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Finance & Accounting
Pages 4 (1004 words)
Managing Revenue and Working Capital to Avoid Factoring in Health Organization (Name) (Date) Managing Revenue and Working Capital to Avoid Factoring in Health Organization Health organizations sometime run into financial problems, while they need some cash to pay their creditors or recurrent expenditures…
The risk of this mode of getting cash inflow is that the organization will lose a percent of the invoiced amount to the factoring company. Another risk is that when debtors default in paying their invoices on the stipulated date the hospital risks paying more interest to the factoring company which was not budgeted for. Lack of proper management of working capital and revenue inflow might lead to the business getting to a situation of insolvency. Creditors to the health organization might be claiming from the organization more than the assets of the organization which might lead to bankruptcy. This might tatter the image of the organization and lead to poor performance of the credit rating of the hospital. Banks and other financial organization will refuse to extend any loan to the hospital in future date which might cripple the organization when need for capital arises in future dates. When the health organization gets to this situation it will lack liquid capital to grow, pay supplies or meet unexpected costs within the health unit. Some of the measures that the finance officer has to take into consideration to avoid such situations are: Healthy working capital policy The health organization will need to balance between acquisition of assets and payment of its recurrent expenditure like salaries and wages. ...
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