F BUDGET Cancer Center Emerging Leader Program Ely Kuo-Vasher, MBA Finance Director.
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Transcript of F BUDGET Cancer Center Emerging Leader Program Ely Kuo-Vasher, MBA Finance Director.
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ANATOMY OF A BUDGET
Cancer Center Emerging Leader ProgramEly Kuo-Vasher, MBA
Finance Director
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Budget
Definition - from French bougette or purse-a list of all planned revenue and expenses
Used as a tool to assist in making operating decisions and provides a framework for future growth
Assists in setting expectations, targets and goals
Used to forecast or model based on strategies, events, plan or projects
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Budget – Nuts & Bolts
Revenue/Income Expenses Margin Metrics
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Revenue/Income
Definition – income or expected income from activities related to an organization including goods and services
Patient Services Research Investments Donations Other income
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Gross vs Net Revenue/Income
Gross is total revenue/income generated.Net is the gross revenue/income less
taxes, allowances and deductions.
Net pay is gross income less taxes Net revenue is patient charges less
insurance allowance/reimbursement and bad debt
Research fund less indirect costs
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Expenses
Definition – outflow of money to pay for an item or service, or for a category of costs
Payroll Benefits Supplies Other Operating Building
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Expenses
Direct vs Indirect
Direct are expenses attributable to providing or producing specific product/service
Indirect/overhead are fixed or general expenses, examples include utilities, depreciation, management costs
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Margin – Profit/Loss
Net Revenue/Income Expense = Margin -
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How do you build a budget
Revenue
Define activity – patients, grants, gifts Breakdown of specific activity Develop revenue/income per activity, total gross
revenue/income Include growth/increase projections and assumptions Calculate net income/revenue based on projected
collection
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How do you build a budget
Expenses
Develop cost/expense per activity Breakdown into specific expense categories Include growth projections/assumptions and inflation Calculate the total cost/expense
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How do you build a budget
Time frame will vary depending on the type of budget
Operating – 1 year New programs/projects – 1 to 3years
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Budget Review
Review actual versus budget variances periodically, monthly, quarterly, yearly
Use year end actual to plan for the next year
Review processes or strategies to increase income/revenue or decrease expenses
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Budget vs Forecast
Budget is a static plan, does not change throughout the plan period until the next period.
Forecast is an updated plan and a prediction of performance. Supports flexibility to incorporate changes that may occur throughout the plan period.
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Budget Cycle
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Forecast
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Metrics
“If you can’t measure it, you can’t manage it”
Develop measurements to evaluate performance, key performance indicators are used to develop targets/objects
Metrics are used to assess current financial position Metrics are ratios that present financial information and
makes it easier to compare/benchmark Metrics can be a combination of operational and financial
indicators Represented by ratios, example: Operating Margin = Net Income Sales Productivity = Sales Revenue FTE
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Questions?
Metric Exercise