FINANCIAL PRUDENCE IN HOSPITAL MANAGEMENT

WHAT IS FINANCIAL PRUDENCE

This is the practice of cost consciousness, cost control, cost rationing, relating costs to benefits and preventing or avoiding financial wastages, all aimed at financial efficiency and profitability. But the Chambers dictionary defines prudence as wise or careful in conduct, shrewd or thrifty in planning ahead, wary or discreet.

Financial prudence is a term that is only synonymous with financial activities, but for financial prudence to be practicable, the following factors must be present:

A         There must be a person, business, project, organization or institution

B           Capital/Financial Assets must be involved

C          There must be objectives to be achieved

D         Information must be available

E          A financial plan must be in place

In Accounting, there is a basic convention called “Prudence”. This convention demands that great care should be exercised in the recognition of profit, while all known losses are adequately provided for. There is also the Prudential guideline in banking business in Nigeria which supports the above convention.

When financial prudence is absent in your Hospital management, the followings are commonly found:

·        A situation of financial plan-less-ness

·        No financial purpose, No financial focus and No financial direction

·        Incessant quarrel among management and staff arising from unfulfilled financial expectations.

·        Poor job performance and no motivation

·        Carefree  attitude among staff

·        Fear of using initiatives

·        Lack of Commitments

·        Teeming and lading (method of misappropriation of cash received, by falsifying records of subsequent transaction)

·        Low morale

·        Staff and Contractors Alliance

·        Wage War

·        Fraud

·        Corruption

To establish a mechanism for financial prudence in your Hospital, two fundamental issues must be adequately addressed.

·        Financial Planning  (with a time related budget arising there-from)

·        An Effective Internal Control System

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