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Driver bill format for Financial Services

okay good afternoon everyone and welcome to our webinar first in our series of three detailed webinars on mc-squared managed-care manage cost last year you may recall that we had a series of four webinars on what is MC squared and the result of that was a request for some more in-depth explanation of what some of this stuff is and how I would use it so a year later we've got three topics the first is today's driver based budgeting two or three weeks I'm not sure the date is how to direct charge salaries of the payroll and if you can't how do I do activity-based costing and the third is how would I use contract management or job costing to get more detailed information on individuals that we serve or programs that were running so let's jump right into driver based budgeting why budget at all I think this is the answer so we can worry before we spend money as well as afterwards hopefully if we worry before we spend it we may not spend it and we won't have to worry about it so where does budgeting fall in our MC squared set of boxes those four colored boxes at the bottom represent the four phases in our estimation of what you need to do to manage care and manage costs the first whoops wrong button the first being to identify and control your costs budgeting has got a big part of that what are the costs I'm trying to identify and manage and at the very end of the process monitoring and following up that I actually managing those costs and in the middle the two in the middle are two what are the two in the middle the two in the middle are to optimize performance that's the second one and the third one is organizational change how do I physically make changes in my organization and outside my organization to accomplish this okay by the way we will at the end of the session ii will send you the slides we have your email address because you're registered for the webinar so we'll email the slide deck out this afternoon in PDF format if you want copies of that so what do I want to accomplish in the next 55 minutes two basic things one is I want to convince you that there's the value to having a driver based budget on operational budget we'll talk about what that means in a minute and then I want to show you actually how to do it what things what steps you'll need to go through to accomplish it show you some examples allow you to ask questions it's about all we can do after that you've got to do it yourself if you have questions that you want to ask on your screen on the right hand side in GoToWebinar there's a panel and if the panel is not visible there's a little tiny panel with a red arrow at the top you can click that red arrow that will expand the panel and you'll see a place where it says questions and you just type your question in I'll see it on my studio monitor and I can read the question and answer your hopefully provide you an answer to what that is so I will use interchangeably the words budgeting and planning we wanna the point I want to make is that budgeting is not simply a compliance requirement that accountants demand to see because the Countians have nothing to do the point of budgeting is to plan something and execute that plan effectively and know that you have succeeded or failed at the end so that you've got to put some thought and some effort into a meaningful budget it doesn't mean it has to be terribly complicated it doesn't mean it's got to be really hard to do doesn't mean you have to spend days and days and days and days and days doing it it means you have to think about what do I want to accomplish and how will I get there if you don't know where you're going any road will certainly get you there there's an example of maps some of you if you're old enough over a number of maps used to get him at the Texaco station they were free and you could unfold the map and see where you were going and if you want to go to Arizona to visit your aunt because it's her 90th birthday you got yourself a US map this one shows the interstate highways clearly labeled and away you go this in my opinion is very similar to how many agencies do budgeting today has I got a generic plan I'm going somewhere west and I might go through Chicago and might go through Kansas City I might go through New Orleans they might stop and Memphis on the way but I'm going that way the problem if you're old enough like I am to remember it in fourth grade they taught you how to read a map what interstate signs look like what which ones were double roads double carriageways etc so the problem with math is you have to know how to read it number one same with budgeting if you're not a trained accountant you may not understand how a budget is being presented so if you don't understand how a budget is being presented how is it going to get you where you want to go I distinctly remember riding in the backseat of the car and my father telling my mother you need to turn the map upside down so you can tell which way you're going my mothers are that's ridiculous so if you don't know how to read the thing you're not gonna get anywhere with it secondly as you can see from this map it's very very very high level it's hard to tell what's happening roundabouts st. Louis by looking at this map I'm not even sure st. Louis is on this map it only has capitals of the states so limited information but nonetheless a map that will get you there our next-door neighbors here in Williamsville the triple-a invented this great thing called the triptych again if you're old enough you'll remember this and what it was is literally