Financial Effects and Constraints

1155 Words Mar 27th, 2011 5 Pages
Financial Effects and Constraints
Health care organizations throughout the world are facing many financial challenges. Management has to find ways to streamline processes, reduce waste, and bring profit to the organization. Pharmacies in the health care system tend to be one of the major departments that bring in a very large amount of revenue for an organization. Therefore, it is extremely important for management to focus on processes that will result in the smooth operation of the pharmacy department. Management must be cognizant of the revenue constraints and financial factors that the pharmacy department faces and be able to make good business decisions that benefit the organization. Additionally, to forecast accurately the
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One of the creative strategies implemented was to stop the purchasing of intravenous medications. Oral medications, which are less expensive, were purchased by pharmacies for patient use. Pharmacies nationwide also had to eliminate resident positions, reduce student rotations, cut back hours of services, and place capital projects on hold. Management in health care organizations had to analyze their financial situations and determine if it was possible for them to remain open. Unfortunately, some pharmacies had to close their doors (Thompson & Karpinski, 2009, pp. 7-9).
Financial Reporting in Pharmacies Financial forecasting is important for any organization. Proper forecasting allows management to modify business practices at the right time to obtain the greatest benefits. Additionally, forecasting avoids the organization from spending time and money on products that will eventually fail. Financial reports must be understandable and reliable. The two reports that provide information that help with the decision-making process for a pharmacy’s operating future are the income statement and the statement of cash flows.

Income Statement The income statement provides valuable information about an organization. This financial report will tell the business if it was profitable over a given period. The income statement “measures a hospital’s profitability by
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