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Managerial Accounting Assignment Analysing Current Challenges Faced by NHS


Managerial Accounting Assignment Brief:

You have recently been appointed as a trainee Management Accountant at an NHS trust. The trust is made up of 4 hospitals within the region. During your training you have a meeting with a senior manager of the trust who explains about the trust, and its hospitals. From the meeting you have learned that four hospital belong to the trust and each hospital has a number of departments such as cardiology, pediatrics, maternity, and an accident and emergency department. You also gather that each department has its own specialist doctors and nursing staff and provide a range of services to the patients on the wards, in rooms, as well as outpatients. These departments have the capability to provide different surgical operations and to treat patients with various health issues. The senior manager you met, has explained that the direct costs of the trust include the cost of materials used in the treatment of patients and doctors and nurses pay and the indirect costs include the costs relating to reception, cleaning etc. He has also stated that the NHS receives funding from the government and that the ability to optimize performance with the limited resources received is challenging in the current environment. He is interested in understanding how you think the management accounting techniques you have studied at university could help manage performance better. Required: Write a report to the senior manager of the NHS trust explaining how the management accounting techniques you have learned may help manage performance of the trust better. Your report should

a. Discuss the current challenges faced by the NHS.

b. Identify and explain 2 techniques (for example budgetary control, Activity Based costing, Balanced Score card etc.) you have learned on the Advanced Management Accounting module, which you think, may help improve the performance of the NHS trust.

c. Critically analyze the strengths and weaknesses of each technique.

Your report must:

  • Show clear evidence of research demonstrated through in citation of text books, journals and other resources, and a full list of references presented in Harvard style.
  • Show clear evidence of application of knowledge to the context of the hospital. That is, as far as possible you must relate your explanations to the context of a hospital and give examples from the context of a hospital (i.e. the example you may give relating to types of costs, types of overheads, activities, cost pools, cost drivers, variances etc. must be from the context of a hospital)


Introduction to the case of managerial accounting assignment
The NHS trust contains 4 hospitals within the region. All 4 hospitals within the unit consist of maternity, cardiology, emergency, and paediatrics departments. All these units in the hospital have specialist nurses and doctors providing a wider range of patient services. Different patients visit the hospital across this department and thus the nurses and the doctors are trained to deal with patients. There are varied direct costs involved within the trust such as the cost of raw materials used in the treatment of the doctors and the patients. The indirect costs include the cost linked with cleaning and reception. It has been found that NHS receives funding from the Government but this funding is not considered to be sufficient enough for the smooth and effective functioning of the organization. This study will highlight the present challenges faced by NHS, the two techniques i.e. the balanced scorecard and the budgetary control improving the performance of the NHS trust as well as the strength and the weakness of the balanced scorecard and the budgetary control technique.

Current challenges faced by NHS
The challenges faced by NHS include the optimization of the performance of the NHS trust with limited resources. As there are four hospitals, within the NHS trust, it becomes difficult to keep track of the expenses that are spent under the fixed and the variable costs. Though there are distinctions made between the fixed and the variable costs, all four hospitals do not utilize the same level of expenses under similar heads. Moreover, the overhead costs include the indirect costs that are incurred such as the lost wages, the lost productivity, and the lost cost (Jalal et al. 2019). As the hospital authority does not pay adequate wages to the employees, the productive employees do not want to work for the development of the hospital. This demotivates them to a great extent and thus the productivity of the employees gets lost (Wielogórska and Ekwobi, 2020). On the other hand, another important challenge faced by the NHS includes the enhanced training provided to the specialized doctors and nurses of the hospital. As there exist different departments in the four hospitals, it is important to check that all the staff is treated equally along with the provision of equal training.

