Budget Management Analysis
University of Phoenix
Financial Resource Management
August 03, 2013
Budget Management Analysis
“Finance should be a fundamental nursing administration content area to meet the growing need for nurse managers with core competencies in financial and budget management” (Finkler, Kovner, & Jones, 2007, p. 476). Health care organizations depend on nurse managers to budget the finances of his or her department appropriately. Budget management analysis includes evaluation of departmental and organizational financial concerns to include forecasting, benchmarking, and cost variance. The purpose of this paper is to determine specific strategies to manage budgets within forecasts and compare five expense results with budget expectations as well as describe possible reasons for variance. This paper will also provide three benchmarking techniques and identify those that may improve budget accuracy in future forecasts. Managing Budgets within Forecasts
“Forecasting is an essential part of the budgeting process” (Finkler et al., 2007, p. 430). Determining specific strategies to manage budgets within forecasts is an instrumental facet of budget management analysis. “Forecasts prepared quickly and efficiently at its core not only gives companies the agility to manage as circumstances exchange unpredictably, it also takes less time, enables the implementation of robust incentive schemes and enhances corporate governance” (Sinister, 2009, p. 28). Forecasting is the nurse manager’s decisions about resource allocations for the coming year. For example, a nurse manager will forecast his or her resource allocations for 2014 during the current year of 2013. “Forecasting is a tool that helps in the preparation not only of the operating budget, but also of other budgets” (Finkler et al., 2007, p. 404). One strategy that has become useful in managing budgets within forecasting is the use of computers to track the historical data, trends, and seasonality that comprise forecasting. “The computer programs make the work of forecasting easier and the results more accurate” (Finkler et al., 2007, p. 416). Another strategy to aid in maintaining budget management within forecasting is inventory control and economic order quantity (EOQ). “Economic order quantity (EOQ) is an approach to determine the balance between ordering costs and carrying costs. The goal of inventory control is to minimize costs while not encountering a stockout” (Finkler et al., 2007, p. 427). Nurse managers have the task of forecasting for their specific departments ultimately affecting the financial budget for the entire organization. “However, in having the mechanism to make important changes whenever necessary, management must be careful not to jump at shadows and react to a situation that, on reflection, requires no changes to be made” (Sinister, 2009, p. 29). Expense results with Budget Expectations and Reasons for Variance “Variance analysis is the aspect of budgeting in which actual results are compared with budgeted expectations” (Finkler et al., 2007, p. 310). Nurse managers have planned or expected results and actual results that cause a variance in the budget. “Implementation of the budget, however, does not mean that everything will come out according to plan” (Finkler et al., 2007, p. 8). One expense result with budget expectations is volume of patients. Using historical data to forecast nurse managers can prepare for an expected volume of patients for the coming year. However, variances occur when expected volume is either under or overestimated for each department and the organization. “Recognition of seasonal, weekly, and daily patterns of variation in volume can in fact create significant opportunities for cost reduction” (Clerverley & Cameron, 2007, p. 337). Another expense results with budget expectations is staff and scheduling. Health care...
References: Clerverley, W. O., & Cameron, A. E. (2007). Essentials of Health Care Finance (6th ed.). Sudbury, MA: Jones and Bartlett Publishers.
Finkler, S. A., Kovner, C. T., & Jones, C. B. (2007). Financial Management for Nurse Managers and Executives (3rd ed.). St. Louis, MO: Saunders Elsevier.
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Sinister, M. (2009, August 1). Forecasting the death of budgets. Charter, 80(7), 28-29.
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