1. Budgeting in Nursing Administration

2. DEFINITIONDEFINITION A forecast of the resources required to deliver the services offered by the organization.A forecast of the resources required to deliver the services offered by the organization. A budget is a financial plan that includes estimated expenses as well as income for a period of time.A budget is a financial plan that includes estimated expenses as well as income for a period of time. A nursing budget is a systematic plan that is informed best estimate by nurse administrators of nursing revenues and expenses. It projects how revenues will meet expenses and projects a return on equity or profit.A nursing budget is a systematic plan that is informed best estimate by nurse administrators of nursing revenues and expenses. It projects how revenues will meet expenses and projects a return on equity or profit. Budget is a numerical statement expressing the plans, policies and goals of an organization for a definite period in future.Budget is a numerical statement expressing the plans, policies and goals of an organization for a definite period in future.

3. PURPOSEPURPOSE  To provide a quantitative expression of the plans of the hospital or the institution.  To evaluate financial performance in accordance with the plans.  To control costs.  To enhance fiscal planning and decision making.

4.  To clearly recognize controllable and uncontrollable cost areas.  To provide a useful format for communicating fiscal objectives.  To allow feedback of utilization of money spent.  To identify problem areas and facilitate effective solutions.  To provide a means for measuring and recording financial success in accordance with the objectives of the organization.

5. PURPOSEPURPOSE

6. PRINCIPLESPRINCIPLES

7. Principles of budgeting Sound financial management: A budget should provide sound financial management by focusing on the requirement of the organization.Sound financial management: A budget should provide sound financial management by focusing on the requirement of the organization. Based on objectives and policies: A budget should focus on objectives and policies of the organization. It must flow from objectives and give realistic expression to the realization of such objectives.Based on objectives and policies: A budget should focus on objectives and policies of the organization. It must flow from objectives and give realistic expression to the realization of such objectives. Ahitha.M.Sc7–7

8. Principles of budgeting Financial and nonfinancial resources: A budget should ensure the most effective use of the available financial and nonfinancial resources.Financial and nonfinancial resources: A budget should ensure the most effective use of the available financial and nonfinancial resources. Planned in advance: A budget should ensure that programme activities are planned in advance.Planned in advance: A budget should ensure that programme activities are planned in advance. Consistent delegation: This process requires consistent assigning of fixed duties and responsibilities to managers at different levels for planning/framing and executing the budget.Consistent delegation: This process requires consistent assigning of fixed duties and responsibilities to managers at different levels for planning/framing and executing the budget. Ahitha.M.Sc7–8

9. Principles of budgeting Coordination efforts: Budgeting should aim at ensuring coordination among various departments, establishing a frame of reference for managerial decisions and providing criteria for evaluating managerial performance.Coordination efforts: Budgeting should aim at ensuring coordination among various departments, establishing a frame of reference for managerial decisions and providing criteria for evaluating managerial performance. Adequate check and balance: Utmost care must be taken in fixing targets. A budget should not adopt too high or too low estimates.Adequate check and balance: Utmost care must be taken in fixing targets. A budget should not adopt too high or too low estimates. Ahitha.M.Sc7–9

10. Principles of budgeting Appropriate to the nature: The budget period must be appropriate to the nature of the business or service and to the type of budget.Appropriate to the nature: The budget period must be appropriate to the nature of the business or service and to the type of budget. Under directions and supervision: A budget is prepared under the leadership of the administrator of financial officer.Under directions and supervision: A budget is prepared under the leadership of the administrator of financial officer. Interpretation: A budget should be prepared and interpreted in consistency with communicating the planning process in the organization.Interpretation: A budget should be prepared and interpreted in consistency with communicating the planning process in the organization. Ahitha.M.Sc7–10

11. Principles of budgeting Quality and quantity evaluation: While working on the budget a review of the performance of the previous year is necessary and an evaluation of its adequacy both in quality and quantity.Quality and quantity evaluation: While working on the budget a review of the performance of the previous year is necessary and an evaluation of its adequacy both in quality and quantity. Flexibility: While developing a budget, provision should be made for its flexibility.Flexibility: While developing a budget, provision should be made for its flexibility. Ahitha.M.Sc7–11

12. IMPORTANCE OF BUDGET  An essential management tool  Budget tells you how much money you need to carry out your activities  Budget enables to monitor income and expenditure.  The budget is basis for financial accountability and transparency.

19. TYPES OF BUDGET

20. Ahitha.M.Sc7–20  PROGRAMME BUDGET  PRODUCTION BUDGET  CASH BUDGET  FLEXIBLE BUDGET Incremental budgeting starts out with a budget from a previous period. The business uses this previous budget as a basis for calculating the new budget. They take the old budget and add to or subtract from the totals to come up with a budget for the upcoming period. For example, last year, a company did $1,000,000 in sales. For this year, they expect an increase in sales of 10 percent. Therefore, their new budget will be $1,100,000 for the year.Incremental budgeting starts out with a budget from a previous period. The business uses this previous budget as a basis for calculating the new budget. They take the old budget and add to or subtract from the totals to come up with a budget for the upcoming period. For example, last year, a company did $1,000,000 in sales. For this year, they expect an increase in sales of 10 percent. Therefore, their new budget will be $1,100,000 for the year.

