Budgeting represents the process by which the leadership of an organization express the strategic goals for the future. Through budgeting those goals are made manifest in writing by controlling the resources of the organization and predicting, often through review and analysis of historic trends and information, the expected revenues. The administrator’s role in this process is to work with the board to ensure the vision and goals of the organization care be realized and controlled through the budgeting process. This role begins with a need to understand both the general workings of the health care environment, regulatory structure in which the organization operates and an understanding of accounting, planning and budgeting principles.
The
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Departmental budgeting is a concern in this scenario, the administrator must ensure that all departments are operating effectively and review their operational efficiencies when planning the wider budget. In reviewing the statement of operations data over the last 3 years it appears that operating expenses have risen approximately 11.45% (Hospital Scenario, n.d.). In designing the administrator should review this increase in the cost of operations and attempt to determine why these are …show more content…
Review of historic budget variances within department can allow the administrator to determine if variances are based in inefficacy, unforeseen rises in input costs, or in declines in departmental volumes. It is important to note that there is a limit to the effectiveness of variance analysis, specifically it is important to ensure that the cost of reviewing the variance is not more than the cost of the variance itself.
Vraciu (1979) would consider variance analysis the third phase of budget. This phase is not a single event, but a continual monthly process to ensure that cost controls are followed. This tool should only be used when there is an expected return on the investment of human capital taken to analysis the issue. This control process is not absolutely agreed upon, Tarantino (2007) believes that utilizing budgets for measures of performance leads to fraudulent behavior by managers at worst and incremental improvements at
I attended the Saturday Lab 1 session discussing the Denison Specialty Hospital case study. In our session, we had a through discussion into the different budget terminology. I learned about the difference between accrual and cash accounting methods, which is based on the timing of when the revenue and expenses are recognized. I also learned about responsibility centers as an organizational unit under the supervision of a manager, who is responsible for its activities and results. In addition, the manager is accountable for the budget of the department that they head. Therefore, a centralized form of management in developing the budget because it makes easier to because the information for the department budget is located
The government controls and regulates healthcare somewhat because healthcare organizations are in a position to take advantage of the elderly and sick so there are regulations that protects them. It seems as though healthcare facilities are being paid less for their services today. Some critical measures for the survival of a healthcare organization are to optimize performance and quality. Finding system-wide efficiencies and cost reduction healthcare will help. In order to get better and keep high quality and performance while still raising reimbursements, it is necessary and important to involve doctors with the ideas and plans for any management strategies.
Budgeting Assignment A company's budget serves as a guideline in planning and committing costs in order to meet tactical and strategic goals. Tactical goals such as providing budgetary costs for daily operations, and strategic objectives that include R&D, production, marketing, and distribution are all part of the budgeting process. Serving as a guideline rather than being set in stone, the budget is a snapshot of a manager's "best thinking at the time it is prepared." (Marshall, 2003, p.496)
Participative Budgeting is the situation in which budgets are designed and set after input from subordinate managers, instead of merely being imposed. The idea behind this sort of budgeting is to assign responsibility to subordinate managers and place a form of personal ownership on the final budget. Nearly two decades of management accounting research has resulted in equivocal findings on the consequences and effects of participative budgeting (Lindquist 1995). Participative budgeting certainly has various advantages, these include the transferral of information from subordinate to superior increased job satisfaction for the subordinate, budgetary responsibility and goal congruence. Its disadvantages include budgetary slack and negative motivation, however it is the conditions in which participative budgeting takes place determines whether the budgeting process is successful. The conditions are dependent on various factors such as the level of participation, level of subordinate influence, the extent to which budgetary slack takes place, volatility, job related information, and the complexity of the budget.
Quantitative plans are called budgets. Budgets are prepared to impose cost controls on the activities of an organization (Chenhall, 1986).Budgets are then used to evaluate the performance of the management and budget itself is considered as a standard to evaluate the performance Solomon, 1956). The purpose of the budget is also to implement the strategy of the organization and communicate it to the employees of the organization Rickards (2006). The change in the external environment has led to the change in the budgeting approaches from the initial cash based budgets to the zerio based budgets (Bovaird, 2007).
It requires an adequate and sound organizational structure, that is, there must be a definite assignment of responsibility for each function of the enterprise. Budgeting compels all the members of management, from the top to bottom to participate in the establishment of goals and plans. Budgeting compels departmental managers to make plans in harmony with the other departments and of the entire enterprise. Budgeting helps the management to put down in figures what is necessary for a satisfactory performance. Budgeting helps the management to plan for the most economical use of labor, material and capital. Budgeting tends to remove the cloud of uncertainty that exists in many organizations, especially among lower levels of management, relative to basic policies and objectives. Budgeting promotes an understanding among members of management of their co-workers' problems. Budgeting force management to give adequate attention to the effects of general business conditions. Budgeting aids in obtaining bank credit as banks commonly require a projection of future operations and cash flows to support