The document discusses the importance of budgeting skills for nursing leaders to manage financial resources efficiently in healthcare organizations. It outlines various types of budgets, including operating, revenue, and expense budgets, along with essential budgeting practices such as variance analysis and position control. Additionally, it emphasizes the significance of forecasting needs, working with vendors, and understanding cost classifications for improved patient care and operational efficiency.

1. BUDGETING FOR
NURSING SERVICE
By-
HARSHIKA TEMBHURNE
LECTURER DR.PDNI, AMRAVATI

2. Healthcare organizations are increasingly
focused on cost-containment and efficacious
use of financial resources. Today’s nursing
leaders require budgeting knowledge in
order to efficiently manage operations in the
patient care environment and meet financial
targets.

3. Budgets
A budget is a detailed financial plan,
used to carry out organizational goals. The
budget includes proposed earnings and
expenditures as well as details about how
resources( money, time, and people) will be
acquired and used. The purpose of the budget
is to project future plans and costs.

4. Operating budget-deals primarily with salaries, supplies,
and contractual services It is the financial plan for the
day to day activities of the organization containing a
statement of expected revenues and expenses for the
fiscal year.
Revenue Budget- includes expected income based on
volume and mix of patients, rates, and discounts.
Expense Budget- includes salary and non-salary items
that reflect patient care objectives and planned activities
for the nursing unit.

5. Cost and Profit
Cost Center-the smallest area for which costs
are accumulated. They may produce revenue,
such as laboratory and radiology or not
produce revenue, such as nursing.
Profit Center- a unit where performance is
measured in terms of profit the difference
between revenues and expenses

6. Classification of Costs
Fixed Costs-expenses that remain the same
such as rent or insurance premiums.
Variable costs-expenses that change with
changes in volume and acuity.
Mixed Costs-may vary with volume but not
directly.
Direct Costs-affect patient care.

7. Salary (Personnel) Budget
The personnel budget projects the salary
costs that will be paid and charged to the
cost center. It accounts for replacement of
staff for benefit time, overtime, shift
differentials, orientation, on-call hours,
bonuses and premiums, and salary
increases.

8. Variance Analysis
The difference between the amount that was budgeted for a specific
revenue or cost and the actual revenue or cost that resulted during
the course of activities is known as the variance.
There is an established level at which a variance needs to be
investigated.
A variance may be favorable or unfavorable and may be related to
patient volume, efficiency in relation to nursing care hours provided,
rates in hourly rates paid, or in non-salary expenditures
Position Control- a tool to monitor actual numbers of employees to
the number of FTE’s budgeted.

9. Why you need budgeting skills
oAbsolutely essential management skill
oFinancial viability
oQuality patient care
oUnit operational efficiency
oStaff satisfaction
oLeadership expectation
oMost nurse managers do not come into
the job with these skills

10. Department Patient Nurse ratio
ICU/CCU/NNN,
Burnt
1 1
Paediatric and
Emergency
3 1
General Wards 6 1
Isolation ward 2 1
O.P.D (each) 1
Dressing Room
(each)
1
OT 3 1

11. Capital Budgeting
Process

12. Identify immediate needs
New services
New technology
Broken equipment

13. Identify Long-term needs
New services
New patient populations
New technology
Improved technology
Equipment replacement plan
Elimination of rentals

14. Give what they want
Get input
MDs (Intensivists, surgeons,
cardiologist,specialists)
RN Staff
Respiratory Therapy
Ancillary staff

15. Vendors
• Develop (compliant) vendor relationships
throughout the year
• Be aware of contracted vendors
• Become knowledgeable about products
• Ask for demos
• Ask for references (and check them)
• Evaluate the literature provided to you
• Drive a hard bargain
• Don’t forget trade-in value
• Consider contract for training costs

16. Hidden Sources
Investigate sources of funding
Technology committees
Specialty funds
 Workplace safety funds
Patient safety funds
Equipment used in Clinical Trials
Vendor trials
Contingency Funds

17. Make a convincing case
How does this equipment improve
quality of patient care?
Is it a regulatory compliance issue?
Will it improve patient safety?
Will it improve staff safety?
Will it save you money in the long
run?

