Budgeting - a practical plan
Saturday, May 11, 2013
Posted by: Joy Ingram
by Kyla Delgado, Manager, CliftonLarsonAllen
In the April issue of QuickNotes we received a call to action from Lynn Gerlach, Member Services Manager at NWRPCA, to get in the game. Have you done so?
My bet is that you are still warming up. No problem, budgets aren’t typically completed until the fourth quarter, and for many of you that translates into late fall, and well, as far as I can tell it is just starting to feel like spring here in the Pacific Northwest. However, I challenge you to start thinking about next year’s budget now. Financial health should be as important to every FQHC as its patient’s health.
Did you know there was a $700 million increase in funding for FQHCs over FY2013 with the passing of President Obama’s federal budget this April? Amazing, considering that most news bytes have contained the phrase, “Due to federal cuts or sequestration.” Have you been informed of how that $700 million will reach your health center’s bank account? Not yet? What if I told you the neighboring FQHC just secured a portion of the increased funding to build a new service site? “How?” you may ask. My guess is that it happened with thoughtful and purposeful planning.
This fall, when budget requests are solicited, I dare you to rewrite the 20-second directive you have been emailing to your program managers for the past five years. Instead, as you and your colleagues converge on Anchorage, I would encourage you to take some time to think about the last budget that was accepted and approved by your board of directors. Is it the same line item budget that historically was prepared by your predecessor - and no one can remember it ever looking any different than it does today? There are different types of budgets that may or may not be practical for your organization. This may be the year that your organization adopts a program- or income-based budget.
Speaking of that budget, are you meeting budget? If not, have you determined why? What inputs would you have changed? How did you come up with those inputs? More often than not an organization’s annual budget is based upon the prior year and allocated ratably over the twelve months of the year. When was the last time you remember a year that mirrored the previous? Was last month just like the month before? Probably not, so while you may be planning for an increase in Medicaid revenue in 2014, you might want to also plan for issues or occurrences that can or will reduce revenue, such as provider leave or longer credentialing periods. More importantly, an organization needs a plan to deal with impending budget shortfalls.
Responsible board members and management identify and correct the budget when it goes awry. In fact, there are usually three factors that get an organization in over its head:
1.Leaders have not prepared a realistic annual operating budget, particularly on the income side.
2.Financial leaders do not produce timely and accurate financial statements.
3.The organization fails to take corrective action, preferring to bet on a long-shot income possibility rather than make operational cutbacks.
I challenge you not to just roll forward last year’s budget with across-the-board increases in revenues and expenses that net to a positive bottom line. Instead, get off the bench and warm up. Prior to checking in at the conference in Anchorage, come up with three organizational goals and three ways your revenue will be impacted in 2014. Begin thinking about how you will meet those goals. Together we will spend Tuesday morning discussing the reasons to create a budget, the different types of budgets and, more importantly, what drives the budget to help you meet your goals. See you in Anchorage!
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