CU Health Care Budgeting Developing an Operating Budget Essay

Attached. Please let me know if you have any questions or need revisions.Running head: DEVELOPING AN OPERATING BUDGETDeveloping an Operating BudgetYour NameCapella UniversityBHA-FPX4008U01A11DEVELOPING AN OPERATING BUDGET2AbstractBudgets are a crucial tool in healthcare organizations’ strategic planning to forecast the expectedrevenue and expenses. Organizations use different budget types such as operating, capital, andproject budget, depending on their needs. The operating budget projects the organization’s shortterm revenue and expenses, while the capital budget evaluates asset-buying options while theproject budget estimates the total project cost. This paper uses online scholarly books andjournals to understand the importance of a budget in the planning process and the differencebetween the mentioned budget types. It also helps creates a medical-surgical department from theinformation provided at the organization board meeting.DEVELOPING AN OPERATING BUDGET3IntroductionOnce a business is running, it necessities management of its operation and resources forcontinued success. Just as other organizations, healthcare organizations also need to manage theprocess and maintain a good working environment. Various budgets are used depending on theneed: operating budget forecasts the day-to-day revenue and expenditure; capital budget enablethe organization to purchase an asset that will bring forth high yields; project budget estimatesthe total cost for a specific project. With its goals and objectives, budgets allow accurateallocation of resources and support purchasing and procurement plans. A budget portrays a cleardirection, enhances internal control, and identifies the entity’s weaknesses. Therefore, budgetsare a crucial part of the planning process and, depending on the need of the different types ofbudget, bring positive impacts to organizations.Why Budgets Are ImportantUpon forecasting an organizations’ future, a reliable budget is vital to achieving the setgoal and objectives. The management ought to calculate the expected expenditure and identifythe sources of resources such as government funds or sale revenue. Like other organizations,Healthcare organizations’ budgeting is crucial to ensuring that all the hospital levels and projectsare running smoothly. According to Finkler, Smith, & Calabrese (2020), a budget summarizesthe monetary resources needed to complete an action plan. For instance, a healthcare projectinvolves many activities, from patient care to health systems, requiring resources to becompleted. Still, other expenditures such as staff accommodation and equipment purchase willbe incurred to complete these activities. Consequently, all the project activities should beidentified and resources allocated to each. The accurate allocation of resources will ensure thatthe project is complete without cost overrun.DEVELOPING AN OPERATING BUDGET4Equally, a reliable budget is vital to purchasing and procurement plans. Together withprocuring medical supplies, healthcare organization buys insurance schemes, cleaning services,among others. Failure to plan the cost involved would lead to high inconveniences in theseorganizations. Finkle et al. (2020) indicate that strategic purchasing involves identifying theservices to be purchased, deciding where to buy, and determining how to make payment. Forexample, upon discovering a need for insurance, the planner should choose the service providerand consequently purchase the service. Prior budgeting is crucial as the planner can choose theservice based on the available resources, thereby enabling smooth flow and avoiding constraints.Difference Between Operating, Project, & Capital BudgetOrganizations prepare different budgets, including operating, capital, and project budgets,depending on need. When a company needs to forecast the daily income and expenditure, theyprepare an operating budget where they are budget for a project or purchase of an asset. Theyprepare a project and capital budget, respectively. According to Srithongr…

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