BUDGET ESTIMATE SEMINAR. nursing Management

Nursing Management

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3. SEMINAR ON BUDGET ESTIMATE,REVISED ESTIMATE, PERFORMSNCE BUDGET SUBMITTED TO SUBMITTED BY DR.K.MEENAKSHI M.Sc.(N) (ACU) R.SATHYA BAMA LECTURER M.Sc. (N) YEAR GCON GCON CUDDALORE CUDDALORE 3

4. BUDGET INTRODUCTION: The hospital management is the field relating to leadership, management and administration of public health system. Hospitals and hospital networks in all the primary, secondary, tertiary sectors. A healthcare or hospital budget is an estimation of revenue and expenses over a specified time frame. Through the health care budgeting process, health systems come to an understanding of how much funding must be planned in certain areas, including operating cost and capital equipment. During the budgeting process, leaders must account for key components of planning in healthcare, volume growth assumptions of planning in healthcare, feedback and inputs from key stakeholders and the ability to adjust when input and circumstances change. 4

5. R K Shanmukham Chetty was known as the father of the Indian Budget. New Delhi: The first Budget of Independent India was presented by R K Shanmukham Chetty, a lawyer, economist as well as an industrialist who was active in politics. K. Shanmukham Chetty presented the first ever budget of Independent India on 26th November 1947. Before independence, it was British economist James Wilson who presented the first budget for India in 1860. 5

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7. BUDGET MEANING: British kings coined the word “ BUDGET” in early days from the word “BOUGETTE” which means a leather bag or pouch that held the seal of the medieval court Exchequer (Former Government Department in charge of national revenue). As early in 1215 AD, it had constitutional exposure, and in 1718 AD, consolidated fund act was passed, which considered budget as a comprehensive financial statement of government activities for facilitating accountability of public fund. In 1882 AD, budget entered the parliament for first time seeking advice. 7

8. BUDGET DEFINITIONS: Budget is a numerical expression of the entire management process for a fixed period of time. - Anonymous. A budget is an estimation of future needs arranged according to orderly basis, covering some or all activities of an enterprise for definite period of time. -TN Chhabra 8

9. IMPORTANCE OF BUDGET Budget is an essential management tools. Budget provides an estimation of the money required to carry out organizational activities. Budget needs rigorous thinking for financial planning. Budget monitors, income and expenses. It provides a base for financial accountability. 9

10. PURPOSES OF BUDGET To provide definite targets for income and expenditure of the department. To coordinate the activities of different functional heads in the working of these departmental budget. To enable a case flow statement prepared month by month. To aid management in formulating future policy decisions to promote the growth and welfare of the organization. To provide useful tool for the control of costs. To provide a tool for communication and coordination within the organization. To improve financial planning and decision making. 10

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12. PRINCIPLES OF BUDGET 12

13. PRINCIPLES OF BUDGET The budget plan should be according to the requirement of an organization. It should focus on the objectives and policies of the organization. It ensures appropriate utilization of the scarce, financial and non financial resources. It requires planning of program activities in advance. The managers need to delicate responsibilities in framing and executing budget at a different level. It needs coordinating efforts to make managerial decisions and to develop a criterion for evaluating managerial performance. 13

14. PRINCIPLES OF BUDGET contd…. While setting the budget target, take utmost care to check against and balance estimates. Budget period and type of budget should be appropriate to the nature of service. Prepare and interpret budget consistently throughout the organization. Review performance of the previous year and evaluate its adequacy in terms of quantity and quality. Make the budget flexible. 14

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16. CHARACTERISTIC OF BUDGET 16

17. CHARACTERISTIC OF BUDGET It is a plan, framed based on experiences. It is a comprehensive plan of action. Budget is a scheme for work. It should estimate revenues and expenditure as accurately as possible. It generally involves an annual plan. The budget should be flexible and defined clearly. It should be synthesis of past, present and future. It should be in the form of statistical standard. The budget should facilitate goal achievement. 17

