History
• Budget word was first coined by the British
Kings in early days from the word ‘BOUGETTE’
.
• The important milestones were:
– 1215 AD: constitutional exposure
– 1718 AD: consolidated fund act passed
which considered budget as financial
statement of Govt activities for facilitating
accountability of public fund .
– 1882 AD: Budget entered the parliament for
first time seeking advice
Meaning
• A forecast of the resources required to
deliver the services offered by the
organization
• A plan for coordinating the financial goals
of an organization
• A formal , quantitative expression of
management’s
plans, intentions, expectations & actions to
control results
In summary
• A budget is a financial plan that includes
estimated expenses as well as income for
a period of time.
• Fixed or variable/ either controllable or
non-controllable .
• Fixed expenses do not vary with
volume, whereas variable expenses do
Basic of budget
• Cash Book: Date/ particulars/ receipts /
payments
• Ledger Statement:
• Receipts & payment accounts- prepared
for one year.
Receipts
Payments
Opening balance cash
Salaries
Opening balance bank
Fees
Receipts
Balance
Continues
• Income Vs. Expenses
•
•
•
•
•
•
Income
Expenditure
Receipts
Opening stores
Grants
Purchases
Receipts
Balance sheet
Income
Liabilities
Source of money
Donations
Grants
loan
Expenses
Assets
land
building
cash
bank deposit/saving AC
Purposes
Control costs
Accurately report
all financial and
statistical data
Establish annual
& monthly budget
Identify & analyze
actual experience
compared to the
budget plan
Characteristics
• It is a plan or program, framed on the
basis of past experience
• A scheme for action
• It should estimate revenues &
expenditures as accurately as possible
• It is comprehensive plan of action
Flexible
Features
Synthesis of past, present & future
Product of joint venture or participation of
executive at different levels
It should be clearly defined
Form of statistical standard laid down in specific
numerical form
Represent expected revenue as compared with
anticipated expense
Facilitate goal achievement
Principles
• Provide sound financial management
• Focus on objectives & policies of an
organization
• Be flexible
• Budget necessitates a review of the
performance of the previous year & an
evaluation of its adequacy
Importance of Budget
• An essential management tool
• Budget tells you how much money you
need to carry out your activities
• Budget enables to monitor income &
expenditure
• The budget is a basis for financial
accountability & transparency
Types of Budget
Capital Budget
• Fund needed for the capital items for the
growth
• New supplies & facilities & the replacement of
worn out equipment, machinery and furniture.
• The decision on capital budgeting is primarily
is based on:
i.
ii.
Needs of patients and existing alternatives
Effects of additional equipment on income &
expenditure
iii. Availability of funds
Operating Budget
• It provides an overview of an agency’s
functions by projecting the planned
operations , usually for the upcoming year.
• The nurse manager might include:
personnel salaries , employee
benefits, insurance , medical- surgical
supplies, office supplies , rent , heat , light
, house-keeping
• Both controllable and non-conrolable
expenses are projected
Personal Budget
• Estimates the cost of
direct labor necessary to
meet the nursing needs
of the estimated patient
population.
• The current staffing
patterns, number of
unfilled positions and
last year’s report can
provide a base
Cash Budget
• Cash budget are planned
to make adequate funds
available as needed and
to use any extra funds
profitably
• The ensure that the
agency has enough, but
not too much , cash on
hand during the
budgetary period
Budgeting methods
Incremental
• Simplest method
• Budget for the coming year is projected
• Requires little budget expertise from the part of
the manager
Zero-Based
• Assumes the base for projecting next year’s
budget is zero
• Manager’s are required to justify all activities &
programs as if they are initiated for the first time.
• Every proposed expenditure must be justified
with:
• current environment
• fit with organizational objectives
Continues…
Flexible
• budget flexes over the year : up and down
• Flexible budget automatically calculates what the
expense is
Performance
• This method emphasizes outcomes and results
instead of activities and outputs
Budget Process
Budget calendar
• For practical purposes , the nursing
budget follows three stages of
development:
1. Formulation
2. Review and enactment stage
3. Execution
• The entire budgeting process is given a
specific time frame and a target date is
assigned for each step.
Formulation Stage
• It is usually set number of months (six or
seven) before the start of the fiscal year
for the budget.
• The main functions are
1. Develop objectives and management plans
2. Gather all financial , historical and statistical
data and distribute to cost-center managers
3. Analyze data
Review & Enactment Stage
• Prepare unit budget
• Present unit budgets for approval
• Revise and combine into organizational
budget .
• Present to budget council
• Revise and present to governing board
• Revise and distribute to cost-center
managers
Execution Stage
• Execution of the budget involves directing
and evaluating activities .
• The nurse administrators who planned
the budget execute it.
• Revision are scheduled at stated intervals
usually once or twice during the fiscal
year, if indicated.
Advantages
Places everyone on the management team
Helps to create cost awareness
Helps to measure individual & departmental productivity
as well as profitability
Produce cost savings
Provides a plan or forecast of what is expected.
Help clarify accountability & responsibility
Provides for communication within the organization
Disadvantages
Over
budgeting
leads to
over
expenditure
Restrict
the
activities
Under
estimation
Planning
a
Hospital
Budget
Stages of Budget Plan
(Hospital)
1. Prepare assumptions, in statistical terms
about the kind of services (outputs) the
hospital expects to provide.
2. Prepare the economic forecasts in
respect of new developments.
3. Outline the budget goals and policies as
per the directives of governing board
4. Prepare a budget package incorporating
written instructions.
Continues..
5. Each department head to analyze financial &
statistical data generated by his department as
well as provided to him by the administration on
finance department.
6. Summary of each department is recorded
between the administration and the department
head and also includes observation of financial
officer
7. The finance officer to develop the department’s
revenue budget and forward the departments
budget hearing summary to the concerned
department head
Continues..
8. The finance officer to prepare a
preliminary operating revenue budget for
the whole hospital by summarizing and
collating the individual’s department
budget
9. Finance Officer to summarize the total
budget into a proper budget format
10. In the final step , budget is presented by
finance officer to the governing board or
finance committee for their approval
Preparing a Budget Estimate
Income/
Actual
Expenditure
Last year
Current year
Budget Next Year
Budget
Proposed
Actual
Approved
Role of Nurse Manager
• The administrator requires sufficient funds to
support sound program
• The administrator submits a budget request
and a justification for the proposed
expenditures.
• Budget is presented to the president
• The budget is reviewed , analyzed and
modified on the basis of discussions of
president and budget committee
• Once revisions are made , president presents
the budget to board of trustees for approval
Continues..
• When the budget is approved , it has given
authorization to make expenditure and to
collect income as indicated in the budget
• When the budget is adopted ,
administrator is committed to support the
budget
• Once the budget is approved , it is the
responsibility of the administrator to see
that expenditures do not exceed the
approximates 1 made to the institution
References
1. Jogindra Vati (2013). Principles & practice
of nursing management and
administration, I ed., New Delhi, Jaypee
Brothers Medical publishes (P) Ltd.
2. Marquis, B. L., & Huston C. J. (2009).
Leadership roles and management
functions in nursing: Theory and
application (6th ed.). Philadelphia:
Wolters Kluwer Health.
0
