costing princples and business control systems (assessement criteria 1.1)
DESCRIPTION
78yggg ggffvv jhhjk klkTRANSCRIPT
-
5/21/2018 Costing Princples and Business Control Systems (Assessement Criteria 1.1)
1/22
Assessment criteria 1.1
-
5/21/2018 Costing Princples and Business Control Systems (Assessement Criteria 1.1)
2/22
Aim
At the end of this session, learner should
be able to explain the costingprinciples and the business controlsystemin health and social care
organisations
-
5/21/2018 Costing Princples and Business Control Systems (Assessement Criteria 1.1)
3/22
Introduction to Costing
According to the official terminology of CIMA (2005),it defined Costing as the technique and process ofascertaining cost. These costing techniques compriseprinciples and rules to ascertain cost of products orservices.
Rajasekaran and Lalitha (2010) defined cost as theamount of resource used in exchange for goods orservices. The resources used can be money or moneysworth, which is usually expressed in monetary units
CIMA (2005) Official Terminology. CIMA Publication; Rajasekaran V.; Lalitha R. (2010) Cost accounting. Pearson Education India
-
5/21/2018 Costing Princples and Business Control Systems (Assessement Criteria 1.1)
4/22
For Example The cost of a routine nursing care in a hospital can be
80
The cost of providing mental care in a home can be500
Health and social care managers need to understandhow to ascertained and determined this cost
-
5/21/2018 Costing Princples and Business Control Systems (Assessement Criteria 1.1)
5/22
Cost Categories
Cost can be categorized according to its traceability
Direct cost
Indirect cost
Cost can be categorized according to its Behaviour
Fixed Cost
Variable Cost
Semi Variable
Semi Fixed Cost
-
5/21/2018 Costing Princples and Business Control Systems (Assessement Criteria 1.1)
6/22
Cost category according traceability (Direct and
Indirect cost)A direct cost is specifically traceable to a given cost
object. A cost object is a product, process, department,or activity for which the health organisation wishes toestimate the cost, such as a medical test, a care visit, ora medical procedure.
Indirect costs cannot be traced to a given cost objectwithout resorting to some arbitrary method ofassignment.
-
5/21/2018 Costing Princples and Business Control Systems (Assessement Criteria 1.1)
7/22
Cost category according to behaviour (Fixed,
Variable, Semi-variable and semi-fixed cost
Fixed and Variable cost
A cost is fixed if, within a specified period of time, itdoes not change in response to changes in the level of
activity. A variable cost is one that changes in responseto changes in the level of activity, it changes in directproportion to the volume of activity, that is, doublingthe level of activity will double the total variable cost.
(Broadbent and Cullent , 2003)
To illustrate this concept, we will use the example ofrunning a care home
Broadbent M. and Cullen J. (2003) Managing Financial Resources. 3rd Ed. Routledge
-
5/21/2018 Costing Princples and Business Control Systems (Assessement Criteria 1.1)
8/22
The cost of licensing a care home is fixed for a
particular period of the licensing regardless of thenumber of resident in the care home, likewise thecost of rent of the building will remain fixed forthe period of the lease regardless of the number of
staff and resident in the care home.
The light, heating, carers and toiletries cost is
variable since amount of money spend on thesecost will vary directly with the number of residentin the care home.
-
5/21/2018 Costing Princples and Business Control Systems (Assessement Criteria 1.1)
9/22
Semi-variable and semi-fixed cost
Semi-variable cost includes both a fixed and avariable element. For example, a telephone billcontains a fixed standing charge and a variable
charge based on the number of units dialled.
A semi-fixed cost or stepped cost is one where the
cost remains constant for a range of activity; thenwhen the activity increases still further the cost willtake a step upward.
-
5/21/2018 Costing Princples and Business Control Systems (Assessement Criteria 1.1)
10/22
For example, a care supervisor/manager, up tocertain level of activity in the care home onesupervisor/manager is sufficient.
However, if the activity and therefore thenumber of resident been cared for increases,it will probably be necessary to employanother care manager.
