Example Of Financial Management Of Health Care Organizations Essay

Type of paper: Essay

Topic: Finance, Management, Medicine, Nursing, Investment, News, Health, Media

Pages: 3

Words: 825

Published: 2021/01/06

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Financial Reporting Practices and Ethics

Financial management in health care organizations involves the provision of relevant financial information needed by top management in making strategic decisions. Such decisions include Asset financing, investment as well as working capital decisions. Proper financial management ensures that the organization can plan on where and how to get funds for both operational and investment purposes. At the strategic level, financial management entails sourcing capital for investment, depending on the cost and repayment period. Operational, financial management entails the routine activities such as cash collection, custodianship, and bookkeeping. It also entails the use of accounting techniques and principles to present the financial reports to the users. These reports are in the form of audited financial statements prepared by accredited accountants. These statements present the financial position of the organization, its income, and expenditures as well as the cash inflows and outflows within a specified period (Pavlock, 2000)

Elements of Financial Management

Financial managers should ensure that there is an adequate fund to meet organization’s needs both in the short-run and in the end. Money is required to meet the routine demands of buying stock, making payroll payments and payment of creditors. Financial planning is also required to meet middle term needs and for long-term investment. According to Pavlock, (2000), financial reporting relates to the disclosure of the financial activities in an accurate, complete and timely manner in accordance with the laid down requirements for financial reporting.
For managers to monitor the extent to which the organizational objectives are being met use these reports. Another element of financial management is financial or internal control. This element ensures that the organizational activities are directed towards the attainment of the set objectives. Managers mandated to ensure that organizational assets are secure and that they are being used efficiently. They are also expected to act in accordance with the rules and regulations of the organization and the best interests of the shareholders. Financial decision-making relates to making decisions regarding investment, dividends and financing.
Managers evaluate the available financing alternatives that are suitable for the organization in light of the prevailing circumstances. Managers are required to make dividend decisions on behalf of the shareholders. They are the expected to make considerations as to whether profits made from investment should be distributed as dividends or whether the money should be retained for re-investment.
GAAP refers to the standard framework that forms the guidelines for standard financial reporting in any jurisdiction. The term refers to the international accounting standards recommended for financial reporting. This includes the rules, standards and conventions that accountants must apply in recording, summarizing and preparation of financial statements. These standards are applicable to the accrual-based reporting. In this case, expenditures are recognized in the books when they are incurred as opposed to when they are paid.
Everingham, Kleynhans & Posthumus (2007 have argued that the general financial, ethical standards govern the way financially, and accounting professionals conduct themselves in the business. The Financial Accounting Standards Board and the Professional Accounting Bodies formulate these standards. They are meant to provide a uniform format for financial reporting that would make it easy for people to compare financial reports and to detect fraud. The ethics set by the Financial Accounting Standards Board includes competence. This element is recognized as the basic ethical standard that professionals should possess. This requires professionals be equipped with knowledge and to update themselves on the new developments in the practice and requirements.
They are expected to apply objectivity in their work, this means that they must avoid conflict of interest and be objective in their dealings. Any conflict of interest must be disclosed. Confidentiality is required concerning the clients’ information. Financial professionals have access to many businesses and personal information of their clients such as contact information, bank accounts, as well as employees’ personal information. As such they are required to maintain the highest degree of confidentiality unless when legally obliged to give such disclosures. Integrity requires that professionals should practice accuracy and honesty in all their dealings. They should refrain from any activity that would compromise their fairness and competence.

Examples of Application of Ethical Standards and Financial Reporting Practices

Integrity is best applied in instances when the true position o a professional is tested rendering them vulnerable to misuse by external parties who may want to benefit from the application of ethical standards in healthcare. Financial professional in the United States are faced with a major challenge in reporting due to the rampant introduction of unbranded medications. This has called for finance and procurement personnel to understand those changes in their reporting.
According to the Healthcare Finance News (2015), 78 percent of drugs dispensed in the United States were generic. Financial professionals must put this into consideration in their financial reports because failure to do so would lead to the production of an exaggerated report of the revenue. They have to reveal the proportion of sales resulting from the sale of the generic drugs so that the users of that financial information can make informed decisions. This example is significant in shedding light on the real issues affecting the application of financial standards.
The case of hospital re-admissions in the United States can pose a problem for accountants in the health sector where it becomes difficult to comprehensive data pertaining to such patients (Healthcare Finance News 2015). In this case, high level of competence is required to isolate those cases and to come up to a meaningful conclusion. This scenario is significant in testing the ability of a professional to use incomplete records to make inferences. Apart from that, the example can help financial professionals to understand the importance of cost allocation element of finance that provides that costs incurred must be charged to the appropriate units.

References

Everingham,G., Kleynhans,J., & Posthumus, L. (2007). Principles of Generally Accepted Accounting Practice. Claremont: Juta and Company Ltd.
Healthcare Finance News (2015). Generic drugs complicating hospital pharmaceutical spending. Retrieved March 30, 2015 from http://www.healthcarefinancenews.com/news/generic-drugs-complicating-hospital-pharmaceutical-spending
Healthcare Finance News (2015). How hospitals are reining in patient readmissions. Retrieved March 30, 2015 from http://www.healthcarefinancenews.com/news/how-hospitals-are-reining-patient-readmissions
Healthcare Finance News (2015). How hospitals are reining in patient readmissions. Retrieved March 30, 2015 from http://www.healthcarefinancenews.com/news/how-hospitals-are-reining-patient-readmissions
Pavlock , E.J ( 2000). Financial Management for Medical Groups: A Resource for New and Experienced Managers, New York: Medical Group Management Assn

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