Financial practices and ethics can play an important part of any organization including the health care environment. In order for the health care organization to be successful one must adopt an efficient financial practice and possess ethical standards. The management of finances for a health care organization may be a challenge for managers. This is why the health care manager will follow four basic elements for financial management. The basic elements include planning, controlling, organizing and directing, and decision making (Baker & Baker, 2011).
Health Care Organizations have accounting principles generally acceptable and will comply with the financial practice and the practice of ethics to avoid fraud or abuse of the reporting practices. Elements of Financial Management Financial management has four basic elements, which assist the manager in making effective decisions for the health care organization. The first element of financial management is planning. The financial manager needs to identify the steps that he or she needs to take to accomplish the goals of the organization.
However, first the manager must determine what the goal is for the organization and at that time determine what steps to follow to achieve the goal. The next element is controlling; a plan is in place that each area of the organization must follow. The financial manager must ensure that the areas are following such plans. The staff can view the current reports and make a comparison with reports from the past. In comparing previous and current reports the financial manager can see if an area in the organization needs more attention because the area may not be meeting its goals.
The third element is organizing and directing. In organizing the financial manager must decide on what resources are best to use to be more effective. The manager must also determine how to use those resources effectively to reach the goal of the organization. In directing, the manager must provide supervision daily to run the organizing element efficiently. The final element is decision making. The manager must make decisions with the alternatives available such as information in the reports.
Decision making should be side-by-side with planning, controlling, and organizing. When making a decision the manager must analyze and evaluate the information to make effective decisions (Baker & Baker, 2011). Acceptable Accounting Principles Generally accepted accounting principles (GAAP) provides guidelines to the company’s financial manager. The guidelines will cover the principles of accounting and practices. The generally accepted accounting principles guideline, guides the financial manager in the reporting and recording the financial information.
For example, the financial manager will use the guidelines when preparing the financial statements such as the balance sheet. One health care organizations practice for releasing financial information will perform a practice of reconciliation in accounting. One organization reviews the balance sheets and makes them compatible as one. The next step is to determine the classification of each balance sheet such as high risk or low risk. The final step is the organization must decide a reporting schedule such as monthly or yearly.
In knowing and understanding the documents and how to analyze the information this prevents an auditor from finding misstatements (Cox, Draa, 2008). Standard Financial Ethics Making an ethical decision is a requirement of health care managers. One must ensure the meeting of needs of individuals within the organization. Principles of ethics include fairness, justice, and professionalism. The organization possesses a code of ethics when interpreting the organizations transactions such as losses or assets.
The Health Care Portability and Accountability Act help reduce abuse and fraud concerning finances whether it is deliberate or unintentional. Fraud and abuse is increasing because of the increase in the delivery of health care. Organizations take better actions in working toward the reduction of fraud and abuse. One way to do this is to develop a compliance program, which a financial manager will play a key role. Compliance programs allow a proper practice on reporting the financials, and comply with the ethical conduct standard by avoiding fraud and abuse (Hern, n.d. ).
Conclusion For an organization to be successful it needs to ensure the following of the financial reporting practices and maintain a standard of conduct ethically. The organization should follow the basic elements of financial management. When an organization follows the steps in the correct order there is less of a chance the organization will receive an audit. As long as the organization follows the generally accepted accounting principles there is less chance of an audit, and less of a chance of fraud or abuse when reporting the finances. References.
Baker, J. & Baker, R. (2011). Health care finance: Basic tools for nonfinancial managers (3rd ed. ). Sudbury, MA: Jones & Bartlett Publishers Cox, B. , & Draa, M. (2008). Back to basics with account reconciliations. Business Finance, 14(6), 38-38. Retrieved from http://search. proquest. com/docview/211076250? accountid=35812 Hern, W. (n. d. ). Corporate compliance is a necessity, not an option – healthcare financial managers’ role in helping their organizations prevent financial fraud. Retrieved from http://findarticles. com/p/articles/mi_m3257/is_n1_v51/ai_19146070.