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Conference Assignment 2 - Essay Example

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Conference Assignment 2

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. ...
The fluctuating working capital will be financed through short term borrowing. This situation will eliminate a situation of financing all the working capital needs from short term loans which may lead to factoring within the health unit (Nowicki, 2011). Finance through sale of shares The health organization might be expanding or buying long term assets like medical equipment. Buying of these assets will lead to huge cash outflows which will affect the availability of cash to meet other expenditures. The financial manager might look for other ways like sale of rights share issue to existing share holder. The sale of share will generate some cash inflow that can be injected into the long term expenditures plan without affecting other expenditure within the organization. Sale of shares can be done through seeking for approval from private owners of the health unit to sell a part of it to the public as a way of generating extra capital. Shares save the business from getting into debts ether through factoring while improving on its financial rating within the market. Future need of financing through loans either from banks or other financial institutions will not be problem because good rating of the business by having a huge capital base. Changing business credit policy The health unit might be advancing debts to its clients for a long period compared to the period creditors agree to wait for payment. The finance officer should look for a way that might reduce the huge disparities that exist between these two periods. One of the policies might to take supplies from those suppliers who accept payment at a later date. We might take those who allow payment after fourteen days. Then the finance manager ...Show more

Summary

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…
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Conference Assignment 2 essay example
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