Lecture 10: Fiscal Management Flashcards by Jessica Deak

In the “good ole days,” ____ ____ prepared budget anually.
Based budget on ____ ____ plus an ____ factor.
Monitored budget throughout the ______.

PT Manager
Previous year, inflationary
Year

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21st century fiscal management:
Budget _____
Budget _____
Meeting fiscal goals of ___ ___
Assuring ____ for services
Estimating ____ of levels of patient population being served
Appealing ____decisions to third party reimburses

Planning
Projection
Market management
Payment
Reimbursement
Reimbursement

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What is a fiscal year?

Time frame for when business year starts (Ex: July 1-June 30)

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The Budget:

Mechanism to assess the ____ and the ____ of the organization or department

Success, progress

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The Budget:
Budget projections are derived from-
Known facts from ____ ____.
Estimates are made about ____ costs and then ____.
Assumptions that the _____ makes about the year to come.

Previous year
labor, progress
Manager

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The Budget:
Budgets help the manager control the ______ of a ______.
Budgets express anticipated _____ and _____.

Implementation, program

Revenue, expenditures

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What does PPBS stand for?

Planning-Programming-Budgeting Systems

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Planning-Programming-Budgeting Systems (PPBS):
Plan for a new program is developed from the _____ and _____.
Budget builds upon the _____.
Looks at all of the programs in the organization to make sure there is no _____. Evaluate costs and revenues against _____.

Mission, objectives
Plan
Duplications
Projections

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What is Zero-Base Budgeting?

Takes a fresh look at each program at the beginning of the budget period. Cost of running the program is then computed for a zero are as if the program never existed.

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Is zero-base budgeting usually used in PT?

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What is the traditional type of PT budget?

Break-Even Budgeting

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Break-even budgeting:
______ budgeting.
Goal is to ____ ____ at the end of the year.
Based on certain ____ and ____ from previous year.

Incremental
Break even
Increases, decreases

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What type of budgeting relies on the manager’s decisions regarding staffing levels?

Productivity based budgeting

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Using Financial Information:

____ ____ determines the expense related to the production of a product or a service.

Cost analysis

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Using Financial Information:

Cost information is used to manage ____ and ___ ___.

Expenses

Set prices

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Look at the bottom line: If brackets or red, it’s ____ ____. If black or not bracketed, it’s ____.

Not good

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Use of the Organization’s Financial Information:
_____ agencies
Potential _____
Stockholders
______ analysts
______ (need to make sure you have a realistic plan)

Government
Investors
Industry
Creditors

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Financial Management:

Encompass more than just ______.

Accounting

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____ ____ is the “art of both obtaining the funds that the enterprise needs in the most economic manner and of making optimal use of those funds once obtained.”

Financial management

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The Financial Professional:
Study in \_\_\_\_ \_\_\_\_, \_\_\_\_ or \_\_\_\_.
Advanced certification \_\_\_\_\_.
Adhere to Guidelines established by the Accounting Principles Board and Financial Accounting Standards Board.
Hospitals: \_\_\_\_ \_\_\_\_ or \_\_\_\_\_.
Private Practice: \_\_\_\_ \_\_\_\_.

Business administration, accounting, economics
CPA
Private Accountant, CFO
Public accountant

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Finance Terminology:
Need to become familiar with terminology to protect the ___ generated by your practice or department by understanding where your department stands.

Income

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Financial Statements:
Reports that describe the ____ ____ and ____ ____ results of an organization.
Specified ___ ___.

Financial position, operating results

Time period

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Financial Statements:
Written reports ___ or ___.
Fiscal year (DOES/DOES NOT) have to follow calendar year.

Quarterly, annually

Does not

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Major Financial Statements:

What summarizes the financial position of an organization as of a particular date?

Balance sheet

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Major Financial Statements: | What demonstrates an organization’s profit or loss from operations for a specific time period?

Income statement

Is the income statement the same at all times of the year for PTs?

NO.

Major Financial Statements: What demonstrates what has happened to make available cash increase and decrease during a period of time?? If there is very little __ __ at a particular time of year, may not be able to manage staff/pay off bills.

Cash flow statement | Cash flow

The Balance Sheet: | __ __ of the organization’s ___ position as of a certain date.

Financial statement, financial

The Balance Sheet: | What is the assets equation?

Assets = liabilities + owner’s equity

Assets: ____ resources owned by an organization. Generally assets include: (6)

Economic 1. Cash 2. Investments 3. Buildings 4. Fixtures 5. Furniture 6. Equipment

What are liquid assets?

