Pro Formas

Order Description

Chamberlain College of Nursing: NR-533- Financial Management in HC Org
Pro Formas (graded)
The course outcome for week 5 is as follows:
Formulate a revenue-and-expense budget for a nursing unit within a healthcare organization. (PO 8).
As we begin this week’s lesson, it is important to discuss how pro formas and spreadsheets can be beneficial to the nurse leader in relation to the financial management of a healthcare organization. Last week’s content provided an overview of forecasting and how this can also be beneficial in the financial management of a healthcare organization.

Debbie and her supervisor have moved to the topic of pro formas. Discuss the purpose of pro forma statements and how they may benefit Debbie.

Benefits of Budgeting
As we begin this week’s lesson, it is important to discuss how pro formas and spreadsheets can be beneficial to the nurse leader in relation to the financial management of a healthcare organization. Last week’s content provided an overview of forecasting and how this can also be beneficial in the financial management of a healthcare organization.
Budgeting Process
The budget is a formalized plan prepared by management that reflects the anticipated expectations for a certain area. Typically, this process can take several months to complete, and a budget calendar is usually provided by the finance department to ensure that needed information is submitted by the leader within the needed timeframe to allow senior leadership to approve and release the final budget within the set timeframe. A timeline builds in time the leader may need to provide additional information to justify a certain budget-item request to senior leadership. A sample budget timeline can be viewed in your textbook reading this week. The rationale for a new budget item or an increase in a budget line item may be clear to us, as the leaders, but may not be clear to senior leadership.
When developing a budget, aspects of the overall budget must be considered and reviewed carefully to ensure quality of patient care is not compromised. Reimbursements for organizations are becoming more closely tied to outcomes to providing high-quality care that is at the forefront of healthcare leaders (Finkler, Jones, & Kovner, 2013). Some leaders and organizations may also adopt a specific performance budget to target a specific goal or multiple goals for an area or organization. For example, an organization may wish to increase its patient-satisfaction scores throughout the organization. Leaders may be directed to allot more specific resources in this area for a specific position, incentives, or other items they feel may enhance this specific outcome measure. An example of this type of a performance budget is highlighted in your textbook reading this week.
Some quantified areas of a budget may include the number of patient days or other expected specific service-area measures. The leader considers the goals, mission, vision, philosophy, policies, and organization-wide assumptions of the healthcare organization when preparing the annual budget.Generally, the organization will provide a set of specific, measurable objectives the budget should accomplish. This information should be communicated to leaders before the budget process is initiated. Often, the final budget is a compromise between the leader and senior leadership.
Preparing an annual budget requires the leader to reflect critically on all elements of the budget to determine if any changes are required for the next budget. For example, with the new goal of becoming a Magnet-designated facility, the budget for continuing education, clinical ladders, and time off to attend shared governance meetings must be considered in the future budget.
When the operating budget is developed, some of this financial information is reflected in the pro forma for the specific department or area. When the leader reviews monthly financial information, it provides an opportunity to readjust specific areas as needed to meet budget or exceed the budget, or use fewer dollars than anticipated to ensure financial targets are met by the end of the year. Reviewing the financial information after the budget is developed and approved is part of the budget-control process.
Pro formas
As we have discussed previously, the budgeting process is very complex, and there are many steps and tools a nurse leader can utilize to help ensure the most accurate budget can be achieved, whether it be keeping on track with your current budget or projecting for the next fiscal year. Pro forma financial statements are a summary of a financial organization’s position at a given time (Finkler, Jones, & Kovner, 2013). Most organizations utilize a financial-summary statement in some format, which typically includes their financial position at the end of the fiscal year, revenues and expenses, and cash receipts and payments.
One of the most common types of financial statements is the balance sheet. The balance sheet may also be termed the statement of financial position. The pro forma balance sheet indicates, for each future year, what the end-of-the-year financial-projections results will reflect. Generally, any projections longer than 3 years would not be an accurate reflection due to the changes that occur within healthcare.
Summary
This week, we discussed pro forma concepts and how they can assist the nurse leader in his or her role. Next week, we will discuss various aspects of financial risk the nurse manager may encounter within a healthcare organization.

Reference
Finkler, S., Jones, C., & Kovner, C. (2013). Financial management for nurse managers and executives. (4th ed.). St. Louis, MO. Saunders.
• Chapter 12: Budgeting Concepts
• Chapter 15: Performance Budgeting
• Chapter 22: The Nurse as Entrepreneur (p. 361)
Recommended Article:
Budget spreadsheet upgrade. (cover story). (2013). Credit Union Times, 24(35), 1–23.

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