Working Capital Management in Healthcare
Working Capital Management in Healthcare
Houma Guy.
HCS 579 Health Care Finance
September 24, 2005
Working Capital Management in Healthcare
Working capital is the money required to finance the day to day operations of an organization. Working capital may be required to bridge the gap between buying of stocked items to eventual payment for goods sold on account. Working capital also has to fund the gap when products are on hand but being held in stock. Products in stock are at full cost, effectively they are company cash resources which are out of circulation therefore additional working capital is required to meet this gap which can only be reclaimed when the stocks are sold (and only if these stocks are not replaced) and payment for them is received. Working capital requirements have less to do with profitability and much more to do with cash flow. Within the context of this paper, we will review three current articles that deal with specific issues related to the management of working capital.
In the article, “Short on capital? You might be surprised who wants to help” we learned that General Electric (GE), the creative company is now bringing light to healthcare finance. Recent surveys of healthcare Chief Financial Officers (CFO’s) revealed that an overwhelming majority feel that the management of working capital has become increasingly more and more difficult and the difficulty will only increase over the next 10 years. Difficulties noted include debt capacity, deteriorating facilities and increasing capital spending on a yearly basis.
In 2002, GE launched its Commercial Finance Healthcare Financial Services and has committed more than 13 million dollars to the industry to meet the need for capital. They provide an array of services to include equipment rentals, leasing, and financing; working capital lines of credit; acquisition and turnaround financing; real estate financing; vendor financing programs; and medical and dental practice financing to
Houma Guy.
HCS 579 Health Care Finance
September 24, 2005
Working Capital Management in Healthcare
Working capital is the money required to finance the day to day operations of an organization. Working capital may be required to bridge the gap between buying of stocked items to eventual payment for goods sold on account. Working capital also has to fund the gap when products are on hand but being held in stock. Products in stock are at full cost, effectively they are company cash resources which are out of circulation therefore additional working capital is required to meet this gap which can only be reclaimed when the stocks are sold (and only if these stocks are not replaced) and payment for them is received. Working capital requirements have less to do with profitability and much more to do with cash flow. Within the context of this paper, we will review three current articles that deal with specific issues related to the management of working capital.
In the article, “Short on capital? You might be surprised who wants to help” we learned that General Electric (GE), the creative company is now bringing light to healthcare finance. Recent surveys of healthcare Chief Financial Officers (CFO’s) revealed that an overwhelming majority feel that the management of working capital has become increasingly more and more difficult and the difficulty will only increase over the next 10 years. Difficulties noted include debt capacity, deteriorating facilities and increasing capital spending on a yearly basis.
In 2002, GE launched its Commercial Finance Healthcare Financial Services and has committed more than 13 million dollars to the industry to meet the need for capital. They provide an array of services to include equipment rentals, leasing, and financing; working capital lines of credit; acquisition and turnaround financing; real estate financing; vendor financing programs; and medical and dental practice financing to
References: Hospitals Take ‘Corporate Finance’ Approach to Balance Margin and Mission. August, 2005. Retrieved from the web on September 23, 2005 at www.gehealthcarefinance.com/us/about_us/hfs_releases/2005/recent_news_08_08_05.html Short on capital? You might be surprised who wants to help. July 2005. Health Executive Magazine. Retrieved from the web on September 22, 2005 at www.gehealthcarefinance.com/us/about_us/other_releases/2005/other_rel_02_24_05.html Strategies for effective capital structure management: executive summary. August, 2005. Healthcare Financial Management. Retrieved from the web on September 25, 2005 at www.findarticles.com/p/articles/mi_m3257/is_8_59/ai_n14920105#continue