Health Care Budget: Financial Management Practices
Andrew Ojo
HCS/577
University Of Phoenix

Health Care Budget: Financial Management Practices
Budget involves pulling resources together to achieve a specific goal. According to Gapenski (2006), budgeting is an offshoot in a planning process. A basic managerial accounting tool use in holding planning and control functions together is referred to as set of budgets (p. 255). Most entities and organization create budgets as a guide for controlling its spending, predict how much profit, and it expenditure as they progress toward a set goal.
One major setback manager or budget developer encounter is trying to design a future, a process that cannot be created with the precision just right. This article discusses some financial management practices considered most effective in creating and monitoring an operating budget. It also highlights some least effective financial management practices in creating and monitoring an operation budget.
Most Effective Financial Management Practices in an Operating Budget
Creating and monitoring an operating budget needs a careful consideration of so many factors, one of such factors is managing the finances. To do this, here are some of the most effective practices many organizations adopt in creating and monitoring budgets; * Having a corporate strategy
Evaluating the progress of a budget is dependent on expenses and how resources are allocated. Because of this singular fact, linking a budget creation to a corporate strategy makes the budget more effective. When a budget is linked to corporate strategy, it gives all parties involved in creating and monitoring the budget a clearer understanding of the strategic goals. To ensure the success of this practice management must adopt a good communication channel as this will create the ease of setting a challenging but achievable goals. * Creating allocation procedures
Every department or unit in an organization requires proper funding to work efficiently. Sometimes these requirements are in excess of available resources; creating an inevitable competition for these resources. This may be in the form of capital or operating expenses. Entities embarking on a process of creating a budget should map out procedures for allocation of resources to support key strategies. One way this can be done is reviewing the operating and capital budget. Giving the managers an idea of how a small change in one aspect of a budget can affect a different unit. * Good incentives
Adopting the practice of tying incentives to performance measures in a process of creating and monitoring a budget is very effective. As logical as it may seem, that managers and employees in most entities are evaluated on how well the reach a budget target, it is a misguided opinion for an operating budget hoping to succeed. According to Andersen (2000), this is a one-directional evaluation. Balancing performance measures in a budget and linking these measures in incentive programs not only channels a process towards strategic goals but also reinforces the necessity of key strategies. It informs employees which results deserves rewards. * Streamlining Budget
The drive to reduce budget complexity by streamlining budget procedures help managers and top management staff acquire the necessary budget detail, make informed decisions on allocation and communicate proposed target in less time. When a budget is streamlined, time and cost are just right. Accurate information is made available, and unnecessary details in a budget report are eliminated. * Excellent cost management practice
Organization has over time improved information quality for managers and other employees by linking cost management to budget creation and monitoring processes. An accurate cost management procedure creates that needed information on cost and ascertains the time frame for a budget process. Some organization employs the activity-based costing (ABC) process to find the actual cost of producing, selling and delivering products and services. Some employ the variance analysis in monitoring an operating budget, this studies the variance between actual and budgeted cost; comparing one cost at one organization to another. Variance analysis points out areas that require performance improvement. * Flexibility of budget
No project is done perfect the first time; there is always a chance an error that needs correction or new ideas to make it perfect. So it is with creating and monitoring a budget. Having an accommodation for changes in a budget is a very good practice. It helps managers and budget developers respond to competitive setbacks or breakthrough more precisely and quick. Using available resources for good opportunities or correction of errors.
Less Effective Financial Management Practices in an Operating Budget
Every budget requires a regular review for effectiveness, in doing so optimal performance of a budget process can be attained (Bragg & Burton, 2006). Below are some less effective financial management practices in creating and monitoring an operating budget: * Lack of complete participation from all levels of management (managers and supervisors). Budgets may have negative fall backs on finances, when participation is one-sided or input comes from unaccountable source. * Management inattention to budget information. This can result in loss of control on budget resulting from lack of reviews or accountability. The budget is supposed to be a control tool, having the right information is paramount to avoid wasting resources * Uncorrected variance between budget objectives resulting from poor estimations and lack of coordination. Also, not having a set maintenance process for a budget is common ineffective practice that affects not just finances but time too. * The lack of proper communication resulting from managers not having a feedback loop. This is needed to get an idea of how budgets are arrived on the content of a budget. This practice has proven to be very least effective in monitoring an operating budget.
Conclusively, the knowledge of these practices both effective and less effective practices is a great asset for managers and employees in any organization. Creating and monitoring an operating is a good idea, but having the right practices and procedures that allocate the right resources with precision brings an organization closer to perfect operating budget.

References
Andersen, A. (2000, January). Best Practices: Developing Budgets. Inc., 1(1), 4. http://www.inc.com/articles/2000/01/16379.html
Bragg, S., & Burton, E. (2006). Accounting and Finance for Your Small Business (2nd Ed.). Hoboken, NJ: Wiley and Sons, Inc.
Gapenski, L. (2006). Healthcare Finance (4th Ed.). Retrieved from The University of Phoenix eBook Collection database.