Ask the expert: Methods for calculating your budget

Nurse Leader Insider, November 30, 2009

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This week, KT Waxman, DNP, MBA, RN, CNL, discusses different methods that nurse managers can use when calculating their budgets for the upcoming year.

Q: What are the different methods used for calculating budgets?

A: A budget is a financial plan that outlines the resources an entity foresees using for a particular time period. The master budget encompasses all the departmental budgets. Based on the organization's strategic goals and vision, the master budget is the actual statement of projected revenues and expenditures for the entire hospital.

Different organizations may have different budgeting practices. With some systems, nurse managers are handed a budget and asked to review, edit, and return it by a certain date; others are expected to perform the "zero-based budget method," or ZBB, requiring the manager to build a budget from scratch.

ZBB is the most effective and widely used method for budgeting. It consists of calculating projected costs by line item from the bottom up. In other words, rather than looking at the budget history, the new budget is built upon calculated assumptions. By using this method, you can analyze data and consider alternatives rather than relying solely on the previous year's numbers.

To read other budgeting methods for nurse managers, click here.

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