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19. TYPES OF BUDGET 1.Based on fiscal / non fiscal budget : Financial budget: Capital Expenditure budget: The capital expenditure budget includes the purchases of land, buildings, major equipment of considerable expenses and lifelong. Operating budget: It provides for the cost of supplies , minor equipment repairs, and overhead expenses. Zero based budget: It is one of the budgets that do not utilize any historical data to determine the active level or cost anticipated. All the expenses are justified based on expectation or desires for the upcoming year. 19

20. 1.Based on fiscal / no fiscal budget : Financial budget cont.…. Program budget: Computing cost for a total program refers to the program budget. Performance budget: The budget based on functions such as direct nursing care, supervision, in-service education, nursing audit, and so on, is a performance budget. Revenue and expense budget: It is expressed in financial terms and takes the nature of proforma income statement for the future. It shows items of profit and loss under classified headings. 20

21. 1.Based on fiscal / no fiscal budget cont.…. Non financial budget: Direct labor house: Direct labor house budget includes the wages and salaries of regular employees. Time space material under production budgets: These budgets are expressed in quantities rather than in monetary terms, translated into financial terms. 21

22. 2.Based on the period of coverage Annual budget: Yearly budget is a financial plan that depicts income and expenditure for a fiscal year of an organization. Long term budget: A long term budget is a financial plan, depicting income and expenditure extended for more than 1 year in future. Usually it is for a period of 5 years with strategic planning. Current budget: A temporary or adjusted financial plan, depicting the amount of money to spend in the current fiscal year that usually start from July 1 to June 30. Rollover budget: It is on that forecast program, revenue and expenses for a period higher than a year to accommodate applications that are larger than annual budget cycle. 22

23. 3.Based on the financial position Case budget: It is prepared by the way of projecting possible case receipts and payments over the budget period. Balanced deficit budget: A balanced deficit budget is a type of financial plan when expenses exceed the income. Balanced budget: A balanced budget is financial plan having revenue and expenditure equal are nearly equal are expenses that do not exceed income, usually found in the government sector. Surplus budget: It is financial plan depicting expected revenue exceeding the estimated expenditure for a fiscal year. 23

24. 4.Other types of budget Fixed budget: It refers to those components of budgets that will not vary regardless of changes in patient census or number of procedures. Flexible budget: It is a variable budget and refers to those components of the budget that will determine how the budget should fluctuate based on those changes in the number of procedures or units of activity. Open ended budget: It is a financial plan that present a single cost estimate that considers the optimal activity level for each program without indicating how the policy should be scaled down if less funding is available. 24

25. 4.Other types of budget Historical budget: In the historical budget, the previous year’s expenses are considered as a basis for costs for the next year. Most healthcare institutions use historical data to develop a budget. Forecast are strategical budget: Forecast budget is developed by establishing a level of anticipated activity based on historical or other data such as loss or gain reappears specific program. Trended budget: Trended budgets is one that is developed based on the previous years expenditures pattern. If a specific percentages of expenses occur in a particular month, the budget will be developed using those trends to spread the costs. 25

26. 1.BUDGET ESTIMATE 26

27. BUDGET ESTIMATE Budget estimate is the calculation of the amount of expenditure that is expected in an organization in a year. This estimate is based on the previous year expenditures and according to the new programs and projects of the organization. This is also influenced by the market rate fluctuations. This helps the top level manager in proper administration of the organization without financial crisis. While preparing a budget estimate, forecasting of the coming events is a must. The financial manager should be aware about what happened in the organization what is happening in the organization, What will happen in the organization . 27

28. BUDGET ESTIMATE PREPARATION 28

29. BUDGET ESTIMATE PREPARATION contd…. 1. GOVERNING BODY: Responsible for general planning function . Select the budget steering committee, determines the budgetary objectives, and reviews and approves the master budget . 29

