BUDGETING AND FINANCIAL
MANAGEMENT
.
Management Functions
Planning
Organizing
Staffing
Directing
Controlling
Planning
Deciding in advance what needs to be
done for the day, month, years ahead
Charts the course for future action
Facilitate use of time, activities and
resources
Reasons for planning
To focus attention on objectives
To offset uncertainty and chance
To gain economical operation
To facilitate control
Types of Planning
Standing Plan
List of daily or standard activities
Nursing care plan
Used as a way of organizing time and
activities
Types of Planning
(continued)
Strategic Planning
Market and future oriented
Provide a plan for the life of the entire organization
Occurs at an administrative level or top
management
Includes in-depth analysis of factors within and
outside the organization
Involves:
Methods to increase revenue
Consolidate services
Reduce loss of profit
Provide income-producing services
Types of Planning
(continued)
Long-range Planning
Provides direction for organizational growth
Involves 1, 5, 10, 15, 20 year goals
Administration meet to continually develop
goals for the future
SEE THE HANDOUNT
?What is a budget
It is a tool for planning and controlling
organizational funds. It is a formal
written guideline describing
organization’s future goals expressed in
financial terms within a set period of
time.
It is a detailed statement of estimated
income and expenses. It is a historical
record of the organization’s activities
during a given period.
Purpose of a Budget
Planning document
Incorporates financial data used by a
department/organization
Forecasts both receipts and
expenditures.
Financial data are used to keep system
functioning.
Budgeting Concepts:
The budget is integral to planning. It
provides an orderly and rational
framework for organizing effort; it serves
as management tool for both directing
and controlling effort.
Financial management:
Is defined as "a series of activities
designed to allocate resources and plan
for the efficient operation of the
organization".
Factors influencing Budget planning:
Economic environment, financial means
Changing demands
Availability of human resources
Capacity of facilities
Service costs/market price
Other factors include consideration of
organizational mission goals and strategic
direction as well as the economic
environment and the plans and objectives
of other segments of the organization.
Nursing Budget
Generating and controlling a divisional budget is
a major responsibility of the nurse executive.
To predict budget expenses for any anticipated
period of time, the nurse executive needs to
identify clearly three elements:
The present activities of the nursing division
The activities that the division plans to
institute during the projected financial period
Those activities the division plans to delete
during the projected period.
. ystems of budget development
S
1. Centralized budgets:
Are developed and imposed by the
controller, administrator of the hospital,
and the director of nursing services, with
little or no consultation with lower-level
managers.
This is “top-down approach leaves the
implementers of the budget without
autonomy or the right to appropriate or
control expenses.
2. Decentralized budget:
More and more health agencies are
recognizing the value of having budgets
prepared by those who must implement
them. With decentralization the first-
level manager (head nurse) becomes
actively involved in the planning and
budgeting process; autonomy, ac
countability, and authority are placed at
the practitioner level.
Types of budgets
Operational Budget:
Includes services to be provided and goods
the unit expects to consume or utilize
during the budget period. For a nursing
unit this covers the cost of salaries, fringe
benefits, supplies, small equipment, and
other miscellaneous items.
The Capital Budget
This represents the projection of costs for major
purchases or projects. Each institution has its
own definition of what qualifies as a capital
expense.
Capital items usually include major architectural
renovations, major technological equipment's,
and fixed assets (furniture, buildings).
Capital budgets are forecasted over a 3-year period;
however they are reviewed and revised annually
and as needs change.
In preparing a capital budget, the nurse
executive is required to document the
need for most major items.
:The budgetary process
Preparation of the budget begins several months before
the end of each fiscal year to allow time for careful
preparation.
First: those involved with budget preparation review
agency policies, standards, and objectives
Second: the agency controller and director of nursing
services prepare guidelines for the budget.
Third: The first-level managers (head nurses) prepare
the budget for their units based on past expenditures
and predictions for the coming year.
Managing Financial Resources
Financial management has a large
scope, and has many interrelated
activities.
Preparing the budget is one of the last
steps in handling finances.
In health care institutions, the financial
department coordinates financial
operations throughout the entire
organization or network.
Objectives of Financial Management
Ensure the organization has an efficient
and effective financial management
structure supporting strategic objectives
Establish a uniform set of internal
financial controls throughout the
organization
Provide appropriate financial information
to make timely decisions
Accounting
Records and reports all financial
transactions
Generates the data for the budget
Standard accounting
Reports financial performance on a
monthly, quarterly, or yearly basis
Uses income statements, balance sheets,
or cash-flow statements
Thanks
