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Finance management
Finance management <ul><li>Why do we discuss? Introduction and Objectives </li></ul><ul><li>Basic finance literacy </li></...
Why should we discuss? <ul><li>Profession vs. Business </li></ul><ul><li>Every medical practice, small or big, is a busine...
Objectives <ul><li>To create awareness </li></ul><ul><li>To stimulate  to further learning </li></ul><ul><li>To develop a ...
Financial management – definition  <ul><li>It is the art and science of managing money </li></ul><ul><li>The most essentia...
Basic finance literacy <ul><li>Income and expenditure statement </li></ul><ul><li>Cash flow: outgoing, incoming  </li></ul...
Balance Sheet <ul><li>A statement of assets, liabilities and capital on a given date </li></ul><ul><li>Assets: </li></ul><...
Some core issues <ul><li>Budget </li></ul><ul><li>Accounting </li></ul><ul><li>Cost Accounting </li></ul><ul><li>Break eve...
Budget <ul><li>An important instrument of the financial management used as aid in planning, programming and control  </li>...
Budget: advantages <ul><li>It is a tool for - </li></ul><ul><li>Quantitative expression of the planning  </li></ul><ul><li...
Planning & preparing budget <ul><li>Well in advance  </li></ul><ul><li>An opportunity to plan expansion or improving servi...
Types of budget <ul><li>Importance :Understanding of various types of budget can indirectly  help us understand various me...
Types of budget <ul><li>Operating revenue budget- related to volume of work anticipated </li></ul><ul><li>Operating expend...
Accounting  <ul><li>An art of recording , classifying and summarizing data in a significant manner and interpreting the re...
Types of accounting <ul><li>Financial accounting: documentation of facts, daily transactions  </li></ul><ul><li>Cost accou...
Nomenclature  <ul><li>Costing: to find out money spent on a service  </li></ul><ul><li>Cost center: an allied group of act...
Categories of expenditures <ul><li>Important in understanding  dynamics of costing  </li></ul><ul><li>Capital Vs Recurring...
3.Direct vs indirect expenditures <ul><li>Direct : Clearly linked to a service  </li></ul><ul><li>Indirect: can not be cle...
Objectives & advantages  of costing <ul><li>To get clear picture of financial situation  </li></ul><ul><li>Identifying pro...
Advantages of costing <ul><li>Helps in entering into agreements with TPA, corporate clients etc </li></ul><ul><li>Helps in...
Effective cost accounting <ul><li>Proper records  </li></ul><ul><li>Proper segmentation of costs </li></ul><ul><li>Sound a...
Difficulties in cost accounting  <ul><li>Many inputs have to be considered e.g. labor, material, depreciation,  </li></ul>...
Break - even analysis <ul><li>Volume of activity at which total income just equals total variable and fixed costs </li></u...
Cost - benefit analysis <ul><li>An economic technique and  formalized way of comparing the cost and benefit of undertaking...
Expenditure - containment and  cost - cutting <ul><li>Sound economic sense </li></ul><ul><li>It does not mean compromising...
4.Strategies for expenditure control <ul><li>Decrease the cost of inputs relative to outputs: materials, man power  </li><...
5.Cost saving areas <ul><li>Streamlining of services e.g. laboratory, OT, indoor </li></ul><ul><li>Purchases : planning, b...
Investments <ul><li>We work hard to make money, but learn to make your money work for you </li></ul><ul><li>Daily wage ear...
Personal investments <ul><li>Required for future expansion and growth </li></ul><ul><li>Commitment to the financial needs ...
Various investment avenues <ul><li>Real Estate </li></ul><ul><li>Gold and Jewellery  </li></ul><ul><li>Government Securiti...
Some tips on day to day activities <ul><li>1.Accounting   </li></ul><ul><li>Financial memory of practice </li></ul><ul><li...
4. Handling cash  <ul><li>Staff handles lot of cash </li></ul><ul><li>Doctors are too busy to supervise </li></ul><ul><li>...
Tips <ul><li>Deposit cash in bank daily or twice weekly  </li></ul><ul><li>Have 2 distinct streams of cash flow </li></ul>...
