Working Capital Management - Essay Example

The paper "Working Capital Management" is an excellent example of an essay on finance and accounting. The working capital can be defined as the difference that exists between your current assets and current liabilities (Bhattacharya, 2009). Positive working capital is vital for every organization to realize growth and pay off its debts. Most healthcare organizations that are run by the government are fully funded and do not face many problems in managing their working capital. For for-profit healthcare organizations, the management of working capital is mandatory. Such organizations must ensure that at all times they have positive working capital in order to take care of the expenses that are involved in the running of such facilities. Management of private health facilities can be challenging if no proper financial security is put in place. In most healthcare environments today, assets such as inventories, cash, and receivables must properly be managed to ensure that operational excellence and cost reduction are achieved. Managers at all levels are involved at some point in the working capital management.

There are several challenges that face most healthcare facilities in terms of management of the working capital i.e. releasing money from the working capital to reduce the levels of debts. For most organizations, debt is inevitable and plays a crucial role in terms of development. Paying off debts has been a significant challenge for healthcare organizations with most resorting to using their working capital to pay off debts.

Another challenge is the efficient utilization of working capital. Researches have shown that even though most healthcare facilities have positive working capital, its utilization has been a major concern. There have been cases where some funds are not fully accounted for or are not fully used in the intended projects.

In the case of a military healthcare facility, the government funds everything and cases of having debts will not arise. The military facilities operate at their full capacities without any challenges that are seen in the private healthcare facilities. They are not taxed and are exempted from most of the services they offer. This makes it very different from other facilities offering similar services.

In dealing with the challenges, critical decisions have to be made at the management level that involves key players to work on improving the working capital and cutting down on debts (Bhattacharya, 2009). This will ensure good returns for the organization, hence good working capital. The generation of more funds from other avenues will also be great since this is aimed at improving the working capital. The organization should consider partnering with other firms in order to cut down on its spending while improving on the working capital.

Revenue cycle management means taking measures to ensure that the employees are timely paid for what they do (Bhattacharya, 2009). It involves the process from the time a patient calls for an appointment and the secretary takes all the details of the patient, including phone numbers. The revenue cycle helps in monitoring the financial stability of the organization and other factors that enable the organization to run smoothly. It also informs the executives in case of any changes in the cash flow so that an action may be taken in a timely manner to avoid any interruptions in service delivery.

Cash budgeting is one way of improving working capital. It requires the evaluation of the requirements of cash by doing estimation on the receipts and payments. This tool is important because it helps in keeping the optimum level of capital in the organization’s business.