Business for Health Business Skills for Private Medical Practices Module 18: Develop an Operating Budget

Business Skills for Private Medical Practices A Quick Start Welcome! While you are waiting for the class to begin, please take the Pre-Test and make sure your name is on it before you hand it to the facilitator. Thank you!. Business Skills for Private Medical Practices

Agenda Welcome Introduction to an Operating Budget How to Analyze a Budget How to Build an Operating Budget How to Make Sales Projections Summary and Evaluation Close Business Skills for Private Medical Practices

Business Skills for Private Medical Practices Learning Objectives During this session, you will: define what an operating budget is; describe the elements of an operating budget; analyze a budget; discuss how to construct an operating budget; Business Skills for Private Medical Practices

Business Skills for Private Medical Practices Learning Objectives create an operating budget; make a sales projection; discuss the next step; and state your key take-away from this session. Business Skills for Private Medical Practices

Business Skills for Private Medical Practices Introduction You will have 1 minute to introduce yourself: 1. Your name 2. Your position 3. Your business 4. How long you have been in business Business Skills for Private Medical Practices

Introduction to an Operating Budget Business Skills for Private Medical Practices

Definition of an Operating Budget What is an operating budget? Business Skills for Private Medical Practices

The Elements of an Operating Budget Period Categories: a. Revenue b. Fixed Expenses c. Variable Expenses Projected Amount for Each Category Actual Amount for Each Category Budget Difference (Actual Amount – Projected Amount) Business Skills for Private Medical Practices

Operating Budget Template Business Skills for Private Medical Practices

Business Skills for Private Medical Practices How to Analyze a Budget Business Skills for Private Medical Practices

Budget for St. Joseph’s Clinic, July 2013 Business Skills for Private Medical Practices

Budget Analysis Questions 1. What budget categories were included in this budget on the: a. expense side? Business Skills for Private Medical Practices

Budget Analysis Questions 1. What budget categories were included in this budget on the: a. expense side? rent, salary, electricity/gen, phone, medicines, other supplies, staff on call Business Skills for Private Medical Practices

Budget Analysis Questions 1. What budget categories were included in this budget on the: b. revenue side? Business Skills for Private Medical Practices

Budget Analysis Questions 1. What budget categories were included in this budget on the: b. revenue side? fees, insurance, medicines, other Business Skills for Private Medical Practices

Budget Analysis Questions 2a. Which actual expenses are higher than budgeted? Business Skills for Private Medical Practices

Budget Analysis Questions 2a. Which actual expenses are higher than budgeted? phone, medicines, staff on call Business Skills for Private Medical Practices

Budget Analysis Questions 2b. Which actual expenses are lower than budgeted? Business Skills for Private Medical Practices

Budget Analysis Questions 2b. Which actual expenses are lower than budgeted? electricity/gen (by 80) other supplies (by 5) Business Skills for Private Medical Practices

Budget Analysis Questions 2c. What can you say about the overall expenses? Business Skills for Private Medical Practices

Budget Analysis Questions 2c. What can you say about the overall expenses? they were greater than the projected amount by 260 Business Skills for Private Medical Practices

Budget Analysis Questions 2d. Which expenses contribute most to the increase in expenses? Business Skills for Private Medical Practices

Budget Analysis Questions 2d. Which expenses contribute most to the increase in expenses? medicines (by 120) staff on call (by 200) Business Skills for Private Medical Practices

Budget Analysis Questions 3a. Which is actually larger, the actual revenue or the projected revenue? Business Skills for Private Medical Practices

Budget Analysis Questions 3a. Which is larger, the actual revenue or the projected revenue? the actual revenue by 495 Business Skills for Private Medical Practices

Budget Analysis Questions 3b. Which categories of actual revenue differ from the projected revenue? Business Skills for Private Medical Practices

Budget Analysis Questions 3b. Which categories of actual revenue differ from the projected revenue? fees (by 440) medicines (by 115) Business Skills for Private Medical Practices

Budget Analysis Questions 4. What can you say about the overall budget compared to the actual financial results? Business Skills for Private Medical Practices

