Contents Introduction 3 Literature review 4 References 10   Introduction The healthcare industry in Australia is famous for the excellent services provided to the customers. This industry is becoming increasingly competitive due to increased number of providers of health services, mass adoption of health covers and insurance and increasing cost of health care services (Friedman, Baker, & Carpenter, 2006). Added to this is the false claims and their settlement by the organizations. Profitability and cost management of the healthcare industry is a factor often overlooked by the managers as the organizations providing health care services generally do not have maximization of profit as their aim. But it is necessary for the organizations working both for-profit and not-for-profit to generate some amount of profits in order to continue their operations and sustain in the market. The organizations often face a challenge while calculating the costs of services and the estimation of profits due to the moral dilemma and obligation associated with this industry. However, we must make sure that the accounts of the organizations working in the health care industry are managed properly as the profitability and cost management affects the entire management of these institutions (Jones, 2008).   Literature review It is important for every organization, regardless of the industry it belongs to, to prepare financial statements conforming to the accounting principles and norms. In Australia, all the Accounting standards are developed and maintained by the Australian Accounting Standards Board (AASB). It is an agency of the Australian Government that takes care of both public and private sectors and their financial reporting. The health care in Australia is provided by both private and public institutions. The quality of health care being provided here is very high and so is the amount spent for its provision. The health care industry is a positive contributor to the growth of the national economy. This is one industry that keeps evolving with the changing trends, the latest discoveries and technological advancements. It is therefore important for the healthcare institutions to focus on both quality service delivery and managing paperwork, taxes and other accounting systems. The objective of this research is to study the challenges faced by the industries in accounting and finance management with special focus on the healthcare industry. Various studies have been conducted on the accounting practices being followed in the healthcare industry and all of them indicate that the methods being used are almost same for all the organizations in this industry (Oracle, 2015). The accounting in the healthcare organizations is done following the norms made by the Australian Accounting Standards Board. There are various issues that an organization may face depending upon the organizational structure and the accounting practices being followed. The major challenges faced by the healthcare institutions are related to risks and uncertainties, cash flows, deposits and investments, contributions. The most crucial step in managing the accounts of a healthcare institution is in deciding a performance indicator. The performance indicator is an operational measure of the profits of the organization. It gives us a yardstick to compare the performances of the organizations in the industry across the world. Earned income, revenues after expenses are some of the indicators that can be used to measure and compare the accounts of an organization (Kaufman, 2009). The sources of revenue for a health care institution are patients, government funding, third party payouts, investment income etc. The issues or contingencies that may be faced by the healthcare organizations in managing the accounts are malpractice claims, third party payments, uncompensated care provided, contractual agreements, risk contracting etc. The budgets must be made in a comprehensive manner for managing the accounts in a systematic. There are numerous health care frauds and illegal activities these must be taken care of and accounted for. The restructuring of organizations is another factor that must be taken care of in the accounting (Orchard, 2016). Healthcare accounting is complex. Competency in accounting of healthcare organizations is crucial due to its complexity, but the study and maintenance of accounting records for the heath care organizations is both rewarding and fascinating. Management of accounts and finance is a decision science. Financial management in all industries is of prime importance for the efficiency and smooth functioning of the organizations, but it becomes even more important in the healthcare industry as any lags or loopholes may cause an impact in the heath related services being provided and the lives of the people are at stake. The healthcare organizations may either provide the services directly to the individuals or have organizational clients who have contractual agreements with the healthcare firms for providing healthy related assistance. People now-a-days increasingly seek insurance cover for their health and this has shifted the customer base of the healthcare organizations from individuals to organizational customers (Ministry of Health, 2012). Insurance covers are beneficial for the people as they help in pooling the losses, transfer the risk from individuals to the organizations, aid indemnification and lessen the burden of the people by taking care of the financial perspective of accidents and mishaps, but for the healthcare industry, it can prove to be expensive as the people taking heath covers tend to measure their health and choose the plan accordingly. The people most likely needing a health cover are also most likely of purchasing one. Although the insurance companies and the healthcare organizations try to control this adverse selection by underwriting provisions, there is a fair chance of asymmetry in information being given by an individual. This can be done in case of individual buyers of the insurance, but in case of institutional customers, this risk goes even higher. Another risk for financial management in the healthcare industry is due to the moral obligation of the organizations to provide services at the time of an emergency. This leads to unpaid expenses that fall in the kitty of the organizations only. The service providers have set costs for the services being provided by them (Group, 2014). These costs are a function of the supply conditions and demand for the services in the market. Healthcare organizations cannot practice this as there is a range of reimbursement amount that has to be paid for a single service being provided according to the protocol. Thus, it becomes important that to be an effective healthcare manager, one needs to have a knowledge of accounting and financial management. The main aim of healthcare accounting is to run the operations uninterrupted and profitably. The operations must be viable and the organization must not run into