Chapter 6: Budget Planning
• Focus on planning
budgets in the future
• Emphasis on the
operating expense
budget for an acu...
Figure 6.1. Roles in Health Care Budget
Influence and Accountability.
Accountability
Influence

High

Low

High

High infl...
Budget Linkage
• Strategic plan: establishes overall
assumptions, priorities and objectives for the
next FY
• Statistics b...
Elements of the Budget Cycle
• Calendar with schedule
and assignments for
budget preparation
• Establishing priorities,
go...
Forecasting Methods
• Qualitative forecasting: predictions based
on expert subjective experience
• Quantitative forecastin...
Qualitative Forecasting
• Experience
• Expert
opinion
• Consensus

Range
Estimates
Low

High

Expert A

2.5% 5.0%

Expert ...
Figure 6.2. East Wing Medical-Surgical Unit, Trend
Line Forecast for 2013 Total Nursing Costs.
Concepts of Forecasting
• Forecasting requires effort, expense and
expertise
• A combination of retrospective and
prospect...
Zero-Based Budgeting (ZBB)
• Requires justification for each line item
before entering the item into the budget
• Forces t...
Your Business Plan or Grant
Proposal: Preparing Your Budget
• Personnel budget section
– Salaries, wages and benefits (25%...
Key Points
• Nurses need to become involved in strategic
planning to increase their financial influence and
accountability...
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Nursing Unit Budget Planning

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See Chapter 6 in Penner, Susan J. (2013). Economics and Financial Management for Nurses and Nurse Leaders, 2nd ed. New York: Springer Publishing Company. http://www.springerpub.com/product/9780826110497#.UOtV2axCrTo

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  • Penner, Susan J. (2013). Economics and Financial Management for Nurses and Nurse Leaders, 2nd ed. New York: Springer Publishing Company. http://www.springerpub.com/product/9780826110497#.UOtV2axCrTo
  • Nursing Unit Budget Planning

    1. 1. Chapter 6: Budget Planning • Focus on planning budgets in the future • Emphasis on the operating expense budget for an acute care nursing unit • Directions on preparing the budget for your class project
    2. 2. Figure 6.1. Roles in Health Care Budget Influence and Accountability. Accountability Influence High Low High High influence and High influence high and low accountability accountability Low Low influence and Low influence high and low accountability accountability
    3. 3. Budget Linkage • Strategic plan: establishes overall assumptions, priorities and objectives for the next FY • Statistics budget: revenues and expenses are based on volume • Operating and cash flow budgets • Capital budget: linked to the strategic plan given long-term financial investment
    4. 4. Elements of the Budget Cycle • Calendar with schedule and assignments for budget preparation • Establishing priorities, goals, objectives and performance targets for the next budget year as part of the strategic plan • Preparation of budget proposals • Budget negotiation and approval • Evaluation of performance over the completed budget year
    5. 5. Forecasting Methods • Qualitative forecasting: predictions based on expert subjective experience • Quantitative forecasting: collection and mathematical analysis of measures • Retrospective forecasting: based on past data and trends • Prospective forecasting methods: based on information that influences future events • Trend line: estimates the movement of an economic variable over time
    6. 6. Qualitative Forecasting • Experience • Expert opinion • Consensus Range Estimates Low High Expert A 2.5% 5.0% Expert B 4.0% 6.0% Expert C 7.0% 8.5% Patient Days Forecast 4.5% 6.5%
    7. 7. Figure 6.2. East Wing Medical-Surgical Unit, Trend Line Forecast for 2013 Total Nursing Costs.
    8. 8. Concepts of Forecasting • Forecasting requires effort, expense and expertise • A combination of retrospective and prospective methods may be helpful • A combination of qualitative and quantitative approaches may be helpful • Forecasting accuracy decreases as the time frame increases
    9. 9. Zero-Based Budgeting (ZBB) • Requires justification for each line item before entering the item into the budget • Forces the manager to critically review every item in the budget • Improves the accuracy of the budget • Cumbersome to prepare – Limit ZBB to line items needing greater scrutiny and control – Not practical to apply to the entire budget every year
    10. 10. Your Business Plan or Grant Proposal: Preparing Your Budget • Personnel budget section – Salaries, wages and benefits (25% or so of salary or wage) – Use websites such as Indeed.com/salary for salary information • Non-personnel budget section – Supplies – Maintenance (such as gasoline for a van) • Equipment: start-up costs – Such as purchasing a van for mobile health care • Prepare an annual budget for two years – The first year will include all the start-up costs
    11. 11. Key Points • Nurses need to become involved in strategic planning to increase their financial influence and accountability • Advisable to apply multiple methods to budget forecasting: – Retrospective and prospective approaches – Quantitative and qualitative approaches • ZBB is useful to critically review and justify selected budget line items • Prepare your annual project budget for two years to report start-up costs
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