Slides for Class 8 Strategic Financial Planning February 28, 2002

1
Slides for Class 8Strategic Financial
PlanningFebruary 28, 2002

• Strategic plans, Financial plans and Management
  control

2
The Strategic Planning Process

• Integration of Strategic and Financial Planning
• (Figure 9-1, p. 194)
• Financial-Policy Targets (4)
• Projected Revenues
• Projected Assets
• Debt Policy
• A projected ROE linked to the strategic plan that
  is sufficient to meet the GRIE required (Figure
  9-2, p. 196)

3
Requirements for Effective Policy making. (10)

• An accounting system capable of providing data on
  costs, revenues, and investments along program
  lines.
• Remember that even when no new programs are
  planned, this does not imply a zero-growth in
  assets.
• Providing for Working capital is a major element
  in computing a HCOs future needs for assets.
• HCOs should accumulate funds for future
  investments that are critical to long-term
  solvency.
• A formally defined debt capacity ceiling should
  be established.
• Return on Investment (ROI) by program area should
  be an important criterion in program selection.
• Non-operating sources of equity should be
  included in the financial plan.

4
Requirements for Effective Policy making (10)
continued

• The financial plan must be integrated with the
  management control system.
• The financial plan should be updated at least
  annually.
• The financial plan is a board document and should
  be formally approved by the board.

5
Developing the Financial Plan

• The Developmental Process
• Assessment of Present Financial Position
• Defining Growth Rate in Assets
• Definition of Debt Policy
• Assessing the reasonableness of targeted Required
  Equity Growth

6
Integration of the Financial Plan with Management
Control

• Financial Ratio Targets for Omega health
  Foundation. Figure 9-4, p. 213