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BUDGET FOR SATRTING A CLINIC

BUDGET FOR STARTING A CLINIC BY AN OPHTHALMOLOGIST


Submitted by:
ASHITA RATHOD RUTA SUBHEDAR SAHIL PARIANI SHABARI JOSHI VAISHAKHI PARSAWALA VEKITA GALA 8018 8125 8131 8137 8162 8164

A Report submitted to the Institute in partial fulfillment of the requirement for the award of PG e-MBA for the year 2009 - 10

Under the guidance of: Prof L.N.Chopde

Name of the Institute MET Institute of Management


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BUDGET FOR SATRTING A CLINIC

CERTIFICATE
This is to certify that project titled BUDGET FOR STARTING A CLINIC BY AN OPHTHALMOLOGIST is based on the original study conducted by:
ASHITA RATHOD RUTA SUBHEDAR SAHIL PARIANI SHABARI JOSHI VAISHAKHI PARSAWALA VEKITA GALA 8118 8125 8131 8137 8162 8164

Under my guidance and this had not formed a basis for the award of any other degree of this institute.

PLACE: Mumbai DATE: 16 April 2009

FACULTYs SIGN Prof. L.N.Chopde

ACKNOWLEDGEMENT
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BUDGET FOR SATRTING A CLINIC

With sincere gratitude we express our appreciation to our professor Mr. L.N. CHOPDE for giving us an opportunity to do this project in Management Accounting to understand the Budget Statement. We also recognize the value of constant support, guidance and encouragement given to us when required by Dr. Varun Gogri. Also we would like to convey our sincere thanks to the library staff for their assistance and to all those who directly or indirectly helped us during the project. We would also like to thank our family and friends for the assistance and guidance provided by them as and when required.

EXECUTIVE SUMMARY
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BUDGET FOR SATRTING A CLINIC

Budget begins with identifying and listing monthly income and expenses and shows people how money flows in and out. In order to prepare a budget for an eye clinic we have interviewed Dr Jay Savla who has a clinic in Ghatkopar (east) and he is planning to open a clinic in Chembur.

On the basis of the revenue and expenditure of his clinic in Ghatkopar (east) we have planned the budget of clinic of Chembur. We have interviewed him regarding his start up expenses and revenue and expenditure for the whole year. On the basis of the same we have prepared a budget statement for the period Jan 2009 to December 2009.

Conclusions drawn As per the budget drawn the values of the year are: Total income Rs 7,54,000 Total expenditure Rs 2,34,640 Net income Rs 5,19,360

BUDGETORY CONTROL
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BUDGET FOR SATRTING A CLINIC

Meaning of Budgetary Control Budgetary Control implies the use of various budgets in planning and controlling. We shall first study the meaning of the term Budget. The term budget is derived from the French word Bougetts which means the purse in which funds are collected for meeting the anticipated expenses. Budgeting has been defined by various authorities in different ways:
1.

Kohler, in his Dictionary of Account defines budget as: a) Any financial plan serving as an estimate of and a control over future operations. b) Hence, any estimate of future cost.
c)

Any systematic plan for the utilization of manpower, material or other resources.

2.

The institute of cost and management Accounts, London defines budget as a Financial statement prepared prior to a define period of time, of the policy to be pursued during that period for purpose of attaining a given objective.

Thus, budget is the cost plan for the period of time. Time/Period is the most important factor in a Budget and it provides the plan in terms of cost. Cost is the value of the economic resources. Therefore, budget is essentially a resources plan in terms of value for a future fixed period. Forecast is prediction of what will happen in a given set of circumstances. It is a judgment.

Budget characteristics
1.

A period of time to be fixed to achieve the objectives.


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2. 3.

Forecast preparation. Determination of the policies say, sales to be achieved or profit to be made, investment to be made etc. Consumption of requirements in terms of quantities and values, to achieve the objectives and fulfill the policies of the management. Review the forecast, polices and the preliminary budget, if necessary until the acceptable budget emerges.

4.

5.

6. Acceptance of the budget- which becomes the approve budget. It becomes an executive order and sanction for the activities. Budget Period It is the period of time for which the Budget is prepared and followed to attain the objective. Budget period will depend upon the type of Budget concerned and on the circumstances. Objective of setting Budgets i) It severs as a declaration of polices.
ii) iii)

It defines the objectives for executives at all the levels of management. It provides the means of coordination of business activities.

iv) It provides the means of communications.

Meaning of BUDGETARY CONTROL


1.

The institute of cost and works accounts, London, defines the term as the establishment of budget relating to the responsibilities of executives to the requirements of a policy, and the continuous comparison of actual with budget results either to secure by individual action objective of that policy or to provide a basis for its revision.
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2.

According to Terry budgetary control is a process of comparing actual results with the corresponding budget data in order to approve accomplishments or to reedy differences by either adjusting the budgets estimates or correcting the cause of the differences. A budget is a mean and budgetary control is the end results

From the above definitions it becomes clear that the process of the budgetary control involves the following stages: i)
ii)

Fixing the responsibilities on executives /managers. Establishment or setting up of various budgets. Recording of actual performance. Comparison of actual results with the budgets. Calculation of budget deviations. Investigation into the causes of deviations Taking corrective measures, if and when necessary, to bring the actual close to the budgets.

iii) iv)
v)

vi)
vii)

Thus, budgeting is an art of planning: budgetary control is the act of adhering to the plan. Objectives of budgetary control
1)

Planning: A budget is a plan action. A business concern cannot attain its objectives unless effective planning is done. Co-ordination: In an organization there are various departments and sections carrying out various functions / activates. Unless there is a coordination of the various activities of these departments, it is not possible to achieve the objectives.
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2)

BUDGET FOR SATRTING A CLINIC

3)

Control: Control is necessary to see that performances takes place according to the plan. The function of controlling cannot be performed unless standard are set. Communication: A budget is communication device. It communicates information about the plans and polices.

