chapter 10: budgeting
TRANSCRIPT
Budgeting Chapter 10
Learning Objectives
• State the purpose of budgeting
• Describe the planning and control cycle and the 5 key dimensions of budgeting
• List the major budgets
• Construct each of the major budgets
Budgeting
Serves as a plan and control document
• 4 major components
1. Strategic Planning
2. Planning
3. Implementation
4. Controlling
1. Strategic Planning
• Identifying an organization’s mission, goal, and strategy to bestposition itself for the future
• Assess the organization’s external and internal environments
• Mission Statement
2. Planning
To identify:
• Goals
• Objectives
• Tasks
• Activities
• Resources needed
3. Implementing
• Once defined and approved budgets are created
• Implementing activities are the process of creating theseindividual budgets, which roll up to service line budgetswhich feed into the overall organizational budget
• For revenue gathering cost centers materials used-historicaltrends, market projections, revised fee schedules, grossrevenues expected
Controlling Activities
• These provide guidance and feedback to keep theorganization within its approved budget
• Tools vary
• Monthly Reports
• Expenditures against budgets
Five Approaches to Budgeting
1. Participation
2. Budget Models
3. Budget Detail
4. Budget Forecast
5. Budget Modification
• Controlled
• Latitude
Types of Budgets
Types of Budgets
• Statistics Budget-identifies the amount of services that willbe provided
• Operating Budget-combination of 2 budgets developed usingthe accrual basis of accounting of revenue and expenses
• Cash Budget- organization’s cash inflows and outflows
• Capital Budget-summarizes anticipated major purchases forthe year
• Variances both positive and negative are monitored
1. Statistical Budget: example
Solution:
Example 2: Statistical Budget changing RVU weight
Solution:
Example 3
Example 4:
Example 5:
Example 6
Example 7
Group Purchasing Organizations
• All organizations purchase and consume supplies as part ofdaily operations
• Transfer of supplies through a middleman to the health careorganization’s central distribution is called supply chain
• Oversight of this process is called supply chain Management
• A network of health care organizations all contracting withthe same third party vendor
Example
Summary• Budget is a focus for health care organizations
• The planning and control cycle has 4 major components-strategicplanning, planning, implementation and control
• 5 key dimensions vary according to the organization-participation,budget models, details, forecasts, and modifications
• 4 interrelated budgets-statistics, operating, cash, capital