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June 18th, 2018
Running your own medical practice can be an incredibly rewarding project. Not only can you take more control over your work, but you can find your niche and help people in a way that others can’t.
But when it comes to running your own practice, you are no longer just a doctor. Now you’re a business owner, and you need to be able to juggle wearing both hats. Many very fine doctors have a great idea of what they’d like to achieve with their medical practice, but then struggle to put it into execution once they’re hit with the day-to-day business challenges.
It’s not enough to simply tally revenue and expenses. It’s important to understand how each individual component of your practice performs. For instance, if you offer patients a GP and a physical therapy service, you should track the expenses of both these services separately.
The further you can break your business down into its component blocks, the better understanding you’ll have about what’s working and what’s not.
By compiling a thorough understanding of expenses including supplies, staffing costs, and overheads such as office space and utilities, you can then work backwards to understand how many patients you need on a weekly, monthly, and annual basis. If you’re consistently underperforming, having a properly structured budget will help raise the red flag before it becomes catastrophic.
Medicine is different to some business models in that, by necessity, there is a need or desire to offer services that aren’t necessarily ‘popular’. A small number of patients might need a specific service, and your practice is the only one that can offer that service. Naturally, you’re not going to want to let that go and leave your patients in the dark, even if it’s not a profitable business line.
So supplement that with contracts or services that do draw in large numbers of people. Do some market research, work out what can be your “run rate” business – large numbers of people with minimal costs involved – and offer that as a way of keeping lots of feet through the door.
Of course, you’re obligated to give time off to staff on your payroll. But as a business practice, you also need to understand that doctors and physicians are your exclusive source of cash flow, so if you allow a large percentage of your team to take leave simultaneously, then it can have a substantial impact on your business’ bottom line, as the overall billable hours of your practice is slashed.
Also, take a look at the cost of supplies and whether there are any inefficiencies. Without oversight into purchases, a staff member may take on too much inventory (a large up-front cost to you). Keep an eye on supplier contracts as these might not be as efficient as they could be.
As a business leader, you have a responsibility to keep costs in the business down to ensure the job security of your staff and keep patient costs down. You need to regularly check your expenses line-by-line to ensure cash flow into the business isn’t impacted.
Take a look at this article on how to create a budget for your medical supplies to learn more.
Once your practice involves more than two or three people, the budget is the only way you’re able to get a true picture of everything that is going on in the business. It would be dangerous to simply file it away to look back at each quarter or year when tax time rolls around.
Instead, treat the budget as a living document which can be used to make decisions on the financial health of the business. Keep an eye on what’s over or under budget, then investigate to see the cause.
Running a financially healthy practice takes the stress off yourself, your business partners, patients and your staff. Get in touch with us at MEDIQ Financial today for a free consultation to meet your budgeting needs.