30. BUDGET ESTIMATE PREPARATION contd…. 2. THE ADMINISTRATOR: Responsible for the formulation and execution of the budget by correlating the governing boards, goals with the guidelines for budget preparation and supervising the budget preparation. 30

31. BUDGET ESTIMATE PREPARATION contd…. 3.THE BUDGET DIRECTOR: Responsible for budgeting procedures and reporting. Establishes a completion timetable. Supervise data collection and budget preparation. Serves as the chair person of the steering committee, which approves the budget before it is submitted to the governing bodies. 31

32. BUDGET ESTIMATE PREPARATION contd…. 4. DEPARTMENT HEADS: Prepare and review goals and objectives and prepare the budgets for their departments. Departmental budgets needs to be prepared and coordinated. During this phase, units of service, staffing pattern, salary and non salary expenses and revenues are forecasted, so that preliminary rate setting can be done. 32

33. PREPARING BUDGET ESTIMATE Item no Income or expenditure Actual last year Current cell Budget next year Budget Actual Proposed Approved 1 2 3 4 5 33

34. STEPS IN BUDGET ESTIMATE PREPARATION 34

35. STEPS IN BUDGET ESTIMATE PREPARATION cont.…. 1.PRELIMINARIES: Formulate the budget objectives. Form budget committee and appointment a budget officer. Budget needs budget committee in an organization. To receive and approve all forecast departmental budgets, periodic reports showing comparison of actual and budgeted income and expenditure. Formulate budget time table Drawn an organization chart specifying who will provide key information and who can be held accountable for performance. Create a database. It will contain summary of financial statement for previous one or two years. Gather information about other hospital to which ones patient may look as alternatives . 35

36. STEPS IN BUDGET ESTIMATE PREPARATION cont.… 2. ESTIMATION OF INCOME: The sources of income are. I. THE CHARGES FOR HOSPITAL SERVICES payable by the patient either on their own or through third parties. The services could be broadly categorized under, Nursing home beds Ancillary and services, such as Operation theater, Diagnostic center. Outpatient Department Other operating income like blood bank, ambulance, canteen etc. Miscellaneous income like rent from hospital properties, scrap sales. 36

37. STEPS IN BUDGET ESTIMATE PREPARATION cont.… 2. ESTIMATION OF INCOME CONT.…. II. INVESTMENT INCOME: a. Interest from fixed deposits b. Dividend income from share III. DONATIONS: In kind for general or specific purposes and through cash boxes, charity shows, donation drives. IV. GRANTS : To meet expenditure on specific activities or specialized programs and to cover deficit in current account. V. TRANSFER OF RESTRICTED FUNDS TO GENERAL REVENUE INCOME. 37

38. STEPS IN BUDGET ESTIMATE PREPARATION cont.… FORECASTING INCOME: 1.Assessment of the likely demand from existing and potential customers. 2. Make a conscious effort to optimize use of available resource, and 3. Estimate the income considering the above two factors. 38

39. STEPS IN BUDGET ESTIMATE PREPARATION cont.… FORECASTING INCOME cont.…. The following information is required is to be able to make realistic estimate of future income: Capacity of each department in terms of number of shift per day and number of working days in a year. Current level of activity, utilization for the previous. Any new developments in the catchments area of the hospital, which are likely to have bearing and demand for hospital services. Steps proposed to be the hospital management, purchase of new equipment's and working extra hours. Patients profile classifying under medical and surgical linking categories of patients through demands made for various services. 39

40. STEPS IN BUDGET ESTIMATE PREPARATION cont.… 3.BUDGETARY PLAN: The plan is made based on Operating expenditure forecast: Recurrent ( operating )costs are required for the operation or maintenance of facilities and services. The more important cost for salaries and wages, supplies like drugs, dressing, reagent, fuels, etc. Utilities, including electricity, water, telephone, etc. and equipment maintenance and purchase of spare parts. 40

