had an occasion to address a senior group of doctors of Tamil Nadu Government. sharing the PPT which may be useful to those doctors uninitated in to finance
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Financial budgeting for hospital
1. Presented ByPresented By
S. ManivannenS. Manivannen,, FCAFCA,,
Chartered AccountantChartered Accountant
Managing Director - Parama Health Care PrivateManaging Director - Parama Health Care Private
Limited.Limited.
3. What is financial Budgeting & whoWhat is financial Budgeting & who
does it ??does it ??
You think financial budgeting is prepared by
the finance Man? - No
Financial Budgeting gives the number values
to all the activities of a unit – Here health
care system.
The finance man puts the number value to
the activities that you plan to do.
4. Who should prepare BudgetsWho should prepare Budgets
Government Organizations
Private Enterprises &
The NGOs
Can spend
the money
allocated
Should keep some for admin and
spend the balance for the goals
Should generate
return on money
given and retain the
capital
5. Financial BudgetingFinancial Budgeting and whyand why
Each business or Service unit requires
resources to operate in order to achieve the
objective for which it is established
You as unit head are responsible for raising
funds and ensuring that the funds are used
efficiently.
6. The development of a sound hospital budget
is fast becoming a matter of paramount
importance in hospital administration.
Hospitals receiving grants, donations or
budgetary allocations
Financial BudgetingFinancial Budgeting- The need- The need
7. Hospital raising funds through equity or debt
All of you have to estimate your
requirements continuously
and check whether they are proceeding as
per the budgetary estimates.
Financial BudgetingFinancial Budgeting- The need- The need
8. When community medical centers run by
government are set up in a region and also
act as centers for excellence, the
management of such units should have a
good understanding of financial
management.
Financial BudgetingFinancial Budgeting- The need- The need
9. This is to ensure that the unfunded
healthcare needs are met through efficient
planning and utilization of the resources
established
The ever increasing healthcare cost makes it
essential to manage the financial resources
to get maximum service units for every rupee
spent
Financial BudgetingFinancial Budgeting- The need- The need
11. A mission statement with specific objective and
goals for the healthcare system under
consideration.
The goals must be in measurable units
Should be simple, direct and attainable
A strategic plan should be the basis of the
budget
THE PRINCIPLES INVOLVEDTHE PRINCIPLES INVOLVED
IN BUDGETINGIN BUDGETING
12. A plan to raise resources or modify specific
goals if the current financial resources or
allocations are not sufficient
This plan should relate to achieving the goals
– For example setting up one more cardiac
OT to meet increasing incidences of CABG
surgeries
THE PRINCIPLES INVOLVEDTHE PRINCIPLES INVOLVED
IN BUDGETINGIN BUDGETING
13. The budget should measure the current
financial performance
Internalize the budgeting process.
Financial budgeting is only a aggregation of
department wise budget prepared by each
department within the healthcare system.
THE PRINCIPLES INVOLVEDTHE PRINCIPLES INVOLVED
IN BUDGETINGIN BUDGETING
14. The financial budget should be based on the
operational numbers of each department.
It should be linked to operational budget
which should be derived from the marketing
budget.
Actual financial results must be compared with
the budgeted activities.
THE PRINCIPLES INVOLVEDTHE PRINCIPLES INVOLVED
IN BUDGETINGIN BUDGETING
15. Variance analysis must be made
Mid course correction must be initiated
Units must operate within the budget
Policies for all the activities must be
established
THE PRINCIPLES INVOLVEDTHE PRINCIPLES INVOLVED
IN BUDGETINGIN BUDGETING
16. All the units of the healthcare system should
comply with the policies and procedures
Each department or unit must evaluate the
financial consequences of any new activity is
started.
20. Conventional budget or incremental budget
is prepared on the previous year figures.
It assumes that whatever has happened in
the previous year will continue with some
changes.
It does not take in to account any changes in
the situation.
CONVENTIONAL BUDGET
21. Whatever amount spent last is assumed to
be sanctioned without analyzing whether it is
required.
Conventional budgeting is always out of sync
with the current happenings in the system.
CONVENTIONAL BUDGET
23. ZERO BASED BUDGETINGZERO BASED BUDGETING
Zero Based Budgeting Exercise
Zero-Based Budgeting is a technique of
planning and decision-making which
reverses the working process of traditional
budgeting.
