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Financial Strategic Plan Example Term Paper


Financial strategic plan is a process that begin with looking at the current state of affairs and identify weaknesses in the current financial system. The process will proceed to proposing workable solutions that are in line with company vision and objectives, bearing in mind not forgetting threats, resources and limitations that challenge organization success. While working with Roy A. Hunt foundation (RAHF), one interesting case caught my attention. A Community based organization based in Africa offering healthcare services presented their annual report on how the funds donated to their organization had been expensed. Notes to the management of RAHF highlighted one major setback where the community based organization communicated that it has ceased receiving 40% of its funding from other donors. The community based organization therefore requested RAHF being their main donor to advice on the best set of solution to address the matter at hand. My supervisor assigned the task of developing a strategic Financial Plan addressing the issue at hand. This undertaking would begin by examining all the issues raised, compare a number of possible solution and end with suggest the alternative that would yield maximum effect.

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The two organizations are nonprofit making organizations; RAHF is based in USA with its headquarter in Pittsburgh established as a foundation, the foundation focus on collecting funds from donors across the world to fund projects that are centered on improving human life a mission that the foundation has done for the last five decades. SHOFCO which is an abbreviation for shinning hope for community on the other hand is a community based organization established in Kenya, offering a number of community services among them Healthcare services in slum areas. RAHF has partnered with SHOFCO for the past five years in improving the quality of life in the slums. SHOFCO was founded with an objective of offering a number of services namely; namely healthcare services, water hygiene and sanitation, girl’s leadership and education, essential services and sustainable services. Under Healthcare the organization has set up four medical facilities with healthcare providers numbering to one hundred and fifty. The medical facilities are valued at a hundred million dollars. SHOFCO has been known to champion disease prevention and cure. This is done through maternal and child healthcare, immunization, antenatal care, postnatal care, family planning and laboratory services. This organization maintains the highest standards in delivery of services to ensure satisfaction of their clients.

Root Problem
The community based organization over the years has received funds from donors. The monies received finance the organization budgets. In the last five years RAHF has funded SHOFCO to a tune of 1 million dollars. RAHF funds 40 percent of the community based organization budget while the remaining 60 percent is received from other donors. In 2016/2017 financial statement reports, SHOFCO reported that that the organization fell short of funds as other donors in exemption of RAHF had cut their funding by 30 percent. Acknowledging the challenges as a result of this shortage the community based organization requested RAHF to propose a working strategic plan to help the organization deal with these changes.
A thirty percent decline in funding would mean that provision of essential services will be paralyzed an intuitive that has taken over seven years to set up and create an impact in the affected community. This is not the only problem facing the organization, the past five years the organization has realized increased operating costs owing to salaries increment, increased costs of medical supplies and high overhead costs. Now with the increased costs, the organization is faced with a greater challenge to manage with a reduced budget and handling increasing costs.

Nonprofit making establishments have been faced with management challenges over the years. This is because these organizations lack strategic approach to allow these organization deal with changes in their environment. Currently business environment evolve quickly as competition increased every organization is quick to be the best among competitors. It is good to note that donors have strict requirements to organizations requiring funding. Most of these requirements are pegged to actives carried out by the organization receiving funds, any changes to operations of the community based organization would need approval of the major funding partners as deviating from the initial funding proposal would lead to suspension of funding causing even bigger problems to the organization. To avoid this Developing a strategic financial plan will recommend a workable solution to the problem.

The objective of preparing a strategic financial plan is to propose effective solution to the affected organization without changing the role which the organization was established to perform. A strategic plan will take into consideration of the accomplishments already achievement, the proposed solution will only offer solutions to help the organization cope with the challenges encountered. This finance plan will focus on effective cost management with an aim of cutting down the amount required to fund operations of the community based organization without affecting the quality of services offered by the organization. The strategic plan will cut across the activities carried by the organization to significantly cut down costs of offering services. The proposed solution will look at the organization as a whole with special interest in the healthcare sector which takes the largest share of the organization budget and also being the pioneer project

The purpose of preparing this financial strategic plan is to propose a solution to the community based organization through cost reduction and effective management of resources available to ensure sustainability of organizations operations . Bearing in mind that resources at the disposal of the community based organization are limited to the level of contribution made by donors. Further an evaluation be conducted on the past performance of the organization in line with company objectives to examine whether the resources donated are utilized economically and effectively on core activities.

