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explain how you would optimize working capital to advance your current or future employer.
Healthcare finance leaders account for levels of debt within an organization. Many times,
managers can use their financial leverage to manage a firm’s working capital. Five key steps to improving working capital are as follows: recognition of working capital as valuable, focus on the cash conversion cycle, identifying areas of opportunity, prioritizing targeted areas, implement
working capital policies (Yandreski, 2020). The COVID-19 pandemic direct impacts on healthcare finance planning and decision-making. The uncertainty at the early stages of the crisis
made securing funds a priority yet federal grants, asset relocation decisions, and even forgone capital spending has led to unforeseen increases in liquidity (Stenger & Decker, 2021). This means healthcare organizations have more cash on hand to make impactful restructures to healthcare delivery. Healthcare leaders can analyze cash flow data and use models to make decisions about disruptive modifiers within their given market. Stenger and Decker argue that by
assessing the impact of market-specific modifiers healthcare leaders can adjust risk to meet operating cash targets (2021). Healthcare managers aim to grasp a full understanding of their firm’s resources and promoting efficient cash management. Providing a framework for monitoring operating cash flows leaders help establish a liquidity target to build a financially resilient healthcare organization (Stenger & Decker, 2021). Traditional approaches require high liquidity levels that can hinder innovative projects within a healthcare firm. Carrying large amounts of cash resources
can make future investment difficult (Stenger & Decker, 2021). In attempting to build resilience it is important for finance leaders to also consider the importance of diversification and sourcing multiple forms of liquidity. Key goals finance leaders should focus on are managing liquidity, maximizing market value, emphasizing efficiency, detailed reporting (Stenger & Decker, 2021).
This provides firms with financial flexibility, resource availability, proactive cash management, and performance transparency.
Stenger, G. and Decker, Z. (2021). Liquidity Levels in a COVID world: Why Healthcare Finance
Leaders Should Be Paying Attention. Healthcare Finance Management Association. https://www.hfma.org/topics/hfm/2021/april/liquidity-levels-in-a-covid-world--why-
healthcare-finance-leader.html
Yandreski, A. (2020). Five Steps to Optimize Net Working Capital. Bain & Company.
https://www.bain.com/insights/five-steps-to-optimize-net-working-capital/
Briana,
Thank you for posting, I agree that the connection between managing working capital and profitability is like the links between finance and accounting. Building a resilient firm requires business strategies that increase working capital thereby increasing the profitability of the business. The COVID-19 pandemic has had direct impacts on healthcare finance and the decision-making process. Critical goals finance leaders focus on are managing liquidity, maximizing market value, emphasizing efficiency, detailed reporting (Stenger & Decker, 2021). It is in this way that firms can keep multiple sources of liquidity in times of crisis, like those posed by the changes cause by COVID-19
Stenger, G. and Decker, Z. (2021). Liquidity Levels in a COVID world: Why Healthcare Finance
Leaders Should Be Paying Attention. Healthcare Finance Management Association. https://www.hfma.org/topics/hfm/2021/april/liquidity-levels-in-a-covid-world--why-healthcare-
finance-leader.html
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