It is common for people to confuse financial management and accounting. Financial management is a decision making process that entails the use of theories, concepts and tools to make better financial decisions. Accounting simply provides a way to gauge the financial performance of a business as well as budget for its functions. From these two definitions it is quite overt that financial management is very crucial in the healthcare sector.
Initially financial management was viewed in a very simplistic manner. In an organisation, the project’s financial demands would be made for goods and services. The management would estimate the amounts that should be spend on the project. Finally the accounting department will see how the funds would be raised to meet these needs. However, with the advancements in the study of financial management, other factors are now considered including: planning for, acquisition and utilizing funds to improve the efficiency of the organisation.
Every organisation must have their own set of financial management goals. These goals and objectives will depend on the line of business that they are involved in. For example for organisations in the healthcare business, they need to come up with financial management objectives that target their specific functions with reference to their mission and vision.
Financial management has various benefits to an organisation in the healthcare sector including:
Evaluation and planning
Financial management is all about gauging the financial effectiveness of the present activities. The organisation also has to forecast and see where the financial position will be in the near and far future. This kind of planning entails considering all the activities and initiatives of an organisations against the supposed value.
Future investments and expansion is in the future of every organisation. Financial management ensures that decisions like acquisition of fixed assets like equipment and facilities are made strategically. This way the organisation is able to make calculated risks and avert disappointments in the future. Wrong investments that are not well thought through can be the beginning of the end of an organisation.
Organisations working in the healthcare sector deal with a lot of contracts. For example the issuing of contracts to drugs manufacturing companies. This function is normally in the docket of a few of the executive managers. Such decisions have to be made based on specified criteria.
Working capital management
When the working capital of a given organisation is not handled properly, then the organization is bound to experience unnecessary losses. In order to be effective, financial management principles have to be applied when handling the working capital. This is where financial management becomes a function of not just a few but all the managers within the organisation.
Financial risk management
It is important to be proactive as a healthcare organisation. Being proactive is demonstrated when an organisation comes up with initiatives that avert financial risk instead of coming up with fire fighting measures when they are already in trouble.