Once the previous year's data has been collected, adjustments made due to predicted changes in expenses, and budget categories developed, further action may be taken. The previously defined categories can be broken down into direct versus indirect costs and variable versus fixed costs. Direct costs affect the budget, while indirect costs do not. The institution is responsible for indirect costs such as utilities and other institutional services required by the laboratory.
Unless it is anticipated that more hires will occur or layoffs are expected, laboratory personnel salaries and wages are generally considered direct but not variable expenses. The same can be said of laboratory equipment because the annual cost calculated as depreciation stays the same regardless of test volume. Likewise, General operating expenses not directly related to testing are indirect and generally not variable. However, reagents, controls, and testing supplies are variable and directly related to test volume.
During the budget forecast phase, there is an opportunity to look for ways to contain or reduce expenses. When looking to reduce costs, some of the primary areas often looked at by management include the number of full-time equivalents (FTEs) in the laboratory. This is because personnel is a major expense in the laboratory. Sometimes, the addition of capital equipment can reduce the number of personnel needed, so the cost of capital equipment can be offset by a reduction in FTEs. In addition, if multiple vendors can supply the same products, laboratory supplies, and reagent costs can often be reduced by taking advantage of large buying groups or competitive bidding. Carefully reviewing all expenses can often produce areas where costs can be reduced.
