-382. Available from

Leo, K. J. (2011). Company Accounting. Boston:McGraw Hill

Merchant, K. A. (2012) Making Management Accounting Research More Useful. Pacific Accounting  Review. [online]. 24(3), 1-34. Available from

Needles, B.E. &  Powers, M. (2013) Principles of Financial Accounting. Financial Accounting Series: Cengage Learning.

Parrino, R, Kidwell, D. and Bates, T. (2012) Fundamentals of corporate finance. Hoboken, NJ: Wiley

Peirson, G, Brown, R., Easton, S,   Howard, P. and Pinder, S. (2015) Business Finance, 12th ed. North Ryde: McGraw-Hill Australia.

Petersen, C. and Plenborg, T. (2012) Financial statement analysis. Harlow, England: Financial Times/Prentice Hall.

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