Good news… the COVID-19 pandemic is largely in the rear-view mirror these days. So, can medical practice owners expect smooth sailing from here? Well… not exactly. For several reasons (supply chain, inflation, the Russia/Ukraine war, and rising interest rates) we find ourselves looking at the very real possibility of a recession.
However, just because the risk of a recession is on the rise, there’s not a reason to panic. Recessions are a natural part of any economic cycle and with proper planning and action, your practice can position itself to successfully deal with any financial challenges.
In today’s post, I’d like to share 3 specific ways you can prepare your practice for an economic downtown.
1. Build a Cash Reserve
Chances are good that you’ve heard the standard advice from personal financial advisors: “The first step to creating wealth is having an emergency fund set aside to cover your expenses should the unexpected occur”… but does the same apply to your medical, dental, or vision practice? You bet it does!
Practices that fail to have an emergency savings account tend to find themselves in trouble. I’m always reminding my clients to set aside money to protect their practice. The last situation you want to find yourself in is permanently closing your doors because you ran out of cash. It happens more than you might think!
How much should you aim to set aside in your cash reserve account? A good goal amount for your emergency savings is three months of business expenses. Run a Monthly Profit & Loss report for the last twelve months, then add up the highest three months of expenses – this should be your goal for emergency savings.
Remember these are emergency savings and should be used accordingly. Place the funds in a safe and liquid interest-bearing account. I do NOT recommend placing them in the stock market or rolling the dice with speculative crypto currency or meme stock holdings 😊 . You need to be confident the funds will be there in full and easily accessible when needed.
2. Take a Hard Look at Your Expenses
It’s a healthy financial habit at any time, but now is an especially good time to examine the expenses in your P&L (including digging deeper into each expense category to evaluate individual expenditures).
As you review these expenses, categorize each as either:
- Mission-critical items (things like rent, payroll, liability/malpractice insurance, medical supplies, technology/phone, etc.)
- Important (things like promotion and marketing, office supplies)
You guessed it! Look to cut costs on those items that are just “nice-to-haves” or that are not required to maintain and grow your operations. If you take a hard look, we’ll guess there’s some waste that, once eliminated, flow right to profits that can be used to bump up that cash reserve!
A word of caution: When practice owners are “feeling the pinch,” they too often look at their marketing and advertising as an opportunity to cut expenses. DON’T BE ONE OF THESE PEOPLE! The solution to your problem is better found through growing revenues than cutting expenses. Marketing and advertising are the fuel that will help drive practice revenue.
3. Look to Streamline Your Operations
Review your practice’s daily procedures; money can always be found through streamlining and innovation. In our experience, we’ve found that processes may exist that are inefficient or outdated, yet they continue exist because “that’s the way we’ve always done it”. Take a step back and evaluate your processes and procedures objectively. You may find ways to do things BETTER and AT LESS COST.
One good example is patient appointment reminders. Do you really need an employee spending hours each day calling patients to remind them of their upcoming appointment? There are several software solutions out there that are easy to use and will automate this process with little effort on your end. Just do a simple Google search for a term like “medical appointment reminders” and you’ll see several great HIPAA-compliant options. Of course, this is just one example. You’ll identify others as you evaluate your practice’s operations.
Of course, we’re all hopeful our economy trends in a healthy direction soon, but it’s always a smart idea to be prepared for the worse. By building a cash reserve, eliminating wasteful spending, and streamlining your operations you’ll be in the best position possible to weather any storm!
We hope this was helpful!
If you’re looking to increase both the revenues and profitability of your dental practice, don’t hesitate to reach out at 844-424-9637.
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7 Key Financial Practices That Separate Thriving, Growing Practices From The Rest.
There’s no denying it. Creating a thriving practice is about much more than practicing medicine!
Topping the list of “other” priorities is your practice’s financial management. In this short guide, the experts at STAC Bizness Solutions outline 7 financial best practices that differentiate struggling practices from those which are highly profitable and experiencing healthy levels of growth.