41. STEPS IN BUDGET ESTIMATE PREPARATION cont.… 3.BUDGETARY PLAN cont.… 2. Capital budget: Growth with new facilities being provided Replacement of obsolete worn out equipment, furniture and machinery. The new facility may be by way of buildings, plant and machinery or equipment. There will be many competing requirements. Funds are never available to meet all the demands. Choice has to be made. The needs may be classified as essential and desirable. 41

42. STEPS IN BUDGET ESTIMATE PREPARATION cont.… 3.BUDGETARY PLAN cont.… Cash budget: The enough cash must be available to meet the obligation as and when they arise. There is need to maintain the right flow of cash. Among the receipt will be the revenue for patient service. Salaries have to be paid on payday along with salaries other items like contribution to provident fund have to be met. Payment have to be met for electricity and water so also insurance premium, taxes on vehicle and property and service contract. Payments have to be made for supplies and expansion. Most of these payment are usually made at the beginning of the month. Good planning will help in an even flow of cash as required. 42

43. AN ESSENTIAL REQUISITION FOR BUDGET ESTIMATION 43

44. An essential requisition for budget estimation will include, Forecasting sound forecasting may be related to making decisions on purchases, expenses, working capital, etc. Accounting well conceived accounting system must be needed to compare the budget information with actual accomplishment. Lines of authority budget preparation, operation and supervision require clearly defined lines of authority. Budget Committee To receive and approve all forecasts, departmental budget periodic reports showing comparison of actual and budgeted income and expenditure To request for special studies of deviations from the budget and consider revision of budget to meet changed conditions. 44

45. An essential requisition for budget estimation will include, cont.…. 5.Business policies clearly defined business policies serve as basis for budget preparation. 6. Statistical information in the form of figures, estimation regarding their budget terms are essential for budget. Top level management supports are essential to ensure successful installation of the budget program. 7.Period of budget length of budget period specified, ( usually a year) should be specified. 45

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47. REVISED ESTIMATE A change in the calculation of the cost of a project. This calculation is made and presented to a buyer, usually while a project is in progress, and may be subject to further changes due to both exogenous factors and endogenous factors. In calculating quarterly GDP, a third estimate published approximately three months after the end of quarter. It includes information not available at the time of the advance estimate or primarily estimate as well as any necessary data revisions. 47

48. REVISED ESTIMATE cont.…. The budget revision is a process that allows budget specialists to make changes to a budget in order to increase the company’s financial standing. This can mean making revision to pull in more income to pay off liabilities or finding methods to satisfy the amounts of expansion the business is currently spending . 48

49. REVISED ESTIMATE cont.…. PURPOSES: To bring changes in proposed estimate To ensure adequate utilization of resources To reduce miss utilization of resources. 49

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51. PERFORMANCE BUDGETING Is a system of presenting both inputs of resources and outputs of service of a organization and units. The revenue and expenditure reflected in functions, programs, performance units, primarily the output and its cost. The funds and resources are allocated to specific goals. It emphasis accountability, efficiently and economy by highlighting outcomes. The main goal is to find out the measure relative performance to achieve goal for a specified result. 51

52. PERFORMANCE BUDGETING cont.… OBJECTIVES: Correlate the physical and financial aspect of programs and activities. Improve budget formulation, review and decision making at all levels of management in the government machinery. Facilitate better appreciation and review of the legislature. Make possible more effective performance audit. Measure progress towards long term objectives as envisaged in the plan. Bring annual budgets and developmental plans together through a common language. 52

53. PERFORMANCE BUDGETING cont.… Features: The budget must indicate purpose and objectives for getting funds. It must also show the cost and output of each program and program activity. Each activity based on the cost benefit analysis, regardless of fund allocation. It uses management tools such as work measurement, benchmarking and cost cutting. It is applicable for long term plans. It has performance criteria. It requires a lot of effort in formulating objective, scientific problem based on cost benefit analysis, developing target, performance indicator/criteria, mantra assessing performance with planned program budget, etc., 53

