BHA FPX 4008 Assessment 1 Developing an Operating Budget
Name
Capella university
BHA-FPX4008 Health Care Budgeting and Reporting
Prof. Name
Date
Developing an Operating Budget
Abstract
Budgeting plays a crucial role in managing healthcare facilities effectively and facilitating their expansion. Administrators must maintain meticulous financial records to ensure that the facility operates within its allocated funds and generates anticipated income. Budgets are dynamic documents subject to regular analysis and adjustment to ensure alignment with organizational goals. Despite their challenges, budget cuts are indispensable for sustaining growth (Finkler et al., 2020).
Introduction
This essay explores the importance of budgeting in the planning process at Vila Health, emphasizing the development of an Operating Budget. It delineates the distinctions between operating and capital budgets with illustrative examples. Additionally, it provides accurate revenue and expense estimates for the current period and evaluates their impact on organizational operations.
Why Budgets Are Important
Budgeting is integral to the planning process of healthcare systems as it offers a clear understanding of the organization’s financial status and guides decision-making regarding new initiatives. A well-defined budget enables strategic investments in hospitals and allows room for rectifying errors in unsuccessful endeavors. Without a proper budget, hospital stakeholders risk inefficient allocation of resources (Finkler et al., 2020; Glushchenko et al., 2021).
Difference Between Operating, Project, & Capital Budget
An operating budget forecasts anticipated income and expenses, akin to transactions in for-profit enterprises. It accounts for resources consumed during operations and the timing differences between resource utilization and cash inflows. Capital budgeting assesses potential ventures requiring significant investments, ensuring alignment with predefined criteria through financial analysis methods. Project budgets comprehensively estimate all costs incurred until project completion (Finkler et al., 2020).
Provide Correct Revenue & Expenses
Analysis of the fiscal year 2021 budget revealed a spending cap of $50 million for inpatient care revenues. With expenses totaling $23,123,516 million in the latter half of the fiscal year, projected actuals for 2021 are estimated at $46,247,032. Surplus funds can be utilized for staffing, employee education, equipment procurement, or other initiatives aimed at enhancing patient care (Vila Health Developing an Operating Budget, n.d.).
Estimate the Correct Revenue & Expenses
Current budget calculations indicate a surplus of $3,966,130, exceeding the operational budget of $40,895,000 with an actual amount of $44,861,130.
Balanced Budget for the Next Fiscal Year
While initially proposing a static budget or a 5% reduction, calculations for the upcoming fiscal year involved applying a 5% reduction to all current-year budget allocations. Approval of the revised budget is crucial to maintaining operational sustainability.
Conclusion
Budgeting is imperative for the growth and financial stability of healthcare facilities. Whether operating within an operational, project, or capital budget framework, effective budget management ensures alignment with expenditure and revenue goals, a responsibility integral to administrators’ roles.
References
Armitage, H. M., Lane, D., & Webb, A. (2020). Budget development and use in small and medium-sized enterprises: A field investigation. Accounting Perspectives, 19(3), 205-240. https://doi.org/10.1111/1911-3838.12231
Finkler, S. A., Smith, D. L., & Calabrese, T. D. (2020). Financial management for public, health, and not-for-profit organizations (6th ed.). CQ Press.
Glushchenko, A. V., Kucherova, E. P., Mosolova, N. I., & Mosolova, D. A. (2021). Algorithm of forming the operating budget of integrated agro-formations in the south of Russia. IOP Conference Series. Earth and Environmental Science, 839(3), 32014. https://doi.org/10.1088/1755-1315/839/3/032014
Vila Health Developing an Operating Budget (n.d.). Capella.edu. https://media.capella.edu/CourseMedia/bhafpx4008element18838/wrapper.asp
Yekaterina, D. (2020). Operational budgeting system in trade companies. Retrieved from https://journals.indexcopernicus.com/api/file/viewByFileId/1079977.pdf
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