Zero-Based Budgeting

As the zero-based budget consultant for Windsor Memorial Hospital I will make recommendations to the Board of Directors on how to create a solid plan to reduce costs and increase productivity. This will be a team based solution. In order to sustain the plan for years to come, it will require continued effort and a commitment from all current and future employees. Zero-based budgeting is one of the most efficient ways to allocate resources.

One of the main reasons people turn to this particular type of budgeting is because when managers are forced to account for each line item, they are usually able to find more creative ways to utilize limited resources.

Even though working through a zero-based budget will involve more time, the efforts with be worth it because in the long run it will pay off immensely. Over the last ten years Windsor Regional Hospital has grown exponentially but this increase has also increased their operational budget by 300 %. As a result they accumulated so much debt that their working capital deficit stands $55 million dollars (Windsor, 2008).

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Considering the effects that the increase in demand and a reduction in supply have had, it is now time to take the necessary steps to turn things around. Without drastic measures, the hospital may soon be forced to close its doors. The closing of a hospital this size would cause a negative impact on the town and the people in the community. In order to be part of the solution I will be recommending the steps needed to assist the organization on making the decisions not only to make a full comeback but also to be able to continue their success for many years to come.

Recommendations and Justifications My recommendations along with the reasoning behind it are as follows: 1. Make every dollar count We will account for every dollar. For every dollar spent and/or gained we will invest the difference into paying off the current debt. This will allow us to quickly reduce the capital deficit without accumulating more debt. Any and all extra funds will be invested back into the company to pay down the outstanding debt rather than being put towards new programs or expanding services. 2. Stop wasteful spending

We will create an organizational wide contest to see where we can cut careless spending. Eliminating the need to provide company coffee, plastic utensils, Styrofoam cups, and paper plates can save money. As a part of a team effort, each employee can bring in their own cups, plates, etc. Another idea is to save paper and toner by only printing when it is absolutely necessary. Invest in scanners and faxing programs that can send a fax directly to an email address. This can not only help save the environment but it can also reduce paper and toner costs at the same time. 3. Cut administrative costs

My first stop will be the Human Resources department. They are many administrative tasks that can be converted from using paper and ink to becoming an online paperless process. Not only will they be more efficient but changing these processes will save money as well. For example, instead of mailing out paystubs to employees with an active direct deposit account we will offer online payroll receipts to completely eliminate this type of postage expense. An organization with 1400 employees who are receiving the benefit of direct deposit can save thousands of dollars a year.

At . 49 cents each, with 1400 employees getting paid bi-weekly a company can save $16,464. 00 a year. The money saved in this area will be reinvested in reducing the overall debt. 4. Motivate Staff Increase staff motivation by actively involving them in the process. Employees will go above and beyond when they are included in the “big picture”. They are more likely to become excited about the company’s goals and progress when they know they have helped play an integral part in some of the key decisions along the way. Find ways to involve and motivate staff.

Creating a sense of camaraderie amongst staff can create an unbroken bond that can benefit the organization when relying on team efforts. 5. Identify the cost-of-ratio for each service Many hospitals cannot identify their cost-of ratio. The cost-of-ratio for a service is calculated by comparing the original price paid for a service with the total cost of maintaining that service (Lynch, 2010). This is an important figure to understand because it provides insight as to what something costs and how much it will cost to maintain. To provide a service without knowing what it is costing you is just foolish.

For example, if performing a point of service lab costs more than it would to outsource this service then it is time to look towards outsourcing. It is never a good idea to provide a service you cannot afford to provide. Allocating resources by using a zero-based budget will be prove to be effective by reducing costs and strengthening the company as a whole. 6. Training The development of effective priority setting methods to assist managers and clinicians in making these decisions remains one of the most important challenges in health policy (Peacock, Mitton, Ruta, & Donaldson, 2010).

Excellent performance starts at the top and is mimicked by subordinates. Training for all upper level managers and directors will be mandatory. If they do not possess the skills needed to carry out the mission of the organization the plan will be unsuccessful and the goals will not be fulfilled. Conclusion By following the suggestions above it will give us a good head start in moving towards our goal to decrease the capital deficit. Utilizing a zero-based budget will force the organization to look at each month individually without considering or comparing the budgets of the previous months.

Each expense must be evaluated, justified, and approved. Performing mandatory budgeting, marginal analysis, and increased accountability will reduce costs and force staff to find creative ways to use fewer resources but provide more services. This will also allow them to continue to provide patient care but doing so at the lowest possible cost. Implementing this new initiative will offer a more effective and efficient way to operate but will have the benefit of reducing the deficit at the same time.

References

Lynch, P. K. (2010). Budgeting-an innovative approach. Biomedical Instrumentation & Technology, 44(3), 188.

Retrieved from http://search. proquest. com/docview/366815669? accountid=32521 Peacock, S. J. , Mitton, C. , Ruta, D. , & Donaldson, C. (2010).

Priority setting in healthcare: Towards guidelines for the program budgeting and marginal analysis framework.

Expert Review of Pharmacoeconomics & Outcomes Research, 10(5), 539-52. doi:http://dx. doi. org/10. 1586/erp. 10. 66 Windsor Regional Hospital. (2008).

Zero Based Budgeting, Windsor Regional Hospital, Retrieved from http://www. wrh. on. ca/Site_Published/wrh_internet/RichText. aspx? Body. QueryId. Id=18389&LeftNav. QueryId. Categories=267