Tips <ul><li>Reconcile bank statements </li></ul><ul><li>Do not allow anyone to take records home </li></ul><ul><li>To you...
14.Handling search and seizure <ul><li>Keep your cool </li></ul><ul><li>Call your best friends as witnesses </li></ul><ul>...
<ul><li>Thanks </li></ul>
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Bec doms a ppt on finance management07

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Transcript of "Bec doms a ppt on finance management07"

  1. 1. Finance management
  2. 2. Finance management <ul><li>Why do we discuss? Introduction and Objectives </li></ul><ul><li>Basic finance literacy </li></ul><ul><li>Budgeting </li></ul><ul><li>Accounting ,Cost Accounting and Cost Containment </li></ul><ul><li>Investments </li></ul><ul><li>Some general tips on day to day matters </li></ul>
  3. 3. Why should we discuss? <ul><li>Profession vs. Business </li></ul><ul><li>Every medical practice, small or big, is a business </li></ul><ul><li>Huge investments – expected returns </li></ul><ul><li>An entrepreneur- by default </li></ul><ul><li>Profit - a dirty word? </li></ul><ul><li>Survival and growth </li></ul><ul><li>Self employed - look after your own finances and control them </li></ul><ul><li>Problems: doctors tend to be ignorant & careless about finances, sitting ducks, frauds </li></ul>
  4. 4. Objectives <ul><li>To create awareness </li></ul><ul><li>To stimulate to further learning </li></ul><ul><li>To develop a vision </li></ul><ul><li>To develop an ability to plan and control with clinical precision </li></ul><ul><li>To equip our selves to ask right questions to CA </li></ul><ul><li>To develop a healthy practice with patients as beneficiaries </li></ul>
  5. 5. Financial management – definition <ul><li>It is the art and science of managing money </li></ul><ul><li>The most essential requirement of any organized business or activity </li></ul><ul><li>The process of procuring and judicious use of resources with a view to maximize the value of the firm </li></ul><ul><li>Interdependence with other areas of management </li></ul>
  6. 6. Basic finance literacy <ul><li>Income and expenditure statement </li></ul><ul><li>Cash flow: outgoing, incoming </li></ul><ul><li>Balance sheet: final accounting item (what the practice is worth) </li></ul><ul><li>Budgeting: a process of estimation of income and expenditure </li></ul><ul><li>Assets </li></ul><ul><li>Liabilities </li></ul><ul><li>Capital </li></ul>
  7. 7. Balance Sheet <ul><li>A statement of assets, liabilities and capital on a given date </li></ul><ul><li>Assets: </li></ul><ul><li>Fixed: land, building, equipments etc </li></ul><ul><li>Current: Cash in hand or in bank, stocks, debtors </li></ul><ul><li>Liabilities </li></ul><ul><li>Long term: Loans > 1 yr </li></ul><ul><li>Current/ short term: overdraft, taxes </li></ul><ul><li>Capital= Assets -Liabilities </li></ul>
  8. 8. Some core issues <ul><li>Budget </li></ul><ul><li>Accounting </li></ul><ul><li>Cost Accounting </li></ul><ul><li>Break even point </li></ul><ul><li>Cost benefit analysis </li></ul><ul><li>Cost reductions and containment </li></ul><ul><li>Day to day activities </li></ul>
  9. 9. Budget <ul><li>An important instrument of the financial management used as aid in planning, programming and control </li></ul><ul><li>A budget may be defined as a financial and quantitative statement, prepared and approved prior to defined period of time, of the policy to be pursued during that period for the purpose of achieving the given objective. </li></ul>
  10. 10. Budget: advantages <ul><li>It is a tool for - </li></ul><ul><li>Quantitative expression of the planning </li></ul><ul><li>Evaluation of financial performance in accordance with plans </li></ul><ul><li>Controlling costs </li></ul><ul><li>Optimizing the use of resources </li></ul><ul><li>Directing the total efforts in to the most profitable channels </li></ul>
  11. 11. Planning & preparing budget <ul><li>Well in advance </li></ul><ul><li>An opportunity to plan expansion or improving services , hence involve staff and all departments </li></ul><ul><li>Plans must be realistic </li></ul>
