Health Care Budget Essay

902 Words 4 Pages
Health Care Budget
Effective financial management is the basis of thriving health care organizations. Organizations must make good investment decisions based on objective analysis (Healthcare Financial Management Association [HFMA], 2005). Integration of financial management principles provides decision makers with guidance to make capital decisions maximize mission-based benefits at effective costs (HFMA, 2005). An operating budget is the statement of profit and loss for the entire organization. Various health care entities prepare operating budget for the following year for discussion and approval by top management (Academic Writing Tips, 2011). At the end of the year, departmental managers provide an account for the previous year’s
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During the strategic planning phase, leaders make major investment decisions and set financial target for the coming year. * “Successful organization starts and ends the planning process with a solid balance sheet” (p. 4). Organizations must maintain the integrity of balance sheets by maintaining adequate amounts of cash, an appropriate amount of debt, and a good credit rating. Increased capital capacity and good credit rating enhances an organization’s financial strength and integrity. * “The right capital structure supports strategic-financial goals while optimizing flexibility and minimizing cost“ (p. 5). Proper management of capital structure facilitates access to debt and equity capital to fund future growth of the organization. Efficient capital structures can lower the cost of capital and maximize the return on assets. * “Best practice capital management aligns an organization’s long-range strategic, financial, and related operating plans” (p. 5). Effective decision-making and positive financial performance require direction and control of the capital management cycle. The capital management cycle includes a financial planning process based on goals formulated in a strategic plan, a capital structure, and a capital allocation. This process allows the organization to prioritize capital spending to improve services while

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