In the healthcare world, staff wages and benefits account for a large portion of the budget, and because of this, medical facilities need an effective tool to keep track of all of their labor expenses. By integrating budgeting software into the financial planning process, chief financial officers at healthcare organizations will have the data they need to create realistic financial forecasting models, which can lead to more informed staffing decisions.

“In the budgeting and forecasting process, what we’ve found is that it’s important for healthcare organizations to have a tool specifically focused on labor," Chris Fox, senior vice president of growth and innovation at labor management services company Avantas, told Healthcare Finance News.  

Labor costs make up majority of expenses

Chief financial officers have numerous tasks to address each day, week, month and quarter. Many may want to push budgeting down the pecking order because of the amount of time it can take to produce a thorough and detailed plan. However, effective and all-encompassing budgeting software may help streamline the process, making it easier for CFOs to quickly identify spending and revenue trends as well as inefficiencies in labor investments; this is essential, considering labor costs at medical facilities account for such a large percentage of the budget.

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[Labor costs are] 50 to 60 percent of their expense budgets, so they’re looking for a tool that both helps them set up an annual target around the general utilization of that large expense and a sophisticated tool that will help them transform the way they budget for labor, especially for clinical areas on what an annual budget is right down to a shift-by-shift plan,” Fox told the website.

Budgeting software helps hiring and staffing

Inefficiencies are a CFOs worst enemy, and something all leaders struggle with as they look for ways to streamline operations. One of the most common inefficiencies in the healthcare world is appropriately staffing work hours; understaffing can lead to a drop in quality care, while overstaffing may lead to higher, unnecessary costs.

By using budgeting software, managers will be able to know how much staff they actually need for certain times of the year based on predictive analytics. Having a better understanding for their workforce will allow managers to set appropriate schedules so they have the most effective number of employees on staff.

“Companies without some kind of budgeting software rely on monthly or yearly budgets, and are hiring and staffing through this budget level regardless of actual volumes so they overstaff for shifts and send staff members home, which causes staff dissatisfaction," Jackie Larson, vice president of client services for Avantas, told the website.

More patients may mean more labor costs

Healthcare organizations can also use budgeting software to create data visualizations such as charts and graphs to predict how many patients they will see in the upcoming months. The financial planning tool will allow them to make sure they have the funds to spend on staff so there aren't too many or too few employees at any given time.

Investing in a sound solution and dedicating a sufficient amount of time to craft a realistic budget may provide hospital leaders with more insight into their operations and potentially allow them to make changes that improve their overall bottom line.

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