Budget Proposal in Administrative Management
Introduction and Definition
Literally the word budget means a leather bag or sachet to carry paper in. it is derived from the old English word “budgettee” which means a sack or pouch.
Budget is a concrete precise picture of the total operation of an enterprise in monetary terms.
Budgeting involves establishing a financial plan for operating a unit, department and organization
.Budget is an operational plan for a definite period usually a year, expressed in financial terms and based on expected income and expenditure.
Budgeting is the Calculations
Importance of Budget
- Budget is needed for planning for future course of action and to have a control over all activities in the organization.
- Budget facilitates co-ordinating operation of various departments and secure for realizing organizational objectives.
- Budget serves as a guide for action in the organization.
- Budget helps one to weigh the values in the organization make diversion when necessary on whether one is of a grater value in the programme than the other.
Classification of budget
Budget consists mainly three sections manpower budget, capital expenditure budget and operating budget.
- The manpower budget includes wages and other benefits provided for regular and temporary workers.
- The capital expenditure budget includes purchases of land, buildings and major equipments of considered expense and long life that affect operations of more then one unit and commit the agency to a particular course.
- The operating budget is an agency’s financial plan for achieving short range goals over the next12 month’s period. It includes the cost of supplies, minor equipment, repairs and overhead expenses.
There are several types of budget as follows:
- Incremental budget: it is based on estimates changes in present operations, plus a percentage increase for inflation, all of which is added to the previous year’s budget.
- Open ended budget: it is a finical plan in which each operating manager presents a single cost estimated for it is considered optimal activity level for each program in the unit, without indicating how the budget should be scaled down if less funding is available.
- Fixed ceiling budget: it is a financial plan in which the uppermost spending limit is set by the top executive before unit and divisional managers develop budget proposals for their area of responsibility. It focus each manger to weigh relative merits of alternative program.
- Flexible budget: It is based on the fact that operating conditions rarely can form to expectations. Therefore, a flexible budget consists of several financial plans, each for a different level of program activity.
- Roll-over budget: it is one that forecast program revenues and expenses for a period greater than a year to accommodate programs that are longer than the annual budget cycle.
- Program budget: it is one where costs are computed for a total program such as ambulatory surgery program.
- Performance budget: it is base on functions, such as direct nursing care, in-service education, quality improvement and nursing research.
- Zero-based budget: it requires the manager to justify each cost of every program, both old and new in every annual budget preparation.
- Sunset budget: it is designed to “self destruct” within a prescribed time period to ensure the cessation of spending by a predetermined data.
- Sales budget: it is the starting point in a budgetary program, since sales are basic activities which give shape to all other activities.
- Production budget: it is the budget that aims at securing the economical manufacture of products and maximizing the utilization of production facilities.
- Cash budget: it is prepared by way of projecting the possible cash receipts and payments over the budget period.
- Line item budget: itemize workers, machines, supplies by groups. It is primarily a device for controlling expenditure, as such; it is limited use in planning and decision making.
Tools used in budget preparation
Several tools are used in preparing a nursing budget. The most common are work sampling, system analysis, trend analysis, cost benefit analysis and marginal analysis.
- Work sampling: it is an industrial engineering technique in which an individual from outside the primary work group observes the activities of a selected samp0le of employees at regular intervals, records the activity each is engaged in ad generalize from the observed sample of the workers activities to estimate the percentage of the employer’s total work time spent in each task. More reliable information can be obtained by work sampling than employees self report because a desist nested outside will measure time more objectively than an employer whose job security may be threatening if study results reveal insufficient time use.
- System analysis: in this a nursing program is viewed as a complex whole, an interacted secure of steps in which specific inputs of employees, material and equipment are subjected to designate through put processors to produce a desired service output. It is helpful in re-planning or adjusting an insufficient service program; because step-by-step examination of a complex process often reveals workable activities to malfunctioning system segments. By analyzing the nursing process systematically, the manager can discover ways in which to improve patient care by altering the number or type of personnel, assigned, rescheduling care activities, changing the relationship of patients to personnel or improving the manager’s information about patient census, patent classification or acuity or staff availability.
- Trend analysis: it is the mathematical tool whereby a manage graphs data from the proceeding there to five years related to the following factors: patient census, patient diagnosis, patient length of stay, staff seniority staff turnover, staff sick or absent time, hours of care per patient per day delivered by each employee classification and daily cost of direct nursing care per patient per Day. Trend analysis often yields information of value in budget planning. However factors other than theoretical trends also influence future nursing supply and demand. Among there are population changes, medical staff characteristics, technology breakthroughs, weather changes and alteration in the ration’s work or recreational patterns.
- Cost benefit ratio: it is a numerical relationship between the value of a program’s costs and the value of the program’s benefit. The cost effective is greater than expressed as a fraction. If benefits outweigh costs, the program is economically worth while the cost benefit ratio is useful is relating the best of several alternative program. Unfortunately the ratio is difficult to complete, because many expenditure are impossible to separate on a program to program basis. It is difficult to determine what proportion if the agency’s nursing research costs should be changed to each nursing unit. In addition many program benefits cannot be expressed in financial terms. It is impossible to establish the monetary value of improved morale and self esteem experienced by patients who are cared for under primary or care methods of nursing care delivery.
- Marginal analysis: it is a mathematical by which a manager computer the additional value to be derived from expenditure above a program’s minimum spending value / level. This analysis is useful because the phenomenon of diminishing utility or the tendency for benefits to decline from each additional unit of input above a critical point. The margin is that part of balance in any system where additional expenditure for personnel, supplies or equipment yields the same return as the former level of expenditure level before which to aim a budget request to avoid financial waste.
As advantageous as there methods are for budget planning, trend analysis, cost benefit analysis and managerial analysis are rarely used because health managers lack time to gather the needed data and social costs and benefits of nursing services are difficult to quantify.