Budgeting and finances are some of the most important aspects of every business, and when it comes to healthcare, this is no exception. While you may be familiar with personal budgeting, the organization of your practice’s finances is a whole new ballpark that you need to quickly become acquainted with. The right budgeting plan ensures that you’re able to deliver high-quality healthcare solutions without breaking the bank and keep you on track to meet your goals and client needs.
Why is budgeting important for a healthcare practice?
Budgeting is essential to efficient corporate operations for a variety of reasons, including the fact that it acts as the financial backbone. Making strict private practice budget plans based on your needs and resources allows you to have more control over your spending and save money where necessary. Good budgeting will also enable appropriate delegation, so that management is not only the job of one person. When it comes to essential resource allocation, you can greatly enhance decision-making speed, and you can keep stakeholders and internal staff up to date on all things finance. It's an important part of the planning process since it keeps everyone on the same page and communicates long-term goals concisely and effectively. Furthermore, drafting budgets can actually help with increasing motivation. Having devoted budgets allows employees to be able to view their service contributions, which work toward valued work. Budgets are a large contributor to improving telehealth practices financially, and quite frankly, are non-negotiable.
General expenses for running a private practice
Before drafting up a budget, it’s important to keep these general expenses in mind, which are often associated with private practices.
These costs are associated with setting up your practice and adding in the essential licensing and registration needed. After all, you need to ensure that your business is legally legitimate before even thinking about operating.
If you’re thinking about operating from physical offices, you need to consider rent prices for the workspace. While there are alternatives, such as remote services with telehealth software, many practices still prefer the face-to-face option.
Naturally, you’re going to need to ensure you have insurance coverage in the case of accidents, malpractice, and other events. It’s an important safeguard, and sometimes complicated, so it’s important that you have a good understanding of health insurance terminologies, as well as a sound knowledge of insurance coverage in telehealth.
Website hosting and marketing costs
Marketing is absolutely essential for your business, as it gets the word out there and ensures you have a steady stream of clients coming through your doors. However, it also has associated costs, and when you set up a website with a domain, this’ll also have a considerable expense that you must take into account.
While it can be tedious, and honestly boring, taxes are of utmost importance to ensure that you’re legally compliant. Failing to set aside taxes can result in severe consequences, including fraud charges, or worst-case scenario, jail time.
Depending on the size of your business in terms of employees, and the gaps in your knowledge and/or skillset, you’re going to want to allocate a budget for any training costs. To be able to compete, you need to have the highest quality service, which may entail further education to reach a higher level.
Practice management software costs
Practice management software can automate tasks and streamline business processes to enhance and boost the quality of your services. It is highly efficient, and can provide appointment checklists for telehealth patients, video consulting, EHR evaluations, as well as an abundance of other features. If you choose to implement these softwares, you may need a separate budget for this.
Lastly, you’ll also need to consider finances pertaining to your equipment costs. This includes anything from ordinary stationery resources, to high-tech X-ray tools.
What does an ideal practice budget include?
While every practice budget can look a little different, depending on the size, resources, and goals you have, there are some universal factors that you must include. Implementing these will ensure you’re covering all bases, and have effective plans in regard to your finances.
Revenue and expenses
Budgets don’t just list the bills you need to pay, and the loans you may have. Rather, your budget should list every type of revenue that your business earns, and provide a complete overview of your incoming and outgoing finances. This ensures that you can plan effective coverage of your expenses, and can anticipate any financial challenges that may arise.
Current and projection numbers
Your budget must include the current numbers you have, as well as the projections of what you aim to hit. This means that you can better plan in regard to your goals, and acknowledge where you’ve overspent, or where you may have earnt less than anticipated. It holds you accountable for all your expenses and contributes to greater decision-making.
Covers a certain timeframe
It’s important that your budgets consist of a specific timeframe, such as a monthly or quarterly budget. This helps with your day-to-day operations and purchasing decisions, with these budgets serving as great baselines for comparison to performance within annual budgets.
Tips to build a budget for your therapy practice
Now that you know what you should include in your budget, it’s important to include the following factors to enhance the quality of it and help flesh it out. You need to make sure that you’re providing all relevant details without missing any crucial aspects, and incorporating these is a surefire way to create a robust financial solution and plan for your practice.
Track your expenses competently
To avoid overspending and wasting money, you should always be mindful of what you're spending your money on. This entails rigorous recording and bookkeeping so you understand the intricacies of all your expenditure and how it pertains to your budget. Ideally, you should establish a chart of accounts that includes expenses other than those covered by the IRS tax form and CPA categories. This guarantees that you're specific to your area of expertise and aren't inadvertently avoiding any certain area, as well as making potential theft easier to detect. This could include malpractice insurance, catastrophe recovery, relocation, and nonphysician providers, among other things. Doing so also works towards greater HIPAA compliance in your medical practice.
Use benchmarks while creating your budget
To ensure that you’re not overspending or failing to create value where you could be, it’s important to compare your budget to common benchmarks within your industry of healthcare. Good resources include the Medical Group Management Association (MGMA) Cost Survey, as well as the Statistics Report on Medical and Dental Income and Expense Averages. This way, you can make necessary adjustments, and ensure you’re up to speed with other healthcare businesses and their operations.
From time to time, compare the actual finances with your budget
Every now and then, it’s always recommended to set aside time and check in with your budget. Compare whether the numbers in your current finances make sense and whether it’s on track with what you originally planned. This way, you can make amendments where appropriate, with the budget being able to hold you accountable and guide you on the right track.
Maximize your tax deductions
Many businesses fail to realize the missed tax deductions that they could be receiving. With the right business record systems in place, you can ensure that you keep track of all spending, and be rewarded with eligible expense returns such as business property, health insurance, and business expense returns, as well as retirement contributions.
Review your personnel needs
While it may not be obvious, it’s important to review the performance and salaries of your staff and evaluate whether they are efficient. If you have underperforming staff, investment in the right training can lead to better customer service and higher quality solutions, which in turn, generates higher revenue.
Scale your budget as you grow
Within the healthcare space, it’s important to recognize that you’re likely to encounter considerable growth as you enroll more patients in your clinic. As a result, you may need to scale your budget to accommodate such growth, which includes greater investment in certain resources to continue boosting and strengthening the quality of your services.
We recognize that budgeting can be tricky, as finances accompany a ton of risk. However, with the right budgeting plan in place, you can ensure that you’re transparent with your spending, and are held accountable in regards to all of your decision-making. You’ll be able to stay on track to achieving your business goals and work towards increasing efficiency and efficacy within your practice without compromising on quality. Budgeting can be difficult, but with the tools in place, you can ensure that you optimize your operations and maximize profit in no time.
One easy to use practice management app: Try Carepatron for free today