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Budgeting in Health Sector
A budget is a plan that relates planned resource consumption to a specific period of time. It allows organizations to track expenses, categorize expenditures according to needs, and act as a safety valve to prevent overspending. Budgets must be planned and approved before activities begin and follow organizational policies. Budgets do not exist in isolation but are part of larger projects or plans. Careful consideration is needed when creating budgets to avoid over or under expenditures.
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Introduction to budgeting and its definition as a planning tool related to resource consumption over time.
Discusses tracking expenses, the planning process, and the significance of careful budget management.
Overview of various budgeting methods: Incremental, Zero Based, and Flexible budgeting approaches.
Explains budget variances, their causes, and the concept of variance analysis in budget management.
Details the steps involved in budgeting, including creating line item budgets and utilizing worksheets.
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Budgeting in Health Sector
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- 2. A budget canbe defined as ‘a tool used to relate planned resource consumption to a period of time’ (Mellett et al. 1993). This definition highlights the three main features of a budget: • it is a plan that is developed before an event has occurred; • it can include a broad range of resources – not just money; • it relates to a specific period of time.
- 3. A Process oftracking your expenses Categorizing your expenditures according to needs. A safety valve to prevent over expenditures Ensures that the finances are spent for true purpose of spendings.
- 4. Cash Budgeting isnormally followed in organizations. Budgets must be planned and approved before start of planned activities. Use the organizational policies for preparing budgets.
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- 6. Budgets do notexists in isolation. They are parts of Projects or Planned activities and usually proceed once detailed work plan has been made. Needs careful insights as distorted budgets can lead to over or under expenditures resulting in altered quality of work.
- 7. Types of BudgetingIncremental Budgeting Zero Based Budgeting Activity based on Flexible Budgeting
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- 10. Zero Based BudgetingZero-based budgeting, by contrast, assumes the previous year’s budget to be quite irrelevant and begins from scratch to identify and cost all of the inputs that will be required to achieve the desired level of activity.
- 11. Activity Based orFlexible Budgets Both incremental and zero-based budgets take the level of activity for the budget year as fixed. Increasingly, however, health services managers are adopting flexible budgeting systems designed to respond to changes in activity as the budget period progresses. This involves using cost information to calculate standard costs for the various items in a budget, so that the increase or decrease in expenditure associated with an activity level different from that which was budgeted can be forecast.
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- 14. Variance A variancemay occur because: you have used more or fewer resources than planned – this is referred to as a usage or volume variance or, in the case of labour or overhead costs, an efficiency variance; the cost of those resources was greater or lower than anticipated (a price variance).
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- 17. Steps in BudgetingLook at your detailed work plan. List all the activities, purchases, personnel which consume finances. Cost the activities Prepare Line Item budgets Sum up the Line Item Budgets into Master Budget.
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- 19. Costing Costing looksat the current market prices of various items or carrying out various activities. Done by market scanning, looking at previous prices and adjusting by discounting or estimating the costs.
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