the map cut up in strips and you only saw the strips that were relevant to your trip and they took a blue marker as in this example and highlighted follow this particular road and it will get you where you want to go I think for an extra 10 bucks they would actually circle where the construction was so that's a better answer to a road trip plan it's specific it's readable you don't even have to understand you just got to follow the line and it kind of generally tells you where to look out and where to be concerned in your trip today of course in the 21st century we all have time tops or Magellan's or whatever which tells you in 20 feet turn right you will be at the restaurant in two hours and three minutes very specific very directional immediate feedback as to what you should be doing now what you will be doing tomorrow etc this is where you want to be with your budgeting you want it to guide you through the pitfalls the roads travels that your organization is going through wherever possible so a triptych is better than a map and a TomTom is better sorry triple a than a triptych and that's what we want to do is move you as an organization from the map kind of generic high-level hard to read hard to understand budget - what do I do today so if you think about your budgeting currently in your organization if you're doing this you may be doing budgeting at the agency level you may well have budgets and budget reports down to the department the division the program level there may be a residential budget there may be a clinical budget there may actually be a budget for an ID for each individual IRA it's up to you I'm not we're not I'm not concerned about how far down you go but the concept is you'll see a budget that probably has conceptually this in it a bunch of stuff in red on this pie chart that you can't control and a relatively small piece that you can and that includes things like allocations and fringe benefits and all sorts of things that get added into the bottom line for which you're going to be asked explain this often that's as far as the budget goes is I don't understand what you're asking me you're asking me things that I don't have control over I can't explain it I will explain it but it's a meaningless explanation and budgeting is now finished because nobody believes it nobody trusts it there's no reason to put any effort into it I would argue that your budget should be something different we want a difference between accounting which we're describing I'm sitting standing here looking at a room full of accountants so if you start to see things flying into the camera at me it's because we don't necessarily want to do what the accountants want that's accounting that's a required statutory thing what we're looking for in MC squared is accountability how can i account how can I trust you as a program director as a manager as a fiscal manager to say I will take personal responsibility for lowering this cost or managing this thing and it's my plan so we want personal accountability as part of the planning process as part of the budgeting process not just accounting so what we'd like to see is a world that looks closer to this pie chart and that is a fairly big chunk although not 50% even or maybe more than 50% whatever a big chunk that says these are the things that you can control and you understand and you can explain that's a stuff in blue then there's a bunch of stuff in this particular chart in red hopefully a very little piece that you can't control maybe nobody can control an example of that is we're not-for-profit so we don't have this issue but in the real world of for profit there's taxation so I can't control taxes so you can plan for them by saying I'm gonna write down what I think they're gonna be but if they change they change and there's nothing you can do about it so we want to ideally minimize the amount that's not controllable but certainly if it's not controllable we don't want to waste a lot of time trying to explain why I can't control it just accept it and move on the green in this case is stuff that can be controlled but not by you and so the point here is if that's on your budget and you're being asked to explain it it probably means it's on the budget of the person who does have to explain it and therefore we're not getting a meaningful explanation people who can justify it don't see it the people who do see it can't explain it and it becomes an unexplainable or uncontrollable cost and that's that's going to lead to waste that's gonna lead to all sorts of problems so what we want to do is is get through this process where we're increasing what we can control identifying who can control at getting them to control it and minimizing what we think is out of our scope here's a really big long long Texas slide which I don't think I'll read all the way through but this came from somewhere it may well have come from Wikipedia as an explanation of what is budgeting the things I've highlighted in red is what I would like to highlight today consider how conditions might change so making a budget that says well this year I spent a hundred thousand on salary so I think next year I'll spend 101 doesn't do it I need to say I think minimum wage is going to go up in New York State that's gonna drive our salary questions we may need to raise our salaries significantly we may not we may have people leaving which may force overtime there's all sorts of things that you want to consider what might change it doesn't mean you have to have a crystal ball and you have to punt if you have to know what's happening it means you should think about what's reasonable