4)

Advantages of budgetary control

i)

Budgetary control aims at maximizing of profits through effective utilization of resources. It provides information about the objectives and policies of the organization.

ii)

iii) It acts as a powerful tool of accounting responsibly. iv) It provides a basis for internal check. v) It facilitates bank credit.

Limitations of budgetary control


i) ii)

It is a costly system particularly for small concerns. It is at times, regarded as solutions for all business problems and may lead human effort resulting its failure.

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iii)

It may be resented by the executives as it places control on human initiatives.

The above limitations only suggest that the system of budgetary control should be dynamic and realistic. ESSENTIAL CONDITIONS OF BUDGET CONTROL
i)

Organizational Structure: To get better benefits the company must have a proper organizational structure. Well Defined Objectives: the objectives of the business should be clearly defined. System of accounting : There should be an effective system of accounting System of Communication: The organization should have a proper system of communication. Budget Manual: Effective implementation of budgetary control system depends on its Budget Manual.

ii)

iii)
iv)

v)

STEPS IN BUDGET CONTROL SYSTEM

i)

Preparation of organizational chart: The chart defining the functions and responsibilities of each member has to be framed. Establishment of Budget Committee: A committee consisting of senior executives of different department is to be formed. Appointment of Budget Officers: Function of budget officer is to prepare the budget manual.
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ii)

iii)

BUDGET FOR SATRTING A CLINIC

TYPES OF BUDGETS

1.

Functional Budget

2. Master Budget We shall briefly discuss these budgets in the following section: Functional Budgets A Functional budget is one which relates to any of the functions or activities of an organization. The function determines the scope of activities of various departments. Each department has to prepare its own Budget. The following are the various Functional Budgets:

i)
ii) iii)

Sales Budget Production Cost Budgets Paint Utilization Budget Capital Expenditure Budget Selling and Distribution Cost Budget Purchase Budget Cash Budget

iv) v) vi) vii)

Fixed and Flexible Budget


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Fixed Budget is A budget which is designed to remain unchanged irrespective of the level of activity actually attained (ICWA London). Its purpose is to lay down the major objectives of the organization and to coordinate the activities to achieve the objectives. The fixed budget will remain same and will not take note of changed circumstances which may compel to change the level of activity.

Flexible Budget is a budget designed to change in accordance with the level of activity actually attained. (ICWA London). This type of budget provides costs budgeted at different levels of activity. It facilitates comparison of actual performance with the budget at any level of activity. Its enable assessment of what any individual cost should have been at the actual level of activity attained. This type of budget is necessary for control. A managers actual performance or achievement can be compared with what should have been achieved in the conditions prevailing and not with what should have achieved under different circumstances. To prepare flexible budget all costs should be classified into variable. Semi-variable and fixed costs. If variable and semi-variable and fixed costs also vary the extent or degree of their variability should be determined. However the fixed cost remains unchanged.

Master Budget It is defined as the summary budget, incorporating its component Functional budgets which are finally approved adopted and employed. Master budget summaries all the functional budgets .it means, a master budget can be prepared only when all the functional budgets are prepared and approved. Master budget is the overall plan of operations to be followed
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during the budget period. Master budget also takes the form of budgeted profit and loss account and the balance sheet.

BUDGET FOR A NEWLY OPENED EYE CLINIC


In order to prepare a budget for an eye clinic we have interviewed Dr Varun Gogri who has a clinic in Ghatkopar (east) and he is planning to open a clinic in Chembur.

On the basis of the revenue and expenditure of his clinic in Ghatkopar (east) we have planned the budget of clinic of Chembur. We have interviewed him on the regarding his start up expenses and revenue and expenditure for the whole year. On the basis of the same we have prepared a budget statement for the period Jan 2009 to December 2009

START UP EXPENSES
15, Rent of land in Chembur for 150 sq.ft.@10000/month Interior(furniture & air condition incld) Equipments (as follows) Auto reflector meter with caratometer Slit Lamp Ophthalic Chair unit Trial Set Vision Drum Direct Ophthalmoscope 00,000 2,50,000 5,00 ,000

Rs.

TOTAL

22,50,000

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Assumptions:For the purpose of preparing the budget for the entire period we have made certain assumptions as follows: For the total income calculation exact figure cannot be derived because the fees charged is different patients coming for the first time were charged Rs 500 & the repeated visit were charged Rs 350 & the surgery charges for cataract also differ from patients to patients.

No promotional activities were undertaken since the doctor is quite famous in Ghatkopar (east) area practicing since 3 years. There are already 2 eye clinics in Chembur & so the patients coming to the doctor in the first year would be less as compared to other clinics, the doctor would attract more patients in the subsequent year because of his goodwill.

The slack period of doctor is assumed from April to May due to the conductions of the exam followed by summer vacation. In residential area Expenditure

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Fixed cost:
1.

The doctor requires one assistance who is paid adequately as per the general practice as per the other clinics. Salary (Shift basis) - the cleaner is paid on the monthly basis of Rs 500.

2.

3. Maintenance of machinery- which includes sterilization of the equipments is considered as fixed cost due to no increase in machinery in the said period.

Variable cost: 1. Drops , medicines, injections cost as well as the stationary cost which includes the bill books n the subscription book would vary as per the number of patients visiting the doctor in a month. 2. Electricity charges vary as per the usage of the equipments and the telephone charges which includes the reminder calls to the patients vary every month.

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CONCLUSION
Net income earned at the end of the year is Rs 5,19,360 according to the budget prepared for the year 2009. Since the doctor is earning reasonably well in the first year he has a good opportunity to grow in future and he can raise his goodwill and earn good name and fame.
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