24. In Traditional incremental budgeting,
departmental managers justify only increases
over the previous year budget and what has
been already spent is automatically
sanctioned.
No reference is made to the previous level of
expenditure.
ZERO BASED BUDGETINGZERO BASED BUDGETING
25. By contrast, in zero based budgeting, every
department function is reviewed
comprehensively and all expenditures must
be approved, rather than only increases.
This process requires the budget request
justified in complete detail by each program
starting from the Zero base.
ZERO BASED BUDGETINGZERO BASED BUDGETING
26. The Zero-base is indifferent to whether the
total budget is increasing or decreasing.
"With zero-based processing one can forget
about last year, assuming that the program is
brand new
and see if one can provide a detail of expenses
for what one would need to fully accomplish
the program.
27. This technique will help one to develop a
complete picture of what the program
actually needs to cost and not just what it has
been costing.”
In effect we create a clean slate. The analogy
we will use is if the hospital is was empty
today and we were told we had to start
operating it as a Hospital in six months.
28. INPUT OUTPUT METHOD
Break down the healthcare system in to a
set of activity center.
Medical Departments
Service Departments
Admin Department
29.
30. These are further classified in to final service
departments and intermediary service
departments
The departments which render services directly
to the patients are final service departments
Departments which provide service to the other
departments and not to the patients directly are
known as intermediary service departments.
INPUT OUTPUT METHOD
31. Healthcare system challenges this method of
classification since some departments earn
revenue directly as well as serve the other
departments.
The ideal way to solve this complexity is to
decide based on billable activities.
INPUT OUTPUT METHOD
32. Decide on the unit of service. It is also essential t
The ideal way to solve this complexity is to
decide based on billable activities or services
which directly reach the patients
INPUT OUTPUT METHOD
33. Cost of intermediary services are allocated
to direct services departments
The final services costs are matched with
the revenues
INPUT OUTPUT METHOD
34. INPUT OUTPUT METHOD
Medical Departments
Service Departments
Admin Department
Out Patient Departments
Ward
ICU, CCU, & NICU
Operation Theater
Pharmacy
Diagnostic & Radiology
Bio-Medical
Nursing
Purchase
EDP, HR
Maintenance
Marketing
Input=Investment/ExpensesInput=Investment/Expenses
35. Fees for servicesFees for services
RevenuesRevenues
Room RentRoom Rent
SurgeriesSurgeries
Investigation & ProcedureInvestigation & Procedure
PharmacyPharmacy
F & BF & B
38. Revenue Budgeting
Estimates of manpower cost, material
costs, overheads, financial cost and
estimation of working capital
CLASSIFICATION OF BUDGETSCLASSIFICATION OF BUDGETS
40. We need to estimate revenues and
expenses for every department under
following categories
Manpower
Material
Overheads
Technology
Finance
SOME MORE OBSERVATIONSSOME MORE OBSERVATIONS
41. Under each head mentioned above
Direct
Indirect
SOME MORE OBSERVATIONSSOME MORE OBSERVATIONS
42. Further classify in to
Fixed
Variable
And assess the capacity utilization of all
the elements of cost like material,
manpower, Overheads and technology
SOME MORE OBSERVATIONSSOME MORE OBSERVATIONS
44. SUMMARYSUMMARY
Need for Budgeting tool
Principles involved in budgeting exercise
Types and methodology – Conventional,
Zero based and Input-Output Method
45. Classification in to capital and revenue
budgeting
Time frame
Further estimation under manpower,
materials, overheads, technology and finance
Differentiating between fixed and variable
expenses
Estimation of capacity utilization
SUMMARYSUMMARY
46. The Importance of audit
Types of audit
Audit as a tool
Audit to give confidence to external agencies
like the government, donors and investors
including banks
Audit and its importance toAudit and its importance to
hospitalshospitals
48. What is audit ?What is audit ?
A study, linking management to
Administration,
operations,
finances.
10/02/201348
49. What is audit ?What is audit ?
review the work process,
Assess effective utilization of resources,
to fix accountability
to reduce risks in operations with proper
internal control.
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51. Use audit as a tool to monitor whether we are
deploying the resources properly or not
Audit as a tool should be used for improving the
systems in place
Audit as a tool should be used to control or reduce
cost
ConclusionConclusion
52. Thank you..,Thank you..,
Parama Healthcare P LtdParama Healthcare P Ltd
Email: smv@paramahealthcare.comEmail: smv@paramahealthcare.com
