1. BMS4667 Laboratory Leadership and Management Dr. David Ricketts

2. MSc/PgDip Biomedical Science

3. Postgraduate Course Feedback Lesson 3: Managing Budgets

4. Learning outcomes Understand the need to budget Understand how to organise a budget Be able forecast budgets

5. Budgets Why budget?

6. Budget sub types Pay Non-Pay

7. Other financial terms Assets Stock Reconciling Depreciation Accruing Income Fixed cost Variable cost Cost per test Cost per reportable CIP ABC

8. Pay This is you staff cost This is not just how much you pay someone It includes on costs Pension National Insurance Sickness and annual leave Rough guide pay cost = pay grade x 1.125

9. Non pay Everything else Remember include VAT @ 20% and remove VAT from VAT exempt items Most reagents have a VAT cost

10. Organising a budget Most budgets are organised into cost centres with their own codes This allows transparency in the budget and resources to be allocated against need i.e. NKGB RE25 and NKGB RCO4 are two non pay codes in use NKGB is the code for the department RE25 and RC04 are cost centre codes within the department with a budget line assigned to them NKGB H661 is a pay code

11. Assets These are items of value which have a cost attached to them. I.E. they are worth something if you sell them Assets are not consumable, therefore a reagent is not an asset Assets include the building, analysers, pipettes, balances, centrifuges, etc Assets should be recorded on an asset register

12. Stock Stock is the amount of a good or product you have stored This should also be recorded, including lot number, expiry date, storage conditions required and reorder details Stock takes are done to ensure that there is no over or under ordering Stock costs can be offset against the budget when reconciling

13. Reconciling a budget This is an accounting process that looks to compare two sets of figures to ensure they are in agreement Budgets are checked against spend to make sure they match (hopefully) If they do not then look at the cost centres to identify the problem

14. Why does this not reconcile NKGB H661EstablishmentBudgetWTECOSTBalance MLA330000220000 BMS14800005100000 BMS251500005 BMS31400001 300000310000-10000

15. Depreciation Definition from Investopedia Definition of 'Depreciation' 1. A method of allocating the cost of a tangible asset over its useful life. Businesses depreciate long-term assets for both tax and accounting purposes. 2. A decrease in an asset’s value caused by unfavorable market conditions

16. Accruing This allows known spend to be spread over the length of a contract, normally within the same accounting period. Why do we do this? Discuss

17. Income This is the money received, either as addition work to the budget and/or known payments for services Income>expense= Profit Income<expense= Loss

18. Fixed cost These are costs which do not change in line with activity They are set for the length of a contract They are paid independently of any business activity Examples are leasing costs Fixed costs can be spread over any activity to reduce the associated cost of a product without changing the total cost paid A fix cost of £100000 spread over 100000 units is £1 over 50000 units is £2

19. Variable cost These costs vary with activity. They can include labour, reagents and office supplies They can go up or down over the course of a contract Often they can be linked to activity with discounts kicking in as trigger limits are reached

20. Cost per test This is dividing you total cost against all the test numbers that you produce Its is often used by benchmarking as a tool to compare different laboratories In a simple form Budget = £1000000 test volume = 1000000 Cost per test = £1000000 / 1000000 or £1 per test

21. Cost per reportable This looks at pay the cost of the end result issued to the customer It means only the end product is paid for not waste Waste means QC,QA reruns, dilutions etc are not factored if you have an agreed cost per reportable set in original budget

22. CIP Cost improvement programme What is it and how can we manage it?

23. Activity based costing Looks for Value Holistic approach to process management Defines activities in terms of business sustaining and non business sustaining Allows these activities to be reviewed for appropriateness

24. Example

25. ABC with staffing

26. Questions Thank you David.ricketts2@nhs.net