1. Business for Health Business Skills for Private Medical Practices
Module 18: Develop an Operating Budget

2. Business Skills for Private Medical Practices
A Quick Start Welcome!
While you are waiting for the class to begin, please take the Pre-Test and make sure your name is on it before you hand it to the facilitator.
Thank you!.
Business Skills for Private Medical Practices

3. Agenda Welcome Introduction to an Operating Budget
How to Analyze a Budget
How to Build an Operating Budget
How to Make Sales Projections
Summary and Evaluation
Close
Business Skills for Private Medical Practices

4. Business Skills for Private Medical Practices
Learning Objectives
During this session, you will:
define what an operating budget is;
describe the elements of an operating budget;
analyze a budget;
discuss how to construct an operating budget;
Business Skills for Private Medical Practices

5. Business Skills for Private Medical Practices
Learning Objectives
create an operating budget;
make a sales projection;
discuss the next step; and
state your key take-away from this session.
Business Skills for Private Medical Practices

6. Business Skills for Private Medical Practices
Introduction
You will have 1 minute to introduce yourself: 1. Your name 2. Your position 3. Your business 4. How long you have been in business
Business Skills for Private Medical Practices

7. Introduction to an Operating Budget
Business Skills for Private Medical Practices

8. Definition of an Operating Budget
What is an operating budget?
Business Skills for Private Medical Practices

9. The Elements of an Operating Budget
Period
Categories: a. Revenue
b. Fixed Expenses c. Variable Expenses
Projected Amount for Each Category
Actual Amount for Each Category
Budget Difference
(Actual Amount – Projected Amount)
Business Skills for Private Medical Practices

10. Operating Budget Template
Business Skills for Private Medical Practices

11. Business Skills for Private Medical Practices
How to Analyze a Budget
Business Skills for Private Medical Practices

12. Budget for St. Joseph’s Clinic, July 2013
Business Skills for Private Medical Practices

13. Budget Analysis Questions
1. What budget categories were included in this budget on the: a. expense side?
Business Skills for Private Medical Practices

14. Budget Analysis Questions
1. What budget categories were included in this budget on the: a. expense side? rent, salary, electricity/gen, phone, medicines, other supplies, staff on call
Business Skills for Private Medical Practices

15. Budget Analysis Questions
1. What budget categories were included in this budget on the: b. revenue side?
Business Skills for Private Medical Practices

16. Budget Analysis Questions
1. What budget categories were included in this budget on the: b. revenue side? fees, insurance, medicines, other
Business Skills for Private Medical Practices

17. Budget Analysis Questions
2a. Which actual expenses are higher than budgeted?
Business Skills for Private Medical Practices

18. Budget Analysis Questions
2a. Which actual expenses are higher than budgeted? phone, medicines, staff on call
Business Skills for Private Medical Practices

19. Budget Analysis Questions
2b. Which actual expenses are lower than budgeted?
Business Skills for Private Medical Practices

20. Budget Analysis Questions
2b. Which actual expenses are lower than budgeted? electricity/gen (by 80) other supplies (by 5)
Business Skills for Private Medical Practices

21. Budget Analysis Questions
2c. What can you say about the overall expenses?
Business Skills for Private Medical Practices

22. Budget Analysis Questions
2c. What can you say about the overall expenses? they were greater than the projected amount by 260
Business Skills for Private Medical Practices

23. Budget Analysis Questions
2d. Which expenses contribute most to the increase in expenses?
Business Skills for Private Medical Practices

24. Budget Analysis Questions
2d. Which expenses contribute most to the increase in expenses? medicines (by 120) staff on call (by 200)
Business Skills for Private Medical Practices

25. Budget Analysis Questions
3a. Which is actually larger, the actual revenue or the projected revenue?
Business Skills for Private Medical Practices

26. Budget Analysis Questions
3a. Which is larger, the actual revenue or the projected revenue? the actual revenue by 495
Business Skills for Private Medical Practices

27. Budget Analysis Questions
3b. Which categories of actual revenue differ from the projected revenue?
Business Skills for Private Medical Practices

28. Budget Analysis Questions
3b. Which categories of actual revenue differ from the projected revenue? fees (by 440) medicines (by 115)
Business Skills for Private Medical Practices

29. Budget Analysis Questions
4. What can you say about the overall budget compared to the actual financial results?
Business Skills for Private Medical Practices

