Look Beyond Next Year!
We are very excited when we get more new patients. To get new patients, marketing is important, but financial management can be the key to successful marketing. Once you get a new patient, the key is to get them to accept care, which is the importance of a Report of Findings. Remember, no person calls you or your office without a need. The exposure you are getting for your office, for chiropractic, is exciting and the cost is minimal considering the exposure. Once an ad or a commercial is placed, hopefully your phone will ring. The key is for your staff to try to do less phone talking and instead get new patients into the office. My experience has shown me no person can close a patient better than the doctor. The amount of new patients that stay for care is where you can determine the cost effective nature of your marketing.
A good budget encompasses all the financial details of running your practice. Good budgeting goes further and projects how those details will help achieve your and your practice’s larger, long-term goals. The dual purposes of operational and strategic planning lie at the core of your success.
Look Further Ahead
Yes, in order to grow your practice your budget will need to grow. But in today’s marketplace there is no better place to invest your money than in your office. Chiropractic practice budgeting is more than a series of annual targets. The effective planning process considers strategic issues for the coming five or even ten years. This is business goal setting. Where do you want your practice to be in five years? What is your plan?
Before your accountant, manager or administrator can “run the numbers,” you must provide them with your plans, your goals for the coming years. If your budgeting and planning efforts don’t project beyond the coming year, schedule such planning sessions. Otherwise, it’s like building a bridge from one riverbank with no knowledge or concern of what’s lurking on the opposite shore. That’s exploring, not planning.
Strategic questions such as “What do we want to be doing in five years?” produce natural operational questions such as “What will we do next year to put us, or keep us, on that path?” This strategic planning step involves questions about internal (physician goals) and external (competition and other market forces) factors such as:
- Do you want to make the practice larger?
- If so, how? Should you add physicians? Should you increase your geographic market, perhaps with an additional office? Should the practice introduce new services you’ve referred out in the past?
- What competitive threats exist or are likely to develop? How can you react to them or eliminate them?
Next, begin the traditional budget mechanics. Have your manager start using the budget framework to attach numbers to agreed upon ideas and goals. We’ll look at the following different budget components in greater detail in the coming months:
1. Revenue budget. Looking at past data and projecting forward, how much revenue does the practice except from insurance payments? And what about managed care plans, prepaid HMO contracts, patient co-pays and self-pays, receivables on the books and the prospective sale of any assets? Well-researched revenue budgeting explores all likely income sources.
2. Expense budget. The health care services you render cost money to provide. You must meet fixed, variable and “semi-fixed” expenses to keep your doors open and the revenue coming in.
3. Capital budget. Small and mid-size practices (even many larger ones) rarely develop capital budgets. Nor should they. But for larger practices, capital budgeting can be an important part of the overall process and an alternative to borrowing.
4. Profit plan. This integrates the revenue and expense budgets to show net income for the practice. Some groups even start the budgeting process by deciding what take-home pay their doctors should receive and then work back up the line to project the revenue needed to produce that profit.
5. Cash budget. The cash budget details the anticipated cash flowing through the practice. Net charges and actual revenue don’t march in step. Prepaid contracts, workers’ compensation and outside referrals can create a significant short-term difference between what you’re due and what you actually receive. And cash outflows like malpractice premiums and meeting travel may vary significantly from month to month. The cash budget helps keep you on top of your practice’s monthly cash needs.
6. Balance sheet. The balance sheet puts all the revenue and expense data together and projects the practice’s assets and liabilities—essentially a snapshot of the practice’s financial health—at the end of the budget year.
7. Review, revise. After you put the collected information into an initial draft, the crucial review process begins. Are the numbers accurate to the best of your forecasting ability? Are the forecasted results good enough to support the practice and meet the needs of the physician owner(s)? If you project these numbers into the future, will the practice likely stay on track toward achieving its long-term goals? Was anything inadvertently left out?
Project some problems
Consider the financial implications of falling a little short, or a lot short. That raises the issue of whether a budget should represent your best projection of what will likely happen, a “stretch” goal to strive for, or a near worst-case scenario that will still meet the needs of the physician owner(s). We’ll focus on that issue next month when we examine the planning process.
Regardless of the approach you choose, instruct your manager to run some good, bad and middle-of-the-road scenarios so you know what to expect if the unexpected happens. But, if you carefully gather your information, project reasonably and don’t get blindsided by external changes, budgeting shouldn’t provide too many surprises. And that’s the point of the entire process.
Dr. Eric S. Kaplan, a former President COO of a NASAQ traded public company, which included Nutrisystem, Currently he is CEO of Concierge Coaches, Inc., www.conciergecoaches.com, a comprehensive coaching firm with a successful, documented history of assisting doctors create profitable practices nationwide, providing over 30 New Patient marketing Programs. Teaching doctors nationally how to develop a successful business in the health care industry of today. Dr. Kaplan is the best selling author of Dying to be Young, and Lifestyle of the Fit and Famous and Co-developer and President of Discforce and Palm Beach Massage Centers, www.pbmassage.info, the next Generation Chiropractic Practices, massage and Spinal decompression For more information on coaching or spinal decompression, call 1-561-626-3004.