Two techniques that improve the performance of NHS trust
Budgetary control can be considered as an important way of controlling organizations where varied budgets are made and within these budgets, the organization finds different weak points and thus it tries to improve the weak points. With the help of budgetary control, it becomes easier to analyse the varied results of the budget after its successful implementation. Within the NHS trust, it has been found that the four hospitals are trying to control the budget and thus find out more improved ways to control the budget. With the help of variance analysis, the budget of all the departments within the four hospitals can be estimated and thus compared with the actual accounting figure (Shtiller et al. 2017). The variances of all the hospitals can be found out with the help of these techniques. However, in some cases, these variances might be favourable and unfavourable. This variance analysis of the budgetary control technique assists in reducing the cost of businesses. On the other hand, the responsibility accounting technique can also be considered as an important budgetary control for the NHS trust. The investment center, the cost center, and the profit center of the NHS trust can be measured with the help of responsibility accounting. The employees of the varied departments of the hospital are assigned the work based on the number of visits of the patients (Akeem, 2017). The performance of all these employees is to be recorded and thus measured manually. Depending on this performance, it becomes easier to calculate the wages of the hospital employees. Further, within the budgetary control technique, it is the responsibility of the higher authority management to adjust the funding of the four hospitals within the trust. As it has been found that the Government provides a budget to the NHS trust but this budget is not considered to be sufficient enough to fulfil the wages of the employees and the other related costs (Yilmaz and Antmen, 2019). There should be a specialized management accounting department who will be in charge of maintaining and forecasting the required amount of the hospital. The misuse of funds can be tackled with the help of forecasting amount. Zero-based budgeting is also an important technique for controlling the budget. The budget of the hospital is made based on a nil base and this zero-based budgeting can be tackled when the estimated income is equivalent to the estimated expenses (Akeem, 2017). It is essential to check that the difference between the estimated income well as the estimated expense is zero. In the case of NHS trust, this zero-based budgeting will assist in controlling the expenditure and the spending base of the hospital.

The balanced scorecard can be considered as the strategic management performance metric that will assist the NHS hospital to identify and improve the internal operations to assist in the external outcomes. With the help of this balanced scorecard, it will be easier to analyse the past performance data and thus provide the hospital with the desired level of feedback so that it becomes easier to make improved decisions for the growth of the hospital. As this balanced scorecard can be considered to be a disciplined framework, it will assist the hospital to align between the functioning of varied departments related to strategic management in the hospital (Yilmaz and Antmen, 2019). Within the NHS trust, as it has been found that there are four hospitals and each hospital consists of different departments, it is important to align the everyday work among the employees in such a way that it becomes easier to connect with the strategy. Further, there should also be an improved level of communication so that it becomes easier to accomplish the everyday tasks of the hospital accordingly. It can be said that the balanced scorecard also assists the senior manager to focus on varied measures that are considered to be critical for the effective functioning of the organization. However, it has been found that if the NHS trust adopts the balanced scorecard, it will be easier to compete with the other related hospitals or trusts (Henttu-Aho, 2018). When the trust will adopt the scorecard, it will be easier to compete for the management report of all the four hospitals that are functional within the trust. It is the responsibility of the managers to consider all the operational measures that are taking place within the hospital and thus compare the improvements accordingly. It is also essential to track the specific goal of the hospital so that with the help of a balanced scorecard it becomes easier to track the attractive solutions (Yilmaz and Antmen, 2019). Though there is some information that is available internally, it is the responsibility of the higher authority to maintain confidentiality and thus utilize the data effectively. Based on the evaluation of the customers, it will be easier to define the performance measure of the company. In doing so, it has been found that some companies hire third-party companies to carry out surveys among the customers (Yilmaz and Antmen, 2019). However, it has been found that the NHS trust has not done so, and thus it is important to check the external standards of the hospital. The benchmarking procedure can be considered to be an essential technique that can be utilized by the NHS trust to compare the performance of the four hospitals. It is essential to consider the quality, time, service, and performance that are essential for the hospital to operate effectively according to the demands of the customers. The customer-based measures are also considered to be vital and thus it is essential to keep an eye on the expectations of the higher authority management from the hospital staff.