54. PROCESS OF PERFORMANCE BUDGETING : 54

55. PREPARATION OF PERFORMANCE BUDGETING Allocation of resources. Budget execution. Appraisal and evaluation. 55

56. PREPARATION OF PERFORMANCE BUDGETING cont.… 1 . Allocation of resources: Submit the recruitment per program classification. Indicate its past activities, their cost ,the activities to be taken up during next year, the results expected a pattern of assignment of responsibility, or time based plan for expenditure and work. 56

57. PREPARATION OF PERFORMANCE BUDGETING cont.… 2. Budget Execution: Initiate the action for implementation after getting the grants, monitor the activities and regulate the flow of expenditure. Prepare the time based reports showing investment and work and keep a record. 57

58. PREPARATION OF PERFORMANCE BUDGETING cont.… 3.Appraisal and the evaluation : Evaluate each program in the light of results obtained and expenditure incurred. 58

59. PERFORMANCE BUDGETING SYSTEM-A CRITICAL EVALUATION The very basis of performance budgeting is classification of governmental work into functions, programs and activities. But in practice, it may not be possible to have such well organized categories. The program and activity classification developed are sometimes too broad to reveal the significant activities of the department to serve as the basis for budgetary decision and management. This technique focus on quantitative than a quality evaluation. 59

60. PERFORMANCE BUDGETING SYSTEM-A CRITICAL EVALUATION cont.… The process of allocation of cost estimate over performance elements is difficult and often these estimates may not be as meaningful as they should be. Performance budget aids, but it does not solve the greatest problem in budget decision making. 60

61. PERFORMANCE BUDGETING Advantages: The budget has clear goals and objectives based on performance. It allocates the funds and the expected performance cost. The method aim at improving the performance. It is a very objective method based on cost effective analysis. Each program evaluated based on criteria and indicators. The outcome weighs against budgeted performance. 61

62. PERFORMANCE BUDGETING Disadvantages: There is a probability of inaccuracy in forecasting and expenses. It measures the results quantitatively. It needs a proper accounting, monitoring and reporting system. It is difficult to measure the social benefit of function. The process is time consuming and expensive. Due to its flexibility feature, programs may change at the time of implementation. It requires more skilled man hours to plan and implement the process. 62

63. SUMMARY A budget is simply a spending plan that takes into account estimated current and future income and expenses for a specified future time period usually year. It also serves as a tool for monitoring and evaluating the performance of the hospital and its department. 63

64. CONCLUSION Financial management in nursing is crucial as it ensures that resources are allocated efficiently, promoting quality patient care it aids in strategic planning, decision making and cost control within healthcare facilities, ultimately leading to improved patient outcomes and healthcare services. 64

65. JOURNAL FINDINGS: Source: BMC Health services research. Topic: Comparing the average cost of outpatient care of public and for profit private providers in India. Authors: SAMIR GARG et al.,, Findings, comparison of average cost of care for public provider and for profit providers. The average cost for government households put together was substantially greater when formal for profit providers were utilized than the public providers. This has important policy implications for India’s mixed health system, including the desired public private mix and the appropriate role for profit sector. 65

66. JOURNAL FINDINGS cont.… It suggests that purchasing from private providers or extending the publicly funded insurance to outpatient care in India may increase costs. Poor regulation of for profit providers seems to be an important structural cost driver in mixed health system of LMISC’s like India. Policies to strengthen public provisioning of curative primary care close to communities need to be encouraged to reduce cost. 66

67. 67 THEORY APPLICATION Taylor’s scientific management theory (1909) INPUT Budget estimate Man power Material Machinery resources OUTPUT END RESULT Health care organization provide cost effective, efficient quality care Planning Directing Organizing Controlling Proper budgeting

68. ASSIGNMENT Plan for budget estimation of 100 bedded hospital for the year of 2025. 68

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