  12. 12. Types of budget <ul><li>Importance :Understanding of various types of budget can indirectly help us understand various methods of finance management </li></ul><ul><li>Project budget : probable expenditure and likely revenue for a specific project </li></ul><ul><li>Departmental budget </li></ul>
  13. 13. Types of budget <ul><li>Operating revenue budget- related to volume of work anticipated </li></ul><ul><li>Operating expenditure budget: recurring expenditures for operation and maintenance of services e.g. salaries and wages, supplies, support utilities, maintenance </li></ul><ul><li>Capital budget ( non recurrent ): meant for growth ( new facilities), replacement of obsolete. Needs are many – prioritize </li></ul><ul><li>Cash budget : provision for anticipated cash expenditures , for planning the cash flow e.g. salaries, bills etc. </li></ul>
  14. 14. Accounting <ul><li>An art of recording , classifying and summarizing data in a significant manner and interpreting the results </li></ul><ul><li>Data may be in form of money transactions and events which are, in part at least , of a financial character </li></ul>
  15. 15. Types of accounting <ul><li>Financial accounting: documentation of facts, daily transactions </li></ul><ul><li>Cost accounting : expenditure for a particular service </li></ul><ul><li>Management accounting : Analysis and interpretation of financial information for management purpose </li></ul>
  16. 16. Nomenclature <ul><li>Costing: to find out money spent on a service </li></ul><ul><li>Cost center: an allied group of activities in a hospital eg laboratory, immunization, laundry service </li></ul><ul><li>Cost object: anything for which separate measurement of cost is desired e.g. rooms, OT, ICU, equipment </li></ul><ul><li>Cost unit: a measurable detail of service rendered e.g. linen, laboratory investigation </li></ul>
  17. 17. Categories of expenditures <ul><li>Important in understanding dynamics of costing </li></ul><ul><li>Capital Vs Recurring </li></ul><ul><li>Fixed Vs Variable </li></ul><ul><li>Fixed : Remains unchanged despite changes in related level or volume of activity e.g. salary of permanent staff </li></ul><ul><li>Variable – volume dependent, varies in proportion to changes in level of activity e.g. medicines, consumables, power cost </li></ul>
  18. 18. 3.Direct vs indirect expenditures <ul><li>Direct : Clearly linked to a service </li></ul><ul><li>Indirect: can not be clearly linked to a particular cost object e.g. administration cost,security cost </li></ul>
  19. 19. Objectives & advantages of costing <ul><li>To get clear picture of financial situation </li></ul><ul><li>Identifying profitable and non profitable segments and taking action accordingly </li></ul><ul><li>To decide pricing of services and discounts </li></ul><ul><li>To decide for out sourcing of services </li></ul>
  20. 20. Advantages of costing <ul><li>Helps in entering into agreements with TPA, corporate clients etc </li></ul><ul><li>Helps in identifying wastages </li></ul><ul><li>Helps in budgeting, planning </li></ul>
  21. 21. Effective cost accounting <ul><li>Proper records </li></ul><ul><li>Proper segmentation of costs </li></ul><ul><li>Sound accounting practices,regularity </li></ul><ul><li>Record of utilization of equipments </li></ul><ul><li>Record and analysis of man power utilization </li></ul>
  22. 22. Difficulties in cost accounting <ul><li>Many inputs have to be considered e.g. labor, material, depreciation, </li></ul><ul><li>Every transaction has to carry a price tag </li></ul><ul><li>Variation in quality of service e.g. consultant to consultant, patient to patient </li></ul>
  23. 23. Break - even analysis <ul><li>Volume of activity at which total income just equals total variable and fixed costs </li></ul><ul><li>Lower break even point is more desirable e.g. bed occupancy 60% Vs 80% </li></ul><ul><li>Advantages: Equipment selection and purchase decision, formulating price policy </li></ul>