bankruptcy and at the same time they need to make sure that there is no compromise on the quality of services being provided. The organizations working in the health care industry have to deal with the question of providing services without getting paid for them in order to continue business operations at times. Many healthcare organizations do not have maximization as a goal, but even those have to generate some profit in order to survive, sustain and continue their operations. Whether the healthcare organization is for profit or not for profit, they have to operate profitably in order to expand its operations and services so the health care services are within the reach of more and more people. They also have to earn profits from patients whenever possible so that they are able to support and provide services to the patients who are not able to pay for or afford the services being provided. They need to work profitably to acquire the advanced technologies that keep getting developed in order to further improve the quality of services being provided and most importantly, they have to earn profits so that they have ready cash in case of an emergency. Money is also needed to replace the old equipments and infrastructure as they wear out. Replacement of these costs the organization huge amounts and the costs are constantly going up due to inflation (Dorgan & Layton, 2010). All these arguments simply mean that the healthcare industry needs profits for functioning even though their primary motive is to provide health and wellness related services. Profit maximization has a direct tradeoff with risk. The greater is the risk one is willing to take,the greater is the profit if it is a success. Profits may not be the primary motive for the running of healthcare organizations, but it is the means to an end and not the end in itself. Sometimes the conditions may be such that the organization has to choose to earn lower profits in order to provide better services to the customers, but it is all a part of risk and profit trade off. The pressure on the healthcare industry id immense due to lower premiums of the health insurance, pressure to increase the benefits in the available policies, financial and tax incentives and burdens, increasing trend towards small business and self employment, reduction in employee benefits, frauds and claim payment procedures etc. All these challenges create both opportunities and threats for accountants working in the health care industry. This industry is also becoming increasingly competitive with the increase in the service providers and increase in the costs of health care. The increased supply always leads to decrease in the profit margins and this is never a good sign. Although the organizations do not work for the aim of profit maximization, the industry needs to earn profit to sustain itself. This added to the rapid evolution of technology only aggravated the problem of the finance managers further. It thus becomes necessary for the organizations to accurately analyze the data and devise a profitability model that helps in proper allocation of costs incurred and revenues earned. A comprehensive and flexible allocation plan will not just benefit the organization, but also provide a measure to compare the performance of the healthcare industry as a whole (Walshe & Smith, 2009). This moral dilemma associated with healthcare accounting makes it even more complicated. The primary aim of healthcare accounting is to assemble the information related to health care and structure it to hold the service provider formally accountable for the services being provided in the health care sector. This will make it easier for the information seekers to analyze the performance of the organization and to reward the good performances with a better payout. The discipline of accountancy in the health care industry is still in its infancy at present. This task seems to be so challenging that some people from the industry have given up on it. The health care accountants need to measure the outcomes and results of the services provided by the financial interventions and profits made. The organizations must have the information note down for every dollar spent and owned. The detailed statements of assets owned, debt carried, the net worth of the organization also called owner’s equity must be included in the balance sheet of the organization. The accountant of the organization must calculate the dollar worth of all the things listed in it regularly. This can be done monthly, quarterly or annually as per the organizational convenience and policy. The business accountants face conceptual and practical challenges regularly while computing and maintaining the accounts for the healthcare organizations. These are equally daunting if not more to the challenges faced by the healthcare researchers. The government also has varied rules for accounts maintenance in the healthcare industry and their decisions are to be followed at all times by the accountants. The health care industry must get used to working with these and maintaining records of the accounts and financial performance of the organization working in this industry (WHO, 2012). The economic evaluations need to be made more objective and respectable. The financial accounting must be done keeping it away from the emotional and moral obligations of the healthcare industry.   References Dorgan, S., & Layton, D. (2010). Management in Healthcare:Why good practice really matters. McKinsey & Company. Retrieved from http://worldmanagementsurvey.org/wp-content/images/2010/10/Management_in_Healthcare_Report_2010.pdf Friedman, L., Baker, G., & Carpenter, G. (2006). Understanding healthcare financial management. Retrieved from http://www.ache.org/pubs/chap1-3gapenski5th.pdf Group, C. (2014). Healthcare Challenges and Trends: The Patient at the Heart of Care. Retrieved from https://www.cgi.com/sites/default/files/white-papers/cgi-health-challenges-white-paper.pdf Jones. (2008). Introduction to the health care accounting and financial management. Retrieved from http://samples.jbpub.com/9781449645281/45281_Ch01_FINAL.pdf Kaufman, F. (2009). Hospital accounting and finance. Retrieved from http://dhss.alaska.gov/ahcc/Documents/meetings/201306/PrimerHospAcctFinance4thEd.pdf Ministry of Health. (2012). Health Care Records - Documentation and Management. NWS. Retrieved from http://www1.health.nsw.gov.au/pds/ActivePDSDocuments/PD2012_069.pdf Oracle. (2015). Profitability and Cost Management in Healthcare. Retrieved from http://www.oracle.com/us/industries/healthcare/042343.pdf Orchard. (2016). Healthcare Account Manager. Retrieved from https://www.orchard.com.au/wp-content/uploads/2016/01/Healthcare-Account-Manager-NY.pdf Walshe, K., & Smith, J. (2009). Introduction: the current and future challenges of healthcare management. Retrieved from http://www.mheducation.co.uk/openup/chapters/9780335243815.pdf WHO. (2012). Leadership and management. Retrieved from http://www.who.int/hiv/pub/imai/om_10_leadership_management.pdf