What Managers Who Can't Read a Balance Sheet Overlook.

When it comes to hospital management, many people look at the Profit and Loss (P&L) statement.
How much is the profit? How does it compare to the budget?

Has it increased from the previous year? Of course, these are important.
However, the real difference in management ability shows up in the Balance Sheet (BS).

This is because the BS reflects the hospital's financial strength.
For example, suppose there are two hospitals. Both have an ordinary profit of 100 million yen.
Looking only at the P&L, they look the same. But when you look at the BS,

Hospital A
Cash and deposits: 1 billion yen.
Borrowings: 300 million yen.
—
Hospital B
Cash and deposits: 100 million yen.
Borrowings: 1.5 billion yen.

What do you think?
Even with the same profit, the sense of security is completely different.
This is a world that cannot be seen in the P&L.
Hospitals that fall into financial distress have one thing in common: they look only at profit and ignore the BS.

That is why they miss the warning signs.
For example, accounts receivable are increasing.
Payments are delayed. Cash is decreasing.
However, a profit is being made. They realize it too late.
For example, borrowings are increasing.
They keep making capital investments. A profit is being made.
But the repayment burden becomes heavy.
If you don't look at the BS, you won't notice.
In other words, the BS is a mirror that reflects future risks.
—
The P&L is the past.
The BS is the present.
And cash is the future.
Strong hospital managers look at these three things in connection with each other.

In particular, what you should look at in the BS are:

1. Cash and deposits
2. Accounts receivable
3. Borrowings
4. Net assets
—
These four items.
Just by looking at these, you can understand the health of a hospital quite well.
Even if you are making a profit, if the BS is deteriorating, you need to be careful.
Conversely, even if profits drop temporarily,
if the BS is healthy, you have the capacity to recover.
Therefore, hospital management is not a game of looking at profit.
It is a game of protecting financial strength.
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POINTS
• The BS is a hospital's physical strength chart
• You cannot determine safety from profit alone
• Check cash and deposits, accounts receivable, borrowings, and net assets
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PRACTICAL TIP
At the next board meeting or monthly meeting, when you open the BS,
please start by asking these questions:
“Have cash and deposits increased compared to last year?”
And, “Have borrowings increased?”
Just by looking at these two things, you can see the health of the hospital.
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Next Preview
“Commonalities of Hospitals Where Cash and Deposits Decrease”
Why does the bank balance continue to fall even though a profit is being made?
We will consider the most overlooked cash outflow in hospital management.
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BS analysis sheets, financial health checklists, and management dashboards for hospitals that can be used in the field are scheduled to be released on platforms like note in the future.

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