Financial management forms the basis of every business. The management has an obligation to pay attention to the set accounting standards and ethics that have been set. This should happen to all institutions whether operating as a profit making or nonprofit organizations. This will aim at ensuring proper financial management and this contributes to continued solvency of the organization.
Health care sector is not an exception when it comes to observing and adhering to financial management practices. Today the health sector faces a lot of challenges as well as rising costs of health care. Health care facilities are experiencing a high cash flow and this calls for good financial management. On the other hand, the cost of medical equipment has gone up and so the health care facilities need proper budgeting. Ethics and good financial management are keys in the health sector since they touch on the lives of every person. The personnel in the health sector need to focus on maintaining a high level of integrity. This paper focuses on the different elements of financial management that are vital to health care organizations. These elements will foster continued operations of the health care organizations (Jody, 2013).
Elements of financial management are also referred to as principles of financial management. The various elements of financial management include financial planning, controlling, directing and financial decision making.
Financial managers must be knowledgeable on the short term and long term financial goals and objectives of the organization. In relation to this, it is their duty to ensure that the objectives are achieved. The managers must identify the various activities and steps that need to be carried out so as to achieve the objectives. Planning is more of a top management job, but it should be noted that the management cannot execute all the plans alone. The management has the responsibility of identifying personnel who has a duty towards the achievement of a set objective. They should make sure that the individuals work towards the course. The management has to ensure that funds are availed at the right time. This ensures that programs run smoothly without delay (Riley, 2012). These calls for the need of the management to identify the various sources of funding that are appropriate to finance both short and long term goals.
Financial control is another significant element of financial management. Financial control is a key thing that helps the business to achieve its objectives. Financial control involves setting up of procedures that will ensure that the assets of a business are safeguarded, and they are used efficiently. The management has the responsibility of establishing a sound internal control system so as to ensure that the company assets are secure. This eliminates chances of embezzlement of funds, and it also ensures that everything runs smoothly. Financial control also ensures that the management acts in the best interest of the stakeholders. In health care system, the management needs to make sure that the equipment and drugs are safeguarded to avoid loss (Dumlao, 2010).
Financial decision making is another key element of financial management. The financial managers have the responsibility of making decisions relating to financing and investment. The quality of decisions made by the management reflects in the future success of the company (Dumlao, 2010). Poor decision making will have negative effects on the financial position of the company. Managers have to adopt sound decision making skills so that they would be able to make the right decisions (Dumlao, 2010). The managers need to be well informed on the various options available so as to choose the best. In the case of a health care organization, the management needs to make decisions on which medical equipment to buy.
Directing is another important function of financial management. Directing is a process of setting everything in motion in the organization. The elements of directing include supervision, motivation and leadership. Directing ensures that individuals handle their duties and responsibilities. The management should also motivate employees to ensure that they perform their roles efficiently (Dumlao, 2010).
Generally accepted accounting standards refer to general rules and guidelines followed in the USA by accountants. These guidelines ensure that the accountants act in an ethical manner in their practice (Riley, 2012). The GAAP sets clear guidelines in the preparation of financial statements. GAAP sets certain principles, which the accounts in the health care and other sectors can adopt.
They should be sincere in their dealings and they should be as accurate as possible. They should update the records regularly and they should be consistent. They should also make full disclosure on the material items.
Jody Hatcher lays a lot of emphasis on accounting ethics in a health sector. He illustrates examples of the code of ethics that the accounting personnel in a health system should observe (Riley, 2012). Some of the ethical standards include independence, integrity and objectivity, competency and objectivity.
The accounting personnel in the health system need to be independent and they should avoid conflict of interest in their dealings with vendors and customers. The accounting personnel should be committed and remain focused on the course. They should illustrate a high level professionalism (Dumlao, 2010). The accounting personnel need to maintain a high level of competency. They should update themselves on the current changes in the medical field concerning book-keeping. The accounting officers should be responsible persons. They should act in favor of the employer and the customers. They should be ready to uphold their profession ethics in all their dealings.
The effects of unethical practices in accounting can be illustrated by Enron a company that has had a lot of scandals (Jody, 2013). This example forms practical lessons that companies can learn from, and thus refrain from unethical practices.
In conclusion, ethics in financial management needs to be upheld in all sectors. This will foster confidence as well as quality service delivery in the health sector.