6) Fiscal Management Flashcards
Budget
Mechanism to assess an organization’s/department’s success and progress
- Helps the manager control the implementation of a program
Planning-Programming-Budgeting System (PPBS)
Plan for a new program developed from the mission and objectives
- Look at all programs for duplicates
- Evals cost and revenue against projections
Zero-Base Budgeting
Takes a fresh look at each program at the beginning of the budget period and calculates the cost of running the program from as if it never existed
Break-Even Budgeting
Traditional type of PT budget where the goal is to break even at the end of the year
- Based on incremental incr/decr from the prior year
Productivity-Based Budgeting
Relies on manager’s decisions regarding staffing levels
- # of PT’s needed to provide services
Cost Analysis
Determines expenses related to the production of a product/service
- Cost info is used to manage expenses and set prices
Financial Management
Art of obtaining needed funds in the most economical manner and making optimal use of those funds
Financial Professional
Studies business administration, accounting, or economics
What does being financially savvy do and why?
It protects the income generated by your practice/dept bc you’ll understand where your dept stands
Financial Statements
Reports that describe the financial position and operating results of an organization for a specified time period
Balance Sheet
Summarizes the financial position of an organization as of a particular date
Assets
Economic resources owned by an organization
- Liabilities + Owner’s Equity
Liquid Assets
Can quickly be converted to cash
Fixed Assets
Can’t be converted to cash
What are some liabilities?
Debt & Accounts Payable
Current Liabilities
Must be paid in the short-term (w/in 1yr)
Long-Term Liabilities
Paid over the long-term
Owner’s Equity
Portion of the assets that’s owned by the organization’s owners; Earnings from profitable operations
- Can incr through investment of resources by the owner
Income Statement
Demonstrates an organizations profit (net income)/loss(net loss) from operations from a specific time period; Evals the organization’s performance comparing expenses vs revenue for a specific time period
Formula for net income/loss
Revenue + Expenses
Revenue
Income received for services sold during a specific period of time
Operating Revenue
Revenue from sale of services
Non-Operating Revenue
Revenue from other services
Accrual Basis of Accounting
Revenue is recorded in the period that the revenue was made
Cash Basis of Accounting
Revenue is recorded when $ is received
Can income come from the assumption of risk and how?
Yes → Occurs in a capitated payment agreement
Expenses
Money spent to produce goods/services during a specific period of time
Capital Intensive
Money spent on equipment
Labor Intensive Expenses
Money spent on salary and benefits
Statement of Operations
Compares the projected income statement w/the actual income statement for a period of time
- Looks at (+)/(-) variance
Ratio Analysis
Financial statements that allow you to make comparisons btwn one piece of financial info and another
Current Ratio
Compares current assets w/current liabilities
- The higher the ratio, the better the organization’s ability to pay its bills
- Important to creditors and investors
Quick Ratio
Compares liquid assets w/current liabilities
Debt Ratio
Compares total liabilities to total assets; Gives the % of the assets that are financed by borrowing & determines if the organization is a good credit risk
- A lower percent means less money is being borrowed
Receivable Turnover Ratio
Avg # of days it takes to convert accounts receivable into cash
- The older the debt, the less likely it is to be collected
Revenue Productivity Ratio
Amount of revenue generated for each dollar of salary expense (Total Revenue/Salary Expenses)
- An indicator of salary expense
Return-on-Assets
Used to eval an organization’s ability to earn a return on funds supplied from all sources (Net Income + Interest Expenses/Total Assets)
- Justifies purchase of equipment
- Higher Return = Higher Performance
Cash Flow Statement
Demonstrates how an organization’s cash balance changes over a specific period of time
- Ultimately impacts an organization’s ability to grow
What is the most important use of financial info for an organization?
Financial Planning
Operating Budget
Guides the operation by outlining tupes and levels of expenditures
- Typically for a year, and then subdivided into quarters and months
Chart of Accounts
Collect info about how money is spent and earned
Fee Schedule
Listing of services and products provided by the practice
What is revenue a function of?
Reimbursement Type
Non-Operating Revenue
Incoming revenue that refers to the incoming money that adds value to the business but does not result directly from the sale of a product of or service
Accounts Payable
Recording and payment of money owed by the business to its creditors
Operating Costs
Cost of resources needed to produce the product or servuce
Capital
Purchase of equipment and facilities that contribute to the production of goods and services
Direct Expenses
Directly associated w/production
- Salary, benefits, supplies, depreciation of equipment
Indirect Expenses
Incurred but not directly related to service delivery
- Administrative salaries, financial services, grounds/buildings, cafeteria
Fixed Cost
Cost that’s unchanged regardless of volume
Variable Cost
Incr/decr relative to volume
- Salaries, linen, and medical supplies
Semi-Variable Cost
Basic cost is fixed, but per-use is variable
Total Cost
Sum of fixed, variable, and semivariable cost