Over the past five the organization has realized tremendous growth from operating a single facility to currently running four facilities. Like any other growing institution, SHOFCO has encountered a number of challenges emanating from rapid organization growth. Unlike a profit making organization whose one main objective is to break even and this can only be achieved through cost controls and effective management nonprofit making organization will insist on one goal which is service delivery. Offering Healthcare and WASH services is capital intensive affair requiring personnel, facilities and high operating costs, threatened by a cash crunch the entire mission can be paralyzed. A good number of nonprofit healthcare organization have stabled when faced with a need to expand its operations , this had been the case with SHOFCO. The health facilities has reported increasing number of patients attended owing to success of the organization in treated cases. This is a credit to the organization mission and a threat with a possible reduction in organization funding as the organization will be expected to attend to an increasing client level with a shortage in resources. Medical supplies such as laboratory kits and pharmaceutical drugs will not be adequate to meet the increasing number of clients in need of healthcare services.

The table above summarizes how the organization spent funds. Healthcare took the biggest the share at 25 percent for the years 2017, this is consistent with spending in the previous accounting periods showing the important role the organization play in the community they operate bearing in mind Over 80 percent of Sub-Saharan Governments allocate less than 5 percent of their budgets to healthcare. 19 percent of the funds was spent on affirmative action activities to provide education to girls. Further 16 percent was spent on programmes operations while overheads and other activities each took 15 percent as the remaining 10 percent went to essential services. Looking in the Healthcare department where SHOFCO runs four outpatient clinics, a total of 17 million dollars was spend. 10 million dollars was spent on salaries to healthcare providers, 5 million dollars was spent on medical supplies while the remaining 2 million was spent on development and maintenance of the facility.

It is prudent to note that most donor funding contacts will have strict terms that are expected to be met consistently by the organization receiving the funds . In this case a contract exist between SHOFCO a community based organization and RAHF a non-profit making organization where the two organizations share a vision to improve wellbeing and health standards of the community living in the slums, therefore the two organizations in the contract have agreed not to charge for the services offered to the community hence the monies collected by the foundation will finance the activities carried out by SHOFCO, SHOFCO is not bound by these terms from receiving funds from other donors.

Financial Projections
Now only being certain of receiving an annual donation of approximately USD 68 million following a reduced donation by 30 percent, SHOFCO would need adopt a strategy that will ensure that operating costs drop significantly without necessarily affecting the quality of services offered or suspending some of the programmes. According to Ufuk University, Turkey (2019) running an organization for more than three years, the management will eventually head up the running curve towards achieving effective managements having utilized organization’s resources effectively. Therefore, in an attempt to cut down organization’s operating costs internal reorganization is necessary to reduce the number of cost centres.

SHOFCO has six main costs centres consuming more than 10 percent of the available funds, in the memorandum presented to the organization donors, SHOFCO has approached it service delivery under five main categories namely; health, sustainable livelihood, WASH (which include water sanitation and Hygiene), essential services and girls leadership and education. The solution to the underlying problem would be to treat the five Key Performance indicators as cost centres, this would mean that no funds will be directly allocated to overheads and program operations. Overhead costs will be absorbed to respective cost centres while operation of programmes will be merged with other services. This move translate to 69 percent of the current budget allowing respective cost centres to adjust specific costs to adopt the new changes.

Following reduced funds from donor organizational restructuring has allowed SHOFCO to operate with the available funds without suspending major programs. In 2017/ 2018 financial year the funds used in financing activities totaled to 68 million dollars Changes in allocation will allow the organization to make changes without necessarily suspending some of the programs or charging a fee for the services offered. Further, after absorbing overheads to respective cost centres the organization will be able to adjust their budget based on the funds availed to them. Adopting the changes recommended gives the organization to assess the value created from each sent spent. On Healthcare sector the organization will be able to remain the initial budget, however, each department will be responsible for its own overhead costs.

