Balancing the Books

     Can you predict the future? Budgeting and purchasing of EMS stock is a skill that requires the manager to anticipate and plan for what his organization will need ahead of time.

     EMS stock, for purposes of this column, means personnel, supplies, equipment, overhead, vehicles or any other item that needs to be purchased. Budgeting is the process of planning what expenses will occur in the coming year--the theory portion of financial management. The practice that accompanies that theory is the actual purchasing process. Much like EMS, providers learn the skill (theory) and then are expected to apply it (practice). Developing a well-thought-out budget (theory), coupled with appropriate purchasing principles (practice) and applied systematically, will guide your organization toward successful financial management.

Budgeting
     Before making any purchases for your organization, you should develop a budget. You likely already have one at home: A certain amount comes in regularly, and from that certain bills (mortgage, car payment, groceries, utilities, etc.) must be paid. As an EMS supervisor, you likely will have to create budgets yearly and evaluate them at least quarterly to determine their effectiveness. Budgeting requires hard looks at what is needed versus what is wanted. For example, a company may offer a sleek new $4,000 mechanical solution to doing CPR, but at the same time, the suction units on all three of your ambulances are more than 10 years old, and they'll cost $3,500 to replace. Your yearly budget for equipment repair and replacement is $5,000--what do you choose?

     The first step in developing a budget is to find out how much money is going to come in during your fiscal year (or other budget period). Determining your overall income requires counting all income from donations, municipal funding, fund drives, billing and all other sources. If your organization accepts donations, it's helpful to set goals for them. Don't be afraid to expect your community to help you out when you need it; donations can be a vital source of income for not-for-profit ambulance companies.

     Once income has been estimated, it's time to develop a budget to serve as the spending blueprint for your next fiscal year. Because each EMS agency is different, it is difficult to develop hard and fast rules on where to place money. Your board of directors, along with the interests of your employees/membership, will help guide your decisions. Some general rules to consider are:

• Personnel costs are usually the highest expense, about 40%–60% of your operating budget.
• Personnel salary expenses are not complete unless you add benefits (including retirement), insurance and taxes. To estimate personnel expenses, multiply the base salary by 25%–30% (depending on taxes in your location).
• Supplies (medical) need to be budgeted for based on call volume trending.
• Overhead (electricity, gas, paper, pens, etc.) should be budgeted so that a fair amount can be used at any given time, but should be policed so that abuse does not occur.
• There should be an "incidental" line item for unexpected expenses.
• Multiyear expenses (e.g., the purchase of new vehicle) need to be included on each year's budget.
• A monthly, quarterly or semiannual schedule should be set to check your budget and make sure you're on track with your spending.
• Add a "savings" line item so your organization has some extra money on hand for "rainy day" situations.

Purchasing
     Purchasing is a skill you may already have--most people develop it during their college years or earlier.

     Imagine the last time you went to the grocery store and bought grape jelly. You went to the jelly aisle and found Brand A, Brand B and Generic Brand jelly. Carefully weighing some of the following options, you made your decision:

• Price
• Quality
• Quantity
• Associated discounts.