Cash Vs. Finance in the Healthcare Industry
One of the classic questions of asset investment is ‘cash or finance?’. Though the common belief in personal finance is that cash is generally better than credit from a spending behaviour, taking this as a default assessment in business context may not always lead to the best outcome.
Despite the healthcare industry being an important government focus evidenced by the projected increase of investment from $81.8 to $89.5 billion over the next three years, behaviours of practitioners still seem to be cash favoured. A default decision of cash ignores the opportunities provided by a relatively low risk industry; one that is government backed, has a growing demand and an ageing population.
Though financial return is never the priority in healthcare, making an uninformed choice for cash comes at a cost to the business and its practitioners or owners (either directly or indirectly), which can eventually lead to a cost to patients. These include:
- Reduced liquidity for unexpected expenses
- The opportunity cost of forgone future investment due to reduced cash
- Uneven cashflow timing if costs are not matched with revenue
- Reduced cash for distribution available for personal/family requirements
- Reduced ability to diversify personal investment from the business and mitigate loss of income risk
- Reduced treatment options with their preferred practitioner if technology cannot be purchased due to constraints
In saying this, debt needs to be appropriately balanced so the benefits of leveraging with finance are never outweighed by the cost of financial stress.
Taking the time to research or seek advice with investment decisions is ultimately being responsible with your resources. Taking unnecessary shortcuts in these decisions may result in ineffective use of resources and therefore reduced ability to achieve the optimal outcomes for your business.
 Commonwealth of Australia, 2019. Guaranteeing essential services. [Online]
Available at: https://www.budget.gov.au/2019-20/content/services.htm
[Accessed 16 06 2019].
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