Introduction
Variances in the hospital budgets can occur because of several reasons, which include payment of staff, supplies being in excess or shortage and other personnel and non-personnel expenses. Budgeting influences clinical practice and is essential in the achievement of the departmental goals and objectives (Macinati, 2010). According to Hurst and Smith (2010), many hospital managers have been forced to employ temporary staff to deal with the increasing staff shortages. Hospitals having to employ temporary staff have increased their wage bill. For instance in a country such as England include 36% of the hospital wages were nursing costs (Hurst and Smith, 2010). Furthermore, cases of increasing patients represent an increase in volume and this may introduce variances. Usually, a certain number of incoming patients is expected and if this number increases, budget changes have to be made as more staff may be required to handle the patients. Additionally, nurses working in such areas may demand or require incentives to continue to handle the increased workload and this has to be accounted for in the budget. Health care reforms may also introduce variances in the budget.
Investigation of Budget Variances
Variances can be favorable or unfavorable (Penner, 2013). Unfavorable variances are of more concern as they provide a direction or indication of a deficit, which can affect the hospitals performance. As a manager, one needs to look for the causes of budget variances in order to be able to provide a comprehensive report and develop mitigation or solutions to handle the variance. According to Penner (2013), issues such as data entry errors and net loss provide reason to investigate a budget variance. Furthermore, policies of the organization provide certain thresholds that can be beneficial in controlling variances. Thus, if certain administration policies are exceeded or not implemented variances may be develop. For instance, budget investigation is required in cases where the policy requires an investigation when net loss reported or expenses exceed the total revenue. Changes in quality of care, which may include use of new technology, may introduce variances
In a case that involves variances in salaries, it is critical to obtain detailed information on issues such as overtime hours and expenses. This information needs to provide the exact overtime hours on a daily basis and on a shift basis to establish the exact duration of the overtime hours. According to Finkler, Kovner, and Jones (2007), poor staffing schedule can cause an increase in overtime and pay raises, which increase labor costs. Supervisors of the various support staff need to have such information, which is updated regularly. In cases where the variance emanates from medical supplies information, complete records of the supplies need to be evaluated to establish which items provide the unfavorable variance (Finkler, and McHugh, 2008). This then may require investigating supplier contracts, shipping costs, and prices of the medical supplies and change in requirements and policies that have caused an increase in the use of the medical supplies.
The difference between the actual budget and the original budget is the total variance. If the actual budget exceeds the original budget then the variance is said to be unfavorable. Consequently, a favorable variance is obtained when the actual budget does not exceed the original budget. Cases of concern in unfavorable variances arise when the amount exceeded is high and warrants investigations. The variances only provide the managers with an idea of the area where further investigations need to be conducted. The nurse manager after conducting an investigation needs to include a justification report in the variance budgeting report to provide an explanation for the different variances. It needs to identify clearly the variance as an expense or revenue. Expenses item will generally be the unfavorable variances and need further specification into personnel and non-personnel expenses. The budget target is normally indicated together with the actual performance and the variance amount. According to Penner (2013), this information may assist in identifying a trend that can be helpful in identifying the potential financial year impact of the variances. As a manager, one will need to provide different options for controlling the each of the variances in the report and reasons for their suitability.
Conclusion
It is important as a manager to ensure that staffing records are accurate. This will ensure that there is better access to workforce data, which will allows clear monitoring of costs and ensure that quality of service is provided. Furthermore, reforms in labor laws need to be analyzed on how they can affect employment of both permanent and temporary employees as temporary employees can be expensive. Temporary staff can be replaced with part-time permanent staff to lower running costs (Hurst and Smith, 2010). The manager also needs to be in good communication with the finance officers who can provide detailed financial reports and may be significant in developing detailed variance reports. Additionally, temporary staffing can be adopted as an indicator to evaluate performance of the hospital. The less the temporary staff the better the performance, as the wages will be reduced.
References
Finkler, S. A., Kovner, C. T., & Jones, C. B. (2007). Financial management for nurse managers and executives. Philadelphia, Pa: Saunders Elsevier.
Finkler, S. A., & McHugh, M. L. (2008). Budgeting concepts for nurse managers. St. Louis, Mo: Saunders/Elsevier.
Hurst, K., & Smith, A. (2011). Temporary nursing staff - cost and quality issues. Journal of Advanced Nursing, 67(2), 287-296.
Macinati, M. S. (2010). NPM Reforms and the Perception of Budget by Hospital Clinicians: Lessons from Two Case-Studies Macinati NPM Reforms and the Perception of Budget. Financial Accountability & Management, 26(4), 422-442.
Penner, S. J. (2013). Economics and financial management for nurses and nurse leaders.
