Creating an Improved Capital Planning Process

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Creatingan Improved Capital Planning Process

Creatingan Improved Capital Planning Process

Thecapital planning process in today’s healthcare environment can bevery complicated owing to it dynamic nature. This can be attributedto technology and innovation. Capital planning involves the strategicallocation of available resources to facilitate the long-term plansof the organization. This paper analyzes the concepts presented byClarke on capital planning in health care organization, in thearticle, and their application to my organization.

Clarkeidentifies the strategic plan of the organization as the overallguide to the capital allocation process. The requests for capitalallocation should be based on three broad categories – newstrategic initiatives, expansion or enhancement of existing businessand infrastructure. Communication of these requests should also bemade directly to strategic level management with specifics on itscategory and contribution to the strategic plan (Clarke, et. al.,2004). Measures of performance should also be instituted based on thegoals of the investment to ensure that the allocated capital isutilized as intended. Also, the concept of a reverse allocationprocess on existing capital to determine their value to theorganization is imperative. The non-strategic assets can be sold tocreate additional capital.

Inconclusion, the concepts of capital planning contained in Clarke’sarguments are applicable in most organizations. Capital is a scarcefactor and to ensure that the going concern assumption is feasible,the strategic plan should frequently be consulted during the planningand allocation process. Within my organization, I would recommend thebroad categorization of capital requests and ensure that all projectscontribute strategically to the overall plan of the organization.Standards of performance for all capital projects should bemeasurable based on the intended goals, to minimize wastages duringthe allocation process. This will ensure that the long-termobjectives of the organization are attained

References

Clarke,R. L., et. al., (2004). Insidethe real world of capital allocation.Healthcare Financial Management, 58 (12), 81.