History of Financial Management
Codifying management thought over time results
in more organized management technique-
building.
History of Financial Management
Historical efforts all sought to make
organizations work more effectively.
Concept of this Text
A method of getting money in and out of the business
Revenues = Inflow
Expenses = Outflow
Concept of the Text
“How does this happen in business?”
The purpose of this text is to show how the various elements of finance fit together; in other words, how “it happens in business.”
The key to understanding finance is understanding the various pieces and their relationship to each other.
Managers’ Viewpoints
Managers within a health care organization will generally have
one of three views:
FinancialProcessClinical
The way they manage will be influenced by which view they hold.
Managers’ Viewpoints
The Financial View
Work with finance on a daily basis.
Responsible for the reporting function.
Usually also do strategic planning.
Managers’ ViewpointsThe Process View
Work with the system of the organization.
Responsible for data accumulation.
Often affiliated with the information system department.
Managers’ Viewpoints
The Clinical View
Usually work with and interact directly with patients.
Responsible for service delivery.
Also responsible for clinical outcomes.
Four Elements of Financial Management
Planning — Identify steps that must be taken to accomplish and organization’s objectives.
Controlling — Make sure that each area of the organization is following the plans that have been established.
Organizing and Directing — Decide how to use organizational resources to most effectively carry out established plans.
Decision-Making — Make choices among available alternatives.
The Organization’s Structure
The structure of an organization is important to management
becauseIt influences the way the managers
manage.
The Organization’s Structure
Types of organizations
Profit-oriented (aka “proprietary”)
Non-profit-oriented (aka “not-for-profit”)
The Organization’s Structure
Profit-oriented organizations
Are responsible for paying taxes.
May be corporations, partnerships, or individuals.
The Organization’s Structure
Not-for-profit-oriented organizations
Do not pay income taxesand
May be voluntaryor
May be the government
The Organization’s Structure
Voluntary organization types may be:churches, private schools, or foundations
Government organization types may be:federal; state; county; city; combination of city-county; hospital taxing district; or state university.
The Organization’s Structure
Organization Charts
Often used to illustrate the structure of an organization.
How the degree of decentralization within the organization.
The Organization’s Structure
The purpose of an organization chart is to indicate
How responsibility is assigned to managers.
The formal lines of communication and reporting.
SUMMARY: The organization’s type affects it’s structure. It’s structure is shown in the organization chart.
Two Types of Accounting
Financial Accounting
Generally for outside, or third-party, use.Emphasizes external reporting.Must be in accordance with generally
accepted accounting principles.Retrospective - (Usually concerned with
transactions that have already occurred.)