Over the years, the healthcare environment has been faced with tremendous pressure from their respective health care board and executive management teams. We have spoken to several CFOs and Finance Managers in the health care industry who continue to struggle with the formidable process of budgeting and forecasting. The process is so complex that it takes several months to complete.
When doing financial forecasting, consistency of assumptions is the key but this is rather hard to accomplish when several data comes from numerous numbers of department heads who provide their assumption without taking into consideration the other assumptions. Consequently, this leads to critical oversights.
We have listed down the things that can help improve how you do financial forecasting.
Know the area´s demographic trends
While it is important to analyze historical volume trends, the team must always assess the service area. Knowing the demographic trends help determine volume forecasts. A good example is looking at a hospital area´s population growth trend which affects inpatient use rates as well. If this is declining, it is safe to assume that market share must be increased to sustain patient volumes.
Include Statement of Cash flows
Preparing a full statement of cash flow is really a pain but this is too critical to be ignored when preparing a forecast. Balance sheet line items can have a huge impact on the cash flow such as capex, working capital changes, pension requirements, required reserve funds, etc.
Include expenses necessary to support revenue changes
Across the healthcare industry, staffing costs occupy the largest cost. These costs must then be assessed in comparison to expected revenue changes. There are a variety of ways to do this and one of which is evaluating trends in ratios compared to industry standards. Analyzing both fixed and variable parts of expenses becomes critical as volume increases or decreases are implemented into forecasts.
There are so many details involved in financial forecasting that it becomes so easy to lose track of the bigger picture in a constant struggle to get the minute details included. While the three listed above can help improve the forecasting process, there are hundreds of other factors to consider.
In all of these, it is important for the finance team to adopt a solution that can make forecasting easier. Performance Canvas Financials supports Financial Forecasting, Budgeting, Reporting and Analysis, and Consolidating. Terri McCracken, Friendly Hospital´s Finance Manager in Bundaberg Australia, can definitely attest to the huge difference a capable financial system can make in the day to day lives of the finance team and the management team.
Click here to watch her testimonial of Performance Canvas Financials implemented together with our OEM partner Epicor. To know more about how Performance Canvas Financials can help your finance team, email us at [email protected] or schedule a free and exclusive demo with us.
DSPanel offers cutting edge technology platform for business analytics, planning, and visualization. DSPanel designs, builds, and operates with the end users in mind. Performance Canvas was created by DSPanel to answer the unarticulated needs of the market not addressed by previous available solutions. With Performance Canvas, information is transformed into valuable business insights for the business executives to utilize in their decision-making process. DSPanel currently has over 2500 organizations deploying their solutions.
