Budget Management Analysis

Budget Management Analysis

Introduction

The ultimate goals of Asset Management in organization today, are to create the most value for the least cost over the long term. This includes the ability to drive policy debate, communicate investment options, and confidently make and defend investment decisions. Accounting for strategic management must operate successfully in this changing, evolving environment if it is to make a positive contribution to the financial aspect of this strategic analysis, planning and control process.

A variance report is a budgetary report care for management. Variance report can be developed at all level of the budgetary process. Review of theses report allow leader to be more time efficient in locating and correcting problems by highlighting the deference between actual and budgeted revenue and expenses for a particular areas (Siciliano, 2003). Budgetary variance can be either favorable (above budget in revenues or below in expenses), or (unfavorable (below budget in revenues or above in expenses) Variance may be controlled or uncontrolled. When management identifies budget variances, one of the most difficult tasks is determining the root cause of the variance.

Increased competition, continued threats of Medicare rate cuts, less-than-adequate state Medicaid payments, and heightened regulatory requirements all point to the need for agencies to strive to become more efficient in their operations. It is challenging to isolate the nature of the difference to be able to take corrective action. In today's environment, every organization must continually search for new ways to more effectively manage their business.

Budgeting is one management tool most businesses use to help plan a successful roadmap for the next year. A budget also is used to compare actual results throughout the year to identify where operations might be veering off course. This monthly budget-to-actual comparison is the often forgotten activity that allows leadership to take timely action to correct any areas of concern. An effective leader will review each line item and determine the reason for the variance and what can be done to improve the budget and expense variance.

The best practices in setting and managing healthcare organization budgets include, using comparative benchmarks, setting accurate, high-performance department budgets, and establishing a culture of accountability. Benchmarking is one of a manager's best tools for determining whether the company is performing particular functions and activities efficiently, whether its costs are in line with those of competitors, and whether its internal activities and business processes need improvement.

Benchmarking can focus on roles, processes, or strategic issues. It can be used to establish the function or mission of an organization. It can also be used to examine existing practices while looking at the organization as a whole to identify practices that support major processes or critical objectives (Powers, 2004). Organization can learn how to plan for the long term more effectively by seeing how other organizations have reached better levels of performance through their own strategic planning.

Benchmarking allows management to determine where major problems lie in comparison to other companies in the same business, and what can be done to strengthen those weak areas. The goal of benchmarking is to identify the weaknesses within an organization and improve upon them, with the idea of becoming the "best of the best." Areas of excellence will also surface, enabling the organization to continue with what it is doing well.

According Finkler, S. A., & Ward, D. M. 2006).There are three principal benchmarks. The first is the organizations history. We always want to review the ratios for the organization this year, compared to what they were in the several previous years. This enables us to discover favorable or unfavorable trends. The second type of benchmark is to compare the organization to specific competitors. By finding where your ratios differ, you may determine what you are doing better or worse than the competition. The third type of benchmark is industry wide comparison. Many consulting firms and benchmarking specialists, such as Solucient, collect financial data, compute ratios, and publish the results. These three Benchmarking principal enables companies to identify the most successful strategies used by other companies of comparable size, type, or regional location, and then adopt relevant measures to make their own programs more efficient. Overall, benchmarking process helps managers to find gaps in performance and turn them into opportunities for improvement.

Benchmarking Techniques

Process Benchmarking/pro is a strategic tool used to evaluate specific portions of the companies processes in comparison to other competitors best practices. The pro to this technique is that the corrective actions are usually quick and cost effective. Process benchmarking helps enhance the efficiency and performance of the organization. The changes made using this tool are suggested from a peer group whose objectives are to make solid, quick improvements that can be considered best practices for the organization.

Performance Benchmarking/pro compares the companies products and services against its competitors using variables of quantitative measures. This will aid in determining what changes need to be made within the organization to improve company operations.

. Strategic benchmarking/pro is the point at which organizations use strategies to increase the organizations success.