How to create a budget for your private practice

Jamie Frew
Jamie Frew
Share

Introduction

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. 

Incorporation costs

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.  

Rent

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. 

Insurance coverage

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. 

Taxes

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. 

Training costs

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. 

Equipment costs

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. 

Growing a practice

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. 

Conclusion

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

Further reading:

Related Articles

Right ArrowRight Arrow

How to tackle an accidental HIPAA violation

HIPAA violations are often a frequent worry for practitioners and their clients. However, you can avoid these breaches through the right system and process.

Jamie Frew
Jamie Frew
7min read

How to use local Google to get therapy clients

Optimizing your Google search and business profile can help grow your private practice with high-quality, low-cost client referrals who live locally.

Katherine Ellison
Katherine Ellison
6min read

How to move from group practice to private practice

We explore the pros and cons of moving from an established Group practice to your private practice.

Katherine Ellison
Katherine Ellison
8min read

Places in America with the Worst (and Best) Hospitals

Making healthcare better for every American is a top priority, however, access to the best hospitals might just come down to your zip code.

Ashleigh Knowles
Ashleigh Knowles
6min read

How much do therapists charge in 2023?

Record high healthcare inflation and increased demand for mental health services have caused a boom in therapy costs.

Katherine Ellison
Katherine Ellison
6min read

Is Healthcare More Expensive in Black Neighborhoods?

Evidence suggests that the black community is at a significant disadvantage regarding healthcare in the United States. It’s a systemic misstep that leaves many black citizens struggling to access basic healthcare necessities and care in 2022.

Ashleigh Knowles
Ashleigh Knowles
5min read

7 ways to create an interesting environment in your patients waiting room

When it comes to business, a successful private practice's first impressions count. They help set the tone for your patient's experience, reduce stress, and make people comfortable.

Ashleigh Knowles
Ashleigh Knowles
9min read

How to set the right prices in a therapy practice

Setting the prices can be one of the most complex aspects of running a therapy practice. It isn't easy to balance your financial needs with your clients' pricing standards and expectations.

Ashleigh Knowles
Ashleigh Knowles
8min read

Creating a physical environment policy for private practice

Physical environment policies help healthcare practitioners maintain their practices. Having an organized, clean and appealing environment will improve efficiency and help ensure patients feel comfortable.

Katherine Ellison
Katherine Ellison
8min read

The Places in America Where Mental Health Rates Are Increasing the Fastest

Mental health rates are increasing across the United States, with more than 50 million Americans experiencing a mental illness within the past 12 months.

Katherine Ellison
Katherine Ellison
11min read

Tips to create an effective patient loyalty program

Implementing strategies to develop client loyalty is a fantastic way to boost patient retention. Healthcare practices can design loyalty programs that suit their business needs whilst simultaneously attracting a wider clientele.

Jamie Frew
Jamie Frew
7min read

What are patient privacy laws - protect your patients personal information

Patient privacy is critical for any successful healthcare business. Ensuring health data management is stored safely, and the use of that data is transparent.

Jamie Frew
Jamie Frew
10min read

HIPAA compliance checklist for private practitioners

Managing HIPAA compliance requires an understanding of guidelines and the capability to complete detailed risk assessments. Healthcare compliance. Private practice.

Jamie Frew
Jamie Frew
9min read

5 Must-Have Features of Effective Practice Management Software for Your Business

Using the very best practice management software is a super power for you and your team. It helps you to focus on the things that matter most rather than getting bogged down in busy admin work.

Jamie Frew
Jamie Frew
5min read

Insurance terminologies in healthcare

Understanding insurance terminology and acronyms help you to understand plans and navigate the claims process. Whether you are in network & non-preferred provider, stay up to date with this guide.

Jamie Frew
Jamie Frew
9min read

8 marketing strategies for your healthcare business

The right marketing strategies can help your healthcare business grow, ensuring you always support the right clients at the best times. Here are Eight practices to ace the marketing of your healthcare practice.

Jamie Frew
Jamie Frew
12min read

How to succeed as a healthcare startup

Building your Healthcare startup is both challenging and rewarding. Whether finding new clients, managing compliance, or balancing your budget, here is an expert guide to help.

Jamie Frew
Jamie Frew
10min read

Tips for creating a robust client retention strategy for nutrition business

Client retention is a critical element of any nutrition business's long-term success. Attract the right clients and then engage them effectively for the duration of their treatment.

Jamie Frew
Jamie Frew
10min read

Join 10,000+ teams using Carepatron to be more productive

One app for all your healthcare work