30. Budget Analysis Questions
5. What does your budget analysis tell you about the business?
Business Skills for Private Medical Practices

31. Budget Analysis Questions
6. How can this budget help the owner make business decisions?
Business Skills for Private Medical Practices

32. Budget Analysis Questions
7a. Which budget categories should be increased?
Business Skills for Private Medical Practices

33. Budget Analysis Questions
7a. Which budget categories should be increased? phones, medicines and staff on call- for expenses fees and medicines- for income (if sales are expected to stay the same as July)
Business Skills for Private Medical Practices

34. Budget Analysis Questions
7b. Which budget categories should be decreased?
Business Skills for Private Medical Practices

35. Budget Analysis Questions
7b. Which budget categories should be decreased? electricity- for expenses (unless next month will be hotter and need more cooling) insurance and other- for income
Business Skills for Private Medical Practices

36. Budget Analysis Questions
8. How can this budget help the owner make business decisions?
Business Skills for Private Medical Practices

37. Why an Operating Budget is Important
Why is it so important for your practice to have an operating budget?
Business Skills for Private Medical Practices

38. How to Build an Operating Budget
Business Skills for Private Medical Practices

39. Steps for Building an Operating Budget
Identify the time period
Determine the categories to track
Identify the level of detail needed
Divide and identify expenses: fixed and variable
Identify budget categories for revenue
Revise the budget template as needed
Business Skills for Private Medical Practices

40. Steps for Building an Operating Budget
Make sales projections
Identify assumptions about expenses
Enter amounts for each category
Review the draft budget:
is it complete and balanced?
Finalize the budget:
date it and keep a copy
Business Skills for Private Medical Practices

41. Operating Budget Template
Business Skills for Private Medical Practices

42. Operating Budget for Dr. Owala
Business Skills for Private Medical Practices

43. Operating Budget For Dr. Owala
Business Skills for Private Medical Practices

44. How to Make Sales Projections
Business Skills for Private Medical Practices

45. Forecast and Plan Your Sales
A sales projection is a month-by-month forecast of the level of sales you expect to achieve. Does forecasting health services make sense?
Business Skills for Private Medical Practices

46. An Example of Poor Forecasting
Working independently, please:
review the Urban Draw case on page 19; then
identify which forecasting pitfalls, listed on pages 20 and 21, should have been avoided.
Business Skills for Private Medical Practices

47. Avoiding Forecasting Pitfalls
Engaging in wishful thinking
Ignoring your own assumptions
Continually changing your goals
Not consulting staff or customers
Not getting feedback
Business Skills for Private Medical Practices

48. Making Sales Projections
Start with last year’s sales, unless they were not typical
Identify your sales assumptions:
Market
Your resources
Overcoming sales barriers
Products or services
3. Develop your projection
Business Skills for Private Medical Practices

49. Sales Projection Methods
Unit Price Method
for products and services
Add up all individual sales projections for each product and service
Business Skills for Private Medical Practices

50. Sales Projection Methods
Sales Method
for products and services
if there are many items in inventory
Divide the business into categories or departments
Forecast the sales in each area
Business Skills for Private Medical Practices

51. Sales Projection Methods
Margin Method
for products
if you use the same mark-up on products
Add a mark-up percentage to the value of the inventory you purchase for resale
Business Skills for Private Medical Practices

52. Sales Projection for Dr. Owala
Business Skills for Private Medical Practices

53. Sales Projection for Dr. Owala
Business Skills for Private Medical Practices

54. Summary and Evaluation
Business Skills for Private Medical Practices

55. Business Skills for Private Medical Practices
Evaluation Sheet
Business Skills for Private Medical Practices

56. Business Skills for Private Medical Practices
The Next Step
Capture past month’s actual expenses and income.
Use this data to begin to plan your budget.
Establish a time period.
Create an operating budget.
Monthly, enter actual results and calculate difference between actual and projected.
Determine reasons for variance-take action.
Business Skills for Private Medical Practices

57. Operating Budget Template
Business Skills for Private Medical Practices

58. Let’s See How Much You’ve Learned
Please take the Post-Test. We will compare it to your Pre-Test to see how much you’ve learned in this session. Thank you.
Business Skills for Private Medical Practices

59. Business Skills for Private Medical Practices
My Key Take-Away
Business Skills for Private Medical Practices