Key performance indicators
Over the years, various authors have cited difficulties in assessing performance of non-profit making organization where performance is not assessed based on profit. When dealing with nonprofit making organization the services provided forms indicators upon which output will be assessed. Following the changes made the key indicators will be formed under the new established cost centres where each is assessed independently. In the healthcare department this will be assessed on the number of patient served per healthcare officer, cost of treating a single patient, cases handled to completion successfully.

Healthcare services after reorganization takes the largest share of funds at 36 percent, this means that the community based organization concentrate more on Healthcare than any other activity undertaken by the organization. Healthcare can be assessed based of the number of patients attended, at the same time cost past data will show different costs of offering different services and this can be used to quote costs per service and commit to performance contracting among healthcare service providers.
Girls’ leadership and education has the second highest cost from healthcare. Financials records also show that the program also had the second highest overhead from providing healthcare. In an attempt to cut cost, internal restricting the program is necessary by first looking at the achievements made under this program to ascertain its impact on the intended community. Following the efforts made in the past under this program landmark achievements are visible where structures are in place to run the program. Such as schools, innovation centres and enterprise workshops. With these structures in place this cost center key indicator will be the number of girl enrolled in the program and the success rate of those who go through the program.

Essential programs are very vital in slum areas, these programs include disease prevention, nutrition and follow up services. Disease outbreaks are very common in slum areas, the most common deceases are tuberculosis, cholera, malaria and typhoid. These diseases are linked to hygiene and sanitation in this areas, a similar program has previously been run under WASH. It is therefore workable to combine some of essential programs with WASH to a wholesome effect on activities undertaken. Successful initiatives undertaken in the past can help the organization solicit for partner to fund future activities.

Despite reduced availability of funds from donors the organization has shown it’s willing to expand its activities with aim or creating a greater impact in the society. It is important to note that the organization activities will over the years be limited funding from unstable sources where foundations such as RAHF depend on willingness and ability of Donor to commit funds to such initiatives. It is important for SHOFCO despite being a nongovernment organization to partner some of its programs with the government a program similar a private-public partnership where the two combine their resources in some programs to achieve a common goal. For instance in providing healthcare services, the organization has established a facility able to provide healthcare services to the local community this can be enhanced through bringing on board those services that are sponsored by the government such natal care and decease prevention to allow the organization free up funds to undertake other projects.

Assessing The Financial plan success
A strategic financial plan is mean to create a desired change in an organization. Effecting the changes recommended are meant to give the organization a financial edge compared to past accounting periods. In the healthcare department the use of a consistent assessment tool is important looking at the two cases presented use of a balanced scorecard to measure staff performance. Creating new cost centres according to the stipulated organization objectives will allow the organization management reduce the overhead costs. Further new cost centres will allow the organization source for funds to fund each project independently. Incase funds are limited to specific programs the organization will be able to go ahead with the program independently without affecting other programs.

Peer Review
Nancy (2010), at the University of Lander wrote a case study on Healthcare strategic planning using Cleveland Clinic as a case study at the time of her study she observed that at the clinic costs were unsustainable and this caused problems in an attempt to expand the clinic as the business proved unsustainable looking at the financial statements. Therefore there was need to integrate concepts of strategic planning in financial matters to help the business sustain its operations. The goal of every healthcare facility is living long enough to achieve to achieve the long term objectives of the facility . She further acknowledged that financial difficulties prove to be the biggest impediment to attaining this long term goal.

Nancy (2010) begin her work by looking at steps recommended by Runy, (2005). Where she proposed that a healthcare financial plan begin by looking at the recent organisation performance scrutinizing specific items leading to organisation success and difficulties. Further the analyst should compare the most recent performance in past years to facilitate forecasting of future performance by the same organistion following the trend crerated. The forecast made would allow the analyst create a strategic plan that will yield improved financial performance and wide up the plan by evaluating performance of the organisation under the impact created by the changes made.

