Budgeting Basics (Exam 2) Flashcards
document that details how financial resources will be allocated to ensure that the organization is able to conduct its daily business and achieve strategic goals. Itemizes predicted expenses and expected revenues for a given period of time.
budget
what is important to know about planning in budgeting?
Decides foals to achieve for a specified period, and ID resources to achieve those goals
Predict revenues and expenses on the basis of goals and budget assumptions
Budget assumptions allow managers to answer various questions that will have an effect on the budget
Budgets are most often developed for a 1-year period on the basis of predicted quantities of services
what is important to know about coordinating and communicating?
Coordinating and communicating are essential functions of budgeting:
Many different groups within an organization come together to discuss the resources necessary to accomplish the goals of a business unit.
Provide opportunity for people from various parts of the organization (ex: finance, RN) to discuss concerns and resolve issues.
what is important to know about monitoring progress?
Vital function of the budget
Nurse manager will be most involved with monitoring on a daily basis
By comparing actual performance against expected, or budgeted, performance, and organization measures the effectiveness of its budget.
Variance: difference between planned budget and actual results
what is important to know about evaluating progress?
Budget results can be used as part of a managers evaluation and may include a staff bonus structure
Budget results can be used by evaluators to determine a managers overall success in achieving goals
what are the types of budgets?
operational
labor
capital
incremental
zero-based
represents revenues and expenses of an operational unit, such as a department, unit or overall organization. Expenses in the operational budget are those necessary to operate on a daily basis (salaries, utility, equipment maintenance, supplies).
operational budget
what are organizations for revenues for operational budget?
Heath insurance companies
Medicare and medicaid
Pts out of pocket payments
Other government programs or grants
what is labor budget?
subsets of the operational budget.
Purpose: provide detailed documentation of salaries, wages, and benefits with respect of operational unit
Factors that affect with personnel budget: salary rates, overtime, benefits (ex: PTO, heath insurance), staff development and training, and employee turnover.
Virtually always the largest expense item in an operational budget for a HC organization is typically 55-65% of total expenses
what is capital budget?
funds allocated for construction projects and major equipment. Main requirements for a purchase/acquisition to be considered part of the capital budget (useful life expectancy of longer than 1 year, cost more than a minimum dollar amount EST. by the organization, usually from $500 to $2000).
Capital: funds used to purchase long-term investments
Capital assets are treated differently from the operating budget expense bc of their multiyear value
what are incremental budgets?
most commonly used budgeting method, primarily bc it is relatively simple to apply to most circumstances. Forward trend of current or recent performance with adjustments for future growth or decline in revenues or expenses.
Primary strength is its simplicity: it is relatively easy to take current revenues or expenses and assume a small inflationary or growth factor
Compatible with most corporate organizational practices
used fare less frequently tan incremental budgeting. Builds a budget from the assumption of no volume and no resources allocated; it is developed as through the budget were being prepared for the 1st time. Each budget cycle begins with a critical review of budget assumptions and proposed revenues and expenditures.
zero based budgeting
what are primary types of costs?
service unit or unit of service
direct costs
indirect costs or overhead
full costs
fixed costs
variable costs
basic measure of the product or service being produced
service unit or unit of service
traced directly to production of the unit of service
direct costs
