Pharmacy Management: Financial Management

Financial Management in Pharmacy Practice

• A budget is a critical step in planning any economic activity, and it is a key tool for planning, control, and decision making in virtually every organization.
• A budget is a detailed plan, expressed in quantitative terms, that specifies how resources will be acquired and used during a specified period of time.

Types of Budgets

• Master budget: a comprehensive set of budgets covering all phases of a pharmacy organization's operations for a specified period of time.
• Cash Budget: shows expected cash receipts and planned cash disbursements to pay the bills incurred by the pharmacy.
• Operational budget: focuses on daily activity revenues and expenses, such as sales, cost of goods sold, and operating expenses.
• Capital budget: a financial plan that outlines a company's long-term investments in assets such as buildings, equipment, and technology.

Purposes of Budgeting Systems

• Planning: determines the pharmacy's goals and objectives.
• Allocating resources: determines how resources will be used to achieve the pharmacy's goals and objectives.
• Controlling and operations: ensures that the pharmacy's operations are running efficiently and effectively.
• Profit performance: evaluates the pharmacy's financial performance.
• Evaluating: provides a basis for evaluating the pharmacy's performance.
• Facilitating communication and coordination: provides a framework for communication and coordination among different departments and teams.

Accounting

• Accounting is a service activity that provides quantitative information, primarily financial in nature, about economic entities that is intended to be useful in making economic decisions.
• Accounting principles are the rules and guidelines that companies, and other bodies must follow when reporting financial data.

Accounting Principles

• Obtaining financing: acquiring assets and financing activities to acquire assets involve obtaining funds from owners and creditors.
• Making investments: depends on the type of business being conducted.
• Conducting a profitable operation: includes purchasing, distribution, clinical activities, and administration.

Three Essential Financial Statements

• The Balance Sheet: provides a snapshot of an organization's assets, liabilities, and shareholder equity at any particular point in time.
• The balance sheet shows the organization's financial position at a specific point in time.
• Other financial statements include the Income Statement and Cash Flow Statement.