Budgets are forward looking and by their very nature are really just predictions of what is likely to happen in the future. On what basis can we make these predictions and how closet o reality can we get? That will depend largely on the data you have available on what has happened previously, how constant or changeable these factors are, and what you expect will happening in the future that has not happened before.
In all cases, you are making a bunch of assumptions and building you budget on these.
One of the biggest risks you face is that these assumptions are not realist or they simply do not eventuate. So you need to be very clear, conscious and transparent about the assumptions under pinning your budget, and then identify the risks that might change your assumptions or mean they don’t occur.
Patterns of resources used are actually fairly predictable across the year, months and week. Most managers know where their good and bad days are. These financial patterns are key to managing the budget well.
Look at your past sick leave and notice when it is up and down.
What is the normal demand for your services and when does it change? For example, you are an urgent care centre at a seaside organization with a massive influx of presentations over the holiday periods. From a budget perspective this might mean that you ASSUME a certain number of presentations per month for these months, FTE, consumables, etc to match the costs associated with those numbers.
Other assumptions might include:
- The activity on your unit – expected number of patients, clients, residents per year
- The occupancy of your unit – how many days are you fully occupied?
- The number of operations that will be undertaken
- The type of patients and associated WIES/NEP/CHSP/HACC etc
This is about knowing and explaining when your resources will be needed most and least. Armed with a well considered, evidenced set of assumptions, you are in a strong position to build a convincing budget.
- What are the factors that have in the past or might influence any of your ins and outs?
- What data/information do you have to test whether these assumptions are likely or not.
- What assumptions can you make about the coming year?