Strategies for Establishing Operational Budgets
NSG 6620 Week 4 Discussions 1 and 2 Papers
NSG 6620 Week 4 Discussions 1 and 2 Papers
Discussion Question 1: Strategies for Establishing Operational Budgets
An operational budget is the plan for an organization or unit for daily operating expenses. The operational budget is very similar to how one manages a personal home budget but on a grander scale. For example, there is a balance between accounts receivable and accounts payable, and then there is either a surplus or deficit at the end of the budget period. Most budget periods are a fiscal year or a calendar year.
The unit operating budget is the most critical budget in which unit managers must be involved and have the most control over. Extensive information is needed to prepare the operational budget. For example, the operational budget typically requires information related to workload budgets with activity reports, units of service, and workload calculations like HPPD; expense budgets for personnel, staffing, and supplies equipment; the overhead budget; and the revenue budget. Nurses in the unit are often part of the operational budget to examine, or be aware of, weekly or monthly budget variances. This helps the unit function with a positive versus a negative revenue stream.
Using the readings for the week, the South University Online Library, and the Internet, respond to the following:
Describe at least two strategies for establishing operational budgets.
Examine the advantages and disadvantages of using each strategy.
Explain the strategies your nurse manager or CNO uses to gather and secure the most timely and relevant information to shape future operating budgets.
Identify two challenges the nurse manager or CNO faces with this task.
Examine implications for the nurse manager or CNO when the unit operating budget is running in the “red” or has numerous negative monthly variances.
Comment on the postings of at least two peers.
Evaluation Criteria:
Described at least two strategies for establishing operational budgets.
Examined the advantages and disadvantages of using each strategy.
Explained the strategies your nurse manager or CNO uses to gather and secure the most timely and relevant information to shape future operating budgets.
Identified two challenges the nurse manager or CNO faces with this task.
Examined implications for the nurse manager or CNO when the unit operating budget is running in the “red” or has numerous negative monthly variances.
Justified your answers with appropriate research and reasoning. Commented on the postings of at least two peers. NSG 6620 Week 4 Discussions 1 and 2 Papers.
ADDITIONAL DETAILS
Strategies for Establishing Operational Budgets
Introduction
Budgets are a necessary part of running any organization. The challenge for any manager is how to create an effective budget that meets the needs of his or her department while also ensuring that it doesn’t become too complicated or costly to maintain.
Start With the Big Picture
When you’re setting up an operational budget, it’s important to start with the big picture. What is your company trying to accomplish? How much money does it have? What are its goals and how much money does it need to operate these goals?
Here are some questions that can help you answer these questions:
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What is the budget for?
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How much money does the company have in its accounts right now (or at any given time)?
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How many employees work in each department or division of your business?
Organization and Department Budgets
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Organization and Department Budgets
Organization budgets are set up in the same way as organization budgets, except that they’re used for departments within an organization. For example, if you work at a company that has five departments with different functions (such as Sales, Marketing and IT), then each department will have its own budget to pay for things like salaries and benefits.
Employee Salaries
Employee salaries are the largest single expense on your budget, and they’re often the most difficult part of your budget to get right. You need to know what you can afford, and then work with HR or other departments to determine how much money is needed for each category.
The salary groupings below are based on an average employee’s annual salary:
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Managerial: $100k+
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Professional: $70k-$99k (includes professional technicians)
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Semi-Professional: Less than 70K
Materials and Equipment Costs
Materials and equipment costs are one of the largest parts of most budgets. They include things like furniture, office supplies, technology and office space. These items can be broken down into categories (e.g., furniture or technology) to make them easier to track and manage in your budgeting process.
Finally, you’ll want to consider depreciation when calculating your materials & equipment budget—this is how much value has been lost because an item wasn’t used for its intended purpose for two years or more before being replaced by something new that suits your needs better than what was previously purchased (or even rented).
Crisis and Contingency Funds
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Contingency funds are used to cover unexpected expenses. They can also be used to pay for costs that are not expected, but are necessary.
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Contingency funds should be set aside in a separate account from the general operating budget and reviewed and updated regularly.
Each budget should focus on those elements crucial to that department’s operation.
The budget should be focused on the critical elements of your department’s operation. This will ensure you don’t spend money on items that are not essential, and it will help make sure that the budget is used to its fullest potential. It’s also important to review your budget annually or at least every six months, so you can see how well things are going in terms of revenue generation and spending down.
If there have been any major changes in your company (such as a merger), industry conditions, or customer needs since last year, review these as well—this could indicate areas where there needs some extra attention on top of all those already accounted for in your operational budgets!
Conclusion
As we’ve seen in this article, there are many different ways to create and manage an operational budget. While each department will have its own unique challenges, these strategies can help you prepare a solid plan that works for your company: from calculating employee salaries to creating a materials and equipment budget or establishing crisis funds. Remember, though: the most important thing is that you start with one clear picture of how everything fits together—and then work on building out from there!
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