Budgeting.pptx

BUDGETING
MS. JYOTI CHAND
M.Sc. NURSING
1

OBJECTIVES
At the end of the class the students can be able to:-
 define budgeting
 elaborate the features of budgeting
 enlist the importance of budgeting
 explain the principles of budgeting
 describe the types of budgeting
 explain the classification of budgeting
2

INTRODUCTION
Budget, as a control device is an extension of planning after
the planning and programming decision, the approved
program is translated into a totaled statement of monetary
requirements and financial consequence.
3

DEFINITION
 ‘Budget is a concrete, precise picture of the total operation of an
enterprise in monetary terms’.
HM Donovan
 Budget is a plan that uses numerical data to predict that activities
of an organization over a period of time.
-Bessie
 Budgeting is an operational plan, for a definite period usually a
year-expressed in financial terms and based on the expected
income and expenditure.
4

FEATURES OF BUDGET:-
 Budget should be flexible.
 It should be synthesis of past, present and future.
 It should be product of joint venture with cooperation of
executives/department heads at different levels of management.
 It should be in the form of statistical standard laid down in specific
numerical terms.
5

Cont…
 It should have support of top management through-out the
period of its planning and supplementation.
6

Budget-Characteristic
 A planning device also serve as a basis for performance
evaluation and control.
 Prepared either in money terms or in quantitative terms or in
both.
 Prepared for a definite future period.
 Purpose of budget is to implement the policies formulated by
management for attaining the given objectives.
7

IMPORTANCE OF BUDGET:-
 Budget is needed for planning future course of action and to
have a control over all activities in the organization.
 2. Budget facilitates coordinating operation of various
departments and sections for realizing organizational objectives.
 3. Budget serves as a guide for action in the organization
8

The budget is very important for an organization as:
 1. The budget is an essential management tool.
 2. The budget tells you how much money you need to carry out your
activities.
 3. The budget forces for rigorous in thinking through the implications
of your activity planning.
 4. The budget enables to monitor income and expenditure and to
identify the problems.
 5. The budget is a basis for financial accountability and transparency.
9

Essential requisition for budget
 Forecasting :- related to making decision on purchase,
expansion, advertising, services etc.
 Accounting:- Needed to compare the budget information with
actual accomplishment.
 Lines of authority :- Budget preparation, operation and
supervision need /require clearly defined lines of authority
 Budget committee
10

Cont…
 Business policies:- clearly defined business policies server as basis
for budget preparation.
 Statistical information :- estimates regarding the budget terms are
essential for budge in form of figures.
 Top level management :- support is essential to ensure successful
instillation of the budget programme.
 Period of budget : length of budget period should be specified.
11

PRINCIPLES OF BUDGET:- 13
1. Budget should provide sound financial management by focusing
on requirement of the organization.
2. Budget should focus on objectives and policies of the organization.
It must flow from objectives and give realistic expression to the way
of realizing such objectives.
3. Budget should ensure the most effective use of financial and non-
financial resources.
4. Budget requires a program activities planned in advance.

 Budgetary process requires consistent delegation for which fixed
duties and responsibilities are required to be allocated to managers at
different level for framing and executing budget.
 6. Budgeting should include coordinating efforts of various
departments establishing a frame of reference for managerial
decisions and providing a criterion for evaluating managerial
performance.
 7. Setting budget target, requires an adequate checks and balance
against the adoption of too high or too low estimate.
 8. Budget period must be appropriate to the nature of business or
service and to the type of budget.
14

 Budget is prepared under the direction and supervision of the
administrator or financial officer.
 10. Budgets are to be prepared and interpreted consistently
throughout the organization in the communication of planning
process.
 11. Budget necessitates a review of the performance of the previous
year and an evaluation of its adequacy both in quantity and quality.
 12. While developing a budget, provision should be made for its
flexibility.
15

 Operating Budget(Revenues and Expenses)
The operating budget provides an overview of an agency's functions by projecting
the planned operations, usually for the upcoming year. The operating table reveals
an input-output analysis of expected revenues and expenses.
 Among the factors that nurse managers might include in their operating budgets
are personnel salaries, employee benefits, insurance, medical-Surgical supplies,
office supplies, rent, light housekeeping, laundry service, drugs and
pharmaceuticals, repairs and maintenance depreciation, in-service education, travel
to professional meetings, educational leaves, books etc.
17

 Flexible Budgets
Some costs are fixed and do not change with the volume of business. Other costs
vary proportionately with changes in volume. Some variable expenses are
unpredictable and can be determined only after change has begun; thus the need
for flexible budgets, to show the effects of changes in volume of business on
expense items.
18

 Cash Budgets
Cash budgets are planned to make adequate funds available as needed and to use
any extra funds profitably. They ensure that the agency has enough, but not too
much, cash on hand during the budgetary period.
 Capital expenditure budget
The capital expenditure budget includes purchases of land, buildings and major
equipments of considerable expense and long life
19

 Labor or Personnel Budgets
Personnel budgets estimate the cost of direct labor necessary to meet the agency
objectives. They determine the recruitment, hiring, assignment, layoff and discharge of
personnel. The nurse manager decides on the type of nursing care necessary to meet
the nursing needs of the estimated patient population. How many aides, orderlies are
needed during what shifts, what months and in what areas? The current staffing
patterns, number of unfilled Positions and last year's reports can provide a base for
examination and proposals. Patients occupancy and the general complexity of cases
affect staffing patterns
20

 Strategic Planning Budgets
Long-range budgets for long-range planning are often called the agency's strategic
plan and are usually projected for 3-5 years. Program budgets are part of strategic
plan that focuses on all the benefits and costs associated with a particular program.
 Rollover budget is one that forecasts program, revenues and expenses for a
period greater than a year, to accommodate program that are larger than annual
budget cycle.
21

 Incremental budget is one based on estimated changes in present operation, plus a
percentage increase for inflation, all of which is added to previous year budget.
 Manpower budget The manpower budget includes wages and other benefits
provided for regular and temporary workers.
 Fixed-ceiling budget is a financial plan in which the uppermost spending limit is
set by the top executive before the unit and divisional managers develop budget
proposals for their areas of responsibility.
22

 Program budget is one where costs are computed for a total program, i.e.
group total costs for each service program, e.g. MCH, FP, UIP, etc.
 Zero base budget requires the nurse manager to examine and justify each
cost of every program both old and new, in every annual budget preparation.
23

BUDGET PLANNING FOR COLLEGE OF
NURSING
 Requires cooperative activity of the principal and her associates.
 Prepared under direction and supervision of administrator or finance officer.
 Items to be included in the budget for college of nursing are following:
• Salaries for professional, clinical and domestic staff
• Stipends for students
• New equipments and repair
• Linen and other household supplies
• Office supplies
• Transportation costs
24

ADVANTAGES OF BUDGETING
 Fixes accountability, assignment of responsibility and authority.
 Encourages managers to make careful analysis of operation.
 Weakness is revealed, corrective measures taken.
 Financial matters can be handled in orderly, and activities are
balanced.
25

Disadvantages
 Inaccuracy
 Personal bias
 Time consuming process
 More paperwork
 Skill and experiences are required for successful budgetary
control
26

Conclusion
 Budget is the heart of administrative management. It serve as a
powerful tool of coordination and negatively an effective
device of eliminating duplicating and wastage. Budgeting is
the process of creating a plan to spend your money. This
spending plan is called a budget. Creating this spending plan
allows to determine in advance whether you will have enough
money to do the things you need to do or would like to do.
27

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