Historically, the training of nurses is limited to clinical and nursing skills, little in taught with reference to budgeting principles (Parsons, Howell & James, 2012). Consequently, nurses demonstrate a lack of prowess in fiscal planning and management and that explains why nurses who ascend in managerial nursing positions are retrained on the concept of budget development (Angela, 2013). Nevertheless, one of the delegate task of nurse manager is budgeting, the nurse leader is held accountable for the nursing budget (Untalasco-Gealan, 2013). This paper aims to offering a detailed analysis of findings from the interview, supplemented by research on budget management techniques as pertains nursing leadership. To achieve this objective, a mentor, a nurse manager in one of the major states’ hospital with over fifteen years’ experience in budgeting and financial strategic planning was interviewed. Most of the nurse manager’s comments are based on her longstanding experience and insight she derived from her predecessor.
Operating and Capital Budgets
Succinctly, a budget is a drafted financial plan for a given fiscal year. It is based on an organization’s strategic plan and mission (Angela, 2013). In the nursing profession, a budget is developed after evaluating the population needs (Parsons, Howell & James, 2012). According to Angela (2013) organizations that provide healthcare services use various types of budget including master budgets, operating budgets, capital budgets and program budgets. Operating and capital budgets are constructed and monitored most frequently by nurse managers upon which they are held accountable. Moreover, capital and operating budgets are split further into unit budgets to enable the nurse manager to develop, monitor and manage his or her budget effectively (Angela, 2013).
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“ An operating budget is a formal quantification of an organization’s goals and objectives -a roadmap for achieving the organization’s strategic mission, or the main reason the organization exists” (Angela, 2013, p. 38). From the interview, it was asserted that all organization’s expenses and revenue are captured by operating budget. On the other hand a capital budget covers major investments and expenditures including construction of new building and purchase of equipment. Notably, operating budget covers the anticipated levels of output the number of patient day, the number of admissions, departmental activity, and new programs or services (Angela, 2013). The nurse manager asserted that workload for a given year and revenue constitute the key metric when formulating an operating budget. In this context, nurse managers are encouraged to take charge of their center or unit as their own business so as to maximize profits. With regard to revenue, the nurse managers have to strive to keep the black and not the red bottom line, a state in which the organization’s revenue exceeds expenses (Angela, 2013). The fundamental lesson from the mentor was that management of operating budget entails a comprehensive understanding of expenses both direct and indirect patient care costs. Additionally, consideration has to be made on departmental expenses charged to patients such as stock, central and linen supplies
Capital budget are essential aspect of strategic planning. It covers budgets on fixed assets and major movable equipment which are generally expensive undertaking (Angela, 2013). Recovering costs of this budget is longer often exceeding a year, a consideration that has to be factored in the budgeting process. A determination of the minimum dollar amount of items covered under capital budget is key. The returns from capital expenditures takes a longer time and are not spent on daily operations of the organization but for future capital expenditures. In managing capital budget, a determination is made on the precise capital purchase, either direct or indirect (Angela, 2013). As part of the lesson, it was evident from the interview that the preliminary step in determining capital items to include in the budget begins with maintaining an inventory of major movable equipment; in this process a consideration is made on the shelf life and depreciation value. Next step involves evaluation of an existing alternative. Angela (2013) comments that a less expensive equipment that will deliver a similar result is prudent in capital budgeting, “successful capital budgets evaluate alternative plans and purchases” (p. 78). As asserted by the mentor, the outcome of every purchase ought to yield a tangible economic return to the organization. The insight from obtained from the above assertion is that an evaluation of why it is necessary to purchase the capital item has to be well defined in addition to the impact it will have on the operating expenses and revenues
Labor Force, Equipment and Services
The initial phase of resource allocation entails pragmatic analysis of collected data of the previous fiscal year (Sharma, 2016). As was commented by the mentor, feedback on how the resources were utilized in financing labor, equipment, and services vis-à-vis the organization’s outcome forms the baseline for budgeting in the present year. The mentor agreed that it was a difficult task to operate within the budget in all the fifteen years of her experience as nurse manager. Deficits or shortfalls would be the major problem that necessitated sourcing for more funds not to mention expenses that emerge that were not comprehensively accounted for in the fiscal planning or emergency expenses that exceed the contingency scheme. These issues would cause a negative variance on the budget. As a lesson, a policy that minimizes cost is often employed when allocating resources for equipment, labor or services. The principle is to prioritize basic supplies at the expense of advanced supplies. Alternatively, an approach that eliminates high-cost products is applied when lower cost products that offer same functionality are within reach (Sharma, 2016). Supplies are categories in a manner that reflects the needs of an organization. Three fundamental issues that must be addressed before allocating resources in the acquisition of equipment, namely: the purpose and the process that the new equipment will fulfil that is missing in the organization, adaptability of the new equipment with the already existing ones, reasons as to why the change is being effected and the expected impact on workflow (Chi & Bump, 2018). Agreeably, as stated by the mentor, resource management should center on human capital and not on automation; nurse manager must appreciate that neglecting human resource at the expense of achieving automation can result in damaging effects. The lesson is clear that it is prudent to attain balance between automation and labor force during resource allocation in order to obtain excellent results.
