Capital Budget Calculation
As a nursing manager, it is important for one to be able to carry-out financial management for the unit they manage. It is in this capacity that the nursing manager is required to financially plan for their units. Through financial planning the unit is able to run both daily and in futuristic terms. Managers are expected to come up with both capital and operating budgets that enable them to manage their units financially. It is on this premise that we will look at an example of a capital budget of a hospital unit. To be able to have an added advantage over competition, it is crucial for the unit to make capital investments from time to time. Planning for capital investments also depends on the profits and the available funds from the operating budget. This therefore means that the two budgets need to be in sync with each other. Capital budgets address certain issues that need to be looked at to improve the overall productivity of the business while operating budgets help in the day to day running of the hospital unit (Wilson, 2005).
In this case the nursing unit manager aims at reducing the staff turnover in the unit. During exit interviews the nursing manager has noted that most of the staffs are leaving due to low motivation and poor working environment (Duffield et.al, 2014). The capital budget therefore will invest in items that are meant to make it easier for the employees to work and motivate them. A good example of these items is a huge investment towards renovation of the staff lounge aimed at motivating the staff. For a capital budget to be effective it needs to ensure that the projects are fully implemented within the set time period without delay. This is achieved through making sure that the budget includes both the item cost and the installation cost. The capital budget needs to also specifically state the time period that the investment will be carried out.
For the capital budget to be conclusive the nursing manager needs to be aware of all the costs as per the market pricing at the moment. This ensures that the budgeted amount will be enough by the time the project is being implemented. The nursing manager should work hand in hand with various stakeholders especially suppliers and the finance department to ensure the pricing is on point. He will also have to make some assumptions on those matters that he has no much control or information on (Stoudt, 2013). The assumptions should be well informed to evade a crisis later on in the project implementation.
Capital budget example
|ITEM REQUESTED||PURPOSE / USE||ITEM COST||Installation COST||TOTAL COST|
|Floor Scrubber||Cleaning facilities||$ 3,000||$ –||$ 3,000|
|Tablet Counters (2)||For use in Prep room & radiology room||$ 1,500||–||1,500|
|Filing Cabinet||Document storage||$ 2,500||–||2,500|
|Scanner for Inventory||Inventory management||$ 18,000||$ 500||18,500|
|Intercom System||Replace outdated system||$ 15,000||15,000|
|Nurses lounge renovation||Quality improvement investment||$ 29,000||29,000|
|TOTALS||$ 69,000||$ 500||$ 69,500|
Capital budget involves a list of certain projects that the unit will undertake in the coming financial year (DeCampli, Kirby & Baldwin, 2010). The projects need to be clear and precise to evade any cases of duplication or lack of clarity. A capital budget should be directed towards a certain vision or goal that will be achieved. In our case the nursing manager want to reduce staff turnover by improving the work environment. This will be achieved through a certain number of projects with the main one being renovation of the nurse`s lounge.
Main Capital Project
The vision for the capital budget is to reduce staff turnover that has been caused by poor working environment of the hospital while at the same time improving the quality of services offered by the unit. Some of the working equipment have broken down which is leading to low staff morale (Tomey, 2009) and the staff lounge is in deplorable condition. The main project for this capital budget is the renovation of the nurse`s lounge. The budgeted amount for this project is $29,000. There is no installation cost since it’s a renovation task. The figure was gotten upon consultation with various suppliers. $29,000 is the budgeted amount since it was the least bid. This renovation goes into the core vision of this capital budget and therefore the need for it to be done precisely. The project will begin being worked on in the first quarter of the year and is expected to be completed in a month`s time. Having a renovated nurse’s lounge with good seats and a television system will go into improving the morale of the nurses which is the goal for the capital budget. Having motivated staffs is important in improving the quality standards of customer delivery while at the same time reducing staffs turnover which are the two visions for the capital budget.
Staffs resigning from the hospital raised working environment concerns during the exit interview. This has necessitated the need for the hospital to improve the staff lounge and purchase a floor scrubber machine to improve the cleanliness of the unit. This machine will help cleaners in their day to day work. The scrubbing of the floors will see an improvement in the general cleanliness of the facilities within the unit. Once the machine has been purchased there will be no installation. A clean working environment will improve the morale of the nurses.
The nursing managers has also planned to purchase 2 tablet counters to be used in the prep room and radiology room. These machines will make work easier for the nurses as they go about their duties. The tablets will be installed with latest software to enable them to carry-out their duties. The IT department will be required to service the same every 3 months.
In the spirit of improving working conditions, the nursing manager plans to also purchase a new filing cabinet and an inventory scanner. The filing cabinet will be used to store files that the nurses have used for their day to day services. Having a new cabinet will see reduction of paper materials in desks and other areas. It will also be easier to spot a file as opposed to the past. Inventory scanner will help the unit to stay afloat in terms of the available resources for the day to day use. The inventory scanner will be installed at a cost of $500. This cost involves purchase of the needed software. Having the needed items to carry out their duties will be helpful in improving the morale of the nurses. The inventory scanner will alert the nurses the moment a certain supply is about to run out therefore a purchase order will be placed.
Communication with other employees is important not only to improve the delivered services but also to resolve any disputes arising. Through having a working communication system nurses in the unit will be able to serve their clients promptly and in high standards. It is in line with this thinking that the nursing manager has budgeted for a new intercom system to replace the redundant one being used at the moment. The new system will be purchased at a cost of $15,000. It is conviction of the nursing manager that having these items purchased in the coming financial year will improve customer service delivery and reduce staff turnover led by having a renovated staff lounge.
To be able to have competitive advantage over other hospitals the nursing manager should be able to come up with a steady capital budget that will help the general performance of the hospital. It is on this thinking that we have looked at an example of a capital budget that aims at improving the working environment in a hospital thereby increasing the work morale of the employees. This was achieved through certain projects that will help achieve this. Once the work environment has been improved it is expected that customer service standards will improve. This will lead to an increase in revenue for the hospital in the near future. Reduction in staff turnover will also lead to reduced costs of recruitment and training which is essential for the income statement of the hospital.
DeCampli, P., Kirby, K. K., & Baldwin, C. (2010). Beyond the classroom to coaching: preparing new nurse managers. Critical Care Nursing Quarterly, 33(2), 132-137.
Duffield, C. M., Roche, M. A., Homer, C., Buchan, J., & Dimitrelis, S. (2014). A comparative review of nurse turnover rates and costs across countries. Journal of Advanced Nursing, 70(12), 2703-2712.
Stoudt, J. R. (2013). 12 strategies for managing capital projects. Healthcare financial management: journal of the Healthcare Financial Management Association, 67(5), 68-71.
Tomey, A. M. (2009). Nursing management and leadership. USA: Mosby Elsevier.
Wilson, A. A. (2005). Impact of management development on nurse retention. Nursing administration quarterly, 29(2), 137-145.