Assets that can be quickly converted to cash

What are fixed assets?

Those assets which cannot be quickly converted to cash

What is debt considered?

A liability

Liabilities: | That which is owed by the organization is ___ ___.

Accounts payable

Liabilities: | ___ ___: that which must be paid in the short term, usually within 1 year.

Current liabilities

Liabilities: | ? = that which is paid over the long term

Long term liabilities

Liabilities: | Electric, water bills are what type of liabilities?

Current liability

Liabilities: | Mortgage is this type of liability...

Long term liability

Owner’s Equity: Portion of the assets that is owned by the _____. Can increase through _____ of _____ by the owner. Earnings from ____ _____.

owners Investment, resources Profitable operations

Using the Balance Sheet: Valuable when used to do ___ ___. Common size statement- entries are in _____. Do ___ ___.

Comparative analysis | Percentages, vertical analysis

Using the Balance Sheet: | Comparative balance sheet- compare the organization’s ____ ____ at different points in time.

Financial position

The Income Statement: Evaluates the performance of the organization comparing money ___ (____) to money ___ (____) for a specified period of time. Demonstrates net ____or net ____ for the period.

Spent (expenses), earned (revenue) | Income, loss

The Income Statement: | Revenue + ______ = Net income (____)

Expenses, loss

Revenue: | _____ _____ for services sold during specific period of time.

Income received

Revenue: _____ revenue: revenue from sale of services _____ revenue: revenue from other services

Operating | Non-operating

Revenue: ____ ___ of Accounting (most common) Revenue is recorded from the period that the revenue is made.

Accrual Basis

Revenue: | __ __ of accounting: revenue should be recorded when money is received

Cash basis

Income from the Assumption of Risk: Relatively ____ source of income. Occurs in _____ payment agreement. Payment is _____, volume is ____.

New Capitated Guaranteed, not

Expenses: Money spent to produce the goods/services What is capital intensive?

Money spent on equipment

Expenses: | What is labor intensive expenses?

Money spent on salary and benefits

Using the Financial Statement: | Income Statements can be set up for the ___, the ___, and the ___.

Past, present, future

Financial Statement for the past: | Examine past history what was ___ and what ___.

projected, occurred

Financial statement for the present: | Look at ___ ___ areas

Under performing

Financial statement for the future: | ___ ___ statement: very helpful as part of business plan

Pro for a

Statement of Operation: A ______ income statement. Compares the _____ income statement with the _____ income statement for a period of operation.

Comparative | Projected, actual

Statement of Operation: Look at ___ and ___ variance. What does it cost to produce a ____?

Positive, negative | Service

___ analysis: | Financial statements that allow you to make comparisons between one piece of financial information and another

Ratio

``` Ratio Analysis: ___ ratio ___ ratio ___ ratio ___ turnover ratio ___ productivity ratio ___ on Assets ```

``` Current Quick Debt Receivable Revenue Return ```

_____ ratio compares current assets with current liabilities.

Current

Current Ratio: The ___ the ratio, the better the organization’s ability to pay its current bills Important to creditors and ____.

Higher | Investors

____ ratio compares liquid assets with current liabilities. | Similar to current ratio, except it only includes that which can be ___ converted to ___.

Quick | Quickly, cash

____ ratio: Compares total liabilities to total assets

Debt

Debt Ratio: gives percentage of assess that are financed by _____. Determines if the organization is a good ____ ____. The ___ the percentage, the less money borrowed by creditors to purchase ____.

Borrowing Credit risk Lower, assets

____ ____ ratio: average number of days it takes to convert accounts receivable to cash.

Receivable turnover

Receivable Turnover Ratio: | The older the debt is, the ____ likely it is to be collected.

Less

_____ _____ Ratio: Amount of revenue generated for each dollar of salary expense

Revenue Productivity

Revenue Productivity Ratio: | Calculated by dividing the total ____ from services by ___ ___ ___

Revenue, related salary expenses

Revenue Productivity Ratio: | In a labor intensive industry such as PT, this can be an indicator of ___ ___

Salary expense

___ ___ ___: used to evaluate an organization’s ability to earn a return on funds supplied from all sources.

Return on assets

Return on assets: | Divide __ __ + interest expenses / total _____

Net income | Assets

Return on Assets: Higher the return, the ___ ___ ___ Will justify purchase of _____

Better the performance | Equipment

_____ _____ _____: demonstrates how an organization’s cash balances change over a specific period of time

Cash flow statement

Cash flow statement: Identifies both the ___ and ___ of cash. Important impacts on ability to ___ ___ and buy new ____. Impacts the ability to ____. Cash flow projections allow management to delay planned _____ or arrange for ____ if needed.

