The Process of Budgeting in Nursing Paper Example

Paper Type:  Essay
Pages:  6
Wordcount:  1538 Words
Date:  2022-12-21


Budgets are the organizations formalized financial plans, and planning is a paramount activity in the budgeting. The budget represents the organizational goals that mainly focus on operational improvements through defining specific, quantifiable financial performance measures. Moreover, budget planning involves making predictions for the next years volume, revenue as well as expenses that are routinely based on the; prior years historical or actual performance and the projected estimates for the growth. Budget planning is also a significant way to introduce and reinforce budget controls by simply setting financial performance targets that requires reporting and efficient management throughout the organizations fiscal year (In Dunham-Taylor & In Pinczuk 2015). However, until recent years, most nursing leaders have had a low influence on the budgets in the health departments under their purview with the exception of monitoring expenses as well as explaining variances. Thus, it's important to understand the importance of budgeting and budget planning in relation to nurse leaders as illustrated in the subsequent questions.

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Why is it essential for the nurse leader to provide a reasonable and fair operation budget?

It's paramount for the nurse leader to provide a reasonable as well as a good operation budget which will enable the organization to be accountable for all the aspects of their budget management and the key influence which they take part in during the budget planning process (In Dunham-Taylor & In Pinczuk 2015). Another important reason for providing a reasonable and fair operation budget by the nurse leader is that it's vital in understanding the link between the amounts of money received from all payer sources such as Medicaid, Medicare, insurance and also the private pay (In Dunham-Taylor & In Pinczuk 2015). Moreover, providing a reasonable and fair operational budget will enable the nurse leader to play a vital role in balancing revenue with incurred expenses at the unit level (e.g., equipment, supplies, staffing).

Also, through providing a reasonable and fair operational budget, nurse leader will be able to advocate for the patients by ensuring that the patients receive the best and the safest services possible (In Leger & In Dunham-Taylor 2018). Moreover, as the level of the management gets closer to the services at the various point of care, a nurse leader who is characterized by a sound knowledge of relevant budget information influences patient care. Furthermore, all the nurse leaders are most effective when they are able to make sound decisions and defend those decisions by having the necessary skills as well as the vocabulary to; determine the financial information is available, acquire that information, interpret its importance to the patient care, and to communicate that to others within the organization (In Dunham-Taylor & In Pinczuk 2015).

Although budget figures are estimates of future projections, why and how should nurse leaders be prepared to explain short-term variations?

The process of budgeting, both in annual preparation and ongoing monitoring consume a large portion of the nurse leader's time. Generally, budgeting usually comes down to a predetermined amount of funding which is allocated for a particular cost center. However,the nurse leader is expected to meet the department with an appropriate diversity of skills of nursing staff while staying within the planned budget (In Leger & In Dunham-Taylor 2018). Also, depending on the clinic setting, a variety of nursing staff may be required to meet patient care needs. Hence, in healthcare, these positions are calculated as full-time equivalents (FTEs). Moreover, a nurse leader should be in a position to explain short term variations through proper calculations of full-time equivalents (FTEs) involving the calculation of an individual working 2,080 hours per year (In Leger & In Dunham-Taylor 2018). The number is derived merely from the premise of a worker laboring for five days per week eight hours single day and fifty-two weeks per year, which will be (8x5x52= 2080).

Nurse leaders have many responsibilities when it comes to the development of the budget. What issues would be considered most important for the nurse leader in this process?

In the process of developing a budget, nurse leader usually has a lot of responsibilities. Thus, the following issues will be considered most significant for the nurse leader specifically in this process:

Establishing volume

The information relating to the establishment of the patient volume can be collected from the various sources which include the percentage of the direct admits from the emergency room (ER), the average patient delays or the number of the outpatient (In Leger & In Dunham-Taylor 2018). Thus during the process of the development of a budget, it's paramount to recognize the various factors which can influence the volume and be able to aware of these potential influencers such as medical staff admission trends and the increase or decrease in the number of medical staff.

