nursing budget, performance budgeting, capital budget, operating budget, personnel budget, cash budget

1. University of Bohol
Graduate School & Professional Studies Department
Tagbilaran City, Bohol, Philippines
MS
MS
V
V
Principles of Budgeting in
Principles of Budgeting in
Nursing Administration
Nursing Administration
Mary Ann Adiong, BSN, RN, USRN Masterand

2. DEFINITION
DEFINITION
• A forecast of the resources required to deliver the
services offered by the organization.
• A budget is a financial plan that includes
estimated expenses as well as income for a
period of time.
• A nursing budget is a systematic plan that is
informed best estimate by nurse administrators of
nursing revenues and expenses. It projects how
revenues will meet expenses and projects a
return on equity or profit.

3. PURPOSE
PURPOSE

To plan the objectives, programs and
activities of nursing services and the fiscal
resources to accomplish them.
 To motivate nurse managers and nursing
workers through analysis of actual
experiences.
 To evaluate the performance of nurse
administrators and managers and increase
awareness of the costs.

4. PURPOSE
PURPOSE

5. PRINCIPLES
PRINCIPLES

6. IMPORTANCE OF BUDGET
IMPORTANCE OF BUDGET
 An essential management tool
Budget tells you how much money you
need to carry out your activities
Budget enables to monitor income and
expenditure.
The budget is basis for financial
accountability and transparency.

13. TYPES OF BUDGET
TYPES OF BUDGET

15. OPERATING BUDGET
OPERATING BUDGET
 It provides an overview of an agency’s functions
by projecting the planned operations usually for
the upcoming year.
 The nurse manager might includes personnel
salaries, employee benefits, insurance, medicalsurgical supplies, office supplies, rent, heat,
light and house keeping

16. CASH BUDGET
CASH BUDGET
 Cash budget are planned to make adequate
funds available as needed and to use any
extra funds profitably.
 The ensure that the agency has enough, but
not too much, cash on hand during the
budgetary period.

17. PERSONNEL BUDGET
PERSONNEL BUDGET
 Estimates the cost of direct labor necessary
to meet the nursing needs of the estimated
patient population. It includes recruitment,
hiring, assignment, lay off and discharge of
personnel.
 The current staffing patterns, number of
unfilled positions and last year’s report can
provide a base.

18. 136 = 5.44
25

19. BUDGETING APPROACHES
BUDGETING APPROACHES
INCREMENTAL
Budget for the coming year is projected
Requires little budget expertise from the part of the manager.
Advantages:
 Simple to prepare and understand
 Consistent basis
 Better coordination between budgets
Disadvantages:
 Totally ignore the impact of changes
 No incentive in development and innovation
 Encourages spending up to the budget
This approach is not recommended as it fails to
take into account changing circumstances.

20. ZERO-BASED BUDGETING
ZERO-BASED BUDGETING
Assumes the base for projecting next year’s budget is zero.
Managers are required to justify all activities and programs as if
they initiated for the first time.
Every proposed expenditure must be justified with:
current environment
fit with organizational objectives
Since all the costs are required to be justified, it seems
inappropriate to use ZBB for the whole budgeting process.
One way of overcoming this drawback is to use this method
selectively.

21. ZERO-BASED BUDGETING
ZERO-BASED BUDGETING
ADVANTAGES:
 Efficient allocation of resources
 Drives managers to find cost reduction methods
 Identifies and eliminates wasteful activities
DISADVANTAGES:
 Very complex  Time and manpower consuming
 Necessary to train employees, especially managers
 In a relatively large corporation, the amount of
information might be too excessive to go through all.
Compressing the information might take out critical
details
 Can result in internal conflicts between departments
over budget allocation.

22. FLEXIBLE BUDGETING
FLEXIBLE BUDGETING
 are budgets that adjust automatically over the course of the
year depending on the variables such as the volumes,
labor cost and capital expenditures.
 automatically calculates what expenses should be given
the volume what is occurring thus the costs can be
allocated on a volume basis.
ADVANTAGES:
DISADVANTAGES:
1. Adjustment for Predictions
1. Continuous Monitoring
2. Adapting Change
2. Lack of Information
3. Control and Evaluation
3. Complexity

23. PERFORMANCE BUDGETING
PERFORMANCE BUDGETING
 Focuses on the activities of a cost center such as indirect care, direct
care and quality monitoring. Each activity has objectives with specific
financial resources; performance budgeting focuses on what is expected
to be accomplished.
 Performance budgeting is an improvement over flexible budgeting
because it ties performance to consumption of financial resources.
STEPS OF PERFORMANCE BUDGETING:
1. Define the performance activities or areas of accomplishment for
the cost center.
2. Identify the line-item operating budget for the cost center being
evaluated.
3. Define how much of the resources presented by each line item
are to be devoted to each performance areas.
4. Choose measures of performance for each performance area,
budget an amount of work for each area and determine the
budgeted cost-per-unit of work based on these measures.

24. PERFORMANCE BUDGET SAMPLE
PERFORMANCE BUDGET SAMPLE