Strength and weakness of the two techniques
The advantage of budgetary control is that with the help of this technique, it becomes easier for the NHS trust to aim at maximization of profit through careful control and planning. This approach can be considered to be a planned approach that is relevant to business affairs. With the help of this approach, it becomes easier to eliminate uncertainty and thus prevent the hospital from suffering losses. There is also an improved level of provision for the coordination of varied activities within different departments and functions of the hospital. There are also chances of an increase in the production efficiency, control of the wastes as well as the elimination of the wastes (Henttu-Aho, 2018). This budgetary method also motivates the employees of the hospital to attain specific goals. According to this budgetary control method, each of the employees within the hospital is assigned with fixed roles and responsibilities. The employees need to be aware of the task as well as remain conscious to find out the best way to fulfill the goals of the organization (Yilmaz and Antmen, 2019). Moreover, the budgetary control method also assists in directing the capital expenditure as the most profitable way of attaining the goals of the organization. In some cases, it is found that there are higher chances of deviation from the weaker spots as well as the inefficiencies so that the desired corrective actions are to be taken accordingly. The budgetary method also compels the management to carry out planning and thus it is considered to be the most economical way to utilize the machines, materials, and employees (Henttu-Aho, 2018). It also instills the varied level of management of the hospital to carry out careful planning. There are varied important conditions for the introduction of the standard costing system in the hospital. However, some limitations of the budgetary control system include the unsuitability of the budget due to the changes in the forecasted condition. As the budget is considered to be an important plan, it is essential to find out what can be done and how it is to be done. The budgetary control curtails the freedom of action as well as the innovation of executives (Yilmaz and Antmen, 2019). Budgetary control is a costly process for small and medium organizations. This budgetary control does not always bring success to the hospital and thus there should be an improved level of efficiency of the higher management authority.

The advantage of the balanced scorecard is that with the help of this balanced scorecard it becomes easier to adopt a comprehensive and balanced approach for controlling the performance of the hospital. This is possible by setting the specific level of objectives as well as measuring the performance depending on the four important perspectives i.e. the customer, business, financial, learning and growth as well as internal processes (Bazrkar et al. 2018). On the other hand, the balanced scorecard also facilitates the understanding and the communication of the business strategies and goals across all the levels in the organization. The vision and the strategy of the organization are at the centre of the managerial focus according to the balanced scorecard approach. It is the responsibility of the higher authority management to check that the NHS trust does not deviate from its goals. There are also improved levels of chances for the integration of the financial and the non-financial performances and goals into one single system (Fatin and Rahman, 2020). However, the disadvantage of the balanced scorecard is that this approach stresses only the four perspectives i.e. the customer, financial, production process, and the business aspects only. The hospital authority must make careful attempts to include more approaches in the balanced scorecard perspective so that it turns up into a perfect and balanced aspect (Akeem, 2017). This balanced scorecard approach can be considered to be a vague approach that controls the success of the organization (Cooper, Ezzamel and Qu, 2017). There are no such standard set of goals or performance measures that is at the center of the balanced scorecard approach. This scorecard approach also considers the organization's performance but it does not suggest any such steps that are to be done to improve the perspectives of the organization.

Thus, it can be said that the NHS trust must try to adopt careful strategies to tackle the challenges within the hospital. The budgetary control and the balanced scorecard approach will also improve the performance of NHS. It is essential to provide an adequate level of training to the employees so that the goals and the objectives of the hospital are fulfilled accordingly. Therefore, there should be the facilitation of an improved level of understanding for the enhancement of the NHS hospital’s profitability to a great extent.

Henttu-Aho, T., 2018. The role of rolling forecasting in budgetary control systems: reactive and proactive types of planning. Journal of management control, 29(3), pp.327-360.

Akeem, L.B., 2017. Effect of cost control and cost reduction techniques in organizational performance. International Business and Management, 14(3), pp.19-26.

Shtiller, M.V., Appakova, G.N., Selezneva, I.V., Vasiljeva, M.V. and Sisina, N.N., 2017. Procedure for efficiency assessment of financial-budgetary control system. Journal of Applied Economic Sciences, 12(8), pp.2442-2454.

Cooper, D.J., Ezzamel, M. and Qu, S.Q., 2017. Popularizing a management accounting idea: The case of the balanced scorecard. Contemporary Accounting Research, 34(2), pp.991-1025.

Fatin, T. and Rahman, N., 2020. Measuring Digital Marketing Performance: A Balanced Scorecard Approach. Managerial accounting assignment International Journal of Applied Management Theory and Research (IJAMTR), 2(1), pp.1-15.


Yilmaz, D.E. and Antmen, F., 2019. Project selection method based on balanced scorecard framework. Business and Economics Research Journal, 10(5), pp.1179-1187.

Wielogórska, N.L. and Ekwobi, C.C., 2020. COVID-19: What are the challenges for NHS surgery?. Current Problems in Surgery, 57(9), p.100856.

Jalal, M., Bardhan, K.D., Sanders, D. and Illing, J., 2019. Overseas doctors of the NHS: migration, transition, challenges and towards resolution. Future healthcare journal, 6(1), p.76.


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