Determining the nurse-patient ratio

After the establishment of a volume, a nurse leader can start the calculations with the aim of identifying the appropriate nursing workload. The nurse-patient ration is necessary during the budgeting in order to learn how to provide the minimum standard of care optimally (Jones et al. 2012). Thus, hospital policies, community standards, accreditations standards will help drive this ratio.

Establishing a skill mix which is necessary to meet patient needs

The organization policy, trends, and standards should be highly observed during budgeting to help incorporate into skill mix calculations to enable the organization to stay competitive with the local healthcare organizations (Jones et al. 2012). For instance, many healthcare organizations are now moving towards Registered Nurse (RN).

Personal time off

Since the volume, nurse-patient ratio and the skill mix are established during the budgeting; the nurse leader will require to factor the annual personal time off (PTO) for each employee. Also, during the budgeting, it's essential for the nurse leader to carry out overtime analysis, education, and orientation as well as establishing a facility overview to assist in defining the critical components of the departments that will influence budgeting and staffing (Jones et al. 2012).

How should a nurse leader prepare to handle minimum staffing requirement costs in the budget process in case this is challenged?

Nursing homes are usually faced with the challenges of providing acceptable phases of quality at low cost. Hence, in cases whereby a nurse leader is faced with the challenges of managing staffing requirement cost during the budget process, he/she should be prepared to use the tree staffing models namely; budget based nurse-patient ratio and patient acuity (Jones et al. 2012). Also, nurse leaders should be prepared to handle the minimum staffing requirements costs by monitoring, controlling, and taking record of all the finances (income & expenditure), they also should be in a position to investigate as well as identifying certain problematic areas and consequently rectifying them (Jones et al. 2012). Lastly, the nurse leader should handle the minimum staffing requirement cost by merely managing and authorizing expenditures efficiently.

Besides a department budget approach, what other alternatives are available in the budgeting process?

Budgets are generally used for various reasons, some of which are controlling, planning, coordinating, communicating, measuring performance and motivating purposes. Hence, besides the departmental approach of the budget, there are some other alternatives which are available in the budgeting process. These are:

Fixed and flexed budget

These are budgets which are commonly set at the beginning of the budgeting period; hence they do not change. Moreover, there are a number of styles of the fixed budgets as well as the essential methods of reaching the final budget, for instance, "top-down and bottom-up" (Finkler et al. 2013). Fixed budgets help in recognizing that there are cost behavior patterns which should allow for changes when production volume changes.

Incremental budgeting

It involves increasing prices as well as cost on a budget from a given period to another, with no significant changes to the set budget. The stated marginal incensement in cost and prices may symbolize reflection of inflation.

Rolling (continuous) budgets

Nurse leaders may need to budget due to specific changes such as competition, technology, activity level, environment and organizational structure change (Finkler et al. 2013). Hence, the rolling budget can help in dealing with these changes through continually updating.

Zero-based budgeting

This budget is similar to the top-up budgeting whereby the department begins with absolutely $0 budget and consequently works its way up to a spending limit.


In summary, health care organization frequently use various types of budgets for the sole purpose of monitoring the financial status of their respective organization. These organizations may include operating, product, cash, program, line or capital. Also, it's paramount that the nurse leaders are familiar with the different types of these budgets most importantly operating budget since it's the nurse manager who is assumed to be closer to the patient and understand clearly what is needed in order to provide care as well as services. Moreover, revenues and expenses are the two major components of the operating budget.


Finkler, S. A., Kovner, C. T., & Kovner, C. T. (2013). Financial management for nurse managers and executives.

In Dunham-Taylor, J., & In Pinczuk, J. Z. (2015). Financial management for nurse managers: Merging the heart with the dollar.

In Leger, J. M., & In Dunham-Taylor, J. (2018). Financial management for nurse managers: Merging the heart with the dollar.

Jones, C., Finkler, S. A., & Kovner, C. T. (2012). Financial Management for Nurse Managers and Executives - E-Book.

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The Process of Budgeting in Nursing Paper Example. (2022, Dec 21). Retrieved from

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