How to write a Finance and Economics in Healthcare Delivery essay

Budget variance is an important measure of an organization’s estimated and actual expenditure. In accounting, budget variance describes instances where actual costs are either lower or higher than the projected costs (Woodruff, 2019). For example, an unfavorable budget variance indicates a budget shortfall. Differences in the actual versus estimated budget may arise due to various reasons including human errors, poor expectations, or a change in economic conditions. On the other hand, favorable or positive budget variance indicates a well-padded budget that takes into account expenses like project complications and changes in market demand (Penner, 2016). Overall, healthcare organizations should understand issues like errors, changing business conditions, and unmet expectations that can alter their budgets.

In the presented scenario, there are many favorable and unfavorable budget variances indicating the need for strategic financial management. For instance, the organization budgeted for a surgical volume of 2300 and ended up dealing with 2600 patients. As a result, there was an increase in the amount of revenue generated from the gift shop, surgery, and parking. These changes indicate a favorable budget variance that led to profitability. The expenses section indicates a few changes in the financial expenditure whereby there was an increase in pharmacy, miscellaneous supplies, and fixed overhead costs. These changes indicate an unfavorable budget variance prompting an investigation of the actual expenditure.

Various strategies can be used to address budget variances, especially when unfavorable outcomes are observed. The most effective solution to address this issue is to formulate a careful, well-researched, and practical budget (Woodruff, 2019). There should be a coordinated review of the budget with all stakeholders. Secondly, it is important to use incentives for the financial management team for staying within the budget limits. Giving bonuses to staff and rewards during annual meetings can serve to decrease miscellaneous expenditures (Penner, 2016). For my proposed project, I will use this knowledge to plan adequately for the number of patients and miscellaneous costs that are often a challenge to many. I will be keen to observe management issues that can affect expenditure and change in market conditions, especially during the COVID-19 pandemic.

References

Penner, S. J. (2016). Economics and financial management for nurses and nurse leaders (3rd ed.). New York, NY: Springer Publishing Company. Chapter 4, “Measuring Nurse Care” (pp. 85–110)

Woodruff, J. (2019). What is budget variance analysis? Retrieved from

http://smallbusiness.chron.com/budget-variance-analysis-60250.html

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