Every Practice Needs a Budget
The absence of proper planning can detrimentally affect the financial success of a medical practice. Especially in the current turbulent healthcare economy, planning is more important than ever. Budgeting is just one example of effective planning.
Today, many medical practices have some financial challenges. But what physician or practice leader doesn’t wonder: Why aren’t we making as much money as we used to? Are we staffed properly? Spending too much on supplies? Are we maximizing our capacity? Are we profitable?
Many of the physicians we encounter can’t begin to answer these questions because they don’t have a budget in place, let alone monitor one regularly. Some physicians think their practice is too small to need a budget. Others think they are budgeting by simply comparing last year’s numbers to this year’s. Still others feel that so much of their business is controlled by outside influences that preparing a budget is a waste of time. Nothing could be further from the truth!
A budget will become one of the most valuable resources in a practice’s decision-making tool-kit when properly executed. Think of a budget as a mini business plan covering a predetermined period of time (day, month, or year). A budget helps to establish a plan, adds a level of expectation of daily cash flow, and sets the foundation to properly track results, identify areas of concern and quickly intervene when issues arise.
5 Reasons to develop and stick to a budget
- It helps keep your eye on the prize. A budget helps you figure out your long-term goals and work towards them.
- It ensures you don’t spend money that you don’t have.
- It leads to a happy retirement. An exit strategy should not be a surprise but a well-executed plan.
- It helps you prepare for emergencies. Life is filled with unexpected surprises, some better than others.
- It sheds light on bad spending habits.
A budget will allow you to see how your practice spends its money and provide the ability to better control costs. To create a budget, begin by planning the revenue side of your practice and then consider the expense side.
For example, take a look at the number of office visits and procedures that are required to meet your practice’s earnings goals, services you might add that are more profitable or that will attract more desirable patients, and services that could be reduced or eliminated because of changes in staffing or payer contracts. Next consider the expense side of you budget including changes in routine expenses that might occur because of fee changes or decreases in patient volume. Planning allows you to put additional services in place, eliminate money-losing activities, and discover and fix inefficiencies.
Lastly, when sitting down to create your budget; remember three key considerations:
- Know why you are budgeting: If you are developing a budget just because someone says it’s a good idea, it probably won’t help very much.
- Be realistic: It will not work If you make huge, unrealistic assumptions. Small steps work and big steps result in failure.
- Be flexible: There will usually be moments when you’re learning to budget when you discover that some elements of your budget are just not right. Don’t panic. Don’t abandon your plans. Just go back to your plans and make the needed adjustments and start over again.
So what is getting in your way?
Budgeting provides better control of your financial health. If you think you are in need of a checkup, we are here to help you.