Tips on Preparing a Final LTPAC Annual Expense Budget

For long-term post-acute care (LTPAC) providers, budget season is here! In fact, most organizations are already in the midst of finalizing their numbers for approval in the upcoming year.

Every industry approaches budgeting differently, but when it comes to long-term care, there are certain areas that require special attention. The most frequent budget-related questions I receive from clients have to do with comparisons between actual expenses and what was originally projected. There are certain areas that seem simple, but if they are missed can cause frustrations and large variances when the time period comes.

Key Expense Items to Double Check:

• Wage accounts: Wage accounts are the most tedious components of an expense budget. This is also the area I receive the most questions about. Not properly budgeting this can cause large variances in your monthly numbers. Verify that full-time employees are projected correctly. Did you account for any new positions? Raises? Overtime pay? Check that months with holidays are properly accounted for. Are there certain times during the year where people will be working longer hours? All of these things need to be considered when planning out the wage expense for the year.
• New contracts: If you have signed any new contracts for items like utilities or insurance, make sure any increases or decreases have been broken out properly in the correct months of service.
• Depreciation: Review your depreciation to make sure any planned capital expenditures are being accounted for in the expense totals.
• Formulas: Review all amounts that are formula driven to make sure they are pulling correctly. Amounts that correspond with revenue numbers should be reviewed to make sure the linking is accurate.
• Verification: Verify all the account numbers are correct and amounts are under the correct departments. It is important for department heads to make purchasing and management decisions based on valid numbers.

The most important rule when finalizing a budget is to be realistic. Compare your yearly budget total to what happened during the year. If there are sizeable differences, check the reason or reasons behind them. Run the totals by the individuals who are in charge of the department to get their opinion. They are usually the ones making departmental decisions, so they have a good idea of what they are spending each month. Ideally, everyone wants to have high revenue and low expenses, but budgeting on the low end could lead to disappointment when the actual numbers come in.

Good luck!