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Budgeting

WHAT IS BUDGETING?
An amount of money available for spending that is based on a plan
for how it will be spent.
What is it for?
PURPOSE-A budget is a plan that uses numerical data to predict the activities of an
organization over a period of time, and it provides a mechanism for planning and control, as
well as for promoting each units needs and contributions

Objectives of the Budget Process


To

provide a written expression, in quantitative terms, of the plans of the organization.


provide a basis to evaluate financial performance in relation to the plans of the organization.
To provide a tool to measure fiscal and outcome compliance with the stated plan.
To create a sensitivity and heightened awareness of costs relative to resources used.
To

Who does the budgeting?

Nurse Manager
Resources include the personnel, time, and supplies needed to accomplish
the goals of the organization.
Nurse manager has the responsibility - effectively manage resources in
providing safe, effective patient care in an economic manner.
The nurse manager must prioritize what is essential for his units functioning in order to
deliver high-quality patient care.
what does he/she should be consireding?
Must be considered by the nurse manager or someone who is creating or forming a budget.
We need to keep in mind that money spent in any area must be budgeted. If unbudgeted
money is spent, if the category is over budget or over the projected budget, then that
money must be subtracted from another area. There is not an infinite supply of money that
can be spent, no matter what the reason. Take for example a personal budget. If you
overspend, you try to accommodate this by spending less in another area. Or you go into
debt.
In contrast, if you spend less than the budgeted amount and are under your budget, you
may have money saved for another area or to compensate for overspending.
The nurse manager must be proactive: look to the future and estimate or try to predict the
what ifs or what could happen during the projected budget period

Budget Planning
An essential feature of budget planning is responsibility accounting, which means that
each of an organizations revenues, expenses, assets, and liabilities is someones
responsibility
This typically means that the individual with the most direct control on any of these financial
elements should be held accountable for them.
Budget planning is a proactive and deliberate process. it requires flexibility, ongoing
evaluation, and revision.
The intended goal of budget planning is to create a budget that will meet the needs of the
nurse manager and unit. When creating the budget, a function within budget planning, the
nurse manager should take into consideration what may occur in the future that could
potentially affect the units budget. The nurse manager must be proactive: look to the future
and estimate or try to predict the what ifs or what could happen during the projected
budget period.

CREATING A BUDGET
Nurses have been expertly educated to use the nursing process. The same type of process is
the most widely used approach to preparing a budget:
Assessment Planning Implementation Evaluation
Your budgeting plans effectiveness and efficiency greatly depends on how you effectively
and efficiently assessed and gathered the essential information regarding to your plan.
ASSESMENT
In the assessment phase, a significant amount of effort is spent validating the standard of
care hours for patients in different cost centers.
The organizations strategic plan and financial plans is to assess the department and
determine what needs to be covered in the budget to meet the organizations goals. The
nurse manager assesses the needs of the area for which the budget is being created. It is
important to involve as many staff members as possible in the budgeting process so that
they have an appreciation for the resources needed to deliver their particular services or
product.

Planning

The nurse manager begins the planning process by reviewing past budget history to
determine average supply costs for the average daily census for the unit. The nurse
manager needs to determine if there will be any significant changes within the units
supplies, either quantity utilized or if there will be any new supplies or an increase in current
supplies related to patient volume, acuity, or diagnosis/procedure specific care.

Implementation
The nurse manager must be actively involved in monitoring and analyzing budget activity to
remain within the budgeted parameters and to avoid inadequate or excess funds at the end
of the budget period.
The nurse manager should review the approved budget with the unit staff. It is especially
important for the nurse manager to explain any changes from the previous budget. The staff
needs to understand projected changes in staffing, patient population, and supply usage.
The more the staff understands the budgetary goals and the plans to carry out those goals,
the more likely the goal will be attained.
The manager generally is accountable for deviations in the departments budget.

Evaluation
The nurse manager should determine what areas within the budget are either above or
below the projected budgeted amount. This is accomplished by comparing the projected
budgeted amount with the actual amount spent. Modifications in spending should be made
throughout the budget period to accommodate for any deviation, and corrective measures
should be put in place to bring the total into the projected targeted amount. The budget
process is continual and cyclical in nature. It starts where it ends

Three Types of Budgets


1. Personnel
Allocates funds for salaries, overtime, benefits, staff development and
training, and employee turnover costs
2. Operating budget
Allocates funds for daily expenses such as utilities, repairs, maintenance,
and patient care supplies
3. Capital budget
Allocates funds for construction projects and/or long-life equipment such
as cardiac monitors, defibrillators, and computer hardware; capital budget
items are generally more expensive than operating supplies.

Supply Budget

The supply budget includes the expense of all supplies that are utilized on the nursing unit
to provide patient care. Supplies are the area of the budget in which managers must be
actively involved and can make adjustments to remain within the budget.
The supply budget reflects expenses that change in response to the volume of service,
above or below the budgeted census, and changes in acuity, requiring more, fewer, or
completely different supplies. Controlling the number of supplies used in excess or in a
wasteful manner is the responsibility of the nurse manager.