I don’t know if you have ever found yourself in this situation of being worried about money, but in the early days of setting up in private practice, I certainly did.
When a ‘lock-out’ clause prevented me from working with previous referrers, I had to make myself a whole new referral base from scratch. It was high-octane scary, and with a large mortgage and loans to repay, I was very worried about money.
If you’re finding yourself increasingly anxious that you are not making enough money, then the first thing you have to do is to ‘fess us’ and acknowledge that it’s happening.
You can’t make the fear go away by pretending it’s not there. (You are not seven years old. Hiding behind the sofa may have helped you during a scary scene of a Dr. Who episode, but it’s not going to serve you well in your business.)
It’s normal to feel fearful at times, and ‘wibbly feelings’ inevitably arise when we realise we are not reaching a financial goal or something unexpected arrives, like a tax bomb.
Here’s what to do…
Get clear on your numbers.
So many people only have a feel for what their personal and professional outgoings are, versus the actual figures.
Why do we behave like this? I sense it’s partly because we are not measuring things sufficiently carefully and partly because we don’t really understand finance.
Confession: Many of us are bamboozled by tax.
It may seem, duh-obvious, but you need to work out how much you need to live on. Take a look through your bank statements, and tally up what you need for rent, mortgage, school fees, gas, ‘leccy’, council tax, car insurance and paying off that ill-thought out spending spree at Christian Louboutin. (Oh, but I needed them!)
Once you get clear on your actual numbers (and, yes, it’s often quite revealing doing this) you’ll work out what you need to bring in each month – net.
Next, do the same in terms of your practice. What are your medical indemnity bills, med sec outgoings, room hire, computer equipment, travel, conference expenditure and membership fees? Don’t forget to include things like internet and broadband etc.
You are also going to have to set aside money for tax which is where people get very confused – more about that later.
Clarify your ‘average’ patient income.
By this I don’t mean how much your patient brings home in their paycheck, I mean how much on average you earn per patient interaction. This is actually very easy to calculate, but so few people make time to do this. It’s much easier to get a handle on your patient numbers and patient income if you use software that tracks it. Most practice management systems will have an inbuilt billing system, or at the very least you can put numbers into a spreadsheet.
This is particularly useful if you are having a little bit of a panic about transitioning from full-time to part-time practice.
Get clear on how many new patients that you saw this month, and what fees were paid from their insurance companies or through self-funding. Do the same for follow-up appointments.
Add all the figures together and then divide by the number of patient interactions (i.e. new or follow-up patient appointments). The result will be a pretty good ‘gestimate’ of what, on average, each patient interaction earns you.
You can make this figure even more accurate by adding up the figures for an extended period of time, e.g. six months. This may seem a strange figure to calculate, but it stops us getting lost in the quagmire of new/follow up/insurer/self-funding figures.
It can help give us reassurance in our numbers.
To use an example in my own practice, as a Sports Physician, I might see a patient just two or three times for follow ups, for every single new patient appointment that occurs. I know that this equates to an average of £150 per patient interaction for all interactions.
If I decided I needed to bring in e.g. £5,000 per week of patient gross income, then I would need to see at least 33 patients per week – either new or follow-up appointments. This makes it much easier for me to estimate how many patients I need to see to be able to sort out my overheads and those Christian Louboutin shoes.
Because I’ve done my calculations, based on lots of averaged data, I can trust in the figures and know that on average, I’ll meet my financial targets if I get ‘x’ number of patients into clinic. It really helps cure a dose of the ‘wibbles’.
It’s time to take concerted action and chase up those late payments.
If you are not already using a billing collection service, this is an appropriate time to consider it! Whilst patient billing may be containable for you (or your med sec) when your numbers are still small, billing can quickly fall by the wayside when there are more ‘urgent’ things to do.
Billing, paradoxically, should be though as a priority task – and it may need to be made someone else’s priority if you are slipping behind.
Whilst you’re calculating your average patient income figure, have a hunt through the diary and look to see which patients you should be seeing for a follow-up, who have not yet booked back in again. Can you possibly task your med sec to draw up a list and contact those patients?
Seek accountancy advice.
If you’ve not got a good accountant- get one. If you have less than stellar accountant, who requires you to insert a ‘Babel fish’ into your ear to make sense of what’s being said, then sack ‘em. Unless you’ve done an MBA, it’s probably a mistake draw up a tax return by yourself.
Tax is complicated. It will inevitably cost you more time and expense in the long run, so hand it to over to an expert.
Don’t wait until December to submit your paperwork for a January tax payment.
It’s sooooo much better to keep up to date with you figures throughout the year so that you know what you are going to paying, way in advance, at the end of January and at the end of July. One of the reasons we don’t tend to do this is that we are rather lazy about logging our receipts and our expenses.
Why not consider using an app like ‘Freshbooks’? They make it really easy for you to take a picture on your mobile phone of a receipt, and they nicely categorise it and file it away for you online. You can even link your account to your accountant by email.
Getting clear on your figures is the best way to start dispelling fear so that you are not paralysed and failing to take action.
If you would like to get clarity on how to get on top of your numbers and grow your successful private practice, why not get in touch.
Sometimes, we all need a little extra help in building our practices – from a business perspective, as well as a clinical one.
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