you want to be considering problems before they arise we don't want any shocked and stunned if the legislature passes into law a $15 minimum wage we don't we don't want to be surprised by that we may be unhappy with it we may be whatever but we shouldn't certainly be surprised by it and third we want to identify which relationships exist between my department and other departments that affect me so for example I T if the IT department can't hire qualified trained people to be the helpdesk and I'm the one that uses the help desk and I call the help desk and I get a wrong answer and that results in my having to do the work again that's the thing that's gonna affect it so that doesn't mean I can dictate who a IT hires but I want to be aware of their issues if those issues affect me so so I can plan for alternative ways of doing it whatever it happens to be okay so when you get these the slides emailed you you'll be able to read this in detail and study it and highlight it and underline it and all the sorts of things you might want to do with this slide I would dare say this is probably something like what you would see in a budget if you got a budget report this is not even a not-for-profit agency I think this is a law firm but it doesn't really matter you can see there's a whole long list of expenses in the first column there's an actual year-to-date column that's the first column of numbers is how much have I actually spent so far in April the third column is how much have I budgeted for the entire year and the fourth column is what do I got left to spend so it's like unreal a fortune when you buy all the stuff and you take what's left that I gift certificate right so you've spent what you're gonna spend and then at the end I can afford to spend another $40,000 in occupancy so let's move into a mansion I got a lot of extra money well that you're not focusing on the fact that I still got six ten eight months do the math here eight months left in the year that needs to come out of that forty thousand dollars so if it costs me eleven thousand for January February March and April for occupancy then I'm using occupancy at the rate of about twenty six hundred dollars a month and I got eight more months to go it looks like I might be pretty good but you can see that if you don't if you don't know what you're looking at and you don't do this calculation you can't really tell am I good or am I not good okay another one you might see this is the kinda thing that makes accountants drool it's just numbers from side to side on the paper what do I do now so this is the same business same expense lines but now I'm saying what did you do for the particular month of October versus what you thought you'd do in October and am i overspent or under spent and is that if I am overspent it's in red and the next three columns are year-to-date so it's the whole year and just at a glance you can see there's a lot of red on this page so this is kind of like a triptych it's getting closer to I can see because of the blue line drawn in there I need to start worrying because there's a lot of red but it's still pretty complicated to read and understand what you're talking about so let's go back and take the first one and use this idea of what can I control what can I control and what do I do about it so if this was your divisional budget or your program budget you might might see by looking at it that I have a line for depreciation / amortization so there's actually a difference between depreciation and amortization and you have to go to school for five years now to find out what it is but trust me it's accountants concerned with it not you secondly you got information systems IT so what is that is that software that you bought is that computers that you use is that your internet connection is that the cost that you're being charged by the IT department for helpdesk I don't know what that is fringe benefits presumably fringe benefits are determined by the HR department and in human resource policies so you're gonna hire people you're going to determine your needs and the skill sets of employees that you're looking for but the fringe benefits are something that's going to be decided by somebody else so you don't really have control I would like to hire four more people but I would not like to pay fringe benefits please not likely to happen so why wouldn't the accounting department explain away the depreciation because it couldn't be good and it could be bad there is a variance there I just don't know what it is likewise an IT likewise an HR why wouldn't I literally take those lines off of the budget put them on those other departmental budgets so if you have budgets that look like the blue boxes today the IT department has a budget your department has a budget the HR department has a budget why not so everything that's currently on the H of the IT departments budget on the Left would now directly below it appear on the I t's accountability plan so this is the things that they are responsible for but they're also responsible for some things that are in your budget namely that line called information services so let's take it off your blue budget and put it on their green budget some of the things are gonna stay on your budget and some of the things are going to come off your blue budget and go on to the HR departments green budget and what's what we're going to end up with is what's on your green budget is what you need to explain those are the things that we've identified that you're responsible for and the stuff that's on your blue budget may well still exist because the accountants need to have that and