BHA FPX 4008 Assessment 1 Developing an Operating Budget

• BHA FPX 4008 Assessment 1

Introduction

This paper explores the significance of different types of budgets in managing an organization’sorganization’sorganization’s financial operations. Specifically, it highlights the operating, project, and capital budgets, detailing their unique purposes and impact on achieving financial goals. Budgets are essential tools that guide leaders in effectively planning, implementing, and evaluating financial strategies. As part of BHA FPX 4008 Assessment 1, this analysis emphasizes the importance of budgeting in ensuring healthcare organisations’organizations’organisations’ financial stability and success.

Why Budgets Are Important

A budget is a financial roadmap for an organization. It enables leaders to allocate resources efficiently and achieve desired outcomes. Preparing, revising, implementing, and evaluating budgets is fundamental to organizational success. Historical performance data plays a critical role in forecasting future financial performance. Including key stakeholders in the budgeting process fosters accountability and motivation, ultimately enhancing the effectiveness of the budget (Walsh, 2016).

Budgets come in various forms, catering to different organizational needs. For instance, a budget might focus on a specific project, such as renovating a facility, or it could be an annualized plan outlining the financial activities for the entire year (Finkler et al., 2022) and understanding the organization’sorganization’sorganization’s goals, whether an not-for-profit entity or a government institution, is vital in shaping an adequate budget. For example, a government entity cannot exceed its budgeted spending by law, while a not-for-profit organization may report a deficit under certain circumstances (Finkler et al., 2022).

Differences Between Operating, Project, and Capital Budgets

Operating Budget

An operating budget focuses on the income and expenses required to maintain a business’s day-to-day operations. In healthcare, income sources may include insurance reimbursements, grants, or retail sales, such as those from a gift shop. Expenses might include salaries, utilities, and marketing. The primary goal of an operating budget is to allocate resources effectively to achieve operational objectives (Finkler et al., 2022).

Capital Budget

Capital budgets are used for strategic long-term planning and are often tied to significant investments. Unlike operating budgets, capital budgets focus on assets that generate revenue for more than a year, such as medical equipment. These budgets account for depreciation and the lifecycle of assets, helping organizations plan for replacements or upgrades. A well-structured capital budget is critical for ensuring financial sustainability and achieving strategic goals (Ward, 2015).

Project Budget

Project budgets are designed for specific, time-bound initiatives, such as implementing a new electronic medical records (EMR) system. They include fixed income allocations and detailed expense breakdowns, such as software costs, IT labour, and staff training. Similar to capital budgets, project budgets focus more on the financial requirements of individual initiatives.

Estimating Revenue and Expenses

Current Fiscal Year Estimates

Using the Medical-Surgical Department Budget, the estimated revenue and expenses for the fiscal year were calculated based on performance from July through December. The actual revenue for this period was $23,123,516. By doubling this figure to account for the remaining six months, the total annual revenue is projected at $46,247,032.

Similarly, the actual operating expense for the same period was $22,433,565. Doubling this figure yields a total annual operating expense of $44,867,130. Subtracting the total expenses from the total revenue results in a net revenue of $1,379,902 for the year. While this is a simplified calculation, it provides a baseline for financial performance analysis as part of BHA FPX 4008 Assessment 1.

Next Fiscal Year Projections

For the next fiscal year, the budget assumes unchanged revenue at $46,247,032 and a 5% reduction in operating expenses. The projected total operating expense, calculated as 95% of $44,867,130, is $42,623,774. This reduction improves the Med-Surg department’sdepartment’s net revenue to $3,623,258. Although these calculations are simplified, they highlight the potential financial impact of cost-saving measures.

Developing a Balanced Budget

A 5% across-the-board expense reduction may not be feasible. Certain costs, such as licensing and taxes, are fixed and unaffected by budget cuts. Instead, savings might be realized in areas like staffing, where operational efficiencies could offset reduced expenses. Leadership must identify opportunities to streamline processes and optimize resource utilization to maintain service levels despite budget constraints.

BHA FPX 4008 Assessment 1 emphasises that creating a balanced budget requires strategic planning and a willingness to adapt to changing circumstances. Leaders can ensure financial stability and operational effectiveness by aligning resources with organisational goals.

Conclusion

Effective budgeting starts with understanding the organization’sorganization’sorganization’s goals and desired outcomes. Different budgets—operating, project, and capital—serve unique purposes and are essential for addressing various financial needs. Preparing, implementing, and revising budgets as necessary ensures they remain aligned with organizational priorities.

Organizations can create realistic financial plans that promote accountability and motivation by incorporating historical data and involving key stakeholders in the budgeting process. BHA FPX 4008 Assessment 1 highlights that a well-developed operating budget is a cornerstone of financial management, enabling organizations to achieve their objectives while maintaining fiscal responsibility. 

References

Finkler, S., Calabrese, T., &Smith, D. (2022). Financial Management for Public Health, and Not-for-Profit Organizations (7th ed.). SAGE Publications, Inc.

https://capella.vitalsource.com/books/9781071835357

Slyter, M. (2016). How well do hospitals budget operating results? The relationship between budget variances and operating margin.

https://www.proquest.com/docview/1853121327?parentSessionId=BU%2FpRTvqM59ifVOaY7XG07JP2ClQ%2BL0hP3unIRE6yDA%3D&pq-origsite=summon&accountid=27965

Walsh, K. (2016). Managing a Budget in Healthcare Professional Education. Annals of medical and health sciences research, 6(2), 71-73.

https://doi.org/10.4103/2141-9248.181841

Ward, W. (2015) Health care budgeting and financial management. ProQuest Ebook Central

https://ebookcentral-proquest-com.library.capela.edu