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A budget will help you to monitor the financial health of your practice – but that’s just the beginning. Stephen Allan, Credit Executive at Medfin Finance, explains how a budget can also help you to run a more productive and profitable practice.
It’s easy to put off creating a budget. When you’re running a busy practice, budgeting can seem like a time-consuming, low-priority chore.
But, just like any other business owner, you have to know how much revenue you need to generate to cover outgoings such as rent, wages and tax. And a budget can also play a positive role in helping you to run your practice more smoothly and productively.
“When you’re keeping track of your finances it’s much easier to identify and take advantage of opportunities,” says Stephen Allan, Credit Executive at Medfin Finance. “You’re also more likely to spot any areas of concern in time to address them before they become major problems. Without a budget you have no benchmarks for measuring your progress – it’s impossible to know for sure whether your practice is becoming more profitable or going backwards.”
A business plan that incorporates your overall strategic goals and objectives is an invaluable decision-making tool – but only if it’s up to date. “A budget is a dynamic thing, not something you can just set and forget,” says Allan. “Economic uncertainty, changes to legislation and healthcare reform can all have an impact on the finances of a practice, as can more local issues such as a new competitor or adding a member of staff. These kinds of things all need to be factored into the budget as they arise.”
Failing to budget for tax can be a danger zone for people with their own practice. “It’s certainly the cause of financial difficulty that I see most frequently,” says Allan. “When you’re running your own business you have to build tax and other statutory payments such as superannuation and GST into your budget. If you can’t pay the full amount when it falls due you could face serious penalties, and trying to catch up can create a great deal of stress.”
Allan recommends starting with expert advice. “Business structure, insurances and asset protection strategies are fundamental to any budget and a qualified accountant can ensure you have the right ones in place,” he says. “An accountant can help you to develop the budget itself, and to establish an appropriate in-house accounting system.
Once this is in place, a good practice manager can then manage the day-to-day bookkeeping with regular oversight from your accountant. In a one-person practice, the right receptionist will be able to take on the role. “All you’ll need to do is review it on a regular basis, which shouldn’t take a great deal of time,” says Allan. “You should also find that that the practice is running more smoothly, so you could actually have more time to spend with your patients.”
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