certain rules apply that say I want to see a budget in a certain standard format I'm not saying take the blue ones away why not make another set of budgets that are green ones that have those accountable things so what's control and then there'll be things that appear on a blue budget and I aren't on anybody's green budget because they're not controllable it doesn't mean they definitely were ignoring them they appear on the blue budget they appear in our reports but there's no reason to beat anybody up over them and so the green budgets are going to be shorter they can be simpler and you need to explain them that's the concept of accountability versus accounting the blue budgets are counting the green ones are accountability so I want to be real clear about what I'm proposing because you're gonna sitting in your office they're chopping on your sandwich listening because your gives it did he just say we should have two budgets yes that's what I just said you should have two budgets your organization may have two three four five different budgets now I'm not suggesting that you go through the budget process in October five different times I'm saying you go through the budget process and you produce five different very different looking reports depending on who gets that report and what I expect them to do with it so you may have multiple budget reports the same dollar amounts appear but they're grouped differently so I see on my budget the things I'm responsible for you see on your budget the thing you're responsible for and both of those things appear on the master budget somewhere but the point is we want to make we're trying to go from a generic high level hard to read document like a US map down to at least a triptych if not a TomTom that says this is what you need to do this week okay operational budgets and our plans are going to drive your decisions and actions and compliance budgets are things that you have to have because God invented accounting and says you have to have this so what we want to do is understand what it's going to cost so budgeting tells us that we want to know why it's gonna cost that and we want to know why when that doesn't happen that's also important so we need to get you as a direct frontline manager you got to understand what it what it means to get there and you've got to have some buy-in that this is going to work so you all probably know the best way to eat an elephant is one bite at a time so we're gonna go through how am I gonna do this step by step into this process so for each specific cost so what I'm assuming now is you've a race you've crossed off on your budget all the things that you're not responsible for okay we're talking just about your controllable costs how will you budget them now take each line first line identify what are the drivers that make this line work and I'll explain that in a minute what time period in my budget typically we're talking about a year broken up into twelve months I don't know how many agencies are actually budgeting for a week or a day or anything like that but assuming it's going to be a month you might have a one that runs a calendar year runs one the school year but you gotta you gotta figure that part into your plan then you're gonna estimate how many of these things I'm gonna have again I'll explain that in a minute how much do I think it's gonna cost for each one I'm gonna write this down this is my budget I think I'm gonna have 20 of these and each one's $5 my budgets a hundred thousand with my budget what I actually expect and I actually use twelve and they cost me sixteen dollars a piece and I don't know how to do that math but it's gonna be a lot more than the 20 that I planned you need to explain two things why did you use twelve and not ten and why did they cost sixteen and not five but presumably you can answer both of those questions because you know that those things Drive the budget okay so you can explain it in your report and you can justify it it's either sorry that's what happened and I'll do better next time or I think we need to change something to fix the problem so but at the very least what we're going to get is an understanding of how I got there why I spent it and hopefully a plan to cry so that on a TomTom it's gonna tell you turn left turn left then you turn right and then it's gonna say recalculating recalculating turn right at next possible right so it's going to try and put you back on track so that's what we're talking about here is hopefully it's going to help keep you on track but if you go off you're gonna understand why and be able to recreate the plan okay so what are drivers drivers are facts statistics events that show how much will be spent they should be expressed as a number they'll be part of a formula you could have multiple drivers that drive something here's an example electricity when you get your electrical bill it says on yet you used 17 kilowatt hours and last year same month you use 10 kilowatt hours so you used almost twice as much electricity use last year that means something not just oh my electric bills higher you can see it doesn't tell you that you need to go out and unplug the pool filter that's been running 24/7 for the last month but you know you use more electricity rates are how much it cost for that driver so if you can at least understand what the driver is and you know what the rate is you can multiply it together you've got to make some guesses budgeting is guessing budgeting is not knowing if you knew the answer you could produce the actuals in advance right that was the whole concept of back to the future which by the way I