Time Frame

Budgets can be prepared to cover several time frames. The annual budget, which covers 1 year
(budget cycle), is the main working guideline for management. In addition, budgets are frequently
prepared to cover other periods. Long budgeting however, is a tremendous help in planning the
direction and long-term needs of the laboratory.

The time frame of the budget can also involve different dates. A budget cycle developed on a
fiscal year may cover any 12th-month period. For an instance, health care institutions experience their
busiest season during the first quarter of the year, so they may find it beneficial to postpone tax and
budget preparation until a later date. Governmental agencies now tend to oppose the use of fiscal
years; however once established; change in the fiscal years requires special permission from taxing and
regulatory authorities.

Forecasting Stage

Although most projections of future business activity are based on the exploration of historical data,
several factors must be considered in all forecasts:

 Shifts patient mix or volume

 Changes in medical staff composition
 Changes in business parameters such as inflation and reimbursement rates
 Expansion or cutbacks in services offered by the hospital or laboratory
 Population fluctuations brought about by changes in the local economy

A more realistic and predictable budget can be prepared if these are incorporated into forecasts
based on the historical information.

Scheduling Stage

The budget preparation schedule varies from facility to facility. The document must undergo
several drafts, numerous meeting and negotiation sessions, and many revisions. Consequently, most
institutions start the process about 6 months before the beginning of the new budget year.

The deadlines may be rotated by asking the manager to prepare the first draft of the revenue or
volume section first because the rest of the budget depends on these figures. After a reliable revenue is
made, the rest of the budget can be completed based on the information. The next step is usually the
labor hours because it is the largest cost and the most crucial to the operation of the facility.
Synthesis and Information

The organization of the financial information is very important. It must be presented logically in a way
that it is useful to the manager and the organization.

The budget report is usually organized into three major parts:

 Revenue and volume figures

 Itemized cost categories
 FTEs and labor hours

The current, budgeted, year-to-date, and variance results for each of these parts are also listed.