Lecture 10: Fiscal Management Flashcards
In the “good ole days,” ____ ____ prepared budget anually.
Based budget on ____ ____ plus an ____ factor.
Monitored budget throughout the ______.
PT Manager
Previous year, inflationary
Year
21st century fiscal management:
Budget _____
Budget _____
Meeting fiscal goals of ___ ___
Assuring ____ for services
Estimating ____ of levels of patient population being served
Appealing ____decisions to third party reimburses
Planning Projection Market management Payment Reimbursement Reimbursement
What is a fiscal year?
Time frame for when business year starts (Ex: July 1-June 30)
The Budget:
Mechanism to assess the ____ and the ____ of the organization or department
Success, progress
The Budget:
Budget projections are derived from-
Known facts from ____ ____.
Estimates are made about ____ costs and then ____.
Assumptions that the _____ makes about the year to come.
Previous year
labor, progress
Manager
The Budget:
Budgets help the manager control the ______ of a ______.
Budgets express anticipated _____ and _____.
Implementation, program
Revenue, expenditures
What does PPBS stand for?
Planning-Programming-Budgeting Systems
Planning-Programming-Budgeting Systems (PPBS):
Plan for a new program is developed from the _____ and _____.
Budget builds upon the _____.
Looks at all of the programs in the organization to make sure there is no _____. Evaluate costs and revenues against _____.
Mission, objectives
Plan
Duplications
Projections
What is Zero-Base Budgeting?
Takes a fresh look at each program at the beginning of the budget period. Cost of running the program is then computed for a zero are as if the program never existed.
Is zero-base budgeting usually used in PT?
No
What is the traditional type of PT budget?
Break-Even Budgeting
Break-even budgeting:
______ budgeting.
Goal is to ____ ____ at the end of the year.
Based on certain ____ and ____ from previous year.
Incremental
Break even
Increases, decreases
What type of budgeting relies on the manager’s decisions regarding staffing levels?
Productivity based budgeting
Using Financial Information:
____ ____ determines the expense related to the production of a product or a service.
Cost analysis
Using Financial Information:
Cost information is used to manage ____ and ___ ___.
Expenses
Set prices
Look at the bottom line: If brackets or red, it’s ____ ____. If black or not bracketed, it’s ____.
Not good
Ok
Use of the Organization’s Financial Information:
_____ agencies
Potential _____
Stockholders
______ analysts
______ (need to make sure you have a realistic plan)
Government
Investors
Industry
Creditors
Financial Management:
Encompass more than just ______.
Accounting
____ ____ is the “art of both obtaining the funds that the enterprise needs in the most economic manner and of making optimal use of those funds once obtained.”
Financial management
The Financial Professional: Study in \_\_\_\_ \_\_\_\_, \_\_\_\_ or \_\_\_\_. Advanced certification \_\_\_\_\_. Adhere to Guidelines established by the Accounting Principles Board and Financial Accounting Standards Board. Hospitals: \_\_\_\_ \_\_\_\_ or \_\_\_\_\_. Private Practice: \_\_\_\_ \_\_\_\_.
Business administration, accounting, economics
CPA
Private Accountant, CFO
Public accountant
Finance Terminology:
Need to become familiar with terminology to protect the ___ generated by your practice or department by understanding where your department stands.
Income
Financial Statements:
Reports that describe the ____ ____ and ____ ____ results of an organization.
Specified ___ ___.
Financial position, operating results
Time period
Financial Statements:
Written reports ___ or ___.
Fiscal year (DOES/DOES NOT) have to follow calendar year.
Quarterly, annually
Does not
Major Financial Statements:
What summarizes the financial position of an organization as of a particular date?
Balance sheet
Major Financial Statements:
What demonstrates an organization’s profit or loss from operations for a specific time period?
Income statement
Is the income statement the same at all times of the year for PTs?
NO.
Major Financial Statements:
What demonstrates what has happened to make available cash increase and decrease during a period of time?? If there is very little __ __ at a particular time of year, may not be able to manage staff/pay off bills.
Cash flow statement
Cash flow
The Balance Sheet:
__ __ of the organization’s ___ position as of a certain date.
Financial statement, financial
The Balance Sheet:
What is the assets equation?
Assets = liabilities + owner’s equity
Assets:
____ resources owned by an organization.
Generally assets include: (6)
Economic
- Cash
- Investments
- Buildings
- Fixtures
- Furniture
- Equipment
What are liquid assets?
Assets that can be quickly converted to cash
What are fixed assets?