guess tomorrow is the day in the movie Back to the Future 2 they go forward to October the 21st 2015 which is tomorrow so although all the things will come true tomorrow but if you new as it says in the movie that the Cubs are gonna win the World Series in 2015 you can go out and back right although the Mets are probably gonna take care of that for you so their assumptions their guesses nothing wrong with guessing wrong you gotta try and educate your guests you gotta have an idea that this is an intelligent estimate not just a random guess but if you guess wrong or circumstances change you have to say I'm gonna change it I'll adjust and then I will try again that's what happens when you turn right when the tomtom or the Garmin or the Magellan tells you to turn left you got a recalibrate so your budget then is your driver times your rate applied to a period of time so let's use a smart detail example let's say your budget has a line that says utilities now if you're in a residential organization if you're in an IRA you have some control over your utilities just like you do in your home if you're in a program department that's part of a corporate office building your utility allocation probably doesn't have anything to do with what you're doing means you don't even turn the lights on the lights are on when you come in they get turned off by the cleaning people at night the heat is in a thermostat that's got a lock on it you can't control it so the utilities are still there there's still a cost but you can't control it so there's no point in you explaining it but if I'm in a residential area I want you to control utilities problem is utilities is too generic a term I don't know what that means I don't know how to explain it so let's break it down into natural gas sold by the cube by hundred cubic feeds I think if you look at please 100 cubic feet if you look at the bill you use if you're a hot water heat the number of people that live in your residence if you've got 10 versus 5 you're probably gonna use more gas because you're going to use more hot water Electric is sold by the kilowatt hour that's used for light appliances air conditioning in the summer if you have it it's affected by the number of people water cable and internet if you have that in your in your building so those I would first argue that if you've got a controllable cost like utilities you need to break it down into more detail the things that you can explain because if my utilities are flat one month to the next it could be because I use way too much and not enough electric for some reason and if I'd known that I could have used less gas and I would have had a reduction in my cost rather than flat that's what I want to know that's what we need you to know so here's an example of electric bill and a gas bill if it's a residential you get national fuel or National Grid that's what they look like and you'll see for the last 13 rolling months how many units you've used and you can see in the electric bill on the right that in September the usage was another looks like 20 25 percent higher than it was the same September last year that's nothing to do with the electric company raised their rates more electricity was used why it's not good enough to just say I don't know it's just electric bill you used it somebody used it what's happening what am I gonna do to fix it okay so in a residential area you can control it in an office setting you may not be able to control it so I would argue in this example that you get a report a budget report that looks something like this an operational budget direct care hours direct care overtime hours nursing hours gas usage electric usage so here's an example of what you might currently see as two lines on your budget salaries and utilities broken into five different lines so you got more lines but each line makes hopefully makes sense to you you can see that in my direct care hours I used 24 hours this month less than I thought but I used exactly 24 hours in overtime which by the way costs me more than direct care regular hours but so what do I interpret from that I interpret from that I have a scheduling problem someone who I wanted to work a shift didn't come in and I had to get someone to cover that shift at overtime rates so now at least I can identify there's a problem here if you looked at salaries and you saw direct care regular direct care over time and nurses hours all added together in a single line you can see because our nurse hours are well under plan I would show my budget would show me I'm actually doing pretty good from a salaries perspective which is true but it hides the fact that I have a scheduling problem causing me to spend overtime so what we want to see is show the detail see where it comes up and you can say regardless of the dollars you can say I get the hours I get with three hundred and seven hundred thirty six hours is in my IRA I get what eight hours is that's one shift in my IRA I get what my nursing hours I know what that stuff means I can tell how much gas I think I should be using based on historical usage I can tell how much electricity I should be using and I can see what's happening and if you got a budget like this you couldn't explain it and better yet an act upon it to make it better use another example salary sizes show you showed you in that example an exit off some more detail but salaries and most of your organization's is going to be the single largest expense so you certainly want to look at this if you can take care of so separate out the different kinds of salaries if I get something I have somebody who's salaried ie exempt not