Owners of dental, aesthetic, and other small practices might have money on their mind this time of year—and we’re not just talking about Christmas shopping. But building a future budget can help you set financial goals and consider growth. Try these 2023 financial tips and get your burning questions answered to help your practice prepare for the new year.
How Do I Create My Practice’s 2023 Budget?
Creating a budget is one of the simplest ways to set and achieve financial goals. But if the thought of a spreadsheet makes your eyes glaze over, fear not. Here are three easy steps to take:
- Set revenue goals. Accurately predicting how much money your practice will bring is priceless. To plan for that month-to-month number, take a look at factors like how many patients you’ll serve, what fees you’ll charge, and when you’ll be open. So if you plan to see 200 patients in January with an average $500 bill, you can expect to earn $100,000 in revenue for the month. But if the number of patients drops to 150 in July because one of your providers is on vacation, you’ll need to plan accordingly.
- Plan for expenses. Historical financial data can help predict your monthly expenses. Rent and payroll typically stay the same. But costs like supplies and marketing can vary widely. As revenue increases, so will costs. But if you can subtract expenses from revenue and have a number in the black, that’s called profit—or extra money. Extra money makes way for investing in people and equipment to help your practice grow.
- Create a path. The clarity you find in a budget will help you answer the remaining questions below, like when you should hire, what you can afford, and more!
Should I Hire a New Provider?
Are your current providers booked months in advance? Do you panic when a staff member goes on vacation? Are patients turning to other practices because they can’t get in your doors? Symptoms like these often point to a single solution: hiring a new provider.
Hiring a new provider can help double the size of a medical spa or dental practice. You can treat more patients, build brand awareness, and ultimately produce more revenue.
However, adding a new provider takes time and money. Starting with a hiring plan—like working with a recruiter and creating job listings—can offload some of the stress. And it helps to have three to six months of expenses in reserve to offset the cost of the new hire’s salary. Once you have more patients in the door, you’ll begin to see a return on your investment.
Once you’ve found the right person for the job, you’ll want to consider proper compensation. Whether they receive a flat salary or commission will depend on their experience. You can talk with your accountant and use that handy budget you created to understand how much compensation your practice can afford.
Can I Afford New Equipment?
When it comes to acquiring new devices for your practice, there are two ways to go about it: leasing and buying. And for items with a six-digit price tag, it’s important to consider what you can afford.
A lease is when you make tax-deductible payments to use a piece of equipment and then return it at the end of the lease. Payments are typically broken into more affordable chunks than if you bought the equipment outright. However, there’s the cost of interest to consider—it might be more expensive to lease than to pay a loan.
Buying equipment is often paid for with a loan. On one hand, you own the equipment and can get a tax deduction for the depreciation. Plus, interest rates might be more in your favor. But if the equipment could become obsolete or you can’t afford to put down all that cash, it might not be the right option.
It all depends on your budget. If your practice consistently produces profit every month, you might be able to afford buying a new device. But if profit is a little less reliable—or sometimes in the red—consider leasing what you need instead.
How Can I Increase My Practice’s Cash Flow?
If you’ve made a budget but the numbers are coming up short, it might be time to examine your cash flow. Here’s a tip: Using percentages and benchmarks helps you understand the data. Calculate each expense line item as a percent of that month’s revenue. You can then compare that percentage to past months, industry benchmarks, and KPIs to see if you’re on track.
There are also several common ways that money can leak out of a practice. But they’re all fixable! Here are a few trouble spots to consider:
- Supplies and inventory: It’s possible to order too much or waste supplies that expire. To combat unnecessary expenses, you can implement an inventory management software that keeps a close eye on what needs to be purchased and what doesn’t.
- Provider vacations: Staggering provider time off and scheduling patients with another provider when their usual provider is out can help keep appointments—and collections—steady.
- Seasonality: If summer is your slow season, it helps to plan ahead and have extra cash flow or year-round promotions ready.
Contact Maven for More 2023 Financial Tips
If your next question was going to be, “How will I have time to put all these 2023 financial tips into action?”—Maven can help! We uncomplicate financials and help practices grow so that you can focus on treating patients. To schedule a complimentary financial analysis in the new year, go ahead and contact us today.