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BUDGET PREPARATION, AND, IMPLEMENTATION, LEARNING OBJECTIVES, After completing this chapter, reader should be able to, understand, Budge and its imporfance in drug store manogement., of budget., Advantoges/, Benefits, Understand the various types/methods of budget., Budgeting control., Expenditure of budget and Implementation of budget., , 16.1 INTRODUCTION, Budget is a plan of activities to be carried out in future for specific period in financial, , term. Budget is used to project future income and expenses. Budgets are a multi-purpose, , management tool supporting planning, control, co-ordination, communication, performance, evaluation and motivation. Budgets are an important mechanism in the allocation of decision, rights. Budgets are often used to measure performance. Budgets are also used as a, , mechanism for control., Objectives of Budget:, It helps to set benchmark for controlling ongoing operations. Budget brings about, efficiency and improvement in the working of the organization. It helps in reducing wastage, and losses by revealing them in time for future corrective actions. t is prepared and, , approved fora definite fixed period of time., , Advantages of Planning a Budget/Benefits of Budget:, All, , levels of management plan ahead., , Definite, objectives for evaluating performance., Early warning system for potential problems., Coordination of activities within the business., Management awareness of the entity's overall operations., Motivates personnel throughout organization to meet planned objectives., , (16.1)
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Pharmacy Practice, , Budget Preparation and Implementation, , 6.2, , 16.2 CLAsSIFICATION/TYPES OF BUDOET, There are different types of budgets and these are classified as per the activities of, organization. Classification of differenttypes of budget is shown in below figure., Types of budgets, , Sales budget:, , actii, level, e v e of, or aCtVIy, , Orecast tor specific period, , cve of, , Administrative budget:, , Flexible budget:, Calculate depending9, , Production budget:, , ESmaton or cost tor, , Salaries of managerial, , personnel, , upon changes in amount, of actual revenue, , nng, a proouct, , Selling and distribution, , Dxpensesbudget:, Expenses for promotion, and distribution of, , Master budget: Oveall, , picture of proposed, activities, Cash budget:, , Labour budgot:, of, , Personnel, budget:, Manpower requirement, , Fixedbudget:Remains, , ncentalves, , of work force, , products, , Cash plan for specific, period of time, , Fig.16.1: Classification/Types of Budget, , 16.3 BUDOETPREPARATION, , Budgets are prepared as per the, requirement or types of organization. Based, on the requirement, the budget may be, , prepared considering, , the, , Length of the Budget Period:, Long-term budget, , length of period of, , its implementation., , Long-term Budget These budgets, , Short-term budget, , are prepared for long term. They are, prepared for the period of 5 to 10, , years. This type of budget is, prepared depending upon of the, size of organization., , Curent budget, Fig. 16.2: Length of the Budget Period, , Short-term Budget: This type of budget is prepared for duration of 2 to 5 years., These budgets are prepared under control conditions., Current Budget: This type of, , budget is prepared for shorter, , duration. The duration is usually 1, to 3 months., , Development of Budget:, , In the preparation/development _of, , budget there are different section. The, of, details, each section, are discussed below:, , and its, , significance, , Revenue accounts, , Expense accounts, Capital equipment requests, , Fig. 16.3: Sectiol29 ke162.t
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Pharmacy Practlce, , 16.3-, , Budget Preparationand Implementation, , Revenue Accounts:, Total income must, , calculated, the, be, for, theimplementation, of, budget. Pharmacy, department or accounts department maintains daily, weekly, monthly and annual cost of the, pharmaceuticals issued to the patient services. The other statistics includes, number of, prescriptions, number of prescriptions dispensed by each pharmacist, hours of work put in, , per hour of service, medication cOst per patient day, average drug cost, prescnption, volume, per clinic visit, average salary cost per prescription and average supply cost per requisition., Expense/Expenditure Accounts, , Expenditure accounts include administrative and general expenses. Professional care of, the, emergency expenses, expenses., expenditure accounts also include the following categories of expenses like salaries and, , patients, out-patients and, , and miscellaneous, , The, , wages, in this expenditure salaries and wages of all employees need to be taken into, consideration. In expenses of supplies and materials, Chief pharmacist or the responsible, person should prepare the financial statement regarding the requirement of amount in, , rupees for supplies and materials with the help of the latest financial budget. It is necessary, to show the actual cost of the materials. If the budgeted figure and the previous figure was, , the same then the previously prepared budget was well prepared. Purchase expense includes, the cost of prescriptions purchased from an outside pharmacy. Drugs and pharmaceuticals:, Those dispensed by prescriptions. Those used in the outpatients and emergency, , departments., , Capital Equipment Requests:, and, for immediate arrangements of a, Equipment, construction, budget, include, budget, new model equipment Budget is also made for remodeling and replacement of equipment., , Italso includes constructionof building/infrastructure for future expansion., 164 ORGANIZATION FOR BUDGETARY CONTROL, Organizing and administering a budget system is a very crucial function and requires an, , effective planning. Organization may have several o, , nts for effective functioning of, , system. The budgetary control flow is through defined channels. There are departments, heads like, sales manager, production manager, finance manager and personal manager, , They report to vice president of respective departments followed by president. Organizations, have budget centers, budget committee, budget officer and chief executive officer., , President, Vice president, production, , Manager, A, , Department, , manager, , Department, , manager, , Manager, , plantA, Department, , ager, , Department, , manager, , Fig. 16.4: Organization for Budgetary Control
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Pharmacy Practice, , 16.4, , Budget Preparation and Inmplementation, , Budgeting, Control:, Effective control on system or any plan is very important aspect in business. To, , bring, efficiency in working of any business budgetany control is useful method. Budgeting is closely, connected with control. The process of control in the organization with the help of budgets is, , known as budgetary control. Budgetary control involves three steps:, Preparation of budgets., , Comparisonsof actual results with planned one, Revision of plan or budgets in the light of changed circumstances., Essentials of Effective Budgeting:, Sound Organizational Structure: Authority and responsibility for all phases of, operations are clearly defined., Based on Research and Analysis: Realistic goas that will contribute to the growth, and profitability of the company., , Top, , Management:Directlyrelated acceptanceby al levels of management., , 16.5 IMPLEMENTATIONOF ABUDOET, , For Implementation of a budget there are requirement of different parameters:, , Actual Fund Position: Successful implementation of budget will depend on financial, position of a fim. Master budget will give insight about the future plan. Cash budget, , will help to know the cash plan for specific period. Overall, all types of budget are, , studied at micro level to implement the planned budget., Utility of Particular Item: This depends upon materials used and expressed in, quantities whereas the materials purchases budget is expressed in both ways that is, , quantitative and financial. This helps in scheduling the purchase of materials to, produce a given volume of output during particular period., Cost of Products: Study of cost required to manufacture/purchase a particular, , product is very important of budget planning. Cost includes direct costs and indirect, costs. Basically, it is production and non-production costs required to manutacture a, , particular product., Quantity of products: Effective inventory management is needed for successful, implementation of budget plan. To avoid stock out and over stock, effective, inventory control is needed, as huge amount of capital is invested in inventory.