In the provision of nursing services it is essential to reduce costs escalation and find savings, a major challenge cited by the interviewee. Sharma (2016) comments that demonstrable savings is achievable following improvement in the care processes and practices that eliminates excessive use of advanced products or supplies. Before allocating resources for services such as wound care, an area that grossly leads to cost escalation (Sharma, 2016), it is vital to consider the following factors: product cost and information, product availability and access, alternative products of lower cost, right supplies in adequate amounts to avoid excess supplies, patient volume data, cost per visit data, and the outcomes of the services rendered to patients such as size, healing and healing in the case of wound care (Sharma, 2016). Additionally, utilization of project resource management scheduling tool constitute one of the judicious ways in the process of allocation. It keeps everyone on the same page (Chi & Bump, 2018). This tool is often utilized in complex project algorithms that demands tracking as well as multiple projects that requires frequent updating.
A framework of five steps often employed in the process of resource allocation as was alluded by the mentor include the following. The first step is definition of the organization’s strategy; the organization’s goals are stated in this phase by the senior leadership as well as the nurse manager. The second step entails identification of the sequence of decisions which lead to allocation through resource mobilization. The third phase is eligibility determination. Fourth is ascertainment of the type of support, that is, services, funds, or other resources that will be made available. The last step involves allocation of specific resources for specific tasks so as to complete the allocation cycle.
Financial Principles to a Strategic Plan
It was agreeably commented by the interviewee that reviewing departmental plans ensures prudent capital appropriation or rather effective allocations of both capital and human resources which ensures fiscal success. For purposes of profitability, measuring management performance is key in addition to appraisal of new strategic plans. Creation of an effective budget for a given fiscal year is a great challenge cited in the interview. Attaining fairness and reasonableness, major fundamental principles in budgeting particularly with regards to other nursing staff whose performance will be evaluated in comparison with the goals outlined in the budget, is a cumbersome process as was commented by the interviewee. The lesson here was that an approach that involves the team’s participation where they are empowered to air their views as well as restating the organization’s vision and mission leads to great success following creation of budget. In essence, the following sequential approaches leads to a more effective budget for profitability and fiscal success, namely: identification of organization’s decision makers and their involvement in budgeting process, application of technology and information management in coordination and consolidation of budgeting efforts with the team, creation of a budget which reflects strategic plans of the organization, comparing and reviewing the budget to identify weaknesses and strengths, urgent resolution of arising issues, and applying the budget process as a tool for translating organization’s goals into dollars (Chi & Bump, 2018).
A fundamental indicator of organization’s success is linking of strategic goals to performance in addition to provision of timely information for facilitating operational or daily decision making. As was explained in the interview, the nurse leader is charged with the mandate of understanding the different type of budgets in an organization especially the operating budget. Furthermore, the nurse manager collaborates with nursing staff and other officials involved in the budget creation process to create a robust tool in governing the daily operations of the unit so as to ensure provision of quality healthcare to patients. According to Untalasco-Gealan (2013) every fiscal aspects captured in the budget of the unit is the responsibility of the nurse managers. In essence, the lesson for the day was that the nurse managers has to see to it that all expenses remain within the framework of the unit’s budget including operating costs, staffing costs, equipment and supplies costs.
Conclusion
An outstanding challenge in organization’s financial strategic planning pertains to staying within the limits of the budget. It was cited by scholars that nurses demonstrate a lack of prowess in fiscal planning and management. Key to the various types of budgets used by organizations that provide healthcare services is operating budget and capital budget. Operating and capital budgets are constructed and monitored most frequently by nurse managers upon which they are held accountable. Creation of an effective budget for a given fiscal year is a great challenge faced by nurse manager. To achieve fiscal success, it is paramount to ensure effective allocation of both capital and human resources in addition to prevention of cost escalation or rather keeping revenue above expenses.
References
Angela Gambino, B. S. N. (2013). The Nurse Manager's Guide to Budgeting and Finance. In Oncology Nursing Forum (Vol. 40, No. 6, p. 611). Oncology Nursing Society.
Chi, Y. L., & Bump, J. B. (2018). Resource allocation processes at multilateral organizations working in global health. Health policy and planning , 33 (suppl_1), i4-i13.
Parsons, L., Howell, T., & James, T. F. (2012). Building New Programs in Women's Health: A Fiscal Perspective. International Journal of Childbirth Education , 27 (1).
Sharma, M. (2016). Budgetary Bandage. Quality Progress , 49 (4), 38.
Untalasco-Gealan, R. (2013). Budgeting Knowledge of Nurse Managers in selected units of Rumailah Hospital, Doha, Qatar.
