Adams-Ender et al (1991) assert that there are a number of best practices that can help in setting and managing healthcare organization budgets. The practices include the use of comparative benchmarks, setting accurate and high performance budgets that are relevant to respective departments, establishing a transparent culture of accountability, proper expense management, accurately monitoring variances and incorporating corrective action plans and finally employing a balanced scorecard.
Operating budgeting process is understood to be the backbone of all financially healthy institutions. To this effect the budgeting results of a health care organization can be improved by setting budgets on the basis of a strategic point of view to fund operations and future growth.
First you are required to set the volume or revenue side of the budget then balance it by driving down the cost and then you provide the managers with the budget of the following year on the basis of historical performance for purposes of holding down the costs (Edwards, 2009).
The budget can also be managed through educating the hospital management about budgeting and finance, incentives offering so as to stay within the budgets, having budget variance meetings with managers and finally requesting for corrective action plans for the specific managers whose budgets are outside the set targets. If properly incorporated, the above measures will help the organization realize improved financial results within a very short time.
It should however be brought to your attention that the operating budgeting process comprises of two parts. The first one is budget setting where by budgets are established before the beginning of each fiscal year (Adams-Ender, et al., 1991).
The second part that forms the operating budgeting process is the budget management where budgets should be monitored and carefully controlled. In the event that either of the above two operating budgeting process parts is not properly executed there will definitely be problems with the year-end financial results and to top that up expectations will not be achieved.
In general best practice budgeting is made up of setting accurate budgets, establishing accountability, monitoring the variances and expenses management. For instance budget setting should be based on a strategic plan. This means the hospitals plan should be on the basis of a five year strategic plan in order to understand the hospitals capital needs.
According to Adams-Ender et al (1991), other issues that will be understood are gain buy-in and the managerial support for the budget targets. To that point is should be noted that managerial support is very vital for running and decision making in any organization save for the hospital as the specific organization in question.
According to Edwards (2009), the strategic plan should be on the basis of a five year strategic plan so as to understand its capital needs and also to gain buy-in and managerial support for the set budget targets. It is mandatory that the strategic plan should be well integrated into a financial plan that is able to calculate cash, debt, capital and profitability requirements that will necessitate fund routine and the five years strategic plans and maintain financial integrity at the end of the day (Adams-Ender et al., 2009). The first year of the finance plan is usually the current year’s budget. It is however advisable that academic hospital budgets should be set in such a way so as to obtain at least a three percent to five percent operating margin target.
In conclusion and as explained above when the budget management theory is well considered and incorporated in the organization that is both short term not forgetting the long term measures the budgetary issues that are related to operational and capital spending will be able to be streamlined. The issue of sick time being very high in the respective unit that I have been assigned and also the occurrences where the staff leave wound products in the rooms that have to be tossed when a patient is discharged from the unit will be checked. All these at present time accumulate into costs thus causing the unit to run over budget. This issue will also be curbed if the issues are addressed according to the above survey.