Preparing the budget
A budget is planned to estimate the upcoming expenses and often itemized predictable income. It is a process that is based on operations for estimations, in which we list down the funds, and time for a particular period. The required money for some specific purposes is set aside. In the budget preparation we allot funds time and made estimations for our future income. The overall process goes through several steps which includes planning, gathering input or feedback, making of final plan then approval, implementation and evaluation. In most of the organizations it is an annual plan. But the process of acquiring funds to meet organization’s requirement and to achieve its goal is continuous. For continuous improvements in management gathering feed backs plays an important role. Whereas some organizations does not exactly follow these seven steps of budget plan they sometimes over lap these steps. Mostly core steps of planning, evaluation and implementation is followed.
The first step in the budget processes is the step of planning which depends on the program for future investments and operations. The clinic in which I am working is a part of Get Well clinic incorporated and our plan is to serve 25% of the 24000 of population. We estimated that each of our patients will visit at least five days a year. The physicians will be getting the amount of $11,000 per month as a salary. Currently we are serving a fee-for-service for Medicare and nonMedicare patients. The clinic has approached several HMO’s but we are planning for differ participation until 2015. This decision is based on the programs history. Since budget planning is a tough task and required several difficult questions that we have to ask ourselves like if the resulting budget will aligned our needs and if the mission can be achieved successfully. There are some basic questions that are necessarily asked; what was the cost of the same program if applied in past? If the last budget was starting point than what changes are required? Is there any program that can be served in collaboration of existing program? Are staffing needs enough for the mission?
Addressing to these questions varies for organization to organization. Previous budget experiences can be very helpful getting useful information. A huge amount of information about the organization’s past budget will be useful in getting a successful budget. In our clinic after adjustments and allowances, average charges are $50 per visit. The receivable of patients are too high and we are expecting to improve collections which results in a balance of $220,000 patients receivables at the end of the year.
The second step in the process of budget preparation is of gathering data and analyzing feedback which is an extension of the first phase. Suggestions about future budget from staff and their support is very important in the budget preparation. The confidence of staff should be gained before preparation of final report to implement and this is only possible by getting feedback about the plan. This step is like a good opportunity to let clinic’s staff known about limitations of activities in a clinic and funds. They can even provide justifications for additions or any changes in the budget. In case of any disagreement the staff should be given space for alternative solutions. This step helps in yielding a better output and enables the staff to understand the challenges faced by the clinic to implement the budget.
The next step is of preparing the final report of budget in which budget is presented to get the approvals. This report should be prepared clear and concise. Expenditures should not be hidden at this point and this report should be a finalized form of report. Diagrams can be made to describe the flow of cash and its maintenance in the clinic. Justifications that are required should be written in the report. The operating costs of the clinic that we are operating has been tabulized which states that variable expenses per visit for nurse salaries, administrative salaries and rent is zero where as medical supplies is $6, service bureau for financial and medical record is $1 and for other operating expenses is $3. Operating costs for fixed expenses per month for nurse salaries is$18,000, administrative and technical salaries is $19,000, medical supplies is zero, rent $4000, service bureau for financial and medical records is $2000, other operating expenses is $6000. The purchases of medical supplies that are planned for per month is $16,000.supplies are paid in the month following purchases. Service bureau expenses are paid in the month following services. All other expenses are paid in the month of incurrence. Our plans to purchase equipments in the year 2015, worth $80,000, which has depreciation rate per five years on the straight line basis. The amount of line of credit that has been arranged at the bank is $75,000. Desired minimum cash is of $10,000. The interest rate on any amount of borrowed money is considered in other operating expenses. The financial statement of our company for the year 2015 states that the financial position for asset’s total amount is $268,000 including cash of $20,000, patients receivable 240,000 and supplies of $8000. The total of equities is $268,000 which includes accounts payable for supplies $6000, and for service bureau is 4000, total liabilities $10,000 and partner’s equity is 258,000. All the approval processes that are a part of organization’s structure should be followed.
Implementing the budget is the next step to be followed. The program manager should ensure the presence of allocated fund that are described in the budget. Proper purchasing and inventory processes should be appropriately placed. No purchases should be made beyond the allocated amount of budget. Staff meetings are essential to ensure that no negligence will take place. Cost plans should be implemented with a balance in all the areas of the budget plan. The variance in budget should be explained every month so that the allocated budget will not go above or over the estimated amount. We have some contingency plans if any adjustments are required in the mid of the cycle.
The ongoing process of the budget preparation is the evaluation of budget. This step works in a loop from feedback to planning stage. To make an impact on all process that are involved in its preparation required daily observations, balance utilization of supplies, purchasing requests should be made reasonable and the use of equipment with cautions.
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