Finance and Accounting PDF

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1 Amy Olsen HCA 240 August 3, 2019 Pauline King Finance and Accounting Finance and accounting both play extremely important roles within the healthcare system. To better understand how each of them relate to one another one must first understand the uniqueness of each department. The Finance department is responsible for management of the organizations cash flow and making sure there are enough funds available for day-to-day expenses (J.A Smith & Associates, 2014). This department is also responsible for credit and collection policies for the organization’s suppliers. When there is a need for cash beyond the everyday-to day working capital, the finance department will be one responsible for finding and sourcing and then advising the long term financing (J.A Smith & Associates, 2014). The Finance department also works with the managers when making key strategic decisions, such as large departmental purchases, or which markets or large projects to pursue (J.A Smith & Associates, 2014). The Accounting department plays a large role in the organization’s functionality. Generally Accepted Accounting Principles (GAAP) is a common set of accounting principle, standards and procedures organizations are using to compile financial information (Hicks, 2018). It is the responsibility of the accounting department to maintain and prepare the balance sheet, statement of operations, statement of cash flow, and statement of change in net assets (Cleverley, Song, Cleverley, 2011). Both departments finance and accounting have a team that work under them. Accounting has numerous people that have jobs that compile the information that go in to

2 the reports, accounts receivable, accounts payable, billing, controller and payroll. In 2002, The Sarbanes – Oxley Act was in acted to hold publicly held cooperation, their internal financial controls, and their financial controls, and their financial reporting audit procedures as performing by external auditing firms (Peavler, 2019). What this means is The Serbanes-Oxley Act (SOX) requires that all publicly held cooperation must have the financial data audited by an outside source, to avoid a scandal like one like Enron’s scandal (Peavler, 2019). In the accounting department there is a designated controller, and they have an auditor, however it is still good practice to have an outside or “fresh” eye look at the books. This is a safety mechanism set up after a catastrophe. However, this insures the investors that the money is being allocated as expected. For organization to run smoothly it is critical for the two departments to work together. The Finance department relies on the information collected and maintained by the accounting department in order to make financial decisions for the organization. If an organization plans to expand the finance department would look to the accounting department to see if the need is there and if the organization can fund the new growth. (Cleverley, Song, Cleverley, 2011). It would then be in the hands of the financial department to find funds to finance the new expansion, equipment and supplies need to support the new project (Cleverley, Song, Cleverley, 2011). The finance department works closely with the accounting department and relies heavily on there data input and data collection to know the financial health of the organization. This key information is how the financial department is how it makes the informed decision on when and where they need to make changes in the organization to continue to make revenue or where there is an opportunity for growth (Cleverley, Song, Cleverley, 2011). Even though finance and

3 accounting deal with financial information in two different aspect of a healthcare organization, both are equally important to the viability of the organization (Cleverley, Song, Cleverley, 2011). The Accounting and Finance team work with each other daily, flawlessly hand in hand. You can not have a functioning hospital with out both departments. To make a financial decision you must have the information provided by the accounting department, account receivable, accounts payable, operations budget or the financial report. This information can be provided on a quarterly basis in order for the finance department to be able to know the financial health of the organization (Cleverley, Song, Cleverley, 2011).

4 References Cleverley PhD, W. O., Song PhD, P. H., & Cleverley PhD, J. O. (2011). Essentials of Health Care Finance (7th ed.). Sudbury, MA: Jones & Bartlett. Hicks, J. (2018). Importance of Accounting in the Medical Office. In VeryWellHealth.com. Retrieved from https://www.verywellhealth.com/role-of-accounting-in-the-medicaloffice-2317551 J.A Smith & Associates. (2014, December 8). Roles and Responsibilities of a Finance Department. In Smythe CPA. Retrieved from https://www.smythecpa.com/newsinsights/roles-and-responsibilites-of-a-finance-department/ Peavler, R. (2019, May 26). The Enron Scandal That Prompted the Sarbanes-Oxley Act. In The Balance Small Business. Retrieved from https://www.thebalancesmb.com/sarbanes-oxleyact-and-the-enron-scandal-393497...