paid for the number of hours that they work then I want to know that because multiplying the number of hours they work is irrelevant doesn't matter to me so I want it separate I don't want to say I've got 10 hours and that costs $100 and I see at the end of the month that I use 20 hours and it was still $100 well that doesn't make any sense to me well the reason was that those extra 10 hours were on an exempt employee and they didn't it you didn't pay for that so you want to separate from a salary preventative hourly from not hourly you probably want to separate out overtime hours the reason is even though they're hours they are at a different rate you're paying time and a half or you're paying double time or you're paying triple time if you're in the Union and it's Christmas Eve so you want to separate out things that have unique characteristics or have their own rate so that you can easily multiply that stuff out so an example here you might say I want to know all the day shift hours in my IRA ok there's 31 days in this month and every day has a day and every day has a night and every day has an evening so I got 31 day shifts at 8 hours each I got 31 evening shifts at 8 hours each and I got 31 night shifts at 8 hours each or I might want to say wait a minute I pay extra if you work the weekend ok so now it's not 31 days shifts it's 20 day shifts and 10 weekend day shifts and one holiday that's different and if I find that I incur my overtime because my employee decided not to come in on the holiday that's a different answer then I have a scheduling problem I have a personnel problem so if you if you know what you're looking for and I would dare say that in many of your residences you're already tracking these hours you're already planning these hours you're already scheduling these hours they just don't bear any relationship to what you know as the budget so the driver what I'm talking about the driver in this case is hours what kind of hours daytime week date hours and how many of those am I going to have and what is my rate for that multiply it all out that becomes my salary budget I turn that into fiscal they put it on my report okay so if you have salaries that come from another department like you're using physical therapists and you have to have them come to your residents and provide something who's budgeting that time the answer to the question is it should be you that's budgeting that time not them because you're the one that's responsible for that if if they send a physical therapist to your residence and that day the individuals not there for whatever reason are you gonna get charged for that perhaps why because you didn't cancel that's your responsibility so you want to pay for you want to budget those kinds of expenses what about IT I would argue IT is not something that you budget because you don't have any control over whether that computer breaks or doesn't break and how long it's gonna take IIT to fix it that's their responsibility and they balance the decision I'm going to keep old computers around because I don't want to spend the money one's and I'm going to incur the repair cost to keep them running that's not your decision that's their decision they should budget that so you really got to think through these things the good news is you don't have to think through these things every day you do it once when you create the budget you identify this is controllable this is not controllable this is controllable by T this is controllable by me this is controllable by HR this is controllable by me you identify that stuff and unless you incur a new kind of expense in the coming year you don't have to do that again all you have to do is go through and say what are my plans for the coming year and I would argue that it's gonna be easier for you to say what are my plans in the coming year in terms of how many days shift week day hours I'm gonna spend than to say with accuracy what's my salary expense okay so what you're doing is you're we're taking the budget down to the turn-by-turn level asking you to decide how you're gonna get there and then just like you can on your Garmin or your TomTom there's a button that zooms back you can actually zoom all the way back and see that US map if you wanted to tiny but you're gonna be able to see that so you're you're building the date the budget from the ground up in a way you can explain it and understand it why wouldn't you do this what's gonna get in the way why haven't you already done this all good questions first thing is getting management fiscal whoever to buy in to the concept that there should be two budgets and again I'm not saying we have two different sets of numbers I'm saying we have one set of budgeted numbers with two different kinds of reports for two different kinds of users so you've got to have an you've got to take this to the very top senior leadership and explain if I had a budget that I could understand of items that I can control and is measured on activities that I actually direct I'd be willing to say I stand by that budget I've got more confidence in this budget saying a hundred thousand in salaries then last year's budget that I didn't understand where that came from okay so there there's a value in our opinion in our mc-squared model to knowing these details and providing that feedback what you what may take a little work initially is a consensus on what the key drivers are going to be so as I described in a residential you may or may not agree with me that I'm gonna measure week week day daytime shift hours differently than weekend daytime shift hours I don't care you do that that's your