The four elements of financial management are planning, controlling, organizing and directing, and decision making. These four elements will be defined and explained in this paper. Also emphasized will be the accepted accounting principles and the general financial ethical standards. Examples of ethical standards of conduct and financial reporting practices will be explored and notated in this paper as well. All of these points are important in the accounting practice of health care management to help the organizations run smoothly and to be financially stable.
Four Elements of Financial Management
Planning lets a health care organization set goals and guidelines to make sure their office is a success and that all accomplishments are met. Controlling is ensuring that all areas within the healthcare organization are following goals and guidelines set and gives the organization the opportunity to prepare for any issues that may arise. Organizing and directing ensures that the health care organization is working to its potential and allows them to work on a day to day basis and fix any issues that may be looming. Lastly, decision making works off all of the other elements (planning, controlling, organizing and directing) by collecting information and making the final decisions on how the financial management will work.
General Accepted Accounting Principles
“The common set of accounting principles, standards and procedures that companies use to compile their financial statements. GAAP are a combination of authoritative standards (set by policy boards) and simply the commonly accepted ways of recording and reporting accounting information” (Generally Accepted Accounting Principles , n.d.). Even with GAAP being a set of standards, there are still companies that will finagle numbers on their financial statements, so their financial statements will have to be scrutinized tremendously.
General Financial Ethical Standards
“Ethical standards are determined largely by professional accounting and finance organizations and the Financial Accounting Standards Board. Small-business owners who plan to perform their own accounting services or hire accountants should be aware of accounting principles and general financial ethical standards so they can maintain a positive reputation for their businesses” (Morley, n.d.). Competence is one of the ethical standards that is key for a financial officer to uphold in an organization. Financial managers should follow the GAAP and stay up to date with its guidelines. They should also uphold honesty and integrity.
Examples of Ethical Standards of Conduct
Ethical standards of conduct is a set of standards that each company sets for themselves. There is no consistent standards of conduct for a business, but they must include, promoting values, trust, good behavior, fairness, and kindness. They are not easily enforceable and are always open to interpretation. For example, men and women should be treated equally or treat the patient with respect. Nightingale Home Healthcare code of ethics are direct and descriptive. Some of their ethical standards of conduct are listed as: “all business conduct should be well above the minimum standards required by the law, each employee is responsible for the consequences of his or her actions, each employee must be the guardian of Nightingale’s ethics, leaders at Nightingale have extra responsibility of setting an example by their personal performance and an attitude that conveys Nightingales ethical values, our first responsibility is to the patient and patient’s families that we provide our services” (Corporate Social Responsibility-Code of Ethics , n.d.). There are numerous points of their code of ethics but they serve a purpose and that purpose to make sure their company is ran efficiently and respectfully.
Financial Reporting Practices
“A distinguishing characteristic of high performance organizations is a strong internal control structure-controls that ensure patient care, compliance with regulations, internal efficiencies, and financial reporting. It is controls on financial reporting that are receiving a great deal of attention under a new law, the Sarbanes-Oxley Act of 2002. Public companies are now required by law to document controls over financial reporting, in order to fully address exposures and the effectiveness of current controls. Though many healthcare organizations are not directly affected by the law, regulatory agencies could follow suit and require similar compliance. In fact, several states have introduced bills that require nonprofit organizations to adhere to portions of the act. This article provides a guide for organizations desiring to stay ahead of the curve” (Godwin & Mueller, 2005).
The significance of these examples are that there are ethics that need to be followed within any organization but in a healthcare organization it is extremely important because you handle patients and to ensure the comfort of these patients, a code of ethics need to be enforced for the organization. It is also important to ensure that financial reporting is done, so all finances stay up to date on a legal manner. It helps to show revenue, liability, and expenses and helps control the business effectively.
Corporate Social Responsibility-Code of Ethics . (n.d.). Retrieved from Nightingale Home
Healthcare : http://www.homecareforyou.com/about/code.html
Generally Accepted Accounting Principles . (n.d.). Retrieved from Investopedia :
Godwin, N., & Mueller, J. (2005). Fiancial Reporting Practices: A Comprehensive Evaluation.
School of Accountancy, Auburn University.
Morley, M. (n.d.). Accounting Principles and General Financial Ethical Standards . Retrieved
from Small Business Chronicle: http://smallbusiness.chron.com/accounting-principles-