-
5/21/2018 Costing Princples and Business Control Systems (Assessement Criteria 1.1)
11/22
How costing principles are used in Health and Social care
Costing can be use by the government and its health agenciesin determining the cost of contract / procurement for localhealth and social care providers by the CCG thorough;
Competitive tendering
Any qualified provider (AQP) Single Tender Action (NHS, 2012a)
With costing principles, the government can determine
accurately how much it will cost to buy a particular healthservice from a provider. It also assist the government inplanning for the local community on how much it will cost toprovide a particular health service
NHS (2012a) Procurement of healthcare, What are the procurement options?. Commissioning Development Directorate
http://www.england.nhs.uk/wp-content/uploads/2012/09/procure-brief-2.pdf
http://www.england.nhs.uk/wp-content/uploads/2012/09/procure-brief-2.pdfhttp://www.england.nhs.uk/wp-content/uploads/2012/09/procure-brief-2.pdfhttp://www.england.nhs.uk/wp-content/uploads/2012/09/procure-brief-2.pdfhttp://www.england.nhs.uk/wp-content/uploads/2012/09/procure-brief-2.pdfhttp://www.england.nhs.uk/wp-content/uploads/2012/09/procure-brief-2.pdfhttp://www.england.nhs.uk/wp-content/uploads/2012/09/procure-brief-2.pdfhttp://www.england.nhs.uk/wp-content/uploads/2012/09/procure-brief-2.pdfhttp://www.england.nhs.uk/wp-content/uploads/2012/09/procure-brief-2.pdf -
5/21/2018 Costing Princples and Business Control Systems (Assessement Criteria 1.1)
12/22
Competitive tendering(CT)Outsourced services obtained through price competitive
tendering might cost less, but profit becomes moreimportant than value in the return on investment inservices run by the private sector on the NHSbehalf
Any Qualified Provider (AQP) scheme, are now set to
become key instruments for commissioning NHSservices in England. Members will need to understandwhat these terms mean and how their services may beaffected
-
5/21/2018 Costing Princples and Business Control Systems (Assessement Criteria 1.1)
13/22
Break even Analysis:
Break-Even Analysis is an expected component ofmost business plans, especially for start-up companies.It shows how much revenue you need to cover for bothfixed and variable costs.
-
5/21/2018 Costing Princples and Business Control Systems (Assessement Criteria 1.1)
14/22
Cost information and cost benefit analysis are
frequently used by health and social careorganisation to monitor cost and make decisionabout expenditures. Cost data are very useful inbudget preparation and forecasting for the
financial year
Providers use cost data to manage services and
improve operational efficiency. Cost data is alsoused to support the development of pricing andcurrency design for reimbursement purposes
-
5/21/2018 Costing Princples and Business Control Systems (Assessement Criteria 1.1)
15/22
THE NHS APPROVED COSTING GUIDIANCE
According to Monitor (2013), the NHS financial regulator,who published the costing principles that should be followedby health and social care managers. Quoting one of themanaging director of MONITOR, Adrian Masters saying;
Understanding the real cost of patient care is an essential element ofthis new role. Costing services accurately has the potential to deliverhigher quality care to patients and better value for the NHS, boththrough better prices and improved information for clinicians andother decision makers at health care providers (MONITOR, 2013 p.2)
The Approved Costing Guidance sets out the approach tocosting that Monitor encourages providers of NHS-fundedservices to adopt
MONITOR (2013) Approved Costing Guidance. Available at:http://www.monitor.gov.uk/sites/default/files/publications/6JuneResissuedApprovedCostingGuidanceToPublish.pdf
-
5/21/2018 Costing Princples and Business Control Systems (Assessement Criteria 1.1)
16/22
The six costing principles approved by the NHS
Principle 1 Stakeholder engagementEffective costing requires input from a wide range ofstakeholders, including non-finance staff.
Principle 2 ConsistencyFor some costing purposes, a consistent approach isrequired across or within organisations.
Principle 3 Data accuracyAccurate costing relies on the quality of the underlyinginput data.