that's what you have to do and you could have you've got 25 IRAs the you could have 15 IRA managers saying one thing and the other ten saying another thing and you got to have a fight and decide how it's gonna be but once you do that once you agree to a consensus you should you should have it I would hope I would argue that if you're managing your residential program well you're already defined these kinds of drivers for all your IRAs so that they're not all renegade I was doing whatever they want they're following a set of rules that you've already created you're just using those rules to be part of the budget a real difficult thing could be how do I capture those quantities so let's say I want to get down to managing daytime shift weekday hours how do I find out what that number is I mean you can gas you can look at the calendar and multiply out your budget how do I see the actuals does that mean when people fill out their timesheet they have to enter on the timesheet that was a Thursday during the day that I did this perhaps there's a the next webinar that we'll be doing is on direct charging salary cost and we'll talk more about that then but if you've got a any kind of a payroll system the payroll system can generate a report that knows that October xx is a Tuesday and that's a weekday and it's not a holiday and you just need to know what shifts the person worked and you probably already are capturing that for salary rate reasons so my argument is if you looked at your payroll system in detail not your general ledger but your payroll system you could probably answer those our questions fairly straightforward whether you're using an ADP or some other service or you've got your own payroll system I think you could get without a whole lot of effort those that information where do I put it once I know my budget hours and my actual hours how do I put them someplace so that I can see them side by side on my report well the logical place to put that is in your general ledger because the general ledger is where you're doing all this reporting and that's suggesting you need to go out and buy a new budgeting system you use your general ledger to store this information and you can do it in one of two ways some general ledger systems like Dynamics GP great formerly known as Great Plains Sage 300 formerly known as act pack sage 100 formerly known as mass 90 these kind of systems will have quantities in their general ledger so you'd be able to make a journal entry to your general ledger that includes a quantity is literally three columns in the GL debits credits and and you can book a journal entry every month by the number of hours in that area if you don't if you've got a smaller system if you're using something like QuickBooks or Peachtree now called sage 50 or fund easy or one of these less expensive less complex systems they probably won't support quantities so the way to you do it is to identify an account number make an account number that will be a statistical account so that the quantities are stored as debits and you just know that they're not dollars because the account number says statistical okay so you can record the the quantities then just as exactly as you would record any budget and then every month you get a journal entry and you book that journal entry for not only the dollars but the quantities if you've got a payroll system and you're imparting that information from ADP you get ADP to modify that import and the file comes over with quantities and dollars okay you can produce multiple specific reports then you could produce a report that only has the day shift hours and give it to the day shift manager and say explain this to me you can get the weekend hours and X get the weekend manager to explain this to you and you take that information and you explain it to the residential manager who explains it to the controller who says we're on we're over-budget but we know why and this is what we're working on to fix it okay so those general larger statistical so if you've got a count number seven hundred and that's currently called salaries I would make a seven hundred and one called exempt salaries one called 702 direct care daytime salaries 703 direct care weekends see the look on all the auditors faces in this room saying oh my god how am I gonna audit all these accounts when the auditors come in you roll them together on a report and say it's salaries computers can add numbers up easily can't break numbers apart quite so easily so recording information in detail and adding it up solves the auditors problems solves anybody's problem it wants to see less information then I would go back and make another account if 702 is my account for daytime day shift residential direct care salaries I would make an S 702 meant most of your general ledger systems will us will support alpha numeric account numbers make an S 702 and in there you're gonna record the hours then when you produce your financial statements you just don't print the essence and you'll get what you've always got but if you want to know the hours you show me the assets and if I want to produce a budget report for operational purposes I'm gonna have one column the line is gonna be 702 this is going to be the account that has s in it and this is gonna be the one that doesn't have this in it and this is gonna be last month or this is gonna be this month and this is gonna be here today and all those things that you already have in your financial statements all work and you have budgets of quantities drivers side by side with the dollars a couple of tricks if you're gonna make a statistical account you need to