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Health Care Financial Accounting Essay

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Updated: Nov 25th, 2019


There is need for a company to ensure that accounts receivables are paid within the agreed period. Moreover, healthcare institutions should consider including new affordable services at the outpatient surgery center. This paper aims at discussing whether an employee should be given a bonus or probation after the company realizes a doubling in the accounts receivable days outstanding within the first six months. It also discusses the factors that determine pricing a new service at the outpatient surgery center.

Accounts Receivable Days Outstanding

Accounts receivable is also referred to as debtors. It refers to the money that is owned by a company but has been leased to customers. The accounts receivable is indicated on the balance sheet as an asset. This implies that goods and services are offered on credit. In a majority of the businesses, invoices are usually generated and then mailed or distributed electronically to the customers. Consequently, the client is supposed to pay within a stipulated timeframe. This period is referred to as the payment or credit terms.

After a company realizes that the accounts receivable days outstanding have escalated twice within a period of the first six months, there is a need to take stringent measures. This gives the indication that the company requires tightening and safeguarding its credit policy keenly (Lewellen & Edmister, 2003).

Moreover, the company should thoroughly scrutinize the customers who should receive credits. In addition, strict measures should be laid down to ensure that the customers pay within the agreed period. An escalation in the days outstanding implies that the clients are not paying within the agreed period. In turn, it also gives the indication that there is a need for the company to be extremely aggressive as far as gathering overdue from clients’ accounts is concerned.

The relevant departments at the company should assess the doubtful circumstances that led to the situation. Consequently, there should be an earnest observation. It is not wise to put an employee on probation or give him a bonus without first engaging in critical investigations (Lewellen & Edmister, 2003). The investigations should focus on finding out the exact reasons for the increase in the account receivables days outstanding. Therefore, the situation may be solved through serious investigations.

It is important for the company to shun from giving any employee a bonus as a result of the increase in accounts receivables because there were no actual profits realized. Considering this, the company cannot award any bonus since the situation is exceptionally sensitive. There is even a higher possibility that the employee involved would be terminated because he was inattentive and ignored an exceptionally significant corporate asset. Appropriate measures should be taken depending on whether the company is public or private.

The account receivables are usually presented on a company’s balance sheets and cash flow statements. Lewellen and Edmister (2003) assert that the company should be on the guard to ensure that the days outstanding do not exceed three hundred and sixty five days.

However, it is imperative to emphasize that an increase in the accounts receivable days outstanding within six months should not be used as a reason for issuing a bonus or probation. Such a case does not have sufficient information to permit a company to take such grave actions. The company should not jump into conclusions and make assumptions in the absence of adequate information. Hence, an increase in the account receivable days outstanding warrants a thorough investigation.

A probation can only be undertaken if the company had taken the necessary measures before the incident took place. For instance, an employee can be put on probation if he had been trained prior, the employee’s inefficiencies had been documented and appropriate corrective measures put in place, verbal counseling had been offered to the employee, and finally, there had been a documentation of a written counsel.

Such a case is extremely challenging and it is vital that the root causes are established (Lewellen & Edmister, 2003). Hence, a serious investigation is useful in figuring out and comprehending the causes for the doubling in the accounts receivable. It is worth evaluating why the case took so long to be realized (six months).

Considering that the accounts receivables comprises of the monies that the company has lent out, the investigations should also assess the outstanding amount and the kind of credit that was given to contribute to such a case. Before the closure of the investigations and establishment of the root causes, the procedures and policies used at the company should be revisited because the current implementations may not be obeyed or they are ineffective.

Pricing the Novel Service

There are several factors that should be considered before pricing the novel service. Irrespective of the fact that the new service is extremely significant, the institution may be experiencing a working capital shortage.

Therefore, the institution should write a proposal to the ministry of health where the significance of the service is emphasized and funding requested. This money should be used to purchase medical equipment. For capital expansion, the institution should seek funding from government grants and non- governmental organizations.

To cut costs, the service should be offered at the outpatient department for patients in great needs and those who cannot afford paying for inpatient services. Other patients should be referred to the inpatient department. It is not recommendable for the institution to involve in loans since their payment can hinder progress.

Therefore, the institution should operate within its financial means and use the profits for development. Cost- effective equipment to cater for the service should be obtained through the ministry of health. This ensures high quality and affordable equipment. Initially, basic equipment can be purchased to ensure the service begins being implemented. Complex equipment can be purchased after the service is sustained.

In regard to a surgery center, outpatient services are extremely cheap as opposed to inpatient services. This is a key factor that should be considered with keen interest. Moreover, it is important to consider the costs that will be used to pay well trained and experienced employees. This is attributed to the fact that the majority of patients rate a hospital based on the services provided at the outpatient department. Therefore, there is a need to ensure exceptional services and well trained experts.

According to Collins (2002), there should be a survey to assess the sample facilities offering similar services. It is imperative that the most present cost data and information is gathered. In addition, it is important to evaluate and measure other services provided by the organization.

This should particularly focus on the services provided at the outpatient surgery center. Consequently, the anticipated services should be evaluated for cost and a profit margin ascertained for additional services. The next step should be a comparison between the prospective services and what is already being implemented.

When determining the cost, there is a need to compare prices so as to determine the kind of revenue that the services will generate. It is imperative that an estimation is done to assess the level of revenue increase within the next one year. This helps to determine whether the novel service will bring about debts or losses as a result of employing more employees and other resources (Collins, 2002).

There is a need to involve experts from various departments. There should be an estimation of the resources required to assemble a panel of experts, which include contractors, administrators at the institution, doctors, and nurse practitioners. The panel of experts is extremely important for consultation purposes.

Moreover, there is a need to carry out a technological advance study, which is imperative in ensuring productive developments, quality healthcare, and assessing the influence of inflation. Assessing inflation helps to consider the possibilities of long term growth. There is a need for the surgery center to consult with insurance programs and the government so as to decide whether the novel service will be covered by insurance plans (Collins, 2002).

There should be comparable pricing survey to determine how similar services are charged in other clinics. A service at the outpatient surgery center requires more resources as opposed to a physical. It is also worth noting that some procedures at the outpatient are minimal, for instance ace bandages for sprained ankles.

On the other hand, other services require comprehensive examinations, for instance radiological and laboratory testing. In this regard, costs for the support staff and supplies contribute significantly to cost adjustments and the amount of resources required to sustain the service.

There is a need to incorporate a wide array of services at the outpatient department. There is also a need to seek various forms of funding when the funds in an institution cannot sustain a new service. The above choices are appropriate and, therefore, I would apply them in a future job (Collins, 2002).


Collins, C. (2002). Implementing the patient’s charter in outpatient services. BMJ: British Medical Journal, 304 (6839), 1396.

Lewellen, W. G., & Edmister, R. O. (2003). A general model for accounts receivable analysis and control. Journal of Financial and Quantitative Analysis, March, 195-206.

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IvyPanda. 2019. "Health Care Financial Accounting." November 25, 2019. https://ivypanda.com/essays/health-care-financial-accounting/.


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