As we all know, COVID-19 has wreaked havoc on hospital and health system financials. The main questions we’re receiving from clients these days include, “How do I reforecast the remainder of this year? Can I recast my volumes and, using variable relationships, update my financials for the remainder of the year?”

We’ve also had clients who want to adjust their remaining budget for the current year. They need to report on their original budget, but then also re-forecast or adjust the budget for the remainder of the year to determine the financial impact of COVID-19.

The Current Year Forecasting functionality in Axiom Budgeting makes this easy. Current Year Forecasting can re-project the remaining months of the fiscal year using a variety of forecasting methodologies such as trending, historical relationships, year-to-date actuals, year-to-date budget, and remaining budget.

The challenge is that traditional forecasting methodologies are generally based upon the current budget, and, as we all know, current-year budgets are no longer accurate. The forecast in Axiom Budgeting is updated monthly immediately following the general ledger close, and you can use those actuals as the basis for projecting the remaining months of the fiscal year.

This process has four steps:

  1. Create a Department-level baseline forecast. It’s volume-driven, so you can apply a percentage change to your budgeted volume or trend your historical volumes. Multiply that result by your revenue per unit, hours, and supply cost per unit, using current relationships, and then fill in the remaining fixed expenses.
  2. Use Department-level adjustments to determine the areas where you need to bend the curve. As you view the baseline forecast, are there areas where the curve is bending up or down? Simply make those adjustments that will recalculate any variable calculations, and also adjust any fixed expenses.
  3. Entity-level adjustments. While steps 1 and 2 are at the department level, which is the same level of detail where you budget, Step 3 provides you with a P&L view where finance leaders can recommend adjustments to revenue, deductions, salaries, etc. These macro-level changes ultimately become part of your total current year forecast.
  4. Adjust the budget. You can take the net difference between your original budget and the updated forecast and bring that into the budget as a separate record. Your budget variance reports, as well as financial statements, now will automatically use the adjusted budget. If you want to report on your original budget, you can filter out the forecast adjustments.

This automated and streamlined process allows you to support several other processes within your organization:

  • Report on your original or adjusted budget
  • Continue with monthly variance reporting using an adjusted budget
  • Provide management with an updated forecast of year-end results
  • Serve as the baseline starting point for next year’s budget process
  • Supply an updated forecast for your financial planning process

Axiom Budgeting helps you assess the impact of COVID-19 on your organization’s financial and operational conditions so that you can chart your path forward.

Meet the Author
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Debra Miller

Debra Miller

Client Relationship Executive
Debra Miller is a Client Relationship Executive at Kaufman Hall, with responsibility for client services management for all Axiom Software Suite healthcare clients. Since joining the firm in 2001, she has served in numerous capacities including managing the product direction of Budgeting, Performance Reporting, and more.
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