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Managerial Accounting in the Area of Health Care

Introduction

In human society, it is natural that people united with a certain joint goal need some rules of regulations according to which they plan to achieve this goal. As well, the monitoring of results of their performance is also demanded to see how successful the work is and what improvements are needed. Drawing from these factors, the sphere of accounting has appeared in human society as a means of monitoring the financial side of the performance of any organization. Currently, there are two major types of accounting, financial and managerial (Accounting for Management, 2009). While the former is mostly used, to sum up the results of work for a certain period and present the outside partners or investors with the data on an organization, the latter is exclusively internal. In other words, managerial accounting is the tool allowing managers of an organization to be aware of its performance and structure their future work accordingly.

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Managerial Accounting

Essence

Thus, the essence of the area of managerial accounting lies in the fact that the managerial staff of any organization becomes able to control their own activities and see the progress in them based on the data provided in managerial accounting reports (Accounting for Management, 2009). The most important point in managerial accounting is, however, that it is directed at facilitating decision-making in organizations. In other words, reports directed to the organization managers are focused on the improvements needed and are equipped with recommendations for decision making (Bamber et al., 2008). For instance, if the income rates are on the decrease, managerial accounting reports not only state this fact but also suggest either a change in the organization’s policy or some innovative ideas for marketing, promotion, etc. On the whole, managerial accounting is the toll that helps to keep the activities of an organization agreed with its goals and current and future opportunities.

Importance in Health Care

The health care sphere experiences the need for properly structured managerial accounting to an especially high degree. In the light of the fact that health care has a complex structure in the United States and the funding of this sphere is carried out through numerous sources including the Government, philanthropy organizations and private persons, it is obvious that monitoring of health care organizations’ performance becomes an extremely complicated matter (Garrison and Noreen, 2007). For example, to trace the cash flows that are directed from various sources it is necessary to involve the most qualified and professional specialists and to demonstrate to all the interested staff members how these flows should be distributed and used by the health care organization (Finkler and Ward, 2006). Finally, managerial accounting in health care helps monitor the performance of the organization in respect of equipment and efficiency of services offered so that too timely improve them.

New Employee Perspective

Ways to Explain

Accordingly, the best way to explain the importance of managerial accounting to a new employee in a health care organization is to specifically demonstrate the main ideas of managerial accounting and show the ways in which it can be fruitfully used in practice. First of all, it is the generally accepted truth that a managerial accountant looks forward, while a financial one looks backward (Finkler and Ward, 2006). This means that managerial accounting helps develop the organization by using the summed up results of the organization’s financial performance to formulate the strategic needs and goals of the organization and assist the managers in decision making. Drawing from this, being a tool of development makes managerial accounting especially relevant in health care where the modernity of equipment and services offered predetermines both the lives and health of people and the performance of the organization as such (Bamber et al., 2008).

Ways to Use

As for the specific ways of using the managerial accounting in the area of health care, they include monitoring the financial performance of an organization, controlling the equipment modernization and services development issues in an organization, as well as making recommendations as for the improvements possible in this or that area of an organization’s activity and useful for decision-making procedures (Garrison and Noreen, 2007). For example, a managerial accounting report can state the fact that equipment in a trauma department of a health care organization is outdated which leads to the complaints of patients and the decrease in the efficiency of the department work. As well, the report might recommend investing more funds in the department and updating the equipment as soon as possible to stop the decline and start the new wave of performance improvement.

Conclusions

As a result, we can observe the integral importance of managerial accounting for any kind of organization, especially for a health care one. In other words, managerial accounting is the tool allowing managers of an organization to be aware of its performance and structure their future work accordingly. The most important point in managerial accounting is, however, that it is directed at facilitating decision-making in organizations. In the area of health care, managerial accounting is used for monitoring the financial performance of an organization, controlling the equipment modernization and services development issues in an organization, as well as making recommendations as for the improvements possible in this or that area of an organization’s activity and useful for decision-making procedures.

References

  1. Accounting for Management. (2009). Introduction to Managerial Accounting. Retrieved July 3, 2009, from Accounting for Management.
  2. Bamber, Linda S., Braun, K., Harrison, W. T. (2008). Managerial Accounting: International Edition. Pearson Education, Limited.
  3. Finkler, S.A. & Ward, D.M. (2006). Accounting fundamentals for healthcare management. Sudbury, MA: Jones and Bartlett.
  4. Garrison, R. H., Noreen, E. W. (2007). Managerial Accounting. McGraw-Hill/Irwin; 12 edition.

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StudyCorgi. 2022. "Managerial Accounting in the Area of Health Care." July 24, 2022. https://studycorgi.com/managerial-accounting-in-the-area-of-health-care/.

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StudyCorgi. (2022) 'Managerial Accounting in the Area of Health Care'. 24 July.

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