Budget Management and Variance Analysis Essay

A compute is a tool that fosters passenger vehicles to ensure that the demand resources are obtained and used effectively and efficiently as the face moves towards achievement of its objectives. The ciphers are watch overd categoryly and are based upon the previous years figure and variances. This penning will discuss a study of operating budget, comparison expense results with budget expectations, description of possible reasons for variances and strategies to keep results aligned with expectations, testimonial some benchmarking techniques that might remedy budget accuracy.The operating budget is a plan for the organizations revenues and expenses that generally covers a goal of one year (Finkler, Kovner, & Jones, 2007). In healthcare organization the nurse manager of each woo center involves in the preparation and control of the operating budgets (Finkler, Kovner, & Jones, 2007). The finance office of the organization provides support throughout the budget process dev elopment. The budgets for the costs centers are combined, and the executive management of the organization makes final decisions on a budget to be submitted to the age for approval.The nurse managers need a variety of information to begin the process of preparing operating budgets for their cost centers, such as the information generated by the organizations environmental review and by its development of general goals, objectives, policies, organization wide assumptions, program priorities, and specific measurable objectives (Finkler, Kovner, & Jones, 2007). For example, the environmental review and the general goals, objectives, and policies allow the manager to down the stairsstand what the organization wants to accomplish and what it believes it will be able to accomplish.For another instance, the organization-wide assumptions and specific measurable objectives then provide the manager with information needed to cause preparing the specific details of the budget. In addition, within nursing administration, additional back-ground information is needed before nurse managers can commence cost center budget preparation (Finkler, Kovner, & Jones, 2007). Especially the organizations approach to delivering nursing care must be clearly understood by all nurse managers. For example, responsibilities of LPNs as opposed to RNs, role of nursing assistants, or proportion of staff works on each shift.According to Finkler, Kovner, & Jones (2007), the primary flavours of the operating budget development include the calculation of expense budget for personnel, the expense budget for costs other than personnel assistants, and the revenue budget, budget compliance, and budget implementation. To prepare the revenue or expense portions of the operating budget, the first step is to ascertain the volume of work for the coming year (Finkler, Kovner, & Jones, 2007). The amount of work performed by a unit is referred to as its workload (Finkler, Kovner, & Jones, 2007).Workload budget is budget that indicates the amount of work performed by a unit or department, measured in terms of units of service. Workload may be measured in a variety of moods, such as the number of tolerants, patient days, deliveries, visits, treatments, or procedures. Each cost center must determine the measure that is most appropriate for its unit of service. Once a cost center defines its key unit or units of service, it must predict the number of units of service that will be provided in the coming year.This will allow development of the operating budget. Expense budget for personnel is budget for all personnel under the managers direction, generally within a cost center such as RNs, LPNs, aides, and clerical staff (Finkler, Kovner, & Jones, 2007). Expense budget for other-than-personnel services is budget for all expenses for other-than personnel services such as supplies, minor equipment, including both direct unit or department expenses and indirect overhead expenses (Finkl er, Kovner, & Jones, 2007).Budget submission is another step in budget development, when revenue and expense portions of the budget must be summarized and submitted for review together with detailed supporting calculations and narrative vindication (Finkler, Kovner, & Jones, 2007). Budget revisions may be required as the result of a series of negotiations over the submitted budget (Finkler, Kovner, & Jones, 2007).Budget implementation is a final step of budget development, when managers must address a number of issues in implementing an approved budget, including development of a staffing plan that provides coverage for staff weekends, olidays, vacations, and sick leave as well as busy and slow periods (Finkler, Kovner, & Jones, 2007). A budget variance occurs when the actual results of financial activity differ from your budgeted projections (Finkler, Kovner, & Jones, 2007). The expense reports show the difference among the budget and the actual amount spent and the result is cal led the variance. Variances may be within the budget, which is halcyon, or over the budget, which is unfavorable (Finkler, Kovner, & Jones, 2007).The variance is used to predict the budget for upcoming years, help with spending during the current year, and help with evaluating the managers and their departments. To determine the cause of variances the managers must investigate and justify to upper management why the variance occurred. at that place are a variety reasons for variances, which must be identified and controlled if possible. While analyzing the nursing expense results from various units for a pay period, there were some favorable and unfavorable variances.While reviewing the expense record the paid productive hours variance was within the budget and the paid nonproductive hours variance was 60 hours over the budgeted hours. The unfavorable variance of paid nonproductive hours may exact occurred due to some staff being on change duty, sick leave, meeting era, or educ ation time, which means they are getting paid with no patient care involved.The overtime percentage of hours variance was 7. 