18. Final Advice
Be mindful of deadlines
Allow enough time for each step of the
process
Vendor response time
Paperwork
Local/regional/corporate approvals
Fiscal year

19. Budget Variance in the
Operating Budget
WHY ARE
YOU
OVER
BUDGET?

20. Budget Variance
•Payroll budget
•Non-payroll budget

21. Non-payroll Operating Budget
 Supply Costs
 Equipment Costs
 Operational Costs

22. Non-payroll costs
•Unit upkeep / construction
•Operational Costs
•Education
•Conference fees
•References materials
•Employee recognition

23. Non-payroll (cont.)
Transportation
 Traveler housing
One-time expenses
 Lost patient belongings

24. Supply Costs
Ask yourself,
“Is there a change in the supply
OR
a change in the patients?”

25. Change in supply cost
New product
Change in cost of product
Change in vendor
Change in contract price
Substitute product
Stocking Issues

26. Change in Patient
•Change in volume
•Change in patient population
•Individual patient need

27. Equipment Cost
Purchases
Rentals
Maintenance
Vendor change
Contract Change
Consider capitated costs for rentals

28. Payroll Budget
Simply put…
What you pay the people who
take care of the patients

29. Payroll Budgeting Tips
• Budget to full-time equivalents
(FTEs) and dollars
• Account for inflation and salary
increases
• Factor in contractual obligations
• Estimate non-productive time
• Account for anticipated changes in
patient volume and acuity

30. Payroll budget
• Volume
• Acuity
• Overtime Pay
• Penalty Pay
• Registry and Traveler Pay
Payroll Variance
• Volume
• HPPD
• CPPD

31. Summary of Variance
 Examine Payroll and Non-payroll costs
Look at both in relation to volume
Non-payroll
Supply cost
Equipment costs
Other operating costs Payroll
Payroll
OT and Registry Usage
Training Costs
Concisely explain why

32. ANALYSIS
1. What can we determine from this position
control document?
2. Have we budgeted for enough staff?
3. Do we currently have enough staff?
4. What additional positions would we need to
post?

33. Step one: Review past performance:
1. As a starting point, the nurse executive will require to review
the following

34. a. The financial records from prior financial periods as a
basis for planning.
b. The present activities of the nursing division.

35. c. The activities that the division plans to institute during the
projected financial period.
d. Those activities the division plans to delete during the
projected period.

36. • Step two: Review the organization's goals and projections:
• The nurse executive has to study the organization's goals and
financial projections thoroughly. - Items in the major
budgetary report that affect the nursing department should be
determined

37. • Step three: Review of the variances with higher levels of
management :
• Once the goal statement is finished, it, (together with the
actual versus budget analysis done earlier), should be reviewed
with higher level management

38. • The departmental goals proposed should be carefully
considered; as well as the variances, their causes, and proposed
corrective actions should be reviewed.
• Once the final statement for the department is in place, the
new budgeting process can begin in earnest.

39. • Step four: Actual preparation of the budget:
• The actual preparation of a new budget can be done based on
a previous budgetary plan, or newly proposed plan (if a newly
developed or modified service).

40. • To complete the budget, a budget worksheet is essential.
Worksheet is "a tool used by managers to prepare their
budget". It includes a number of columns including
information about:

41. a) Historic information with old budget.
b) Actual numbers with comments explaining the variances.
c) Revenue and costs.

42. What have you learned?
Capital Budget
 Identify short and long-term needs
Work effectively with vendors
Plan ahead and allow lots of time
Analysis of Operating Budget variance
Payroll
Non-payroll
Staffing Matrices
Position Control