Education & Training

Use the 'Right' Assumptions to Build Your Budget

09/07/2022

Focus your Agency on the 'Right' Assumptions to Build Your Budget

Budgeting and Forecasting = Improved Profitability

Successful operations require planning, budgeting, analysis, and forecasting. When we address the fundamentals driving revenues and expenses, we set ourselves up for a more profitable future.

Getting Started

Budgeting projects revenues and expenses for the upcoming operating period, generally a fiscal year. Budgeting that projects revenue and expenses will help an organization better manage, analyze, and understand what happens during the budgeted year. This is key to improving profitability.

Budgeting Fundamentals

Do you understand the drivers of revenue and expenses in your organization?

• Census, payers, wages, mileage, and utilization are just some of the drivers of revenues and expenses.
• What assumptions are you making as you develop your budget? Assumptions are one of the budgeting process's most important but often overlooked aspects.
• The best-operating budgets are monthly, enabling a comparison of the budget to actual results.
• Your leadership team should receive budget-to-actual comparisons shortly after the close of each month.

Budget-to-Actual Analysis

Do you address variances promptly?

• Your budget-to-actual analysis is a vital component of the budget.
• A good budget-to-actual analysis helps to answer the question – why the variance?
• Understanding why a variance has occurred helps your management team make good decisions that keep your agency on track to its goals.

Forecasting

Are you able to project likely financial and operational results at year-end?

• A Forecaster is a dynamic tool known as a 'Living Budget.'
• A Forecaster combines your actual year-to-date results and your budgeted values for the remainder of the year.
• A Forecaster allows you to change the budget assumptions for the remainder of the budgeted period to account for unforeseen changes.

Need assistance preparing a home health-specific budget and forecasting model? Our seasoned consultants can help prepare agency-specific budgeting and forecasting models to help you better manage operations. Contact MA@corcoranconsultants.com to explore how Corcoran Consulting Group can help.