5% over the budget and the registry percentage of hours variance was 8. % over the budget, both are unfavorable. The overtime may have been caused by bad time management, late arrival of the next shift, or working past shift hours due to not enough staff. The increase in the registry hours may have been due to not enough regular staff due to hiring freeze or staff being off for own(prenominal) or illness reasons. The hours per patient day (HPPD) licensed productive hours was . 13 over budget, the direct product hours was within budget, and the total productive hours was within budget.The hours per patient day over budget may have been caused by the unit being over staffed or also due to the overtime and registry hours. The honest daily census (ADC) per unit varied from being within budget to 7. 50 over the budget. The daily census is very unpredictable and d epends on the time of year, the admissions from ER or the clinic, and transfers from other hospitals or facilities. Strategies to keep the results aligned with expectations may be done by writ of execution budgeting, which will analyze key reas such as staffing, cost control, increased productivity, and indirect and direct patient care. The activities affected by analyzing these performance areas would be daily staffing calculations, reduced cost to the unit, working more(prenominal) efficiently and better time management, patient care planning, and time spent on patient charting. Offering incentives could also be a good way to involve the staff by informing them of the budget goals.Benchmarking helps to identify performance gaps and identify where improvement is needed. Benchmarking is used by large health systems and smaller practices like as a tool to identify targets and set goals enabling staff to compare the operations service, process, and outcomes with those already attai ning best practice goals (Borglum, 2008, para 12). in that respect are many benchmarking techniques for the purpose of this paper three will be discussed, financial, performance, and operational. Financial benchmarking is performing a financial analysis and comparing the results in an movement to assess your overall competitiveness and productivity (Cimasi, 2006, para 10).Financial benchmarking is among the more effective techniques for extracting information from a health care enterprises historic operating performance and presenting it in a form that facilitates informed judgments that help predict the subject entitys future operating performance and financial modify (Cimasi, 2006, para 16). Performance benchmarking involves comparing the performance levels of organizations for a specific process, this information can then be used for identifying opportunities for improvement and/or setting performance targets (Business Performance Improvement Resources, 2011, para 26).Performa nce levels of other organizations are normally called benchmarks and the ideal benchmark is one that originates from an organization recognized as being a leader in the related area (Business Performance Improvement Resources, 2011, para 27). Performance benchmarking may involve the comparison of financial measures (such as expenditure, cost of labor, cost of buildings/equipment, cost of energy, adherence to budget, cash flow, revenue collected) or non-financial measures (such as absenteeism, staff turnover, the percentage of administrative staff to front-line staff, budget processing time, complaints, environmental impact or call center performance) (Business Performance Improvement Resources, 2011, para 28).In conclusion, the operating budget is a plan for the organizations revenues and expenses that generally covers a period of one year and developed by the nurse manager with support of the finance office of the organization (Finkler, Kovner, & Jones, 2007). Variances may occur a t any time, may be internal or external, and in most cases are correctable once investigated by the mangers. Benchmarking is used in strategic management and compares processes and performance to help improve organizations. The use of financial ratios and benchmarking is critical to understanding an entitys overall historical performance and to the forecasting function of valuation analysis (Cimasi, 2006, para 28). This paper has discussed specific strategies to manage budgets within forecast, compared five to seven expense results with budget expectations, described possible reasons for variances, gave strategies to keep results aligned with expectations, recommended three benchmarking techniques, and identified what might improve budget accuracy, and justified the choices made.