Budget Analysis Questions 5. What does your budget analysis tell you about the business? Business Skills for Private Medical Practices

Budget Analysis Questions 6. How can this budget help the owner make business decisions? Business Skills for Private Medical Practices

Budget Analysis Questions 7a. Which budget categories should be increased? Business Skills for Private Medical Practices

Budget Analysis Questions 7a. Which budget categories should be increased? phones, medicines and staff on call- for expenses fees and medicines- for income (if sales are expected to stay the same as July) Business Skills for Private Medical Practices

Budget Analysis Questions 7b. Which budget categories should be decreased? Business Skills for Private Medical Practices

Budget Analysis Questions 7b. Which budget categories should be decreased? electricity- for expenses (unless next month will be hotter and need more cooling) insurance and other- for income Business Skills for Private Medical Practices

Budget Analysis Questions 8. How can this budget help the owner make business decisions? Business Skills for Private Medical Practices

Why an Operating Budget is Important Why is it so important for your practice to have an operating budget? Business Skills for Private Medical Practices

How to Build an Operating Budget Business Skills for Private Medical Practices

Steps for Building an Operating Budget Identify the time period Determine the categories to track Identify the level of detail needed Divide and identify expenses: fixed and variable Identify budget categories for revenue Revise the budget template as needed Business Skills for Private Medical Practices

Steps for Building an Operating Budget Make sales projections Identify assumptions about expenses Enter amounts for each category Review the draft budget: is it complete and balanced? Finalize the budget: date it and keep a copy Business Skills for Private Medical Practices

Operating Budget Template Business Skills for Private Medical Practices

Operating Budget for Dr. Owala Business Skills for Private Medical Practices

Operating Budget For Dr. Owala Business Skills for Private Medical Practices

How to Make Sales Projections Business Skills for Private Medical Practices

Forecast and Plan Your Sales A sales projection is a month-by-month forecast of the level of sales you expect to achieve. Does forecasting health services make sense? Business Skills for Private Medical Practices

An Example of Poor Forecasting Working independently, please: review the Urban Draw case on page 19; then identify which forecasting pitfalls, listed on pages 20 and 21, should have been avoided. Business Skills for Private Medical Practices

Avoiding Forecasting Pitfalls Engaging in wishful thinking Ignoring your own assumptions Continually changing your goals Not consulting staff or customers Not getting feedback Business Skills for Private Medical Practices

Making Sales Projections Start with last year’s sales, unless they were not typical Identify your sales assumptions: Market Your resources Overcoming sales barriers Products or services 3. Develop your projection Business Skills for Private Medical Practices

Sales Projection Methods Unit Price Method for products and services Add up all individual sales projections for each product and service Business Skills for Private Medical Practices

Sales Projection Methods Sales Method for products and services if there are many items in inventory Divide the business into categories or departments Forecast the sales in each area Business Skills for Private Medical Practices

Sales Projection Methods Margin Method for products if you use the same mark-up on products Add a mark-up percentage to the value of the inventory you purchase for resale Business Skills for Private Medical Practices

Sales Projection for Dr. Owala Business Skills for Private Medical Practices

Sales Projection for Dr. Owala Business Skills for Private Medical Practices

Summary and Evaluation Business Skills for Private Medical Practices

Business Skills for Private Medical Practices Evaluation Sheet Business Skills for Private Medical Practices

Business Skills for Private Medical Practices The Next Step Capture past month’s actual expenses and income. Use this data to begin to plan your budget. Establish a time period. Create an operating budget. Monthly, enter actual results and calculate difference between actual and projected. Determine reasons for variance-take action. Business Skills for Private Medical Practices

Operating Budget Template Business Skills for Private Medical Practices

Let’s See How Much You’ve Learned Please take the Post-Test. We will compare it to your Pre-Test to see how much you’ve learned in this session. Thank you. Business Skills for Private Medical Practices

Business Skills for Private Medical Practices My Key Take-Away Business Skills for Private Medical Practices