Managing Financial Resources
Differentiate between short and long term financial resources and its implications for health care organizations. Why should nurse managers be aware of working capital and cash management techniques?
Managing Financial Resources
Differentiate between short and long term financial resources and its implications for health care organizations.
Short-term financial resources represent financial resources that a healthcare organization can use for a period of less than one year. Cash is one of the essential short-term financial resources in a healthcare facility. Cash includes currencies and balances that might be available in bank accounts and which can quickly be withdrawn on demand. Healthcare facilities require short-term financial resources such as cash for three primary purposes, including transactions, safety, and investment (McGuire et al., 2019). Transactions include the availability of money on a day-to-day basis which is utilized for operating expenses such as supplies and staff payroll. Organizations such as healthcare facilities cannot wait to receive payments before paying most of their obligations (Jones et al., 2019). Another critical reason organizations such as healthcare facilities need short-term resources such as cash is safety. Most of the time, emergencies might emerge in healthcare facilities that might require unexpected cash outlays. Immediate access to money is necessary for healthcare facilities in instances where unforeseen needs arise. Another important reason that makes healthcare facilities require short-term financial resources such as cash is investments. Healthcare facilities can use cash for different desirable investment opportunities that may arise, which can lead to community service or attractive profits. Healthcare facilities that do not have adequate short-term financial resources can find themselves in situations where they require short-term financing. This financing is obtained for a period of less than one year. The need for short-term financing arises in a healthcare facility to finance the business’s current assets, like an inventory of raw materials, debtors, and finished goods (Shrank et al., 2021).
On the other hand, long-term financial resources are sources of money that an organization can use for a period longer than one year. Long-term financial resources typically include equipment and building and are also financed on a long-term basis. The primary sources of long-term financial resources are debt and equity. Debt represents the borrowed money that an organization utilizes to function (McGuire et al., 2019). Healthcare facilities have an interest during the period of the loan, while the original amount that is borrowed also has to be repaid. Another form of long-term financing for healthcare facilities is equity which represents ownership of a part of an organization such as a healthcare facility. It is essential for nurse managers and executives in a healthcare facility to have adequate knowledge of the most effective long-term financial resources for an organization to make the best decisions (Jones et al., 2019).
Why should nurse managers be aware of working capital and cash management techniques?
Nurse Managers should always be aware of working capital and cash management techniques because cash must not remain idle in a healthcare facility with too much cash on hand being controlled and excess cash being consistently invested (McGuire et al., 2019). Having working capital and cash management skills also allows nurse managers to reduce excess inventory and develop strategies that can help collect receivables from customers promptly to ensure that there is always enough cash available for use in a healthcare facility(Jones et al., 2019). Having effective working capital and cash management techniques can also help nurse managers ensure their safety over here facility during emergencies that require unexpected cash outlays and enough cash for any unexpected needs. Nurse Managers should also be aware of working capital and cash management techniques because they can utilize excess cash in healthcare facilities for investments. Investments can help to serve a community or Enhance attractive profits for an organization (Shrank et al., 2021).
Jones, C., Finkler, S. A., Kovner, C.T., & Mose, J. (2019). Financial Management for Nurse
Managers and Executives (5th ed.). St. Louis, MO: Elsevier, Inc.
McGuire, F., Vijayasingham, L., Vassall, A., Small, R., Webb, D., Guthrie, T., & Remme, M. (2019). Financing intersectoral action for health: a systematic review of co-financing models. Globalization and Health, 15(1). https://doi.org/10.1186/s12992-019-0513-7
Shrank, W. H., DeParle, N. A., Gottlieb, S., Jain, S. H., Orszag, P., Powers, B. W., & Wilensky, G. R. (2021). Health Costs And Financing: Challenges And Strategies For A New Administration. Health Affairs, 40(2), 235–242. https://doi.org/10.1377/hlthaff.2020.01560