of the activity that attracts costs to support management in making decisions (Cohen et al. 2012). ABF in budgeting help to address services agreement objectives such as patient care base costing help reduce wait list, activities against peers will encourage competitions to enhance hospital quality and cost efficiency (Sutherland, Repin & Crump 2012)
Disadvantages of budgeting in ABF
Cohen et al. (2012) suggested some disadvantage adopting ABF in budgeting include the high cost associated with the implementation of this budgeting structure. The requirement to ensure accurate budget forecast in ABF involve the large amount of comprehensive data and information to be reported. The disadvantage adopting ABF involve the data not readily available to the cost require to implement this method in data collection. Another disadvantage involves the use of DRGs in calculating the cost of activity may not be fully reliable (Mihailovic, Kocic & Jakovljevic 2016). This suggested that adopting ABF in budgeting may incurred financial incentive of provision in unnecessary care due to increase in activity volume (Cohen et al. 2012)
The complexities in budgeting to enhance forecast accuracy
Hospitals have very complex revenue and funding structure from grants received from commonwealth, revenue generated from medical invoicing; donations receive from individual parties and other budgetary allocations (Department of Health 2016). The goals must be in measurable units, direct and attainable to enhance forecast accuracy (Eagar 2011). It is important to allow appropriated participation level in the budgeting to ensure an accurate and timely in the forecasting process in budgeting. Authoritarian prepare budget from the top down level as an overhead. The budgeting will include the use of capital and other fix asset to enhance the accuracy in forecasting (Mitton, Dionne & Donaldson 2014). Participatory measure will allow cost centre managers to identify specific activity and resources such as full time employee to enhance forecast accuracy (Tanaka 2007). Cost centre managers will have the ability to identify difference expense related to their unit where upper management may not have the ability to. The complexity in budgeting exercise will consider the inclusion of large and small volume of activity cost that include utility cost, human resources cost, clinical cost and other related operational cost (Mitton, Dionne & Donaldson 2014). The level of detail will need to be achieving at the right level to facilitate timeline-ness and accurate allocation of resources.
(ii)
The forecasting of 5percent growth in cost and 10 percent growth in the activity from previous year is not suitable for the organisation. Reversing the forecasting method will be more suitable with the cost on a 10 percent growth and activity on 5 percent growth to ensure the hospital will achieve the target. This forecasting model has adopted the incremental budgeting method (Bragg 2014). It is a simplified budget method to perform a forecast base on the previous year's budget and applied the percentage difference to the following year (Bragg 2014). This method is not efficient as it does not examine the hospital's expenditure and activity to achieve the forecasting result.
Where the zero base budgeting will allow the hospital to determine expenses according
