Detailed plan outline how resources will be acquired and used during
a specific period of time
Budget
Process to develop budget
Budgeting system
What are the 5 purposes of developing a budgeting system?
Planning Facilitating communication and
coordination Allocating resources Controlling profit
and operations Evaluation performance and providing
incentives
Quantifies plan of action so that one can anticipate/react to changes
and plan for future (i.e. what do you want to accomplish in 6mo., 1
yr, 2yr, etc)
Step 1 (Planning)
Budget process must pull together the plans and financial of others
w/in an organization (i.e. what are nursing�s needs? Dietary�s needs? Etc)
Step 2 (Facilitating Communication and coordination)
Outline use of resources among intro-organizational competitors (i.e.
nursing, pharmacy, dietary) Who�s needs take priority?
Step 3 (Allocating Resources)
Managers must be willing to make changes when actual results compared
to benchmarks / standards aren�t being met (what changes need to be
made to make the organization better? Meet established goals?
Step 4 (Controlling profit and Operations)
Assess overall performance compared to budget, provide incentives if
expectations were met, discuss next steps if not met
Step 5 (Evaluating Performance and Providing Incentives)
Comprehensive plan that ties all operations together; has many
�mini-budgets� which are usually independent of each other (i.e. sales
forecast and operations)
Master Budgets
Pro forma or projected financial statements (best guess income
statement and balance sheet). Used to compare budgeted vs. actual performance
Budgeted Financial statements
Budget that has money allocated for a fixed asset
Capital Budget
Continually updated; extends existing budget
ST and LT Rolling Budgets