Those assets which cannot be quickly converted to cash
What is debt considered?
A liability
Liabilities:
That which is owed by the organization is ___ ___.
Accounts payable
Liabilities:
___ ___: that which must be paid in the short term, usually within 1 year.
Current liabilities
Liabilities:
? = that which is paid over the long term
Long term liabilities
Liabilities:
Electric, water bills are what type of liabilities?
Current liability
Liabilities:
Mortgage is this type of liability…
Long term liability
Owner’s Equity:
Portion of the assets that is owned by the _____.
Can increase through _____ of _____ by the owner.
Earnings from ____ _____.
owners
Investment, resources
Profitable operations
Using the Balance Sheet:
Valuable when used to do ___ ___.
Common size statement- entries are in _____. Do ___ ___.
Comparative analysis
Percentages, vertical analysis
Using the Balance Sheet:
Comparative balance sheet- compare the organization’s ____ ____ at different points in time.
Financial position
The Income Statement:
Evaluates the performance of the organization comparing money ___ (____) to money ___ (____) for a specified period of time.
Demonstrates net ____or net ____ for the period.
Spent (expenses), earned (revenue)
Income, loss
The Income Statement:
Revenue + ______ = Net income (____)
Expenses, loss
Revenue:
_____ _____ for services sold during specific period of time.
Income received
Revenue:
_____ revenue: revenue from sale of services
_____ revenue: revenue from other services
Operating
Non-operating
Revenue:
____ ___ of Accounting (most common)
Revenue is recorded from the period that the revenue is made.
Accrual Basis
Revenue:
__ __ of accounting: revenue should be recorded when money is received
Cash basis
Income from the Assumption of Risk:
Relatively ____ source of income.
Occurs in _____ payment agreement.
Payment is _____, volume is ____.
New
Capitated
Guaranteed, not
Expenses:
Money spent to produce the goods/services
What is capital intensive?
Money spent on equipment
Expenses:
What is labor intensive expenses?
Money spent on salary and benefits
Using the Financial Statement:
Income Statements can be set up for the ___, the ___, and the ___.
Past, present, future
Financial Statement for the past:
Examine past history what was ___ and what ___.
projected, occurred
Financial statement for the present:
Look at ___ ___ areas
Under performing
Financial statement for the future:
___ ___ statement: very helpful as part of business plan
Pro for a
Statement of Operation:
A ______ income statement.
Compares the _____ income statement with the _____ income statement for a period of operation.
Comparative
Projected, actual
Statement of Operation:
Look at ___ and ___ variance.
What does it cost to produce a ____?
Positive, negative
Service
___ analysis:
Financial statements that allow you to make comparisons between one piece of financial information and another
Ratio
Ratio Analysis: \_\_\_ ratio \_\_\_ ratio \_\_\_ ratio \_\_\_ turnover ratio \_\_\_ productivity ratio \_\_\_ on Assets
Current Quick Debt Receivable Revenue Return
_____ ratio compares current assets with current liabilities.
Current
Current Ratio:
The ___ the ratio, the better the organization’s ability to pay its current bills
Important to creditors and ____.
Higher
Investors
____ ratio compares liquid assets with current liabilities.
Similar to current ratio, except it only includes that which can be ___ converted to ___.
Quick
Quickly, cash
____ ratio: Compares total liabilities to total assets
Debt
Debt Ratio: gives percentage of assess that are financed by _____. Determines if the organization is a good ____ ____. The ___ the percentage, the less money borrowed by creditors to purchase ____.
Borrowing
Credit risk
Lower, assets
____ ____ ratio: average number of days it takes to convert accounts receivable to cash.
Receivable turnover
Receivable Turnover Ratio:
The older the debt is, the ____ likely it is to be collected.
Less
_____ _____ Ratio: Amount of revenue generated for each dollar of salary expense
Revenue Productivity
Revenue Productivity Ratio:
Calculated by dividing the total ____ from services by ___ ___ ___
Revenue, related salary expenses
Revenue Productivity Ratio:
In a labor intensive industry such as PT, this can be an indicator of ___ ___
Salary expense
___ ___ ___: used to evaluate an organization’s ability to earn a return on funds supplied from all sources.
Return on assets
Return on assets:
Divide __ __ + interest expenses / total _____
Net income
Assets
Return on Assets:
Higher the return, the ___ ___ ___
Will justify purchase of _____
Better the performance
Equipment
_____ _____ _____: demonstrates how an organization’s cash balances change over a specific period of time
Cash flow statement
Cash flow statement:
Identifies both the ___ and ___ of cash.
