Health Care Business Analysis

Introduction

A budget can be described as a systematic approach that is used to allocate financial, human and physical resources in a company in order to achieve the set strategic goals. The aim of developing the budgets is too be able to monitor their progress in accordance with the set goals, assist in controlling spending and being able to predict profit and cash flow. The main challenge faced by developers of budgets is predicting the future since it cannot be done to precision (Barrett & Baldry, 2009). Because of changes in technology and the challenges that come with global competition, it becomes effective for a company to develop effective budgets.

For a company to be able to improve its budgeting process, understanding the strategic goals is very important as well as ensuring that the goals are supported in order to be able to deal with competition (Barrett & Baldry, 2009). The exercise of being able to create and maintain a budget brings some discipline in the health care sector and results to reduced problems. Patton-Fuller Community Hospital can be able to effectively create and monitor its budget if it is able to follow the best practices.

Financial management practices are most effective in creating and monitoring an operating budget

i. Track the Expenses

If the hospital is unable to track its costs of conducting business and much less the amount of their expenses, then creating and monitoring a budget can become an issue. The hospital should start by tracking all its expenses. There are best practices and standards already in place to in the health care sector in order to be able to track down the expenses and to be able to understand the bookkeeping practice. National statistic protocols can be used in the creation and monitoring of the budget (Barrett & Baldry, 2009).

Though sometimes it is possible to track the expenses without using the best practices and standards, it becomes difficult when it comes to comparing information with the national statistics. The hospital has to designate duties of budget preparation even before the process begins in order to be able to select the expenses to be tracked and to be able to design a list of specific expense categories.

ii. Use benchmarks when creating the budget

After a charts account has been developed and the expenses categorized, it is simpler to design a budget. By using the regional or national statistics, it is easier to adjust the benchmarks to be able to suit the practice (Grant, 2007). The resources available in the hospital have to be allocated strategically since competition for resources in a company is inevitable. Every function and operation in the company is in need of funding for operating expenses and capital. This is why companies should ensure they design procedures that should be used when allocating the resources to ensure that the most important functions and operations are supported.

By being able to allocate the resources effectively, companies are bound to achieve better results. The companies can be able to coordinate the review of capital and operating budgets. By doing so, managers can be able to verify how changes from one budget can affect the other (Grant, 2007). There ought to be sophisticated measures in assessing the proposed budgets. Though the measures used may vary in different companies, the average capital cost is what most companies take into account. Companies can be able to produce the desired results and benefits if they are able to use such measures and examine their action plans.

iii. Reduce Complexities in the Budget

Companies that make effective use of the best practices are able to minimize the budget complexities and streamline procedures for budgeting. The management is able to collect the budget information by being able to streamline the procedures, communicate the targets and allocate decisions at lower costs and less time and in so doing there is a minimized disruption in the company’s functions and operations. By being able to control the amount of budgets required and by being able to standardize the methods of budgeting, the budgets can be streamlined (Grant, 2007).

The amount of details in the reports for creating the budgets should be reduced. There are also new technologies that companies can use to automate their budgets and thus being able to facilitate the workflow (Grant, 2007). To be able to use the new technologies, the budget developers should be fully trained and competent for them to be able to deliver the correct information to the management at the right cost and time.

Financial management practices are least effective in creating and monitoring an operating budget

Many companies make the mistake when the management fails to relate the set planning efforts with the operating budget. The management should always ensure that they are able to strategize on the short-term and long-term goals set and ensure that they align with the goals set in the operating budget.

There is also the failure of the management to ensure that the operating budget stays in line with the different assumptions in regards to the scope, size and the nature of activities to be carried out by the company in the future (Campbell, et al. 1998). Furthermore, the creation of the operating budget is not an affair to be considered only by the management but all the other stakeholders in the company should be included; this comprises of even the employees.

The monitoring process in a budget becomes effective when all parties are involved. When the formulation of the operational budget is left to the management, there is a probability on the higher side that the operational budget may in turn become ineffective. The monitoring is mostly done by financial managers and departmental managers living out the unit and line managers (Campbell, et al. 1998). This can be a dangerous course all together since their contributions are also warranted in order to be able to categorize the expenses. There should be broad participation of everybody when the formulation of the budget is in process in order to increase loyalty towards the realization of the budget goals in the company.

Conclusion

An operating budget should be flexible and responsible as well as being a form of control in terms of expenditures and costs. It is at the discretion of the company if the operational budget increases and the company should be able to cater for the unforeseen events. Documents that can act in supporting the operating budget in the creation and monitoring include salary roster, manufacturing budget, capital purchase budget, etc (Campbell, et al. 1998). It is the responsibility of the management to incorporate all staff in the creation of the budget in order to ease the monitoring process.

References

Barrett, P., & Baldry, D. (2009). Facilities management: Towards best practice. John Wiley & Sons.

Campbell, C., Schmitz, H. & Waller, L. (1998). Financial management in a managed care environment. Albany, NY: Delmar Publishers

Grant, J. (2007,). A primer on EVA for health care providers. Journal of Health Care Finance, 33(3), 22-38.