New Series DAY 1: "We're profitable, but we have no cash."

When I talk to hospital executives and managers, there is a phrase I often hear.
"We are in the black, but..."
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However, when they look at their bank statements, the money hasn't increased. In fact, it has decreased.
This is a very common phenomenon in hospital management.
This is because profit and cash are different things.
The Profit and Loss (P&L) statement shows profit.
However, just because you have a profit does not necessarily mean your cash has increased.
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For example, accounts receivable.
Sales are recorded.
But the payment has not yet been received.
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There is profit.
There is no cash.
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For example, capital investment.
We updated the CT scanner.
We updated the electronic medical record system.
The money went out.
But it is not immediately reflected in the P&L.
There is profit. The cash has decreased.
For example, loan repayments.
Principal repayments mean money is going out.
However, it does not appear as an expense on the P&L.
There is profit. The cash decreases.
In other words, bankruptcy while in the black is possible.
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Therefore, managers must not look only at the P&L.
Look at the P&L.
Then, look at the bank balance.
Furthermore, look at the cash flow.
Only by looking at all of these can you see the full picture of management.
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Strong hospitals do not chase profit. They protect their cash.
Because you cannot pay salaries with profit.
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You cannot pay vendors with profit.
You cannot make capital investments with profit.
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This is because it is cash that keeps a hospital running.
That is why the first thing you should learn about money in hospital management is:
"Profit and cash are separate things."
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POINTS
• Profit and cash are not the same
• You can have a decrease in cash even when in the black
• Managers should look at cash, not just the P&L
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PRACTICAL TIP
This month, after looking at your monthly P&L statement,
try checking the trend of your bank balance as well.
"Why did our deposits decrease even though we are profitable?"
That question will significantly change how you view management.
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Next time
"Managers who only look at the P&L are in danger"
We will consider the pitfalls of hospital management that cannot be seen through the P&L alone.
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Cash flow management sheets, hospital cash flow checklists, and management accounting templates that can be used in the field are scheduled to be released on platforms like note in the future.

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