Are you running your medical practice on a realistic operating budget? Unfortunately, too few practices take the time to create a meaningful budget, instead seeing the endeavor as a complex, time-consuming process that likely will not be used. Creating and following a budget involves self-discipline and sacrifice, but will help you develop wise spending habits to better manage your practice’s finances now and in the future.
If you are continually seeing failure at budgeting, the best place to start is looking at the fundamentals. It only takes a fundamental misstep or two to transform a well-planned and well-formed budget into a complete disaster. Budgets should be realistic, flexible, and consistent with practice goals and objectives.
Here are 3 key strategies to consider that will help point you on the right track toward success as you build your budget:
1. Know why you are budgeting. If you are developing a budget just because someone says it is a good idea, it probably will not help very much. Similarly, if you are just following the steps in a practice finance workbook because it suggests this is a great way to move toward financial success, budgeting will not help much at all. The reason for budgeting is to help you spend less than you earn. It shows you where your spending weaknesses are and provides the structure for you to get stronger in those areas. If you are in the dark about how much your practice spends and where you spend it, changing habits will be difficult. And even if you are financially comfortable, a budget can help identify unnecessary expenditures and deduce ways to redirect funds toward your priorities.
2. Be realistic. It is not going to work if you make huge, unrealistic assumptions right off the bat. Small steps work; big steps result in failure. Operating a medical practice can be unpredictable at times, and things happen that are out of your control. Consequently, look at where money can be moved around within a budget. For example, practices often use budgets to plan for future business growth and expansion. Capital saved on regular business expenditures may be placed into a special reserve account designated for selecting new business opportunities. Budgeting for future growth opportunities ensures that practices have capital on hand when needing to make quick decisions for expanding business operations. This capital may also be used during slow economic times as a safety net for paying regular business expenses.
3. Be flexible. There will usually be moments when you are learning to budget when you discover that some element of your budget is just not right. Should you take time to readjust figures. This approach is not realistic because you forgot some key piece of information while making your plans, and that means the budget you developed does not really work. Do not panic. Do not abandon your plans. Just go back to your plans, make the needed adjustments, and start over. This is normal, it happens to everyone. It does not mean your budget was a failure at all, it just means it needed to evolve. Regularly revisiting your practice’s budget will help you better control financial decisions because you will know exactly what you can afford to spend vs how much the practice is projecting to make.
An accurate, useful budget can be a valuable decision-making tool to analyze potential business challenges and opportunities and help physician owners and practice administrators make sound, strategic, and disciplined choices. Having a business budget enables you to plan ahead, prioritize your allocation of funds, and gauge whether your financial predictions are being met. It will also enable you to make educated decisions to enhance your business operations with added clarity and efficiency.
When properly executed, a practice budget will quickly become one of the most valuable resources in a practice’s decision-making toolbox. A proactive, comprehensive budget gives a practice the ability to properly track results, identify areas of concern, and quickly intervene when issues arise. And do not be afraid to seek out the professional advice of a health care consultant or CPA. They have worked with many practices and can help identify budgetary items which you may be inclined to overlook.
Mr Hernandez is the chief executive officer and founder of ABISA, LLC, a consultancy specializing in solo and small group practice management (www.abisallc.com). He is a speaker, trainer, and author with more than 20 years of leadership and operations experience.
Disclosure: The author reports no relevant financial relationships.
Are you running your medical practice on a realistic operating budget? Unfortunately, too few practices take the time to create a meaningful budget, instead seeing the endeavor as a complex, time-consuming process that likely will not be used. Creating and following a budget involves self-discipline and sacrifice, but will help you develop wise spending habits to better manage your practice’s finances now and in the future.
If you are continually seeing failure at budgeting, the best place to start is looking at the fundamentals. It only takes a fundamental misstep or two to transform a well-planned and well-formed budget into a complete disaster. Budgets should be realistic, flexible, and consistent with practice goals and objectives.
Here are 3 key strategies to consider that will help point you on the right track toward success as you build your budget:
1. Know why you are budgeting. If you are developing a budget just because someone says it is a good idea, it probably will not help very much. Similarly, if you are just following the steps in a practice finance workbook because it suggests this is a great way to move toward financial success, budgeting will not help much at all. The reason for budgeting is to help you spend less than you earn. It shows you where your spending weaknesses are and provides the structure for you to get stronger in those areas. If you are in the dark about how much your practice spends and where you spend it, changing habits will be difficult. And even if you are financially comfortable, a budget can help identify unnecessary expenditures and deduce ways to redirect funds toward your priorities.
2. Be realistic. It is not going to work if you make huge, unrealistic assumptions right off the bat. Small steps work; big steps result in failure. Operating a medical practice can be unpredictable at times, and things happen that are out of your control. Consequently, look at where money can be moved around within a budget. For example, practices often use budgets to plan for future business growth and expansion. Capital saved on regular business expenditures may be placed into a special reserve account designated for selecting new business opportunities. Budgeting for future growth opportunities ensures that practices have capital on hand when needing to make quick decisions for expanding business operations. This capital may also be used during slow economic times as a safety net for paying regular business expenses.
