Budgeting for a Medical Practice’s Success
Budgeting is an important task that isn’t given quite the importance it deserves in private medical practices. By spending time to develop an extensive plan and regularly revisiting it throughout the year, your office can reap the rewards of a powerful tool. Structured and detailed budgeting can help increase revenue and market share while providing important checks and balances.
Developing and Sticking to Your Budget
Although all private practices engage in budgeting, most of the time it is put aside shortly thereafter, and all financial decisions are dealt with in an ad hoc manner. Adhering to a thought-out plan offers predictability. Being able to operate a business with the stability that comes with predictable returns is preferable to the volatility of functioning in uncertainty.
Budgeting provides the added benefit of acting as a beacon for potential problems. Operating according to a plan can uncover warning signs of malfeasance and poor financial practices. On the positive side, budgeting can help grow a medical practice safely and sustainably. If, for example, you intend on purchasing new equipment or adding medicine dispensing to your services, budgeting will allow this to happen seamlessly.
Although budgets are an exercise in accounting and arithmetic, a degree of customization should be considered. Tailoring your medical practice’s plan to your specifications and needs will make it all-the-more useful. Based on your office’s needs, items can be broken down into smaller categories or lumped together in overarching areas of interest.
To create better budgets, it’s a good idea to implement a way of comparing your current finances with past periods. One way to do this is to look at previous years for clues as to where your revenue and expenses are headed. A seasonal or monthly comparison spanning the past five years can reveal helpful insights as to potential opportunities and concerns.
Another important area to analyze when budgeting is revenue. Breaking down your revenue sources will reveal what your potential for growth truly is. Setting a percentage goal for future growth is meaningless without first understanding what your payer make-up is. This will uncover if you have room to grow your revenue or whether you are limited by the high percentage that Medicare holds in your list of payers.
Breaking down expenses is as important as differentiating between revenue sources. Categorizing your practice’s expenses based on their sources and significance will allow for proper budgeting. You can make cuts easier if necessary when you know the effects such reductions will have on your office.
Improving the Practice Through Better Budgeting
Budgets are roadmaps that must be reviewed monthly to guarantee that your business remains within the boundaries you set. Neglecting to review your budgets regularly can result in significant deviations from your intended goals.
Reviewing your budgets offers the opportunity to check for any changes in the market that could affect your office. These changes might otherwise go unnoticed if not for a monthly or quarterly review. For example, if an increase in the price of supplies is causing your expenses to balloon, looking for new suppliers or rethinking your expenses altogether can prevent your plan from spinning out of control.
Some variance in your budgets may be seasonal whereas other changes will be permanent. Having the foresight to review your budget constantly will allow you to react accordingly.
Budget Optimization for Success
Formulating and reviewing a practice’s finances is considered a nuisance by most private practitioners. They create a plan merely as a general compass for their finances. By differentiating your business from the pack and creating a detailed budget, you have the opportunity to grow your practice. Budgeting can bring success and lead to measurable, sustainable and predictable growth in your field.