-
5/21/2018 Costing Princples and Business Control Systems (Assessement Criteria 1.1)
17/22
The six costing principles approved by the NHS (contd)
Principle 4 Materiality
Costing effort should be focused on material costs andactivities.
Principle 5 Causality and objectivity
Costing should be based on an understanding ofcausality to minimise its subjectivity.
Principle 6 Transparency
Costing should be transparent and auditable
-
5/21/2018 Costing Princples and Business Control Systems (Assessement Criteria 1.1)
18/22
THE BUSINESS CONTROL SYSTEMS
The purpose of business control systems is toensure that organisation carries out its
strategy; in making sure that resources areobtained and used efficiently (Anthony andYoung, 1999). It also provides a framework ofprocesses and activities designed to reducethe risk of error or fraud.
Anthony R.N and Young D.W (1999) Management Control in Non-profit Organisation. 6th Ed. McGraw-Hill
-
5/21/2018 Costing Princples and Business Control Systems (Assessement Criteria 1.1)
19/22
THE BUSINESS CONTROL SYSTEMS - Budgeting
The budget set the tune for managers in managingfinancial resources. It compels, coordinate, motivate,communicate, motivate and evaluate the performanceof health care managers.
With budgeting, managers have a clear boundary on
how much is set for each project and as such they cantspend organisational money on any project based onpersonal opinion or sentiment
-
5/21/2018 Costing Princples and Business Control Systems (Assessement Criteria 1.1)
20/22
It can be the IT general control providing generalcontrol over the IT environment (e.g. changemanagement, user and access management etc)
Or
The Application specific control providingautomated system-based controls over businesstransaction processing (e.g. system configurationsettings
THE BUSINESS CONTROL SYSTEMSSoftware and IT infrastructure
-
5/21/2018 Costing Princples and Business Control Systems (Assessement Criteria 1.1)
21/22
THE BUSINESS CONTROL SYSTEMSInternal and external audit
This involve all the internal control, audit reconciliationsystems put in place that provides checks and balancesfor the financial operation of the health and social care
organisation. It also include external audit byprofessional accountant
Others include: Forecasting and monitoring Regulatory Framework Other basic software for monitoring financial
information within an organisation
-
5/21/2018 Costing Princples and Business Control Systems (Assessement Criteria 1.1)
22/22
References Anthony R.N and Young D.W (1999) Management Control in Non-profit
Organisation. 6th Ed. McGraw-Hill
Broadbent M. and Cullen J. (2003) Managing Financial Resources. 3rd Ed.Routledge
CIMA (2005) Official Terminology. CIMA Publication.
MONITOR (2013) Approved Costing Guidance. Available at:http://www.monitor.gov.uk/sites/default/files/publications/6JuneResissuedApprovedCostingGuidanceToPublish.pdf
NHS (2012a) Procurement of healthcare, What are the procurement options?.Commissioning Development Directorate. Available at
http://www.england.nhs.uk/wp-content/uploads/2012/09/procure-brief-2.pdf
Rajasekaran V.; Lalitha R. (2010) Cost accounting. Pearson Education India.Available online athttp://my.safaribooksonline.com/book/accounting/9788131774991
http://www.england.nhs.uk/wp-content/uploads/2012/09/procure-brief-2.pdfhttp://my.safaribooksonline.com/book/accounting/9788131774991http://my.safaribooksonline.com/book/accounting/9788131774991http://www.england.nhs.uk/wp-content/uploads/2012/09/procure-brief-2.pdfhttp://www.england.nhs.uk/wp-content/uploads/2012/09/procure-brief-2.pdfhttp://www.england.nhs.uk/wp-content/uploads/2012/09/procure-brief-2.pdfhttp://www.england.nhs.uk/wp-content/uploads/2012/09/procure-brief-2.pdfhttp://www.england.nhs.uk/wp-content/uploads/2012/09/procure-brief-2.pdfhttp://www.england.nhs.uk/wp-content/uploads/2012/09/procure-brief-2.pdfhttp://www.england.nhs.uk/wp-content/uploads/2012/09/procure-brief-2.pdf