Introducing corporate finance
Introducing corporate finance

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Introducing corporate finance

Business consultant and public sector specialist

Business consultant and public sector specialist

Listen to the experiences of Pamela Dyson, a Business Consultant and Public Sector Specialist, to find out why performance measures and corporate finance are important in the public sector.

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Transcript: Pamela Dyson

My experience as a senior manager in the UK National Health Service suggests that financial performance measures must play a key part in the successful, sustainable future of the public sector, not just in the UK but worldwide. Sound financial performance is key to maximising the absolute value of the public purse, which funds the health and wellbeing of society.

Value for money – or VFM – in the public sector requires economy of spending, efficiency of systems and effectiveness of activity – doing the right thing, in the right way, at the right cost. Implicit in this is the assumption that sufficient funding can be attracted in the first place. To maximise VFM, every manager in the organisation has a responsibility to understand the financial impact of their decisions.

For example, a surgeon may have a personal preference for a particular type of surgical glove, while a colleague may be content with another brand.

Both will want to ensure that the gloves they use are of the required quality to enable safe operations. There’s also a management responsibility to ensure a VFM approach, so knowledge of the financial costs may assist the surgeon in deciding how to use the departmental budget to the best advantage.

At the highest level, the Government has to allocate public funds in a way that leads to the best possible outcomes for the population as a whole. This includes things like a sustainable approach to recycling, reducing knife crime, appropriate care of the elderly and so on.

At a local level, public sector organisations need a method of demonstrating their effectiveness. So financial performance measures, such as benchmarking the costs of waste disposal, the police pay bill and the costs of community care are required.

Financial performance measures can be used to make decisions about the future of public services. They’re also of interest to external stakeholders such as potential funders, government and the public, because these stakeholders not only fund the public sector (via tax receipts) but use the services provided as well. So stakeholders are – in the widest sense – our customers!

In the UK, the National Health Service as a whole is continuously working to find efficiency savings each year and national benchmarks are used to assess progress. Financial penalties can be imposed for underperformance and some services may be reconfigured as a result.

In the UK, the ambulance service is trying to estimate the number of emergency calls that could be resolved by phone, thus reducing the expensive and unnecessary dispatching of vehicles and potentially reducing non-urgent hospital admissions. One organisation has identified an annual target saving of five million pounds through more effective processes.

Whether you’re a school governor, a local councilor, a medical director or a Chief constable, well crafted financial performance measures, used appropriately, can assist you to make better decisions, leading to improved service provision. The opposite is, of course, also true!

Financial management is more than just accounting for what’s happened to the money, the accountants can do that!

Our job is about understanding the nuts and bolts of the service as well as the impact of the business context in which it will be delivered. This means identifying the right sources of funding, at the right time, at the lowest cost. It’s also about driving down costs without compromising the quality of the service. And if all that sounds like a demanding task? Well, it is! Certainly not a challenge for the faint-hearted.

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