Accounting fundamentals of healthcare managementworking capital techniques focus specifically on what aspects of an organization’s finances? what specific task does a manager undertake when handling working capital issues? what are the three primary reasons an organization holds cash or cash equivalents? what is the accounts receivable cycle? why is this task especially important for health care organizations? what is the goal of the eoq? how does it differ from jit inventory? what are the steps in managing the revenue cycle? should an organization take a discount of 1.5/10 n/ 30 on a $9,000 invoice or simply pay the bill when due?

Check the following calculations

Explanation:

1. Working capital techniques focuses on short term borrowings of an organisation. An organisations meet its working capital needs by borrowing the funds for short term and meet the funds it requires to manage the operational requirements. This is the reason why short term borrowing limits of any organisation is linked directly to the value of its working capital ie., Inventories, receivables etc.,

2. A manager typically focusses on reducing the receivables by improving the collections from overdue debtors and on evaluating whether the inventories are procured optimally or purchased in bulk more than the requirement and negotiates with vendors for increased credit terms. He also works on ensuring that the short term borrowings are represented by the drawing power available from its current assets. If there is any gap, he would work on borrowing long term funds and utilise it to meet the shortfall in working capital with necessary approvals.

3.Accounts receivable cycle represents the no of days between the date of invoicing to a customer to the date of realisation of billed amount from the customer. In health care industry, most of the revenues are settled through insurance claim process. Insurance companies typically delay the settlement stating deficiencies in the documents submitted. This would result in increased ageing of receivables. Unless closely monitored and followed up, the realisation of dues would be a concern in this industry.

4. Goal of Economic Order Quantity (EOQ) is to minimise the inventory holding costs and the costs of ordering a product by optimally assessing the quantity to order .Here , the key assumption is the demand quantity would be certain and constant throughout the period. Just in Time (JIT) inventory is a manufacturing system which focuses to produce or procure products only when the demand arise. Hence, the focus is mainly on time reduction between the time of order and time of sourcing the material. JIT doesnt assume any static demand.

5. Revenue cycle in a Health care industry represents the difference between the date of admission of a patient and the date of receipt of fees . Steps involved in managing revenue cycle in a health care industry are provided below:

- Developing a robust system to track and monitor the revenue cycle for each patient

- Agreeing on a clear SOP (Standard operating procedure) with Insurance companies in submission and settlement of claims

- Review of revenue cycle by Top management team and raising relevant queries and actionable points to improve the status

Decision on offering cash discount.

It is prudent to collect after 30 days instead of giving cash discount as shown below