Budget Management and Variance Analysis
Budget Management and Variance
Olga Garcia
NCS/571 - Financial Resource Management
October 1, 2012
Theresa Pichelmeyer
Budget Management and Variance A budget is a tool that helps managers to ensure that the required resources are obtained and used effectively and efficiently as the organization moves towards achievement of its objectives. The budgets are determined yearly and are based upon the previous year’s budget and variances. This paper will discuss a development of operating budget, comparison expense results with budget expectations, description of possible reasons for variances and strategies to keep results aligned with expectations, recommendation some benchmarking techniques that might improve budget accuracy. The operating budget is a plan for the organization’s revenues and expenses that generally covers a period of one year (Finkler, Kovner, & Jones, 2007). In healthcare organization the nurse manager of each cost center involves in the preparation and control of the operating budgets (Finkler, Kovner, & Jones, 2007). The finance office of the organization provides support throughout the budget process development. The budgets for the costs centers are combined, and the executive management of the organization makes final decisions on a budget to be submitted to the board for approval. The nurse managers need a variety of information to begin the process of preparing operating budgets for their cost centers, such as the information generated by the organization’s environmental review and by its development of general goals, objectives, policies, organization wide assumptions, program priorities, and specific measurable objectives (Finkler, Kovner, & Jones, 2007). For example, the environmental review and the general goals, objectives, and policies allow the manager to understand what the organization wants to accomplish and what it believes it will be able to accomplish. For another instance, the organization-wide
Olga Garcia
NCS/571 - Financial Resource Management
October 1, 2012
Theresa Pichelmeyer
Budget Management and Variance A budget is a tool that helps managers to ensure that the required resources are obtained and used effectively and efficiently as the organization moves towards achievement of its objectives. The budgets are determined yearly and are based upon the previous year’s budget and variances. This paper will discuss a development of operating budget, comparison expense results with budget expectations, description of possible reasons for variances and strategies to keep results aligned with expectations, recommendation some benchmarking techniques that might improve budget accuracy. The operating budget is a plan for the organization’s revenues and expenses that generally covers a period of one year (Finkler, Kovner, & Jones, 2007). In healthcare organization the nurse manager of each cost center involves in the preparation and control of the operating budgets (Finkler, Kovner, & Jones, 2007). The finance office of the organization provides support throughout the budget process development. The budgets for the costs centers are combined, and the executive management of the organization makes final decisions on a budget to be submitted to the board for approval. The nurse managers need a variety of information to begin the process of preparing operating budgets for their cost centers, such as the information generated by the organization’s environmental review and by its development of general goals, objectives, policies, organization wide assumptions, program priorities, and specific measurable objectives (Finkler, Kovner, & Jones, 2007). For example, the environmental review and the general goals, objectives, and policies allow the manager to understand what the organization wants to accomplish and what it believes it will be able to accomplish. For another instance, the organization-wide
References: Borglum, K. (2008). Better medicine through benchmarking. Medical Economics, 85(16), p. 39- 43. Retrieved from http://web.ebscohost.com.ezproxy.apollolibrary.com/ehost/pdfviewer/pdfviewer?sid=da8b9d9a-93da-432d-83cf-7ba9259718b8%40sessionmgr14&vid=2&hid=19 Business Performance Improvement Resources. (2011). What is benchmarking? Retrieved from http:///www.bpir.com/benchmarking-what-is-benchmarking-bpir.com.html Cimasi, J. (2006). Financial benchmarking in the health care industry part II. Retrieved from http://www.cpareport.com/Newsletter%20Articles/2004%20Articles/FinancialBenchmarking2_Nov_2006.htm Finkler, S. A., Kovner, C. T., & Jones, C. B. (2007). Financial management for nurse managers and executives (3rd ed.). St. Louis, MO: Saunders Elsevier.