April 1, 2013
Financial Management of Health Care
Financial management is characterized as the management of the finances of a an organization or business in order to accomplish financial objectives. The major goals of financial management are to create wealth for the organization, generate revenue, and provide successful returns on investments. There are four major functions to financial management: planning, controlling, organizing and directing, and decision-making (Baker & Baker, 2011). There is a common set of accounting principles, known as general accepted accounting principles (GAAP), in which organizations use to compile their financial statements. These standards and procedures must be adhered to or organizations can risk governmental penalties for non-compliance. Non-compliance can also lead to fraudulent assumptions and bad reputation, but following professional ethical standards and procedures can lead to successful organizational outcomes. Four Elements of Financial Management
There are four identifiable elements of financial management, which are planning, controlling, organizing and directing, and decision-making. The planning process identifies the organization’s objectives and the steps required for accomplishing those objectives (Baker & Baker, 2011). Planning is beneficial to organizations because it predetermines the course of action to be followed, improves the quality of decision-making, and produces a sense of ownership and identification with organization goals (Raman, 2009). Controlling ensures each area of the organization is following the plans that have been established, thereby shaping the intricate nature of the organization. Organizing and directing is establishing how to use the resources of the organization effectively and how to run the organization efficiently. The final process, which is decision-making, is making the best choice after carefully analyzing and...