Sources, uses Pay bills, equipment Grow Expenditures, credit

_____ _____ is the most important use of financial information for an organization

Financial planning

The Operating Budget: Guides the operation by outlining types and levels of ______. Generally covers a _____ period. Subdivided into ____ and ____ increments.

Expenditures 1 year Monthly, quarterly

Chart of accounts: Collect information about how money is ____ and ____. Keep track of value of _____, ____, and owner’s _____. Need to establish categories of ____, ____, ____, and ____ are called accounts. Each line has an ______ _____.

Spent, earned Assets, liabilities, equity Expense, revenue, assets, liabilities Identifying number

_____ _____: good revenue management maximizes the income from operations Measuring services and products for sale, setting prices, setting billing, credit, collection policies, billing the customer, managing receipt of payment, cash management, calculation of deductions and allowances, payment posting, account reconciliation, financial reporting

Accounts Receivable

____ ____: listing of services and products provided by the practice

Fee schedule

____ ____: gross revenue from operations is equal to the ____ x price of what is sold

Operating revenue | Sales

Operating revenue: net revenue is a function of ____, sales ____, payer mix and ___ mix

Price, volume, case

Operating revenue: price charged is ____ the price paid in health care

Rarely

``` Revenue is based on the following reimbursement types: _____ based Fee for _____ Case ____ Per ____ rate ____ payment ```

``` Cost Service Rate Dime Capitated ```

_______ revenue: incoming revenue that refers to the incoming money that adds value to the business but does not result directly from the sale of a product or service ____ income philanthropic gifts

Non-operating | Investment

____ ____: recording and payment of money owed by the business to its creditors

Accounts payable

``` Accounts payable: _____ management policies and procedures _____ policies and procedures Policies on _____ authorization _____ audit ```

Inventory Purchasing Expense Internal

Expense management: types of expenses _____: cost of resources needed to produce the product or service _____: purchase of equipment and facilities that will contribute to the production of goods and services.

Operating | Capital

Types of expenses: LABOR: Salary per _____ _____: office, medical, minor equipment Purchased and professional services: clinical, accounting, legal _____ expenses: incurred but not paid (sick time, vacation time) _____ expenses*: have an extended useful life

FTE Supplies Accrued Capital

____ expenses: includes all costs related to employment | Includes advertising and ____ fees

Labor | Relocation

Labor expenses: | _____ expense = labor hours paid x rate of pay

Salary

Labor expenses: | _____ _____ ____ = FTE = 40hrs per week x 52 weeks = 2080 per year

Full time equivalents

Capital expenses: each business sets a minimum for capital expense = $____

500

Capital expenses reflect the _____ costs | Equipment, land and buildings

Associated

Capital expenses: depreciation of _____ _____ | Annual depreciation = capital expense/_____ ____

Capital assets | Useful life

Expense Control: ___ and ___ expenses

Direct, indirect

Expense control: Institutions have direct and indirect costs, but private practices only have _____ costs

DIRECT

Direct costs are directly associated with _____

Production

Salary, benefits, supplies, depreciation of equipment | Are these direct or indirect costs?

Direct

Indirect costs are incurred but to directly related to ___ ___

Service delivery

Administrative salaries, financial services, grounds and buildings, cafeteria Are these direct or indirect costs?

Indirect

Expense Classification: ____ ____ is unchanged regardless of volume. Insurance payment ____ ____ ____

Fixed costs | For the year

Expense Classification: _____ _____: increase and decrease relative to volume Salaries, linen, medical supplies

Variable costs

Expense Classification: _______ cost: fixed and variable elements Phone service: basic cost fixed, per use is variable

Expense Classification: | _____ cost: sum of fixed, variable, and semi-variable costs

Expense Classification: What are the 4 classifications?

Fixed Variable Semi-variable Total

``` Managing Financial Performance: Working knowledge of the mathematical relationship between- Fixed, variable, and semi-variable costs Cost per ___ ___ ___ Sales ____ Profit (____) ```

Unit of service Volume Loss

Know your ____ ____ point

Break even

Lecture 10: Fiscal Management Flashcards

(105 cards)