Cash Budgeting: An Underutilized Resource Management Tool in Not-for-Profit Health Care Entities

• Published in: Journal of healthcare management 1991-10, Vol.36 (3), p.439
• Main Authors: Hauser, Rexford C, Edwards, Donald E, Edwards, Judy T
• Format: Article
• Language: English
• Subjects: Budgeting; Cash budgets; Cash management; Indigent care; Lines of credit; Nonprofit hospitals; Nonprofit organizations; Studies
• ISSN: 1096-9012; 1944-7396

Cash budgeting is an underutilized tool for managing fiscal resources in not-for-profit health care entities. Many of these organizations do not prepare cash budgets in any form. Those who budget cash frequently fail to distribute the document to all potential users of the data. Lines of credit are used by only 1/2 of the not-for-profit health care entities to meet short-term cash needs, and the factoring of receivables is rarely done. The monthly budget period is common for preparers of the cash forecast and is probably adequate. Nearly all of those entities that budget cash also use the document for performance evaluation at the end of the period. Interim budgets should be extremely important parts of any cash management program in the not-for-profit health care entity. The cash budget should depict inflows and outflows from the various activities, be widely distributed, and assure the constant scrutiny of receivables and payables. Prudent cash management is much too important to be a hit-or-miss proposition.