Working with Flexible Budgeting

The Flexible Budgeting utility analyzes the impact of volume changes on the budgets for accounts that normally flex or change in proportion to volume changes.

Often, it does not make sense to hold managers accountable for meeting fixed, overall budget targets when their department can be severely impacted by volume, a variable out of their control. Hence, Flexible Budgeting seeks to correct departmental targets for volume variances, allowing managers to focus on rate and efficiency variances ("How much does it cost to provide services on a per-unit basis?").

Defining volume statistics

Before we can correct for volume, we must first define how volume is to be measured. Different organizations and departments measure volume differently, so as part of the Flex Budgeting setup process, you need to specify which statistics in the Axiom Budgeting and Performance Reporting database you will use to measure volume for each department and account.

Commonly used statistics include patient days, revenue, square footage, visits, encounters, and so on.

Target setting for flexible budgets

The Flex Budget for a department/account equals the Budget Amount (how much the department is expected to spend) divided by the key volume statistic (how much volume the department expects to handle), multiplied by actual volume for the period.

Refer to individual report instructions to see whether and how flexible budget data can be used.