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Budgeting and management planning and control.

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BUDGETING Part (A) Whenever there is a requirement for management planning and control, some necessary tools are required to perform this activity and Budgeting is one of them. Budgets are made to help meet objectives. Developing a budget and sticking to it will allow you to live within your means and avoid financial crisis. In the case of Victoria hospital there is an absence of such mechanism the authorities were unable to understand that budgets do not subsist in a vacuity, it's an essential part of a framework designed for planning that is take up by the businesses approaching towards growth. The budgeting work which was done the by the secretary of the hospital was not focusing on core factors such as minimize cost and increase revenue. They don't have knowledge of best practices in setting and managing healthcare organization budget. They are un-aware of using comparative benchmarks, doesn't have such experience of setting accurate, high performance department budgets, there is a lack of culture of accountability, no such mechanism of managing expenses and monitoring variances and required corrective actions plans. To run a successful business it is really necessary to keep an eye on the future, what are the future requirements for your business and what are the opportunities and how you can take best out of it. Whatever a business is strive to attain, a risk factor is involved unless its managers have a clear picture that what would be the future of their business and what sort of business opportunities would be available. Therefore there is a requirement to develop a plan which involves five key steps: * Setting the aims and objectives of the ...read more.


These variances can be calculated in a simple manner: If the actual figure is more favorable than the budgeted figure, it is often reported stating the letters FAV (favorable). Likewise, if the actual figure is worse than the budgeted figure, it is reported stating the letters ADV (adverse). For Example: (�) Budgeted Figure Actual Figure Variance Result Product A 500 450 -50 ADV Product B 600 620 20 FAV Product C 400 500 100 FAV It is necessary to understand by the concerned authorities of Victoria hospital, variances that doesn't affect to cash flow can be over looked. It can be expected some amount of variances in most figures but variances that are noteworthy, which can affect to cash flow, the concerned authorities should start investigate straight away. It may be too late to recoup the difference but for the future it can be helpful to be proactive. In case of favorable variance the concerned authorities should investigate why this has occurred. Is there any way or something they can do to make these figures even more favorable. The budgeting authorities have to keep in mind that income figures will be favorable if actual figure is higher than the budgeted figure; similarly expenditures figures are more favorable if actual figure is lower than the budgeted figure. Therefore hospital budgeting authorities have to realize that don't leave the budget at one side once it has been written, it will need to be carefully stick to it and uphold. Any issue necessitates to be acted upon as early as possible, whether it is favorable or adverse. Victoria Hospital-Laundry Department Report for quarter ended 30 September 2000 Flexible Budget Variance Table (1) ...read more.


* To achieve a desired output it is essential to have a culture of accountability. Senior management should have a firm resolve about reaching the budget target they establish. It is therefore necessary in budget meetings or while designing a budget, the presence of department manager and concerned director who meets with a budget team can be based on, the CFO, budget director and controller to encourage senior leadership accountability into the process. * Exercise flex budgets. Therefore while making a department budget make sure it is flexible and interlink with the hospital's master budget and try to incorporate volume-adjusted staffing grids that are based on productivity standards and per unit of service cost. This form of budget gives an opportunity to modify expected financial performance to imitate the effect of its operations of volume at different levels. * Monitoring of variances and entail corrective action plan. It is vital to monitor volume-adjusted variances on monthly basis and easily available to other concerned department managers and directors for rake. Explanations of variance should be required monthly and corrective action plans should be required with in the one week of variance reports. To intensify accountability, concerned department directors and concerned managers need to develop and present plan of actions with specific timelines and task to senior leadership at meetings. * It is important that the concerned authorities should identify their objectives so that they can coordinate the budget to help achieve them. As we all know that the health care industry operates in a structured, professional, noble and in a dynamic environment rather than a constant one, monitoring in changes on volume and the consequential effects is imperative to good budget management. ...read more.

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