Budget Management Analysis
Budget management analysis is used by mangers as a tool and helps determine that all resources available are being used efficiently. The budgets are determined yearly and are based upon the previous year’s budget and variances. This paper will discuss specific strategies to manage budgets within forecast, compare five to seven expense results with budget expectations, describe possible reasons for variances, give strategies to keep results aligned with expectations, recommend three benchmarking techniques, and identify those that might improve budget accuracy, and justify the choices made.
Strategies to Manage Budgets
Many strategies may be used to control budgets; managers and the chief financial officer of most healthcare organizations have the tools needed to manage the budget. By managing the budget the organization will be better prepared for the financial forecasts, which are the company’s future expenses. Some strategies and tools that will assist with managing the budget are zero based, activity based, performance based, cost variances and benchmarking. Zero based budgeting analyzes every expense within an organization and justifies the need and cost of each. Activity based costing is the gathering of the operating cost data, which is assigned to specific activities such as engineering. The performance dashboard uses the metrics of performance and analyzes the root cause of financial problems. Cost variance analysis looks at the differences of the actual cost and expected cost of an expense. Benchmarking gathers information of the performances and processes from similar organizations and compares the data to help with making improvements. Motivating the staff and informing them of the budget goals is another strategy that may be used to help the organization succeed.