Essay Sample on Creating and Managing a Budget

Introduction

Nurse managers are required to understand the budgeting process. They are required to prepare and manage the operating budget and capital budget. The process of preparing any kind of budget is dynamic and demanding and therefore nurse manager must gather sufficient financial information, develop a good plan for the activities and services that should be implemented in the budget (Srithongrung, 2017). When creating an operating budget, it is essential to first establish the kind of services provided or are in progress when planning for a new service. Such services should include payer mix, the patient mix relating to acuity and others such as the staff mix and the standard of care that ensure that nursing care of every patient is carried out efficiently. Operating budget is a budget which composed of all full-time equipment personnel and all the expenses and revenues required in daily operations. This budget is most important than any other budget because it accounts for all the daily operations of the organization.

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Nurse managers gain experience with the process through participation in the preparation process of the budget with the finance department. In most cases operating budget is made jointly by the nurse manager, finance team and the organization administration and in the process, a nurse leader is likely to gain experience (Bucci, 2014). Nurse managers experience different challenges including integrating operating and capital budget plan that has a larger strategic vision. They also challenged to be as cost effective as possible and also has problems in controlling all variances by ensuring that some do not occur in future.

Nurse managers can use different approaches when preparing a budget. They can either use top down and bottom up budgeting approach. The top-down approach is where a nurse manager uses the previous year's budget and increase each item by 5%. A nurse manager can also use the bottom-up approach where they go through each item and build what they need to be in the budget (Srithongrung, 2017). Nurse managers can also use the modern financial management approach because it helps them to view financial functions in a broader sense. It is concerned with where funds are received and their utilization. This use of this approach ensures that the funds received are able to provide more than the cost used to get them.

Nurse managers manage budget variances by comparing the actual budget and the budgeted figures. This helps in determining whether there is an adverse or favorable variance (Bucci, 2014). The nurse managers are expected to take a more serious action when there is a higher variance. This can be managed by having monthly reports and ensure that there are regular meetings to have a discussion of these discrepancies. This is essential in holding some managers accountable for minimizing budget variance. If possible they can use a system called management by exception which calls for the investigation of larger variances and ignoring minor ones. In the process, managers are able to focus on potential problem areas in the operation of the organization.

There are different lessons that can be offered to other nurse leaders. Other nurse leaders are required to also have basic accounting knowledge to help them understand how to prepare a budget (Santacroce, 2013). Other nurse leaders are also expected to understand that they have a responsibility to ensure that they manage variances efficiently because it may hinder the organization from achieving its objectives by having insufficient cash to support all the operations (Bucci, 2014). The nurse managers are required to have access to financial knowledge in the ongoing training to help them understand how to effectively manage the finances of the organization.

The approaches used in the management of productivity using budget is to properly manage variances so that there is no under production or overproduction but to produce an optimal quantity that the organization can sell without surplus or shortage (Forsythe, 1991). The steps are taken to help ensure there is the ongoing availability of equipment and supplies is to conduct monthly verification of equipment and supplies to ascertain their existence. This issue can be addressed through the use of an evaluation policy which ensures that all the available equipment and supplies are available in the organization.

Nurse managers define Capital budget as financial plan used to estimate long-term sums of money required for investment in long-term assets over a given period of time. They gain their experience through participating in the budgeting process where financial department works in collaboration with nurse managers when preparing capital budgets. There are various challenges that nurse managers encounter when preparing a capital budget (Bucci, 2014). They include determination of ROI, availability of insufficient cash during budgeting and timing of expenditure. These challenges are very common when preparing a capital budget. They usually modern financial approach which considers current and future value of money. For them to manage capital budget variance it is essential to prepare a capital budget in comparison with the previous capital budget. This reduces the variance that would greatly affect productivity (Milgram,1999). After going through the training I would like to advise other nurse leaders that they should try as much as possible to acquire accounting knowledge it can help them manage the financial resources of their organizations effectively. They should support the importance of budgeting which they understand that help in financial control and planning.

Conclusion

It is difficult to manage an operating budget than the capital budget. The key consideration of operating budget is sales revenues, expenses, and other short-term expenditures while the capital budget considers long-term assets and investments (Bucci, 2014). Operating budget is used in determining short-term viability while capital budget looks to the future. They are mainly managed by executives and each investment is examined properly before the investment. The factors that affect the management of operating and capital budget differs greatly. This is because each of them requires different timing intervals. For the organization to achieve its goals or mission, the organization must employ financial principle which states that each unit must ensure that the anticipated benefits are greater than the costs for any planned or ongoing activities. This principle ensures that the organization uses lesser cost than the benefits in order to generate profits.

References

Milgram, L. (1999). Analysis of Capital Budgeting Project-Payback Period. Managing Smart, 391-391. doi:10.1016/b978-0-88415-752-6.50319-2

Srithongrung, A. (2017). Capital Budgeting and Management Practices: Smoothing Out Rough Spots in Government Outlays. Public Budgeting & Finance, 38(1), 47-71. doi:10.1111/pbaf.12167

Forsythe, D. W. (1991). The Role of Budget Offices in the Productivity Agenda. Public Productivity & Management Review, 15(2), 169. doi:10.2307/3380754

Santacroce, R. (2013). Budget, Cost, and Performance Improvement Approach Used by a Highly Effective ME Department. Management Engineering, 41-54. doi:10.1201/b16077-9

Bucci, R. V. (2014). Budgeting and Variance Analysis. Medicine and Business, 79-86. doi:10.1007/978-3-319-04060-8_9