in the healthcare industry, accounting plays a crucial role in financial management. There are two distinct categories of accounting functions, namely financial accounting and managerial accounting. The financial accounting function is responsible for creating and presenting financial reports, such as income statements, balance sheets, and cash flow statements, for external stakeholders. On the other hand, managerial accounting, on the other hand, provides information to internal stakeholders, such as managers and decision-makers, to assist in the planning, controlling, and evaluating of operations.
According to Ogunbodede et al. (2020), accounting functions play a significant role in operational oversight within the healthcare industry. They allow for the monitoring of financial resources, which enables healthcare organizations to allocate resources effectively and efficiently. Financial accounting provides a picture of the organization’s financial health, while managerial accounting allows for internal decision-making and the identification of areas where cost savings can be achieved.
The healthcare industry has unique features that affect its financial management. One such feature is the complexity of healthcare services and the associated costs. According to Al-Ali and Haddad (2019), effectivefinancial management in the healthcare industry necessitates a comprehensive comprehension of the cost framework of healthcare services to assign resources competently.
Additionally, the healthcare industry has a unique payment structure, with different types of payers and reimbursement mechanisms, including public and private insurance and out-of-pocket payments. The complex payment structure requires careful financial planning to ensure the organization’s financial stability.
Another unique feature of the healthcare industry is the regulatory environment, which includes various laws and regulations that govern healthcare services’ provision and financing. As a result, healthcare organizations need to stay up to date with regulatory changes that can affect their financial management.
References:
Al-Ali, A. R., & Haddad, S. S. (2019). Financial management in the healthcare industry: A systematic review. International Journal of Healthcare Management, 12(2), 124-138.
Ogunbodede, E. O., Adeyemo, D. A., Adeyemo, T. A., & Fadare, J. O. (2020). Accounting functions, financial management practices and organisational performance: A study of selected hospitals in Osun state, Nigeria. Journal of Financial Reporting and Accounting, 18(1), 86-102
This is was question
Unique Aspects of Health Services & Financial Management
There are a number of unique factors relating to the health services sector:
Compare the two types of accounting functions.
Describe how the accounting functions affect operational oversight.
How do these unique features affect the financial management of the sector?
Expert Solution Preview
Introduction:
The healthcare industry is a complex and highly regulated sector that requires effective financial management to ensure the allocation and allocation of resources appropriately. Accounting functions play a crucial role in financial management, providing financial reports for external stakeholders and internal information for managers and decision-makers. This response will discuss the different accounting functions, their impact on operational oversight, and how their unique features affect the financial management of the healthcare industry.
1. Compare the two types of accounting functions.
The financial accounting function creates and presents financial reports such as income statements, balance sheets, and cash flow statements for external stakeholders. This function is responsible for accurately recording financial transactions, providing financial analysis, and preparing financial statements that show the organization’s financial position and performance.
In contrast, managerial accounting provides information to internal stakeholders such as managers and decision-makers to assist in the planning, controlling, and evaluating of operations. This function helps to identify areas where cost savings can be achieved, allocate resources appropriately, and analyze operational data to drive decision-making.
2. Describe how the accounting functions affect operational oversight.
Accounting functions play a vital role in operational oversight within the healthcare industry. They allow for monitoring of financial resources, which enables healthcare organizations to allocate resources effectively and efficiently. Financial accounting provides a picture of the organization’s financial health, while managerial accounting allows for internal decision-making and the identification of areas where cost savings can be achieved. This information is invaluable for mitigating financial risks and achieving operational efficiency and effectiveness.
3. How do these unique features affect the financial management of the sector?
The healthcare industry has unique features that affect its financial management. The complexity of healthcare services and associated costs requires a comprehensive comprehension to assign resources competently. Additionally, the complex payment structure requires careful financial planning to ensure the organization’s financial stability. The regulatory environment includes various laws and regulations that govern healthcare services’ provision and financing, making it essential for healthcare organizations to stay updated. These unique features necessitate a sustainable financial management system that incorporates effective accounting functions to ensure proper allocation and utilization of resources while mitigating financial risks.
References:
Al-Ali, A. R., & Haddad, S. S. (2019). Financial management in the healthcare industry: A systematic review. International Journal of Healthcare Management, 12(2), 124-138.
Ogunbodede, E. O., Adeyemo, D. A., Adeyemo, T. A., & Fadare, J. O. (2020). Accounting functions, financial management practices and organizational performance: A study of selected hospitals in Osun state, Nigeria. Journal of Financial Reporting and Accounting, 18(1), 86-102.
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