Buildinga Nursing Budget
Theobjective of implementing budgeting methods in an organizationentails the identification of concrete and practical steps that mayfacilitate strengthening the operations within the organization.Budgets provide a basic plan through which an organization maystrategize their outgoing expenses as well as the incoming revenuesfor a specified period. Most importantly, budgeting especially in thehealthcare sector serves a crucial purpose in that it allowsplanning, tracking and control on a unit’s expenditure (Ekholm andWallin, 2011). The operations conducted in a unit should follow theplans laid out and stay within preset limits in a way that does notexceed the available funds. Besides, budgeting supports fundingrequests through justifying the utilization plans intended for thefunds. For instance, the operating budget within a healthcare unitmay predict the expenditure for training employees through settingthe annual spending for planning at higher levels. The planningprocess may later be broken down into quarterly figures andeventually monthly (Ekholm and Wallin, 2011).
Someof the methods employed in nursing include fixed and flexiblebudgeting with the aim of planning for the financial operations. Thefixed budgeting method describes a regular financial plan implementedthroughout the budget period regardless of any changes that may occurin the actual activity levels experienced. The healthcare sectorsuffers substantial variations emanating from the expected activitylevels over the period regarding the budget. However, the divergencein the amounts included in the budget may emerge from the actualresults (Ekholm and Wallin, 2011). The essence of fixed resourcesfacilitates in tracking the prices close to the real results insituations such as when the costs are mostly set in a way that theexpenditure remains constant when a fluctuation in revenues occurs.Besides, fixed revenues allow effectiveness in the tracking of theactual results in instances where the industry is not affected by thechange, and the funds become reasonably predictable. These may befollowed closely by a monopolistic situation where customers lack anyother option than to accept the prices. Most healthcare organizationsemploy fixed budgets which indicate that they often encountervariations the expected and actual results (Ekholm and Wallin, 2011).Nevertheless, the impact of such actions leads to a lack of relianceby the employees on the budget.
Onthe other hand, budgeting may involve flexibility where changes occurin the diversity of the activity level. Flexible funds provide afinancial plan created to serve different activity levels subject toindependent adjustment based on the output obtained. Mostimportantly, flexible resources allow the determination of costs atvarious activity levels. Flexible funds provide a suitable platformfor organizations which encounter a high degree of variability infactors such as production and sales. They also enhance financialoperations for industries the face adverse effects from externalfactors or even fluctuations in the market conditions. Consequently,flexible budgets seem more accurate in the evaluation of theperformance, efficiency and capacity of the activity level as opposedto fixed resources (Ekholm and Wallin, 2011). They also facilitate inmaking comparisons in instances where differences exist in theexpected and actual outputs. These may be coupled with theenhancement in judging the performance through comparisons of thereal production and the budgeted targets. Besides, flexible resourcesallow cost ascertainment in cases where the actual and estimatedlevels of activity vary. Furthermore, flexible resources, especiallyin industries such as healthcare, allow adaptation to changes wherethe business environment change. They facilitate the accommodation ofthe changes as well as make appropriate operational adjustments whicheventually leads to increased benefits from opportunities existing inexternal environments (Ekholm and Wallin, 2011).
Typesof Operational Budgets
Theimplementation of budgets in nursing activities facilitates inplanning, monitoring, control and measurement of performance.Nevertheless, the deployment of adequate nursing staffing levelsentails an essential responsibility of inpatient care facilitymanagers. The nursing staff accounts for the majority of hospitalbudgets indicating that their operations are scrutinized during timeswhen cost-containment efforts are required. The responsibilitiesentitled to the nurses requires appropriate accountability of theactivities carried out on a daily basis. These activities includesales, expenses and revenues acquired within a healthcare facility ona day-to-day basis (Ekholm and Wallin, 2011). The operational budgetprovides a structure through which these factors may be incorporatedfor evaluation with the aim determining the activities involvingexpenses and revenues. It also contains a statement presenting thefinancial plan for every responsibility center such as a healthcareunit during the budget period. These factors occur through thereflection of the operation activities that encompass, expenses andrevenues. Some of the most common types of operating funds includeprofit, revenue and expense budgets. The expense budget describes afinancial plan used in documenting the expected expenditure of anorganization during the budget period (Ekholm and Wallin, 2011). Italso allows the evaluation of three kinds of expenses namely fixed,variable and discretionary. The discretionary expenses include thecosts depending on managerial judgment as they cannot be determinedin a particular manner. These costs include R&D expenses, legalfees, and accounting fees. Besides, the expense budget defines thecosts of goods sold and administrative expenses directly related tothe production of goods and services (Ekholm and Wallin, 2011).
