Introduction to Finance

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1 Introduction to Finance Sarfraz Masih RN, DDC, Post RN BScN, MScN Principal Karachi Kings College of Nursing, Karachi

2 Agenda of Talk Definition of finance and financial management Staffing budget preparation Drug budget preparation Service budget preparation Nursing division budget Division income expenses Relating the nursing and institutional budget Financial control

3 Finance Finance is the science of funds management. The general areas of finance are business finance personal finance public finance The field of finance deals with the concepts of time, money and risk and how they are interrelated....

4 Finance A discipline concerned with determining value and making decisions. The finance function allocates resources, including the acquiring, investing, and managing of resources. (Campbell R. Harvey, 2004)

5 Finance Management A series of activities designed to allocate resources and plan for the efficient operation of an organization. Financial management is targeted at the allocation of scarce resources. (Huber, 2006)

6 Goal of Financial Management Overall goal of financial management is to meet the total financial needs of an organization.

7 Phases of Financial Management Budgeting Recording Reporting Evaluating

8 Staffing Budget Preparation Salary and Wages For each person listed on the budget, the detail should include: Name and position title Percentage of time/number of months Summer or academic time designation Annual escalation is added to all salaries each year Students are not allowed to work more than 50% during the academic year Fringe Benefits calculated according to the Rate Agreement negotiated with a cognizant government agency

9 Staffing Budget Preparation Determining FTEs Determining Shift differentials Determining Overtime On- call hours Bonuses and premiums Salary increase Final considerations

10 FTEs Full time equivalent (FTE) is number of budgeted employees in an unit / organization.

11 Determining FTEs Determine hours of replacement time per individual Determine FTE requirement

12 Determining FTEs Determine hours of replacement time per individual Benefit time (Paid time) Vacations Holidays Personal days Sick days

13 Determining FTEs Benefit time Hours / Shift Replacements Hours 15 Vacations Holidays Personal days Sick days 8 40 Total 256

14 Determining FTEs Determine FTE requirement Divide replacements time by annual FTE base FTE = 256 / 2304 = 0.11

15 Determining Shift Differentials A fixed premium (Dollar / Rupee) amount may be set for all personnel working the evening or night shifts. Shift Differentials Calculation Multiplying the projected total number of hours that employees will work those shifts during the year.

16 Determining Shift Differentials Shift Differentials Calculation 1. Multiplying the shift differential per hour by hours / shift 2. Multiply differential / by days / year

17 Determining Shift Differentials E.g. RN receive 1.75 $ / hour Multiplying the shift differential per hour by hours / shift $ 1.75 * 8 = $ Multiply differential / by days / year $ * 356 Total $ 5,096.00

18 Overtime Factors related to overtime Fluctuations in workload Patient volume Variability in admission pattern Temporary replacement of staff due to illness / time off

19 Determining Overtime Cost Projection of overtime for next year can be calculated by Determining staff classification (RN, RM, BScN) Historical or typical number of hours of overtime worked and multiplying that number by 1.5 times the hourly rate E.g. average number of overtime hours for RN is 35 / 2 week & average hourly rate is $ Projected overtime cost for year would be $ 22,864 for RN Category

20 Determining Overtime Cost Multiply average salary for classification by factor to obtain overtime rate Multiply average overtime hours by overtime rate to obtain expenditure per pay period Multiply number of pay periods by overtime expenditure to obtain annual overtime costs $ * 1.50 = $ * $ = $ * $ = $ 22,863.75

21 On- call Hours If nursing unit uses a paid on call system, the approximate number of hours that employees are put on call for year should be estimated and that cost added to the budget. Typically under the on call system, staff are requested to be available to be called back to work if patient need arises. Number of hours on call are paid at a flat rate per hour.

22 Bonuses & Premiums Approximate number of lump sum bonuses should be added to the budget request night bonuses ICU / ER allowance Some organizations offer premiums for certifications or clinical ladder steps In this situation; a fixed dollar amount / Rupee may be added to the base hourly rate of eligible personnel E.g. $ 0.50 per hour paid for professional certifications This would result in the hourly rate of the employee being adjusted from a base of $

23 Salary Increase Merit increases or cost of living raises need to be factored into budget projections. Increases are usually on base pay. E.g. if a 3% cost of living raise is projected and the base salary for an RN is Rs. 10,000, then the new base becomes Rs. 10,300.

24 Final Considerations Other important factors to consider when developing the salary budget are: Changes in technology Clinical supports Delivery systems Clinical programs or procedures Regulatory requirements

25 Drug Budget Preparation

26 Service Budget Preparation

27 Nursing Division Budget

28 Division Income Expenses

29 Relating Nursing & Institutional Budget

30 Financial Control

LEGACY HEALTH. Regular employee A regular employee is any non-temporary employee whose employment is expected to last six months or longer.

LEGACY HEALTH. Regular employee A regular employee is any non-temporary employee whose employment is expected to last six months or longer. LEGACY HEALTH HUMAN RESOURCES Policy #: LHS.500.819 Origination Date: 7/08 Last Revision Date: 1-12 Next Review Date: 7/15 Page 1 of 5 SECTION: HUMAN RESOURCES SUBJECT: EMPLOYEE TRANSITION PURPOSE: When