This blog is the first in our series where we interview professors from the Executive MBA for Physicians program about their courses: both their content and their value for a busy, practicing physician. Dr. Brenda Anderson teaches at both The Heller School for Social Policy and Management and the International Business School at Brandeis University. She has also taught at the University of South Wales, Sydney, Northeastern University, and Boston University. Prior to entering academia, Dr. Anderson worked as an auditor for KPMG Peat Marwick and is a Certified Public Accountant.
Below is the transcript from a short interview, where Dr. Anderson provides insight about her two courses in the EMBA for Physicians curriculum: Financial Accounting and Managerial Accounting.
You teach both Financial Accounting and Managerial Accounting. What are the primary differences between these two courses?
I think it best to employ a health care context in answering this question. While not perfect, I believe this analogy from a clinician’s perspective will quickly capture the essence of the difference between the two courses.
In the examination of a patient presenting symptoms of a medical condition, the physician might look at the patient’s external appearance and current health status to make some type of initial assessment. The first accounting course in the EMBA curriculum, Financial Accounting, is similar to this context in that it addresses how external parties, such as creditors, investors, and regulatory bodies, process information about an economic entity to assess its financial well-being or “health status.” A standard set of financial statements that includes a balance sheet and an income statement are disseminated to these external decision makers for this purpose. The balance sheet tells a story about what the organization owns (assets) and its obligations (liabilities) as well as providing information on owner contributed resources and accumulated profits (equity). This “story” is reported as of a single date in time and, in sum, describes the entity’s financial position. The income statement or statement of operations conveys information about how the organization has performed over an accounting period. It presents the amount of services or goods delivered and matches this “revenue” against resources used in this delivery to measure performance, or in accounting terms, net earnings. Thus, Financial Accounting is a course focused on external financial reporting.
Returning to our patient assessment example, Managerial Accounting would be akin to having the clinician examine diagnostic test results that provide insights as to what is going on internally with the patient so that a medical course of action can be planned going forward. Essentially, Managerial Accounting is a course that focuses on providing decision makers within the organization with information and results of diagnostic tools that will allow them to assess, control and strategically guide the entity.
As this course evolves, the focus is on learning about cost identification, overhead allocation, cost behavior, and how the nature of such behavior impacts net earnings or profits. Critical topics such as break-even and target profit analysis, budgeting, outsourcing and long term project evaluation, such as launching a new service line or opening an ASC, are also examined.
What skills can a physician expect to gain from your class?
Admittedly, I am most certainly biased and steadfast in my beliefs about the critical nature of financial literacy skills. That said, frequent reactions to my class sessions or executive education sessions with physician groups can be summarized as follows.
- I no longer fear the financial people in my organization.
- The administrators in my organization are continually talking about margins and overhead allocation. I finally understand their language!
- I am actually beginning to enjoy learning this stuff but don’t tell anyone.
- Thank you for teaching us – this is exactly the skillset that I need.
Within such comments, you can hear a very genuine, explicit “thirst” for this content. Physicians truly believe acquisition of knowledge in the areas of finance and accounting is tremendously empowering.
At the completion of the two courses, you will be able to read, interpret and analyze a standard set of financial statements – balance sheet, income statement and statement of cash flows. You will have an excellent working knowledge of the origins of each line item on these financials because we build our own set of start up financial statements together in class and use this as a learning platform for the remainder of the course.
I firmly believe, “If you build it, they will come.”
Further, you will be able to understand the nature of product and service cost measurement and behavior, analyze costs using cost/volume/profit analysis, employ a number of cost allocation techniques, analyze a variety of short term business problems (outsourcing, special orders, etc.) using differential cost approaches, evaluate the costs/benefits associated with capital budgeting, and prepare, analyze and interpret budgets and variance analysis reports.
When all is said and done, you will have a full and overflowing toolkit from which to draw upon when faced with a wide range of financial analysis and decision tasks within your health care organization.