Question

Explain the need for and the process for flexible budgeting in healthcare organizations today.

Answer 1

Flexible budget is a budget that adjusts or changes with change in the volume or activity.This budget is flexible and it changes as per needs.This budget is more accurate in comparison to fixed budget.

It is very much needed in healthcare industry since cost per patient can't be calculated unless we allocate the amount of expenditure incurred.Since it is prepared after classification of fixed,variable and semi-variable expenses as per their heads and in case of healthcare industry variable expenses are more in comparison to one time fixed expenses of equipments.Amount paid to doctor and other expenses vary.Also in case of healthcare industry amount of sales or patient can't be predicted in advance based on last year sales.Therw are three methods or process of flexible budgeting tabular method,charting method,formula or ratio method.Flexible budgeting involves use of software that enables hospitals to prepare their budget using revenue and expenses per unit of service.