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Laboratory Budget HandoutASSET VS. EXPENSES difference is the intention or goal in paying for it.

Asset - . If our intention is to pay for something that will be ours or will be our property. Example :microscope, machines, land, equipment, computers, and furniture.

2 kinds of assets:a. short-term assets (assets that you can use within one year such as supplies or cash)b. long-term assets (assets that will benefit more than one year of your operations such as buildings

and equipment)Expense - There is no intention of having them as our properties BUT we simply pay for the right to use it.Or we pay for their services. Example : water, electricity and internet bills; salary of workers, advertisingor insurance

CAPITAL EXPENDITURES (CAPEX) VS REVENUE EXPENDITURES (OPEX) When we buy a long-term asset, we call it capital spending or expenditure.When we buy short-term assets or we pay for expenses, we call it revenue spending or expenditure.

BUDGETING - The process of planning, forecasting, controlling, and monitoring the financial resourcesof the organization

Importance of BUDGETINGFor OPEX - To anticipate the sources (income) and uses (expenses) of funds in short period of time or within one year For CAPEX - To determine what kind of assets are needed by the company and the capacity or ability of the company to purchase such assets

TYPES of BUDGETINGI. Operational Budget- The process of planning for the laboratory as an ongoing business concern;accounting for everyday needs and expenditures

a. Flexible Budgeting: A budgeting process that attempts to set expenditures based on a variableworkload volume

b. Zero-Based Budgeting: A method that analyzes needs based on prioritizing of goals andobjectives and not on past allocations

Operational Budget Preparation1. Time Frame the annual budget, which covers 1 year or budget cycle, is the main working

guidelines for management.2. Forecasting Stage factors:

i. Shifts in patient mix or volumeii. Changes in medical staff compositioniii. Changes in business parameters such as inflation and reimbursement ratesiv. Expansion or cutbacks in services offered by the hospital or laboratoryv. Population fluctuations brought about by changes in the local economy

3. Scheduling Stage when budget is prepared.4. Synthesis of information how the financial information is organized is very important. The

budget report is organized into three parts:i. Revenue and volume figures

ii. Itemized cost categoriesiii. FTEs and labor hours

II. CAPITAL BUDGETINGTwo types of analysis: 1. Narrative description : includes a written justification of the project and a prioritization of thecompeting proposals.

i. Justification a detailed rationale for a request; why the project is needed, how it willbenefit the laboratory, and why it should be considered over competing projects.

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