21. Types of Budgets Incremental budgetIncremental budget Programme budgetProgramme budget Open-ended budgetOpen-ended budget Flexible budgetFlexible budget Revenue and expense budgetRevenue and expense budget Zero-based budgetsZero-based budgets Sales budgetSales budget Rollover budgetRollover budget Fixed-ceiling budgetFixed-ceiling budget Production budgetProduction budget Performance budgetPerformance budget Capital expenditure budgetCapital expenditure budget Cash budgetCash budget Sunset budgetSunset budget Ahitha.M.Sc7–21

22. Incremental budget This is based on estimated changes in the present operation, allowing for a percentage increase for inflation, all of which is added to the previous year’s budget. This is based on estimated changes in the present operation, allowing for a percentage increase for inflation, all of which is added to the previous year’s budget.

23. Programme budget This is one where costs are computed for entire programme, i.e., group total costs for each services programme,This is one where costs are computed for entire programme, i.e., group total costs for each services programme, e.g. Maternal and Child Health Programme(MCH), Family Planning Programme (FPP), Universal Immunization Programme (UIP), etc.e.g. Maternal and Child Health Programme(MCH), Family Planning Programme (FPP), Universal Immunization Programme (UIP), etc. Ahitha.M.Sc7–23

24. Open-ended budget This is a financial plan in which each operating manager presents a single-cost estimate for the optimal activity level for each programme in the unit, without indicating how the budget should be brought down if appropriate funding is not available.This is a financial plan in which each operating manager presents a single-cost estimate for the optimal activity level for each programme in the unit, without indicating how the budget should be brought down if appropriate funding is not available. Ahitha.M.Sc7–24

25. Flexible budget This comprises several financial plans, each for a different level of programme activity. It is based on the fact that operating conditions rarely abide by expectations.This comprises several financial plans, each for a different level of programme activity. It is based on the fact that operating conditions rarely abide by expectations. are budgets that adjust automatically over the course of the year depending on the variables such as the volumes, labor cost and capital expenditures.are budgets that adjust automatically over the course of the year depending on the variables such as the volumes, labor cost and capital expenditures. Ahitha.M.Sc7–25

26. Revenue and expense budget This is expressed in financial terms and takes the nature of a proforma income statement for the future. It may be prepared in a detailed form or abstract statement, reflecting the items of profit and loss under classified headings.This is expressed in financial terms and takes the nature of a proforma income statement for the future. It may be prepared in a detailed form or abstract statement, reflecting the items of profit and loss under classified headings. Ahitha.M.Sc7–26

27. Zero-based budgets This requires the nurse manager is required to examine and justify each cost of every programme, both old and new, in every annual budget preparationThis requires the nurse manager is required to examine and justify each cost of every programme, both old and new, in every annual budget preparation Ahitha.M.Sc7–27

28. Sales budget This is the starting point in a budgetary programme, since sales, activities give shape to all other activities. Sales budgets are compiled in terms of quality as well as of value.This is the starting point in a budgetary programme, since sales, activities give shape to all other activities. Sales budgets are compiled in terms of quality as well as of value. Ahitha.M.Sc7–28

29. Rollover budget This one forecasts programmes, revenues and expenses for a period of more than a year, to accommodate programmes that are larger than the annual budget plan.This one forecasts programmes, revenues and expenses for a period of more than a year, to accommodate programmes that are larger than the annual budget plan. Ahitha.M.Sc7–29

30. Fixed-ceiling budget This is a financial plan in which the uppermost spending limits are set by the top executive. The unit and divisional managers develop budget proposals for their respective areas.This is a financial plan in which the uppermost spending limits are set by the top executive. The unit and divisional managers develop budget proposals for their respective areas. Ahitha.M.Sc7–30

31. Production budget This is the budget that aims at securing the economical manufacturing of products and maximizing the utilization of production resources.This is the budget that aims at securing the economical manufacturing of products and maximizing the utilization of production resources. Ahitha.M.Sc7–31

32. Performance budget This is based on functions not divisions, e.g. direct nursing care, in-service education, quality enhancement, nursing research.This is based on functions not divisions, e.g. direct nursing care, in-service education, quality enhancement, nursing research. Ahitha.M.Sc7–32

33. Capital expenditure budget This is prepared for assuring planned timely capital investment in the business to ensure the availability of capital at the right time over a longer period.This is prepared for assuring planned timely capital investment in the business to ensure the availability of capital at the right time over a longer period. Ahitha.M.Sc7–33

34. Cash budget This is prepared by way of projecting the possible cash receipts and payments over the budget period.This is prepared by way of projecting the possible cash receipts and payments over the budget period. Ahitha.M.Sc7–34

35. OPERATING BUDGET   It provides an overview of an agency’s functions by projecting the planned operations usually for the upcoming year.   The nurse manager might includes personnel salaries, employee benefits, insurance, medical- surgical supplies, office supplies, rent, heat, light and house keeping

36. Sunset budget This is designed to ‘self destruct’ within a prescribed time period to ensure the expenditure is stopped by a predetermined date.This is designed to ‘self destruct’ within a prescribed time period to ensure the expenditure is stopped by a predetermined date. Ahitha.M.Sc7–36