HCS/577
Health Care Business Analysis
University of Phoenix
HCS/577
Health Care Business Analysis
Introduction
An important step in the implementation of a business’ strategic plan is the
development of a budget. Budgeting is a necessary component for the success of any
business. Managers make decisions about daily operations through budgeting. Whether
budgeting is done by individuals or teams, it is established “by forecasting funds, prioritizing
projects, and allocating money to different sources” (Ray, 2019). Budgeting also helps
management to develop short- and long-term plans. Thus, managers must make good
decisions when creating a budget. The decision-making process for creating a budget
involves planning and controlling major categories of activity that are based on the overall
needs of the business.
Decision-making Process in Creating a Budget
When creating a budget, management should begin by establishing a business plan.
Unfortunately, a budget would not make any sense or be of any use without a business plan.
Management could start by assessing the current financial standing of the business. This will
give management a clear picture of where the business is “in terms of daily operations, of the
market as a whole and of plans for expansion and growth” (Ray, 2019). It is important for the
manager to determine any funds that are available and where all resources are being utilized.
After establishing “the framework of available funds” (Ray, 2019), management should be
able
, to list any projected expenses. Next, management must determine which projects are possible
and which projects are considered wasteful spending. It is also crucial to factor in unexpected
events. Management could “write unforeseen expenses into [the] budget and make certain
expenditures flexible in case of possible events” (Ray, 2019). Another important factor is
cash
flow. Cash flow could be a major problem for any business; however, sound decision-making
can help in finding the best ways to fund any project.
Variance Analysis
After establishing the budget, variance analysis is used to determine the causes of any
deviation in the income and expenses of the current year from the projected budget. “The
causes of the difference between the actual outcome and the budgeted numbers are analyzed
to
showcase the areas of improvement for the company, or it could be sign of unrealistic
budgeting” (Borad, 2020). If costs are lower than expected or revenues are higher than
expected, the analysis could indicate a favorable variance in management accounting.
However, if costs are higher than anticipated or revenues are lower than expected, the analysis
could indicate an adverse variation in management accounting.
The Difference Between Financial and Managerial Accounting
“The difference between financial and managerial accounting is that financial
accounting is the collection of accounting data to create financial statements, while managerial
accounting is the internal processing used to account for business transactions” (Fresh Books,
2020). Financial accounting is concerned with making a profit for the business, while
managerial accounting
Health Care Business Analysis
University of Phoenix
HCS/577
Health Care Business Analysis
Introduction
An important step in the implementation of a business’ strategic plan is the
development of a budget. Budgeting is a necessary component for the success of any
business. Managers make decisions about daily operations through budgeting. Whether
budgeting is done by individuals or teams, it is established “by forecasting funds, prioritizing
projects, and allocating money to different sources” (Ray, 2019). Budgeting also helps
management to develop short- and long-term plans. Thus, managers must make good
decisions when creating a budget. The decision-making process for creating a budget
involves planning and controlling major categories of activity that are based on the overall
needs of the business.
Decision-making Process in Creating a Budget
When creating a budget, management should begin by establishing a business plan.
Unfortunately, a budget would not make any sense or be of any use without a business plan.
Management could start by assessing the current financial standing of the business. This will
give management a clear picture of where the business is “in terms of daily operations, of the
market as a whole and of plans for expansion and growth” (Ray, 2019). It is important for the
manager to determine any funds that are available and where all resources are being utilized.
After establishing “the framework of available funds” (Ray, 2019), management should be
able
, to list any projected expenses. Next, management must determine which projects are possible
and which projects are considered wasteful spending. It is also crucial to factor in unexpected
events. Management could “write unforeseen expenses into [the] budget and make certain
expenditures flexible in case of possible events” (Ray, 2019). Another important factor is
cash
flow. Cash flow could be a major problem for any business; however, sound decision-making
can help in finding the best ways to fund any project.
Variance Analysis
After establishing the budget, variance analysis is used to determine the causes of any
deviation in the income and expenses of the current year from the projected budget. “The
causes of the difference between the actual outcome and the budgeted numbers are analyzed
to
showcase the areas of improvement for the company, or it could be sign of unrealistic
budgeting” (Borad, 2020). If costs are lower than expected or revenues are higher than
expected, the analysis could indicate a favorable variance in management accounting.
However, if costs are higher than anticipated or revenues are lower than expected, the analysis
could indicate an adverse variation in management accounting.
The Difference Between Financial and Managerial Accounting
“The difference between financial and managerial accounting is that financial
accounting is the collection of accounting data to create financial statements, while managerial
accounting is the internal processing used to account for business transactions” (Fresh Books,
2020). Financial accounting is concerned with making a profit for the business, while
managerial accounting