On paper, the Cleaveland Clinic was prapered to use all resources at the clinic disposal to achieve organisation mission and vision. The organisation has created key performance indicators for self diagnosis, each year result accompany the financial statement adding value o the figures reported. Key performance indicators included sum of local people and partners that have done business with the cline, ongoing medical education programmes, the level of endorsed residency exercise programs, number of associated health students, contributed revenue and charity levels. Nancy begin by looking at Cleveland Clinic recent performance, looking at the clinics costs centres comparing them to the clinic’s mission and vision statements. Further Nancy proceed to look at the various sources of organisation funduing and how these funds are spent. Financial statements prepared at the end of 2006 showed that medical supplies took the highest share of the budget followed by salaries and constructructing. Looking past performance of the clinic Nancy identifies that traditional cost centres have been inctreasing significantly owing to ever increasing operational costs (salaries, utilities) at the time clinic had an outstanding debt having borrowed a bond to construct a clinic complex. Owing to these factors there was need to develop a financial strategic plan that will give the clinic a competitive edge over its competitors by first reducing costs charged to patients in accessing healthcare services.

Gheith, (2017) made use of balanced scorecard strategy in gaging at Mansoura Univerity Hospital located in Egypt with an objective of assessing staff performance with a special interest in nurses who included head suppervisors, head nurses and staff nurses. This was using eight independent raters where the feed was collected and analyzed. Balanced scorecard looks at the accomplishment of tasks in an organisation and monitor the impact created by the activities taken. As a strategy Balanced scorecard focus on strategic outlines on one end select a number of items to monitor both financial and nonfinancial items. There is increased presure from third party players in the heathcare sectors for increased transparency and accountability to facilitate a review of healthcare sector owing to the fact that healthcare provision is a capital intesive venture .

The study reviewed the human resource aspect in the hospital, assessing Job description of healthcare workers, further the study looked at how frequent the organisation’s human resources departments conducts a review of the human resources requirements bearing considering the current status. Inamdar, Kaplan, & Reynolds, (2002) progressed to look at the current renumeration program its sustainability in line with hospital strategies. The information gathered showed a significant difference in rensponses given by the supervisors, with that of head nurses and staff nurses, staff nurses were 96 in numbers, head nurses were 10 while supervisors numbered to 12. Independent raters included; annual premium, Salary increament, promotions, disciplines, conferences, workshops and training programs. They concluded by providing a recommendation to the facility management that focused on offering a solution to the persisting issue in the human resources sector. The two main notable recommendations included; there was need for the organisation to change performance appraisal as the staff were dissatisfied will the method that was currently employed as it did not capture the state of affairs in the nursing department in the hospital.

In recent years, ways of doing businesses have evolved taking a more strategic approched, as a result organisation are quick to adopt to changes in the market taking customer focused approach. This move have made businesses more competitive and dynamic to their environment changes. Assessing the performance of non profit making organisation proof to be an uphill task as is the case highlighted. On the other hand learning from the two cases reviewed improving the performance of healthcare organisation begin with identifying the objectives of the organanisation under review, proceed to look at recent performance and compare the performance with past performace to predict an expected performance in future.

Managing operations of an organisation that offer more than one distinct services has proved to be a challenge. Most founder when opening up new ventures will have a wide scope of their organisations funtions where an organisation will be deemed to perform a number of functions only to proceed with those that perform well after establishment. SHOFCO however, has defied the odds by having five major function kickoff seccessfully after establishment. This case present a unique challenge where an organisation is focused on adopting to changes brought about by reduced funds available. Following this challenge ,upon an evaluation on organisation efficiency has been conducted and identified new cost centres as way of reduced cost. Abosorption costing has been adopted where overheads will be apportioned to respective cost centers and as result the organisation is able to adjust to the new change of working with a reduced budget.

Each cost centre is to be assessed independently due to uniqueness of the services offered. Healthcare services is a being a resource intensive professional service take

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