Can They See Your Value?
by David E. Coit, Jr., DBA, CVA, CVGA, CMAA
Volume 5 Issue 24, November 27, 2018
Not long ago I listened to a compelling presentation by Monica Oss of OPEN MINDS on the evolving nature of value in healthcare. At the conclusion, she noted that value-based payments for healthcare services and products “are at the core of healthcare innovation” and “that providers must be able to demonstrate value internally and externally.”
The measure of value for any healthcare company is obviously about results, financial and otherwise. It also refers to the clarity of presentation of value and, as Berman, Knight, and Case write in Financial Intelligence, “the art of using limited data to come as close as possible to an accurate description of how well a company is performing.” When “accurate” becomes “cloudy,” it usually translates into questions and doubt, whether for a funding source, buyer or a potential investor.
Here are some reasons why the quality of your financials is so important:
For most healthcare businesses they are the first thing potential lenders, investors and buyers look at after a thumbnail outline of the nature of the company and whether or not it is a going concern. If your results are poor, that is one matter, but often the biggest concern is whether or not the results make sense from the financials themselves. The issue is a not-so-subtle one of competence.
Your financials are part of the trust that usually develops at some level between your healthcare company and an investor/buyer. If there is clarity and there is some challenge on your bottom line, trust can still develop. If there appears to be a myriad of difficult to decipher add-backs that create remarkably positive results, distrust usually ensues.
In my experience, the quality of financials is a projection of the personality of the owner, and this reflects the larger culture of the healthcare enterprise. How attentive are you to the daily needs of your healthcare business, including employees and customer relationships?
The quality of your financials is often related to how active your management and employees are in the operational accountability of your healthcare business. The clarity of the financials is especially important in healthcare companies that are not too dependent on the owner and are relatively transparent.
Buyers, customers, and funders don’t expect perfection. If they are seasoned, they understand adversity and the challenges that impact every healthcare business. However, they do expect to understand the operational truths of your healthcare company, and that’s why the quality of your financials is such a big deal.