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Principles of budgeting essay
Budget planning and control
Principles of budgeting essay
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Budget Management Analysis
Heidi Loebig
HCS/571
June 29, 2015
Debrah Vaughn
Budget Management Analysis
“A budget is a plan” (Finkler, Kovner, & Jones, 2007, p. 232). The budgeting process consists of two components forecasting the budget and maintaining the budget (Clark, 2005). In the budgeting process, the manager 's responsibilities include accountability, analyzing variances and managing expenses. When the actual budget differs from the forecasted budget, a variance has occurred and needs to be examined further. Budgets can be used in the both the internal and external benchmarking process to see how the organization is performing compared to similar organizations.
Strategies to Manage Forecasted Budget
A key role of the nurse manager
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307). Instead, the budget can be used to help the organization constantly improve, by examining what is doing well and identifying areas for improvement. Three common types of benchmarking are competitive, collaborative, and cooperative. The goal of competitive benchmarking is to see what competitors are doing well and how to incorporate it into practice. Cooperative benchmarking goes evaluates other industries to identify best practices then incorporating those into the healthcare industry. Collaborative benchmarking looks at the pooled data for the industry to determine how the organization ranks within the …show more content…
Managers employ a variety of controls to maintain forecasted budgets. When actual budget differs from the forecasted budget, a variance occurs. Variance analysis is done for three reasons, but for variance analysis to effective, the manager must identify and understand the cause of the variance. Benchmarking techniques can be employed to help achieve greater accuracy in budget forecasts and increased patient satisfaction.
References
Borglum, K. (2008). Better medicine through benchmarking. How applying standards to your practice can improve the care you give. Medical Economics, 85(16), 39-43. Ebsco.
Clark, J. J. (2005). Improving hospital budgeting and accountability a best practice approach. Healthcare Financial Management: Journal of the Healthcare Financial
Management Association, 59(7), 78-83. Ebsco.
Finkler, S.A., Kovner, C.T., & Jones, C.B. (2007) Financial management for nurse managers and executives (3rd ed.). St. Louis, MO: Saunders Elsevier.
Horblyuk, R., Kaneta, K., McMillen, G. L., Mullins, C., O 'Brien, T. M., & Roy, A. (2012). Out of control little-used clinical assets are draining healthcare budgets. Healthcare Financial
Management: Journal of The Healthcare Financial Management Association, 66(7), 64-
68.
I attended the Saturday Lab 1 session discussing the Denison Specialty Hospital case study. In our session, we had a through discussion into the different budget terminology. I learned about the difference between accrual and cash accounting methods, which is based on the timing of when the revenue and expenses are recognized. I also learned about responsibility centers as an organizational unit under the supervision of a manager, who is responsible for its activities and results. In addition, the manager is accountable for the budget of the department that they head. Therefore, a centralized form of management in developing the budget because it makes easier to because the information for the department budget is located
It is vital that the operating budget ties in with long-term strategies by planning, setting objects with goals, and forecasting the future. According to Mr. Wright, Robertwood Johnson University Hospital adopted the GE Model of “operation excellence” with long-term strategies with their operating budget. With the ” operations excellence” strategy, the organization has over the years transformed the operating budget by accurately tracking and constantly improving their revenue cycle yearly by setting payment practices to generate revenue to achieve specific financial objectives of greater demand with the maximum revenue margins along with eliminating waste and streamlining the budget by cutting expenses and prioritizing programs
During the year, budget performance was monitored closely. Each week’s and monthly, sales revenue performance figures were sent to Herb Stolzer by Roy Black. Roy Black also sent a monthly management report to Stolzer that included income statement highlights and a summary of key balance sheet figures and ratios. All information was provided with reference to (1) position last month (2) position this month (3) budgeted position.
... middle of paper ... ... Benchmarking is another great metrics that any organization or firm can utilize within their operations management needs. Conclusion Modern organizations rely on modern metrics like Six Sigma, Benchmarking etc.
Vahey, C. D., Aiken, H. L., Sloane, M. D., Clarke, P. S., and Vargas, D. (2010 Jan. 15).
Rizzo, A. S., Difede, J., Rothbaum, B. O., Reger, G., Spitalnick, J., Cukor, J., & McLay, R.
Benchmarking involves: - ü Finding out what makes the difference, in the customer's eyes, between an ordinary supplier and an excellent supplier. ü Setting standards for business operations based on the best practice that can be found. ü Finding out how these best companies meeting those standards. ü Applying both competitors' standards and, if possible, exceed them. What should be benchmarked?
Wade, T. D., Tiggemann, M., Bulik, C. M., Fairburn, C. G., FMedSci, Wray, N. R., Martin, N.
Reid, M., Bennett, D., Chen, W., Eldadah, B., Farrar, J., Ferrell, B., & ... Zacharoff, K. (2011).
Budgets are the financial requirements and consequences of plans. Budgets are made with specific goals in mind. Budgets can be used to lower living expenses, increase savings, or to save for a purpose such as: education or retirement. Budgeting is a process that involves these actions: defining goals, gathering information, forming expectations, reconciling goals and data, monitoring goals and variances, adjusting budgets, and redefining goals.
Budgetary planning may differ between organizations. Single-period budgets and rolling budgets have methodologies that provide advantages and disadvantages that may make one budget time frame better than another. A single-period may require less time in planning during a fiscal year, but is less accurate than a rolling budget that is continuously planned on a repetitive basis. In either case, budgets are planned in advance in order for a company to operate profitably, and less so to have "actual results equal budgeted results." (p. 496)
Participative Budgeting is the situation in which budgets are designed and set after input from subordinate managers, instead of merely being imposed. The idea behind this sort of budgeting is to assign responsibility to subordinate managers and place a form of personal ownership on the final budget. Nearly two decades of management accounting research has resulted in equivocal findings on the consequences and effects of participative budgeting (Lindquist 1995). Participative budgeting certainly has various advantages, these include the transferral of information from subordinate to superior increased job satisfaction for the subordinate, budgetary responsibility and goal congruence. Its disadvantages include budgetary slack and negative motivation, however it is the conditions in which participative budgeting takes place determines whether the budgeting process is successful. The conditions are dependent on various factors such as the level of participation, level of subordinate influence, the extent to which budgetary slack takes place, volatility, job related information, and the complexity of the budget.
Walker, M. P., Ayre, G. A., Cumming, J. L., Wesnes, K.,McKeith, I. G., O’Brien, J. T., et al.
It requires an adequate and sound organizational structure, that is, there must be a definite assignment of responsibility for each function of the enterprise. Budgeting compels all the members of management, from the top to bottom to participate in the establishment of goals and plans. Budgeting compels departmental managers to make plans in harmony with the other departments and of the entire enterprise. Budgeting helps the management to put down in figures what is necessary for a satisfactory performance. Budgeting helps the management to plan for the most economical use of labor, material and capital. Budgeting tends to remove the cloud of uncertainty that exists in many organizations, especially among lower levels of management, relative to basic policies and objectives. Budgeting promotes an understanding among members of management of their co-workers' problems. Budgeting force management to give adequate attention to the effects of general business conditions. Budgeting aids in obtaining bank credit as banks commonly require a projection of future operations and cash flows to support
Performance budgeting encompasses the causal relationship among program funding and the probable results of that program and uses this information as a means to develop an actual budget. A major focal point of performance budgeting is accountability; this type of budgeting is often utilized by administrators to obtain cost efficiency and establish useful budget forecasting.