Hospital Financial Management Cycle

 

Hospital owner/managers need to set operational targets for their work and decide what budgets are required to achieve desired outcomes. They need to account for the use of the money, monitor whether the money was well spent, and be able to report on their financial situation. They need to review how well tasks are carried out, and evaluate whether targets have been fulfilled or whether changes are required. To accomplish all this, a process of financial decision-making is required.

These are the steps in the process of financial decision-making:

1. Operational targets and plans
2. Budgeting (determining resources needed)
3. Accounting, recording & processing financial transactions
4. Monitoring variances and performance Reporting (communicating results and recommending actions)
5. Decision making and taking action

Step 1: Setting Operational Targets and Preparing an Operational Plan

Managers begin by setting targets for its operations for the coming year. These are determined, to a large extent, by the goals of the hospital. An operational plan is set, which is then integrated into the overall plan for the hospital.

Step 2: Budgeting The budget translates the operational plan into monetary terms.

Managers consider the financial resources required to implement the operational plan. They consider the costs of their planned activities and decide what financial resources are required.

Step 3: Accounting

Accounting provides managers, decision-makers, donors, and creditors with financial statements that reflect financial results. This information can then be used to gauge whether resources have been administered efficiently and productively. The aim of every accounting system is to provide financial data for planning and decision-making. Another is to provide a record of expenditures

Step 4: Financial Monitoring

By monitoring progress, managers can make constructive adjustments for the future. The accounting system, together with the operational budget, enables them to monitor and control the work of their team and to decide whether their financial resources are being well spent.

Step 5: Financial Reporting

Financial reports provide an invaluable insight into operational performance.

Step 6: Decision-making and Taking Action

Managers may prepare sensible operational plans and budgets, keep detailed accounts, and carry out monitoring and reporting. However, none of these activities will be effective unless the manager has the power and ability to make decisions and take action.

Readers will undoubtedly be aware of these steps. The question to ask is how well each of these steps is performed. Hospitalforsalelease.com give you the opportunity to compare with colleagues at other hospitals how to best go through these steps.