The genesis of strategic business planning is to secure, and if possible enhance, the financial situation of the organization, facilitating it to continue its mission well into the coming years. Midvale must build a macro level financial model connected to its demand forecasts and based on "most likely" supposition for revenue and expense categories. Certain level of capital costs connected to infrastructure and essential equipment replacement shall have to be included in the fundamental model. Including a yardstick component at this stage will assist in the identification of opportunities for improvement and sensitivity analyses for development of assumption.
Since business planning is concentrated on future investments in clinical enterprise, it is important to delve deeper than the income statement to the balance sheet, cash now statement, debt capacity, and availability of capital needed for the planning horizon. Utilizing the help of outside rating agency metrics adds one more layer of reliability. Till the level possible, Midvale must even examine the financial performance of its clinical service lines. This analysis will underline possible operating problems and set up a basis for evaluating future investment potential. The total baseline financial model will assist the organization evaluate its anticipated future position against established performance metrics fixed by the board. (Bachrodt; Smyth, 2002) ii) Performing an Impact Analysis: - Conducting an Impact analysis comprising market testing a financial modeling will assist in ensuring that a strategy posses merit. This analysis might comprise finding out particular capital and resource needs and taking the experience of the people who have pursued identical strategies. A lot of Hospitals take their strategies believing into them in the absence of testing their financial reality of their strategic direction. In case of visionary strategies specifically that might need considerable investment, it is crucial to appreciate the associated extent of risk and reward. Organizations which apply this level of strategy assessment set up further measure of accountability for the success of the strategy. The impact analysis identifies that financial position is dynamic.
Strategies might be restricted by the present financial realities; however they can propel future financial realities. Bedrock and bridge strategies can build the future financial reality which supports the visionary strategy. Short-term initiatives with short-term financial performance targets have the potential to build the resources for long-term initiatives. A deep impact analysis gives insight from two viewpoints: feasibility and desirability. Feasibility refers to whether in the event the strategy is implemented will the organization is viable on an ongoing basis. Besides, there is also the question as to whether the plan will be viable or not. Does it depend on heroic debt issuance or reduction of costs? Desirability: Will the organization be better off compared to what is would have been under the present situation or other options. (Bachrodt; Smyth, 2002)
Dependent on the net present value and internal rate of return estimates, it is important to find out whether incremental cash flows generated by the chosen strategy is better compared to the cash flows produced by the options. The impact analysis entails building a complete set of financial projections - income statements, balance sheet and cash flow statements in case of present situation and also for the alternative strategy. The financial return linked to the incremental pre-debt cash flows generated by strategy over the baseline is gauged. At times a strategy might have a lower financial return compared to the present set up or other options. Nevertheless, the organization might continue to go with the strategy in case it is achievable and sustainable. The time span covered by the financial projections must be 10 years at the minimum, especially in case important capital expenditures are envisaged.
Even though uncertainties mount with a longer time horizon, a well developed financial projection that must be 10 years at the minimum, especially in case substantial capital expenditures are visualized. Even though fears increased with a greater time horizon, a properly developed financial projection which distinctly relates the underlying movers with financial performance gives a basis on which to gauge success and gives signs when the adjustments must be made to the strategic plan. The strategic plan and the supporting financial plan are considered to be live documents which need adjustments with the changing situation. A long-term financial plan which is linked to the strategic plan shall let Midvale to appreciate whether it is on target and the positions where there might be shortfall of being able to finance its longer term strategies. The financial plan must be refreshed as an element of strategic planning cycle. (Bachrodt; Smyth, 2002)
Detailed Implementation Strategy:
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