Similarly,operational budgets include financial plans for revenue which help inthe identification of fund required by the organization. Mostimportantly, revenue budgets facilitate the forecasting of futuresales within a unit. Additionally, the budget of income gives arepresentation of the sales of products and services on a daily,monthly and annual basis. On the other hand, profit resources bringabout a combination of the expenses and revenue budgets in onestatement indicating the net gross profits acquired in anorganization. They facilitate in making in making final resourceallocation through determining the adequacy of expense budgets withrelation to the anticipated revenues (Ekholm and Wallin, 2011).Besides, profit funds ensure control and monitoring of the activitiescarried out across units through delegating responsibility tomanagers for the shares of the financial performance of theorganization. They also ensure that managers, especially in thehealthcare sector conduct comparisons of the ongoing results of thebudget across the year, thus facilitating adequate adjustment andplanning for any variations in the revenue (Ekholm and Wallin, 2011).
Theuse of a budget types by masters-prepared nurse leaders
Ina particular healthcare unit, the nurse manager in a pediatric wardevaluates the monthly budgets statements and realizes consistentover-expenditure. The nurse decides to reduce the use of agency staffwith the aim of cutting down some costs. Further, upon determinationof the unit’s expenditure, the nurse shockingly identifies that theexpenses on drugs relatively exceed the revenue obtained. However,the nurse leader lacks the ability to control such costs as the drugscome as prescriptions from qualified consultants. Therefore, thenurse determines the current level of supplies and realizes that mostof the drugs in their stores are out of date. After discussing theissues with the relevant stakeholder and personnel, they find thatthe method used in ordering the supplies entails submission of asimilar form every month (Ekholm and Wallin, 2011). Besides, themethod for requesting disregards the current supplies available orthe rates of using the supplies. They thus decide to alleviate thesituation through using appropriate measures that will reduce theexpenses and ensure that the unit remains at its actual budget(Ekholm and Wallin, 2011).
Inthe situation described above, one appropriate measure that wouldenhance in determining the usage rate and availability of suppliesentails implementation of a profit budget. The essence of thebenefits budget involves the provision of a suitable structurethrough which resources within the unit are appropriately allocated.However, the allocation of the resources requires determination ofthe products highly demanded both by the personnel and the patients(Ekholm and Wallin, 2011). The profit budget also allowsdetermination of the adequacy of expense budgets related to theanticipated revenues. These factors enable the control and monitoringof activities within the unit through assigning the relevantstakeholders the responsibility of the organization’s financialperformance. The implementation of the profit budget would bringabout a strategy where the ordering of supplies would involve acompetitive shopping as opposed to topping up existing supplies.These would be followed closely by the combination of the revenuesbudget with the expenses budget in an appropriate way of determiningthe gross and net profits obtained. Besides, the nurse leader wouldensure control and evaluation in instances where changes in the salesand production volume would involve reorganization of the fundallocation depending on the circumstances (Ekholm and Wallin, 2011).
Ekholm, B.,& Wallin, J. (2011). The Impact of Uncertainty and Strategyon the Perceived Usefulness of Fixed and Flexible Budgets. Journalof Business Finance & Accounting,38(1-2),145-164. doi:10.1111/j.1468-5957.2010.02228.x