The success of a health care organization depends primarily on the extensive understanding of accounting and financial management by its executive and managers. Finance and accounting are both used to monitor and manage the financial resources of an organization. Finance and accounting are important aspects of an organization’s long-term attainment of goals and objectives. Despite their similarities, they are applied differently in the various operations of an organization. Finance involves the planning, generation, and controlling of an organization’s resources while accounting involves the monitoring and evaluation of the resources to ensure that they are utilized appropriately to fund an organization’s operations.
Finance deals with activities that involve the utilization of capital within an organization. In that regard, financial management includes the management of money and the making of financial decisions that determine the sustainability and profitability of the organization (Finkler, Ward, & Calabrese, 2019). Both disciplines are related because they deal with activities that determine the financial health of organizations. On the other hand, accounting deals with the preparation, analysis, evaluation, and examination of an organization’s financial records in order to determine how capital/cash is utilized (Finkler et al., 2019). It facilitates the tracking of the financial transactions of an organization. Accounting encompasses several activities. For instance, an accountant ensures that taxes are paid in a timely manner and an organization’s financial resources are used efficiently. The relationship between the two disciplines determines the level of an organization’s success.
In any health care organization, finance officers allocate the available funds based on the financial requirements of ongoing projects. In contrast, accountants track the funds to determine how they are used within the organization. Accounting utilizes Generally Accepted Accounting Principles (GAAP) to present the financial health of their organizations in ways that allow investors to compare the financial performance of their organizations with others (Finkler et al., 2019). Accounting is a very important aspect of an organization because it provides a record of past financial performance, which can be used to make decisions and develop plans for the future.
Financial managers utilize the information provided by accountants in order to make decisions that enhance the effective running of their health care organizations (Cleverly & Cleverly, 2018). In small organizations, finance and accounting roles are held by the same department. However, in large organizations, the roles are handled by independent departments. For example, if a health care organization wants to purchase new medical equipment, the finance and accounting departments play different roles in the project. The finance department’s role is to ensure that money for the purchase of the equipment is available. The accounting department’s role in the project is to ensure that the money is used for the purchase of medical equipment and not diverted to other projects. Moreover, the department evaluates how successful the financing of the project was relative to the organization’s financial ratios. The contribution of both disciplines ensures that health care organization have sufficient capital to fund their operations and projects, and that the capital is used responsibly and in ways that enhance the profitability and sustainability of the organizations (Cleverly & Cleverly, 2018).
In conclusion, the role of finance in a health care organization is to generate and manage money while the role of accounting is to ensure that the money is used appropriately. The accounting department generates useful financial information that is used by the finance department to make organizational decisions. Both disciplines play different but related roles that aid in the attainment of an organization’s success.
References
Cleverly, J. O., & Cleverly, W. O. (2018).Essentials of health care finance (8th ed.). New York, NY: Jones & Bartlett Learning, LLC.
Finkler, S. A., Ward, D. M., & Calabrese, T. (2019). Accounting fundamentals for health care management (3rd ed.). New York, NY: Jones & Bartlett Learning.