make them balance sheet accounts okay balance sheet accounts are they just sit there this is accounting 101 you don't need to worry about balance sheet accounts they just sit there they don't you don't have to worry about them getting included in your revenue or expense you don't have to worry about them closed if you don't know what closing means it doesn't matter if you do know what closing means you don't have to worry about it because their balance sheet accounts what you would have to do however is because we've had double entry accounting since the Year 1200 if you put an entry in s 702 for 10 hours you got to put an offset somewhere so I would have an account called s SS SS and in there you would dump your offset so sure if you don't know what I'm talking about it's fine if you're an accountant you should know what I'm talking about and you're balancing your statistical entry so that your system is not out of balance but your those accounts are logically way at the bottom of the chart of accounts and not included in your financial statement reporting so hopefully that makes some sense as to why you would do that so our recap what we want to accomplish is we want to move I found this this graphic from crawling like an ape to walking upright and you were probably most of your organizations I would argue are probably at incremental budgeting and that means you're taking last year's budget and incrementing it by 3% or 2% and calling it next year's budget and we press on and that's what you're doing we want to move forward to a better more meaningful budgeting process zero based budgeting is every year I start with a blank piece of paper and invent a budget it's better answer than incremental budgeting because it forces you to plan what you're going to do what we're talking about is driver based budgeting which is very similar to that it's not just a blank sheet of paper it's a series of drivers assumptions and rates that says this is how I'm going to get from where I am to what my budget is what we're trying to accomplish is results based budgeting and that is I can ask you as the department head who is responsible why are we not on budget and I would expect a result because you can no longer say I don't know what the budget means I don't know where you got these numbers from this stuff is not under my control we've resolved all those issues so go out and manage your IRA within your budget that's results-based budget and our dream and in fact the goal of managed care is priority-based budgeting the priorities that I'm balancing against my budget are outcomes that my individuals have in their plans of care so if you're going to say I need to increase or reduce my costs or change my plan of care in a managed care environment you're juggling the costs and the revenues are staying the same so you're gonna need to know where these costs come from and how they come about so that you can make effective decisions on how they're affected by this change in priorities so that's the goal what we talked about today doesn't get us there gets us almost there we're still walking with a spear but we're hoping that that's that's the start of a year from now you'll have budgets that are understood justifiable and managed and then can be addressed on an individual basis or program basis in terms of priorities ok that's the end of my presentation are there any questions no one has asked a question certainly someone must have a question we've got like three minutes that I can answer any question if you want to type them in the questionnaire Department I can answer them if not I'll give you a few minutes to type if you click on the red arrow in the upper right hand corner will expand that window and there's a tab that says questions and you can type in there if not we will sis afternoon send you a PDF of the slides we've covered a lot there's some detail here that you may want to go back and study those slides if you have any questions about what I'm talking about or how do I know if my general ledger has quantities or I really can't figure out how to add more account numbers because it will make my general Ledger's numbers out of sequence or any of that sort of stuff give us a call I mean yeah that's what we do for a living or accountants here so we we do all that stuff for a living and we can help you walk through that process I'm being told by Carol Merrill who's off screen here pointing that thing that our next webinar is November the 4th which I don't know what day of the week that is but you can figure it out and that webinar will be on the topic of direct care charging payrolls so some of what we alluded to today in the budget and then the 17th which is two weeks later is the topic is using job costing or contract management software I'm talking about to manage detail cost reporting for individuals in in self directed services also for managing specific contracts if you've got funding sources that are contracting to pay for those or programs or departments that you might have we got a question is CPE credit being offered and if so how do I submit do we have an answer to this question we do have an answer and the answer is you email Stacey gold Taylor s as in Stacey gold Taylor gol DT a yl o r s gold Taylor at Hopkins calm and we will send you a CPA certificate for one our CPE hopefully that answered your question s gol D TI y lr @ dobkins with a p dop as in pneumonia k as a net i NS dobkins dot-com it is now precisely one hour so we'll keep everybody on schedule thank you for all attending and hope to see you again in two or three weeks whenever November the 4th is thanks very much