Question 1
Top down budgeting is a financial planning strategy, especially in the budget making process in which financial spending is allocated starting at the highest levels of aggregation downwards (Kramer and Hartmann 317). Top down budgeting, in most instances, considers the overall spending amount required at the involved institution before breaking it down to the departmental levels. The strategy considers that it is the largest units and highly-rated programs of an organization that really matter for the success of a business organization. The emphasis on the larger aspects of business is intended to ensure that significant and important departments in the business are funded first before the lowly ranked units, whose input is not as significant, are funded. The advantage of the top down budgeting strategy is that it enables more accurate budgeting. The strategy helps minimize the chances of over-budgeting or under-budgeting. On the other hand, top down budgeting could lead to a minimized focus on the lowest ranked units in the organization. Thus, the top down budgeting strategy could lead to the stalling of the activities of the lowest ranked departments due to lack of enough or timely funding.
The bottom up budgeting strategy entails beginning the process of allocating financial spending from the lowest unit in an organization upwards. The lowest units in a business are allocated spending before higher ranked units are allocated the specific spending limits. The advantage of this strategy is that it enables the provision of funding for the completion of tasks at the lowest units, which really matter in business performance (Kramer and Hartmann 333). The bottom up strategy holds that it is the lowest ranked units of business that facilitate the general success of the company; thus, they should be funded in an effective and convenient way to ensure that organizational goals are met. The bottom up strategy could be disadvantageous as every manager seeks to have enough money, they could add up some more amount than the required amount as cushion money, which if done frequently could bring imbalance to the budgeting process.
Question 2
Service volumes in the healthcare sector use some approaches in the budgeting endeavors. The first approach that is used in the service volume budgeting is the output/input approach. The output/input approach considers the levels of income that a unit or an activity brings into the business before giving it priority in the budgeting process. Additionally, the approach considers the expenses that define every unit and activity before being considered in the budgeting process. The approach first considers the outputs and works backwards to considering the inputs. The aim of this is to enhance the effectiveness of the entire budgeting process.
The second approach that is used in service volume budgeting process is activity-based approach. The approach considers all the activities and gives priority to the most crucial of the activities based on their sensitivity in the quest to attain the objectives of the healthcare organization. Every activity is funded but emphasis is laid to the most urgent and crucial activity. The third approach is the minimum level approach. This approach considers the minimum amount required in every unit, department and activity. Any amount considered to be above the minimum level ought to be justified before it is provided. The minimum level has the advantage of ensuring that the budgeting process allocates all the units of a business the required amount to run its activities. It enhances the ability of the company to meet its objectives by ensuring that all units have the required amount of funding prior to the start of business activities. The minimum level approach is effective as it tends to curb instances of over-budgeting and wastage of crucial resources in the service volumes in the healthcare niche. The minimum level approach could also lead to instances of unbalanced budgeting as other units that are considered with little priority could miss out on the budgeting process, an instance that could lead to business instability if done more often.
Question 3
Various legal and regulatory conditions determine and control the budgeting of healthcare organizations in the United States. From the legal spectrum, it is expected that healthcare facilities ought to meet the minimum requirements as established in the American laws and statutes that control healthcare services provision. For instance, the healthcare facilities have to comply with specific Acts of law that control the way patients are treated and the quality of care that they receive. The Medicare Act, popularly referred as to ObamaCare, has arisen to affect significantly the budgeting undertakings in most healthcare facilities. Additionally, acts like HITECH and HIPAA have also been affecting the way various healthcare facilities undertake their budgets.
On the same note, regulatory procedures also affect the budgeting processes of various healthcare facilities. Aimed at enhancing professionalism and responsible medical care service provision, regulatory procedures have to be adhered at all times. The hospitals have to abide by the regulatory policies established to control the working environment for their employees. The equipment used at all the medical care facilities across the US should also meet the expectations and established procedures set by the various regulatory agencies. In most cases, medical care facilities that fail to meet the expectations risk legal suits and varied punishments, which could include closure. Therefore, the budgeting process ought to meet the legal and regulatory requirements if the success and attaining the organizational objectives is to be realized.
Question 4
The fringe benefit level change is an important aspect in the budgetary undertakings of an organization. The fringe benefits are benefits that an employer gives to their employees or private contractors who meet a set of specified conditions. Therefore, the budgeting team should at all times consider the fringe benefit level changes during their development of the budget. Apparently, the budget development exercise will in most cases be influenced by the fringe benefit levels, and they change from time to time depending on the set terms and conditions that will be agreed by both the employer and their employees.
The fringe benefits levels are an important tool in the budgeting process. Apparently, the fringe benefits enhance the levels of motivation among the workers of an organization. The workers who are promised to receive fringe benefits if they meet specific conditions get motivated to work harder and be committed to meet their goals thus enhancing the productivity of the involved healthcare organization. As such, the budget development teams have to ensure that the include fringe benefits in their budgets. The benefit of the fringe benefits levels in the budget include enhancing individual and organizational success in all the levels and fields of business in which an organization participates.
Work Cited
Kramer, Stephan and Frank Hartmann. "How top-down and bottom-up budgeting affect budget slack and performance through social and economic exchange". Abacus 50.3 (2014): 314-340. Web.
