Workingcapital of an organization is the financial metric that representsthe operating liquidity available to the organization including thegovernment entity. It is mostly reflected to be part of the operatingcapital. in a health organization is the amount ofliquidity available to keep the operations running, while thenetworking capital is the actual liquid of assets designed as thedifference between current liabilities and current assets.
Boththe working capital and the networking capital are of importance invarious ways to any health organization especially the networkingcapital. It is used by the organization ensure continued operationsand sufficient funds in supply to satisfy short term loans andorganizations expenses. It is also an indicator of an increase incurrent assets or a reduction in current liabilities of theorganization that keeps it alert. Current assets and currentliabilities are a representation of three specific accounts that areimportant to every health organizations management, and these are theaccounts receivable, the inventory and the accounts payable. Thefirst two accounts form the current assets, and the third is acurrent liability(Fazzari, S. 1993).
Theaccounts payable are the short term loans accrued by the organizationand are payable within one year. They majorly include bank loansacquired to buy drugs and other lines of credit that may involveother supplies in the organizations hierarchy. This then leads to aworking capital cycle that is used to manage the free cash flow of anorganization. A working capital cycle of an organization can then beconsidered as the amount of time taken by the organization to turnnet current assets and liabilities into liquid cash. The differencein time of collecting receivables and delaying the accounts payabledetermines the organization`s return. This allows the organization togrow faster by gaining interests through the exchange of its assetsand cash.
Theworking capital cycle serves the organizations at various levels ofthe banks’ loan access, suppliers, government funding, externalorganizations and the World Health Organizations. Through monitoringof the working capital cycle, banks and other funding stakeholderscan make decisions on whether and how to fund the organization. Thisis because the working capital cycle is the indicator of theorganization`s ability to repay debts.
Therevenue cycle management is the process of managing the claims andprocessing the payments and revenue generation of the organization.It entails the technological tracking of claims in assistance of thehealthcare to process them and address the issue with the aim ofensuring a steady stream of revenue. Among tools and components of aneffective health revenue cycle management are the following importantelements capable management that is there to ensure high-levelmanagement skills, an appropriate model of organization (centralizedand decentralized), consolidated practice management system,transparency and standards. These tools are used by the organizationto measure the success of the revenue cycle management in terms ofdelegation of work and revenue realization claims(Lazaridis, I. 2006).
Inconclusion, the revenue cycle management helps the organization inensuring that claims are collected in time and addresses the deniedclaims in early stages. The implementation of the revenue cyclemanagement has various advantages that include reminding the patientsof their payment responsibility, easy management of patients’details and patients’ appointments to the organization. It alsosaves the staff the task and time of dealing with the claims from thepatients who acquire services from the organization.
Fazzari,S. M., & Petersen, B. C. (1993). and fixedinvestment: new evidence onfinancing constraints. TheRAND Journal of Economics,328-342.
Lazaridis,I., & Tryfonidis, D. (2006). Relationship between working capitalmanagement and profitability of listed companies in the Athens stockexchange. Journalof financial management and analysis, 19(1)