What is the purpose of developing a budget?
Budgeting helps in gaining control over finances by making resources available be properly utilized towards achieving the set goals. A documented budget improves the honesty in an organization it monitors wasteful expenditure and curtails it. It then improves the overall habit of an entity planning for the future to be self-sustainable by utilizing on credit only when necessary (Finkler & McHugh, 2008).
Is the budget a planning document, a control document, or both?
The budget serves as both planning and control document. Management has the discretion of determining which function is more important and then resolve its formulation issues. Big organizations focussing on operational efficiency concentrate on the coordination and control aspects while small and innovative firms are concerned with planning issues (Finkler & McHugh, 2008).
What are some of the phases of developing a budget?
...Budgeting starts with planning which involves assembling a team, deciding on goals and detailing down the resources required. It includes determining how many staff are needed, the revenue and expected costs. Approval of the budget by the organizational heads like the board follows directly or with amendments. Executing it entails carrying out operations based on the earlier set plans. Finally, evaluation of the actual performance against the budget is conducted to determine if goals are achieved and assist in future planning.
Are there different budgeting models?
Incremental budgeting entail allocations based on funding levels of the previous year. Zero-based budgeting requires planning as if nothing existed. Activity-based target activities which are yielding the highest revenue while performance-based allocates funds based on outcomes in specified metrics. Centralized budgeting decision-making power is at the top of administration hierarchy. A rolling
budget requires the new period to be added as soon as the old is completed.
What are factors that could cause variances in a budget?
Inaccurate budgeting, lack of data or forecasting error causes variances. Unpredictable events like storms cause damage and casualties leading to increasing patients unexpectedly. Changes in laws which might increase wages cause expenses to be higher. Better management or use of high-quality materials leads to favorable variances.
How should management address variances in a budget?
Analysis using questions like where, why, when, what caused the variance is done. Positive differences are reviewed to see what caused the favorable outcome like the increase in prices or customers. Negative deviations are investigated with a view of seeing if it is beyond the acceptable tipping point to consider adjusting projections, changing prices, increase marketing, quality or customer mix or even abandon a project.
How could management facilitate a participatory approach to budget development?
Open communication where plans are shared to all and their feedback welcomed and used in the process helps initiate the process. Electing some of the members to be in charge of the process and transparent voting for proposals improves involvement.
How might the budgeting process differ between for-profit (FP) and not-for-profit (NFP) hospitals?
An FP focusses on revenue and profit generation while for an NFP is service provision for as many clients as possible with limited available resources.
Contributions are an integral part of an NFP meeting budget. How appropriate is it for an NFP hospital to budget expected contributions?
Budgeting for expected contributions helps the NFP hospitals to have realistic targets of their plans, follow up for receipt of the contributions and ensure once cash received is not wasted ("Charities,"
2016). Many states have a charities bureau that monitors charitable activities including NFP hospitals. Review the site for your state and comment on this agency as it relates to the budget process. For an example, review the following link for the charities bureau for New York State. New York State Office of the Attorney General. (2012). CharitiesNYS.com. Retrieved from <http://www.charitiesnys.com/home.jsp> The need to register and file annual reports with the New York attorney general forces organizations to budget for the funds they have received and ensure the intended objectives are well met (Charities, 2016).
References
- Charities. (2016). CharitiesNYS.com. Retrieved 16 September 2016, from <https://www.charitiesnys.com/charities_new.html >
- Finkler, S. & McHugh, M. (2008). Budgeting concepts for nurse managers. St. Louis, Mo.: Saunders/Elsevier.
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