Co, Eileen Jicelle R.Garcia, Ma. Gladys L.Inciong, Francisco G

Macuha, Niña Christine B. Muñoz, Vea Raissa V.

Navarrete, Juan Carlo P. Palicpic, Janelle G.

Pescasio, Johara Trissa C. Suan, Vincent Alvin P.

4D-MT

Definition of Financial ManagementThe management of the finances of a

business / organization in order to achieve financial objectives

Taking a commercial business as the most common organizational structure, the key objectives of financial management would be to:

Provide an adequate return on investment bearing in mind the risks that the business is taking and the resources invested

Definition of Financial ManagementThere are three key elements to the process of

financial management:

1. Financial Planning- ensure that enough funding is available at the right time to meet the needs of the business 2. Financial Control- to help the business ensure that the business is meeting its objectives 3. Financial Decision-making - relating to investment, financing and dividend

How to prepare a budgetI. Analyze the Income and Expenses

- "cash-flow analysis”- lay the groundwork for the budget to be created.

How to prepare a budgetA. Income

- list of all the income for one-year period with breakdown of the amounts monthly is needed in budgeting

-can come from patient payments, donations and insurance credits.

How to prepare a budgetB. Fixed Costs

- expenses that generally do not vary much from month to month- include hospital allocations, rent for space, and salaries and benefits for managers-does not change with volume; however, the fixed cost per test fluctuates as volume changes

How to prepare a budgetExamples of Fixed Costs:

Salaries and benefits for management, sales staff (excluding commissions), and administrative support staff

Allocations from the hospital Rent for laboratory space and the patient service

center Sales and marketing promotional expenses Amortization of leasehold improvements Depreciation on laboratory information systems Depreciation on laboratory testing equipment Legal and accounting fees Equipment repair and maintenance

How to prepare a budgetC. Variable Cost

-respond directly and proportionately to changes in activity level or volume-maintenance cost of each department, engineering, air-conditioning, heat, water etc.-fluctuate with test volume

*When test volume rises, so do variable costs.; however, variable cost per test usually remains constant, regardless of volume.

How to prepare a budgetExamples of Variable Cost

Salaries and benefits for medical technologists, cytotechnologists, histotechnologists, etc.

Testing supplies and reagents Specimen collection supplies Forms (reports, requisitions, invoices) Office supplies Telephone expenses Postage Remote printers Insurance tied to revenue Bad-debt expenses Courier vehicle expenses Sales commissions Utilities

How to prepare a budgetII. Set budgeting goals

Budget should tie in with the financial planning goals. 

Annual budget should be reviewed to make it fit with your financial goals (both long-term and short-term).

Goals will help in the determination of the minimum amount of monthly profits required to make the business survive.

Increasing more profits for your laboratory should be the ultimate financial goal.

How to prepare a budgetIII. Create the budget

- writing a monthly budget sheet is the simplest approach

- computer program formulating the budget can also be used for more convenience

How to prepare a budgetEach month’s budget sheet might have these five columns: Column 1, labeled "Expense,”- items listed under fixed and

variable expenses.

Column 2, labeled "Last Year’s Actual,” - monthly amounts that came up with for each fixed and variable expense

Column 3, labeled "This Year's Budgeted,” - what you will allow yourself to spend on that item for the month

Column 4, labeled "This Year's Actual,” - what you spend on that

item for the month

Column 5, labeled "Increase/Decrease,” - how much more--or less--you spent during that month than you had budgeted.

How to prepare a budgetSteps to help cut costs in the laboratory

1. Monitor the laboratory’s cost.2. Determine which costs are volume dependent and volume independent.3. Determine the cost per procedure.4. Determine the income per procedure5. Limit the number of nonproductive tests.6. Discuss proper laboratory utilization with all the staff and laboratory technician.7. Update all laboratory workers on any changes in standard operating procedures.8. Try to run tests together and coordinate procedures whenever possible.9. Order supplies in bulk to save money.10. Look for ways to run tests or procedures more efficiently.

How to prepare a budgetSteps to help cut costs in the laboratory

1. Monitor the laboratory’s cost.2. Determine which costs are volume dependent and volume independent.3. Determine the cost per procedure.4. Determine the income per procedure5. Limit the number of nonproductive tests.6. Discuss proper laboratory utilization with all the staff and laboratory technician.7. Update all laboratory workers on any changes in standard operating procedures.8. Try to run tests together and coordinate procedures whenever possible.9. Order supplies in bulk to save money.10. Look for ways to run tests or procedures more efficiently.

How to prepare a budgetIV. Monitor the budget monthly

- tracking spending to assure if it is working within the parameters of the budget -accomplished by utilizing spreadsheet or database programs, such as Microsoft Excel or Access. -comparing the monthly figures to determine how well the laboratory is prospering

Laboratory Workload Reporting- a management aid designed to effectively measure the productive time expended by technical, clerical, and aide staff performing procedures in the clinical laboratory-can assist in making decisions regarding space, staffing, equipment, and technical methodology selection

Laboratory Workload Reporting-providing an assumption for the number of patient days for the new fiscal year as well as a historical perspective on required lab testing per patient day-estimating production output by hospital’s finance department-making adjustments based on input from the marketing/sales department regarding winning, losing, and retaining clients

Laboratory Workload ReportingProcedure for Workload Prioritization (by

Laboratory Lead Worker)

1. Emergency response (e.g., storm damage, earthquake or bridge collapse)

2. Construction materials testing (e.g., street samples, job mix formula verification, start up evaluation, etc.)

3. Quality assurance testing (IA, proficiency testing, etc.)

4. Soils resistivity/pH5. Coring services for deflection studies (for Advanced

Planning or Design)6. Coring services (other)7. Other testing/special projects

Cost Finding - allocation of the costs of the nonrevenue-

producing departments in relation to each other, and to the revenue-producing centers in relation to the statistical data that measure the amount of service rendered by each department to other departments

Cost Finding- determines the total cost for producing patient services in each department-informs department heads of nonrevenue-producing departments of the cost of services their departments perform for other departments

Cost FindingObjectives:To provide information for:

Managerial decision making regarding the profitability of a specific revenue/cost center

Establishment of rates for departmental servicesPayment systems with third party payers, i.e.,

Workmen’s Compensation, Blue Cross, or MedicarePublic relations efforts to explain costs of health

care servicesReports to external groups such as health facility

associations, commissions, and other governmental agencies

Cost FindingPrerequisites to cost finding

A sound organizational structureA related and appropriate accounting systemRelevant and adequate statistical data

Cost FindingMethods of Cost Finding 

Method OneIn this method, the costs of the nonrevenue-

producing centers are allocated only to the revenue-producing centers. None of the costs of the nonrevenue-producing centers is allocated to other nonrevenue-producing centers.

It is the simplest of the traditional methods because it requires less clerical effort and fewer statistics. This, however, does not produce the full costs of the nonrevenue-producing centers because the equity and accuracy of the end results may be subject to question.

Cost FindingMethod Two

- It recognizes that services furnished by certain nonrevenue-producing departments or centers are utilized by other nonrevenue-producing centers as well as by the revenue-producing centers.

- All costs of nonrevenue-producing centers are allocated to all centers that they serve, regardless of whether or not these centers produce revenue. .

Cost FindingMethod Three

-most complex of all three methods- also known as “double distribution” or the “double apportionment” method-In this method, nonrevenue-producing centers render services to other nonrevenue-producing centers, as well as to the revenue-producing centers.

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