By: Kavita Sahai, Guest Contributor
Medical practice performance is directly represented in the numbers it produces. If they are meeting industry standard benchmarks, then things are going well and if not, you know there is a problem. You cannot grow your practice or increase profitability if you do not know where you are coming from.
What to look at Every Two Weeks: Bills & Cash
The first step is to understand your weekly burn rate, the amount of money you usually spend to cover payroll and other bills. Then you should monitor your cash balances every two weeks to ensure you do not have any cash crunch situations.
We have found practices unknowingly spend a lot of money on late fees or time trying to reverse them. Bills should be approved and reviewed twice a month and it is best practice to electronically file invoices so they are easy to find in case of an audit or billing questions. You can get different accounting software or online solutions to assist, but you will need to make sure your bookkeeper gets properly trained and the system is well implemented. A systematic view of bills also help to make sure you focus on how much vendors are charging and if it is time to renegotiate prices. Most pricing on medical supplies is not volume based but based on who negotiates the best and how often.
What to look at Every Month: Financials KPIs
It is important to close out your QuickBooks every month to validate data entry and confirm that financials are correct. It is difficult to accurately remember when a small payment was made for a few months ago. A quick check on revenue and expenses at this point can help ensure you are not waiting months to address any easily identifiable red flags. We had one practice that had $6 thousand in overtime every other month to the point that it would have been better to just hire another employee. Looking at operating expenses monthly will allow you to easily spot outliers that you can miss looking at financials on a consolidated basis over several months. Also, monthly Account Receivable (AR) analysis is critical to ensuring that your office is coding and capturing all necessary data.
What to look at every Quarter: Trends
On a quarterly basis, it is important to look at trends. Compare income and expenses over the last six quarters to investigate why revenues and more importantly profit were flat or declined. If expenses have been gradually increasing, make sure there is a good explanation and a justifiable return on investment. If you are paying for marketing, is it bringing in enough business to justify the expense? If you are not marketing, should you be looking at programs to see what they can do to increase your revenue or even use customer relationship management systems to reduce your no shows. Most of these programs will offer a free trial or money back guarantee so implement a program and make sure it is working for your practice. A detailed look at each expense item over time provides a lot of clarity at where the practice can improve to make more money. Payroll is another huge area of expense and it is important to see if you really need to hire someone, which requires management hours, insurance, training, etc. or is it more efficient to outsource non-core functions: accounting, billing, human resources and marketing.
What to look at Annually: Financial Statements
On an annual basis, you want to review your financial statements: income statement, balance sheet and cash flow just to ensure everything looks correct. If you have been monitoring the financial health as outlined above there should be no surprises. This would be a better time to review your insurance contracts and make sure you have the best possible rates for the next year. This is also a time to review your consultants and make sure you are using a flat fee service wherever possible especially with accountants. There is no reason your CPA should be charging by the email or phone call.
Kavita Sahai, VP Medical BackOps, works with medical practices to streamline billing, accounting, payroll, employee contracts, and OSHA/HIPPA compliance to avoid costly errors and reduce the occurrence of fraud or appearance thereof. Contact for additional questions firstname.lastname@example.org