Date post: | 10-Jan-2017 |
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History • Budget word was first coined by the
British Kings in early days from the word ‘BOUGETTE’ .
• The important milestones were:– 1215 AD: constitutional exposure– 1718 AD: consolidated fund act passed
which considered budget as financial statement of Govt activities for facilitating accountability of public fund .
– 1882 AD: Budget entered the parliament for first time seeking advice
Meaning • A forecast of the resources required
to deliver the services offered by the organization
• A plan for coordinating the financial goals of an organization
• A formal , quantitative expression of management’s plans, intentions, expectations & actions to control results
In summary • A budget is a financial plan that
includes estimated expenses as well as income for a period of time.
• Fixed or variable/ either controllable or non-controllable .
• Fixed expenses do not vary with volume, whereas variable expenses do
Basic of budget • Cash Book: Date/ particulars/
receipts / payments• Ledger Statement:• Receipts & payment accounts-
prepared for one year.Receipts Payments
Opening balance cash Salaries Opening balance bank Fees
Receipts Balance
Continues • Income Vs. Expenses
• Balance sheet • Liabilities Assets• Source of money land • Donations building • Grants cash • loan bank deposit/saving AC
Income Expenditure Receipts Opening storesGrants Purchases
Receipts Expenses Income
Purposes Control costs
Establish annual & monthly budgetIdentify &
analyze actual
experience compared
to the budget
plan
Accurately report all financial
and statistical
data
Characteristics • It is a plan or program, framed on the
basis of past experience• A scheme for action• It should estimate revenues &
expenditures as accurately as possible
• It is comprehensive plan of action
Features Flexible
Synthesis of past, present & futureProduct of joint venture or participation of executive at different levelsIt should be clearly definedForm of statistical standard laid down in specific numerical formRepresent expected revenue as compared with anticipated expenseFacilitate goal achievement
Principles • Provide sound financial management• Focus on objectives & policies of an
organization• Be flexible• Budget necessitates a review of the
performance of the previous year & an evaluation of its adequacy
Importance of Budget • An essential management tool • Budget tells you how much money
you need to carry out your activities• Budget enables to monitor income &
expenditure• The budget is a basis for financial
accountability & transparency
Types of Budget
Capital Budget• Fund needed for the capital items for the
growth• New supplies & facilities & the replacement of
worn out equipment, machinery and furniture.• The decision on capital budgeting is primarily
is based on:i. Needs of patients and existing alternativesii. Effects of additional equipment on income &
expenditureiii. Availability of funds
Operating Budget• It provides an overview of an agency’s
functions by projecting the planned operations , usually for the upcoming year.
• The nurse manager might include: personnel salaries , employee benefits, insurance , medical- surgical supplies, office supplies , rent , heat , light , house-keeping
• Both controllable and non-conrolable expenses are projected
Personal Budget • Estimates the cost of
direct labor necessary to meet the nursing needs of the estimated patient population.
• The current staffing patterns, number of unfilled positions and last year’s report can provide a base
Cash Budget • Cash budget are
planned to make adequate funds available as needed and to use any extra funds profitably
• The ensure that the agency has enough, but not too much , cash on hand during the budgetary period
Budgeting methods
Incremental • Simplest method• Budget for the coming year is projected • Requires little budget expertise from the part of
the manager Zero-Based • Assumes the base for projecting next year’s
budget is zero• Manager’s are required to justify all activities &
programs as if they are initiated for the first time.• Every proposed expenditure must be justified
with:• current environment • fit with organizational objectives
Continues…
Flexible
• budget flexes over the year : up and down• Flexible budget automatically calculates what the
expense is
Performance
• This method emphasizes outcomes and results instead of activities and outputs
Budget Process
Budget calendar • For practical purposes , the nursing
budget follows three stages of development:1. Formulation2. Review and enactment stage3. Execution
• The entire budgeting process is given a specific time frame and a target date is assigned for each step.
Formulation Stage• It is usually set number of months (six
or seven) before the start of the fiscal year for the budget.
• The main functions are 1. Develop objectives and management plans2. Gather all financial , historical and
statistical data and distribute to cost-center managers
3. Analyze data
Review & Enactment Stage
• Prepare unit budget• Present unit budgets for approval• Revise and combine into
organizational budget .• Present to budget council• Revise and present to governing
board• Revise and distribute to cost-center
managers
Execution Stage• Execution of the budget involves
directing and evaluating activities .• The nurse administrators who
planned the budget execute it.• Revision are scheduled at stated
intervals usually once or twice during the fiscal year, if indicated.
Advantages Places everyone on the management team
Helps to create cost awareness Helps to measure individual & departmental productivity as well as profitabilityProduce cost savings
Provides a plan or forecast of what is expected.
Help clarify accountability & responsibilityProvides for communication within the organization
Disadvantages
Restrict the
activities
Under estimation
Over budgeti
ng leads
to over expend
iture
Planning a
Hospital
Budget
Stages of Budget Plan (Hospital)
1. Prepare assumptions, in statistical terms about the kind of services (outputs) the hospital expects to provide.
2. Prepare the economic forecasts in respect of new developments.
3. Outline the budget goals and policies as per the directives of governing board
4. Prepare a budget package incorporating written instructions.
Continues.. 5. Each department head to analyze financial &
statistical data generated by his department as well as provided to him by the administration on finance department.
6. Summary of each department is recorded between the administration and the department head and also includes observation of financial officer
7. The finance officer to develop the department’s revenue budget and forward the departments budget hearing summary to the concerned department head
Continues.. 8. The finance officer to prepare a
preliminary operating revenue budget for the whole hospital by summarizing and collating the individual’s department budget
9. Finance Officer to summarize the total budget into a proper budget format
10. In the final step , budget is presented by finance officer to the governing board or finance committee for their approval
Preparing a Budget EstimateIncome/
Expenditure
Actual Current year Budget Next Year
Last year Budget Actual Proposed Approved
Role of Nurse Manager• The administrator requires sufficient funds to
support sound program• The administrator submits a budget request and
a justification for the proposed expenditures.• Budget is presented to the president• The budget is reviewed , analyzed and modified
on the basis of discussions of president and budget committee
• Once revisions are made , president presents the budget to board of trustees for approval
Continues.. • When the budget is approved , it has given
authorization to make expenditure and to collect income as indicated in the budget
• When the budget is adopted , administrator is committed to support the budget
• Once the budget is approved , it is the responsibility of the administrator to see that expenditures do not exceed the approximates 1 made to the institution
References 1. Jogindra Vati (2013). Principles &
practice of nursing management and administration, I ed., New Delhi, Jaypee Brothers Medical publishes (P) Ltd.
2. Marquis, B. L., & Huston C. J. (2009). Leadership roles and management functions in nursing: Theory and application (6th ed.). Philadelphia: Wolters Kluwer Health.