BUDGETING

Raharjo ApriyatmokoSTIKES Ngudi Waluyo

Importance of Financial Management

Effect on people’s work

The financial management of the organization affects many aspects of work : the salaries offered, the anticipated raises, the number of people available to do work and the quality and quantity of equipment or supplies available

Componen of the operating budget :

Costs (expenses) Payroll : salary, vacation, social security,

education Supplies : office supplies, treatment

supplies Overhead : building maintenance, water,

electric Other : mortgage interest, loans, insurance

Revenue (income) Patient sources : private pay, medicaid,

medicare, other insurance Contributions : philanthropic, grants-in-aid,

research Others : interest, rent, sale of equipment

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Examples of important organizational decisions based primary on budgeting factors

A hospital with limited revenues (income) has decided to close it’s obtetrics unit

A home health agency has chosen to serve only private-pay and medical client, because medicaid doesn’t pay as much as it actually costs to make the visit

Nursing home keeps staffing levels to minimum required by law in order to reduce costs and increase profits

Importance of Financial Management

Blaming the Budget The budget itself is just a document A collection of piece of paper with

figures distributed according to a series of decisions made by certain people within organization

Planning Roles, responsibility and authority

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Responsibility for financial management

Chief Executive Officer Governing Board Chief fiscal officer Managers Budget committee

Types of Budgeting1

Incremental budgeting (historical budgeting) is traditional

process in which budgets, divided into the components of operating budget

Begins with an analysis of the income and expenses of the previous fiscal year

Types of Budgeting2

Zero-base Budgeting Is designed to require even more

justification from each departement for any funds budgeted for the next year