Build your budget

Lesson

Build your budget

Build your budget

Unless you have access to and some direct influence over your revenue, you will probably only focus on preparing and ‘expenditure budget’.  Aged care managers are most likely – and should – have a revenue budget as well as their team has a very direct impact on the revenue that comes through ACFI.

However, for our purposes here, we will focus on building and expenditure budget – which is actually the most valuable information you can provide your finance person/department in order for them to build accurate organisational budgets.

Often this is done by referring to past expenditures.  However, if in the past expenditures were not corrected coded (and this often happens), then the assumptions will be incorrect.  It is better to build your budget from the group up as if it was a brand new unit or program.

Activity:  Review the current financial state of your organisation, unit or program area.

Focus on an area you have responsibility for. 

If you are the unit manager, this could be the entire units work and budget.

If you are not yet a manager, you could focus on an area that you have some influence over.  For example, a preoperative nurses might have some responsibility for prosthetics and loan equipment.  He or she is responsible for that budget line item.  

Community health nurse might have responsibility for managing wound care products and dressings.

  • Access your ‘month by month budget against actuals, and year to date (YTD) so you can see what was planned (budgeted) and what actually happened (actual expenditure/income).  Here is a sample financial template:

Sample Theatre Budget Template

  • What is the average across the year – are you on track year to date?
  • Where are the variances (actual does not match budget)?
  • What are the causes of the monthly variances – is there a trend or is it a once-off.

Could a variance be the result of a bunch of invoices coming in at once or is it possible that the variation is likely to continue if left unchecked?

Activity: Build your expenditure budget

Assume you are starting a new unit or program – start from scratch!  Either use the sample template, your organisations template or create your own excel spread sheet.

Staff costs in healthcare organisations tend to consumer up to 75% of the budget so it is very important to get these calculations right.

  • Staff costs:

Calculate your staff costs by calculating their FTE (or full time equivalent – also called EFT).  Here is a FTE calculator to assist you.

FTE Toolkit

  • Other costs:

Many of these can be calculated by average use by client/resident or patient.  Examples include:

Consumerables/medical supplies – is this by client/patient/resident?

Prosthetics

Meals

Pharmacy

  • Compare what you have calculated with the budgets of previous periods.  If they vary, why?  Does this explain some of the challenges you may have experienced in filling shifts, having the right resources when you needed them, managing workload?

The reality is that if you have not correctly defined the work, the resources needed and how much these costs then you will feel the pressure in the form of blown budgets, overwhelming workloads and unmet expectations and poor performance.  Get this right, speak the right language and then you can negotiate a better, more realistic deal.

 

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