3. Be flexible. There will usually be moments when you are learning to budget when you discover that some element of your budget is just not right. Should you take time to readjust figures. This approach is not realistic because you forgot some key piece of information while making your plans, and that means the budget you developed does not really work. Do not panic. Do not abandon your plans. Just go back to your plans, make the needed adjustments, and start over. This is normal, it happens to everyone. It does not mean your budget was a failure at all, it just means it needed to evolve. Regularly revisiting your practice’s budget will help you better control financial decisions because you will know exactly what you can afford to spend vs how much the practice is projecting to make.
An accurate, useful budget can be a valuable decision-making tool to analyze potential business challenges and opportunities and help physician owners and practice administrators make sound, strategic, and disciplined choices. Having a business budget enables you to plan ahead, prioritize your allocation of funds, and gauge whether your financial predictions are being met. It will also enable you to make educated decisions to enhance your business operations with added clarity and efficiency.
When properly executed, a practice budget will quickly become one of the most valuable resources in a practice’s decision-making toolbox. A proactive, comprehensive budget gives a practice the ability to properly track results, identify areas of concern, and quickly intervene when issues arise. And do not be afraid to seek out the professional advice of a health care consultant or CPA. They have worked with many practices and can help identify budgetary items which you may be inclined to overlook.
Mr Hernandez is the chief executive officer and founder of ABISA, LLC, a consultancy specializing in solo and small group practice management (www.abisallc.com). He is a speaker, trainer, and author with more than 20 years of leadership and operations experience.
Disclosure: The author reports no relevant financial relationships.
Are you running your medical practice on a realistic operating budget? Unfortunately, too few practices take the time to create a meaningful budget, instead seeing the endeavor as a complex, time-consuming process that likely will not be used. Creating and following a budget involves self-discipline and sacrifice, but will help you develop wise spending habits to better manage your practice’s finances now and in the future.
If you are continually seeing failure at budgeting, the best place to start is looking at the fundamentals. It only takes a fundamental misstep or two to transform a well-planned and well-formed budget into a complete disaster. Budgets should be realistic, flexible, and consistent with practice goals and objectives.
Here are 3 key strategies to consider that will help point you on the right track toward success as you build your budget:
1. Know why you are budgeting. If you are developing a budget just because someone says it is a good idea, it probably will not help very much. Similarly, if you are just following the steps in a practice finance workbook because it suggests this is a great way to move toward financial success, budgeting will not help much at all. The reason for budgeting is to help you spend less than you earn. It shows you where your spending weaknesses are and provides the structure for you to get stronger in those areas. If you are in the dark about how much your practice spends and where you spend it, changing habits will be difficult. And even if you are financially comfortable, a budget can help identify unnecessary expenditures and deduce ways to redirect funds toward your priorities.
2. Be realistic. It is not going to work if you make huge, unrealistic assumptions right off the bat. Small steps work; big steps result in failure. Operating a medical practice can be unpredictable at times, and things happen that are out of your control. Consequently, look at where money can be moved around within a budget. For example, practices often use budgets to plan for future business growth and expansion. Capital saved on regular business expenditures may be placed into a special reserve account designated for selecting new business opportunities. Budgeting for future growth opportunities ensures that practices have capital on hand when needing to make quick decisions for expanding business operations. This capital may also be used during slow economic times as a safety net for paying regular business expenses.
3. Be flexible. There will usually be moments when you are learning to budget when you discover that some element of your budget is just not right. Should you take time to readjust figures. This approach is not realistic because you forgot some key piece of information while making your plans, and that means the budget you developed does not really work. Do not panic. Do not abandon your plans. Just go back to your plans, make the needed adjustments, and start over. This is normal, it happens to everyone. It does not mean your budget was a failure at all, it just means it needed to evolve. Regularly revisiting your practice’s budget will help you better control financial decisions because you will know exactly what you can afford to spend vs how much the practice is projecting to make.
An accurate, useful budget can be a valuable decision-making tool to analyze potential business challenges and opportunities and help physician owners and practice administrators make sound, strategic, and disciplined choices. Having a business budget enables you to plan ahead, prioritize your allocation of funds, and gauge whether your financial predictions are being met. It will also enable you to make educated decisions to enhance your business operations with added clarity and efficiency.
When properly executed, a practice budget will quickly become one of the most valuable resources in a practice’s decision-making toolbox. A proactive, comprehensive budget gives a practice the ability to properly track results, identify areas of concern, and quickly intervene when issues arise. And do not be afraid to seek out the professional advice of a health care consultant or CPA. They have worked with many practices and can help identify budgetary items which you may be inclined to overlook.
Mr Hernandez is the chief executive officer and founder of ABISA, LLC, a consultancy specializing in solo and small group practice management (www.abisallc.com). He is a speaker, trainer, and author with more than 20 years of leadership and operations experience.
Disclosure: The author reports no relevant financial relationships.
