Preparing and Managing an Operating and Capital Budget

Develop an operating budget and a capital budget and analyze how they are designed and managed.

Collapse AllIntroduction

Effective financial management is a crucial aspect of maintaining the fiscal stability of healthcare organizations, with nurse leaders assuming a significant role in this endeavor. Nurse leaders must build on their knowledge of evidence-based practice to cultivate a broader use of evidence in their fiscal management decision-making. Most nurse leaders work with operating budgets but will also have input into capital budgets. The purpose of this assessment is to build a strong understanding of both operating and capital budgets and the differences between them in terms of fiscal management and the role of the nurse leader.

Note: Each assessment in this course builds on the work you completed in the previous assessments. Therefore, you must complete the assessments in this course in the order in which they are presented.

Scenario

You are the nurse leader at your organization. You have been tasked with creating an operating and capital budget. It’s your responsibility to consider the strategic plan you discussed in your previous assessment and apply it to the development of the capital and operating budgets.

Instructions

Using the provided , create both budgets and explain your decisions in an accompanying paper.

Budget Spreadsheet

Capital Budget (think long-term):

Create a capital budget with line items that are specific to the business needs.

• Buildings, equipment, and working capital.
• Cash flow in.
• Cash flow out.
• Utilities.

Operating Budget (think day-to-day operations):

Create an operating budget with line items that are specific to the business needs.

• Marketing materials.
• Direct labor.
• Salaries.
• Insurance.

Narrative Component

Capital Budget:

Explain how the capital budget was designed and created.

• Explains how costs were estimated.
• Justify the need for each expense or service.

Describe the process for calculating costs in the capital budget.

• Explain breakdown costs for each of the major cost categories (ie., salaries, fringe benefits, equipment, travel, supplies, other direct costs, and indirect costs), as well as any additional categories required by the organization.
• Considers the elements of indirect costs and how they were calculated.

Explain ongoing management of the capital budget.

• Explain the role of the nurse leader in ongoing budget management.
• Include considerations for the organization’s financial sustainability.

Operating Budget:

Explain how the operating budget was designed and created.

• Explains how costs were estimated.
• Justify the need for each expense or service.

Describe the process for calculating costs in the operating budget.

• Explain the breakdown costs for each of the major cost categories.
• Considers the elements of indirect costs and how they were calculated.

Explain ongoing management of the operating budget.

• Explain the role of the nurse leader in ongoing budget management.
• Include considerations for the organization’s financial sustainability.

Submission Requirements

• Files to submit: Submit the Excel file along with a budget narrative as a Word document.
• Format: Format your paper using the current APA style. Refer to for help. Use the to help you in writing and formatting your analysis. Be sure to include:
• A title page, reference page, and appropriate section headings.
• References: Include a minimum of five properly formatted citations and references. Refer to the for library research information.

Competencies Measured

By successfully completing this assessment, you will demonstrate your proficiency in the following course competencies and scoring guide criteria:

• Competency 1: Develop an operating budget for a healthcare organization.
• Create an operating budget with line items that are specific to the business needs.
• Explain how the operating budget was designed and created.
• Describe the process for calculating costs in the operating budget. Explain ongoing management of the operating budget.
• Competency 2: Develop a capital budget for a healthcare organization.
• Create a capital budget with line items that are specific to the business needs.
• Explain how the capital budget was designed and created.
• Describe the process for calculating costs in the capital budget.
• Explain ongoing management of the capital budget.
• Competency 4: Communicate effectively with diverse audiences, in an appropriate form and style, consistent with applicable organizational, professional, and scholarly standards.
• Integrate relevant and credible sources of evidence to support budget data and information, correctly formatting citations and references using APA style.