Important impacts on ability to ___ ___ and buy new ____.
Impacts the ability to ____.
Cash flow projections allow management to delay planned _____ or arrange for ____ if needed.
Sources, uses
Pay bills, equipment
Grow
Expenditures, credit
_____ _____ is the most important use of financial information for an organization
Financial planning
The Operating Budget:
Guides the operation by outlining types and levels of ______.
Generally covers a _____ period.
Subdivided into ____ and ____ increments.
Expenditures
1 year
Monthly, quarterly
Chart of accounts:
Collect information about how money is ____ and ____.
Keep track of value of _____, ____, and owner’s _____.
Need to establish categories of ____, ____, ____, and ____ are called accounts.
Each line has an ______ _____.
Spent, earned
Assets, liabilities, equity
Expense, revenue, assets, liabilities
Identifying number
_____ _____: good revenue management maximizes the income from operations
Measuring services and products for sale, setting prices, setting billing, credit, collection policies, billing the customer, managing receipt of payment, cash management, calculation of deductions and allowances, payment posting, account reconciliation, financial reporting
Accounts Receivable
____ ____: listing of services and products provided by the practice
Fee schedule
____ ____: gross revenue from operations is equal to the ____ x price of what is sold
Operating revenue
Sales
Operating revenue: net revenue is a function of ____, sales ____, payer mix and ___ mix
Price, volume, case
Operating revenue: price charged is ____ the price paid in health care
Rarely
Revenue is based on the following reimbursement types: \_\_\_\_\_ based Fee for \_\_\_\_\_ Case \_\_\_\_ Per \_\_\_\_ rate \_\_\_\_ payment
Cost Service Rate Dime Capitated
_______ 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 or service
____ income
philanthropic gifts
Non-operating
Investment
____ ____: recording and payment of money owed by the business to its creditors
Accounts payable
Accounts payable: \_\_\_\_\_ management policies and procedures \_\_\_\_\_ policies and procedures Policies on \_\_\_\_\_ authorization \_\_\_\_\_ audit
Inventory
Purchasing
Expense
Internal
Expense management: types of expenses
_____: cost of resources needed to produce the product or service
_____: purchase of equipment and facilities that will contribute to the production of goods and services.
Operating
Capital
Types of expenses:
LABOR: Salary per _____
_____: office, medical, minor equipment
Purchased and professional services: clinical, accounting, legal
_____ expenses: incurred but not paid (sick time, vacation time)
_____ expenses*: have an extended useful life
FTE
Supplies
Accrued
Capital
____ expenses: includes all costs related to employment
Includes advertising and ____ fees
Labor
Relocation
Labor expenses:
_____ expense = labor hours paid x rate of pay
Salary
Labor expenses:
_____ _____ ____ = FTE = 40hrs per week x 52 weeks = 2080 per year
Full time equivalents
Capital expenses: each business sets a minimum for capital expense = $____
500
Capital expenses reflect the _____ costs
Equipment, land and buildings
Associated
Capital expenses: depreciation of _____ _____
Annual depreciation = capital expense/_____ ____
Capital assets
Useful life
Expense Control: ___ and ___ expenses
Direct, indirect
Expense control: Institutions have direct and indirect costs, but private practices only have _____ costs
DIRECT
Direct costs are directly associated with _____
Production
Salary, benefits, supplies, depreciation of equipment
Are these direct or indirect costs?
Direct
Indirect costs are incurred but to directly related to ___ ___
Service delivery
Administrative salaries, financial services, grounds and buildings, cafeteria
Are these direct or indirect costs?
Indirect
Expense Classification:
____ ____ is unchanged regardless of volume.
Insurance payment ____ ____ ____
Fixed costs
For the year
Expense Classification:
_____ _____: increase and decrease relative to volume
Salaries, linen, medical supplies
Variable costs
Expense Classification:
_______ cost: fixed and variable elements
Phone service: basic cost fixed, per use is variable
Expense Classification:
_____ cost: sum of fixed, variable, and semi-variable costs
Expense Classification: What are the 4 classifications?
Fixed
Variable
Semi-variable
Total
Managing Financial Performance: Working knowledge of the mathematical relationship between- Fixed, variable, and semi-variable costs Cost per \_\_\_ \_\_\_ \_\_\_ Sales \_\_\_\_ Profit (\_\_\_\_)
Unit of service
Volume
Loss
Know your ____ ____ point
Break even