  24. 24. Cost - benefit analysis <ul><li>An economic technique and formalized way of comparing the cost and benefit of undertaking an activity / project </li></ul>
  25. 25. Expenditure - containment and cost - cutting <ul><li>Sound economic sense </li></ul><ul><li>It does not mean compromising quality </li></ul><ul><li>Promote awareness amongst staff </li></ul><ul><li>Practice cost monitoring: analyze actual expenditure against budget and standards , find reasons for variations, work on them </li></ul><ul><li>Cost management: establish systems with responsibility and accountability </li></ul>
  26. 26. 4.Strategies for expenditure control <ul><li>Decrease the cost of inputs relative to outputs: materials, man power </li></ul><ul><li>Increase output relative to input: scheduling of procedures, automation , remove bottle - neck in the flow of services </li></ul>
  27. 27. 5.Cost saving areas <ul><li>Streamlining of services e.g. laboratory, OT, indoor </li></ul><ul><li>Purchases : planning, budgeting, bargaining, group purchasing </li></ul><ul><li>Preventive maintenance AMC’s, back ups </li></ul><ul><li>Planning stage: quality manpower and machines, planned recruitment, up gradation </li></ul><ul><li>Good accounting practices: automation, internal audit </li></ul><ul><li>Energy audit </li></ul>
  28. 28. Investments <ul><li>We work hard to make money, but learn to make your money work for you </li></ul><ul><li>Daily wage earners </li></ul><ul><li>Save, invest, build wealth, spend, give it away </li></ul><ul><li>Invest some percentage in improving services, facilities </li></ul><ul><li>Stagnation without growth </li></ul>
  29. 29. Personal investments <ul><li>Required for future expansion and growth </li></ul><ul><li>Commitment to the financial needs of the family </li></ul><ul><li>Retirement planning </li></ul><ul><li>Building wealth. </li></ul>
  30. 30. Various investment avenues <ul><li>Real Estate </li></ul><ul><li>Gold and Jewellery </li></ul><ul><li>Government Securities </li></ul><ul><li>Company Deposits </li></ul><ul><li>Mutual Funds </li></ul><ul><li>Equity </li></ul><ul><li>ULIP </li></ul><ul><li>Bank & company FDs </li></ul>
  31. 31. Some tips on day to day activities <ul><li>1.Accounting </li></ul><ul><li>Financial memory of practice </li></ul><ul><li>Matter of self discipline </li></ul><ul><li>Meticulous record of financial transactions - legal requirement e.g. Form 3c </li></ul><ul><li>Employ accountant - good documentation and reports generation </li></ul><ul><li>2. Computerization </li></ul><ul><li>3. Periodic meetings with CA </li></ul>
  32. 32. 4. Handling cash <ul><li>Staff handles lot of cash </li></ul><ul><li>Doctors are too busy to supervise </li></ul><ul><li>Easy temptation </li></ul><ul><li>Introduce checks and balances - ensure strict cash control </li></ul><ul><li>Cash collection at counter (many advantages ) </li></ul><ul><li>Minimize temptation for staff </li></ul>
  33. 33. Tips <ul><li>Deposit cash in bank daily or twice weekly </li></ul><ul><li>Have 2 distinct streams of cash flow </li></ul><ul><li>Cash inflow  deposit daily </li></ul><ul><li>Cash outflow  by withdrawal </li></ul><ul><li>Make schedule for making payments </li></ul><ul><li>Documentation support for all payments </li></ul><ul><li>Filing system: cash memos, paid bills, pending bills </li></ul><ul><li>Get personally involved for big transactions </li></ul>
  34. 34. Tips <ul><li>Reconcile bank statements </li></ul><ul><li>Do not allow anyone to take records home </li></ul><ul><li>To your staff, demonstrate your awareness about what is going on and that you are careful about money </li></ul>
  35. 35. 14.Handling search and seizure <ul><li>Keep your cool </li></ul><ul><li>Call your best friends as witnesses </li></ul><ul><li>Know your rights </li></ul><ul><li>Prevention is better than cure </li></ul>
  36. 36. <ul><li>Thanks </li></ul>
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