. . . . . . . . . . . . . . . . . . . . . . . . . . . . Medical
. . . Journal
. . . -.Houston
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .Page. 7
June 2015
Your practice needs a budget!
By Lisa Wood,
Senior Vice President,
Commercial Lending,
BB&T Bank
When running a medical
practice, it is easy to get
bogged down in day-to-day
operations and forget the bigger picture.
However, successful businesses invest time
to create and manage budgets, prepare and
review business plans, and regularly monitor
financial performance.
Physicians invest years in becoming highly
educated in a particular set of skills. But
even the most talented medical professionals
will find the practice of medicine difficult,
if not impossible to continue if they ignore
the financial realities of modern medicine.
A medical practice is still a business − and
businesses need to be organized.
Budgeting lies at the foundation of every
financial plan. It is a basic tenet of
business - before you can make money
you have to figure out how to spend it. A
budget is a plan to control your finances,
ensure you can continue to fund your
current commitments, enable you to make
confident financial decisions and meet your
objectives, and ensure you have enough
money for your future projects.
Using a budget as a tool, you can track
cash on hand, business expenses, and now
much patient revenue you need to keep your
practice growing, or at least stay in business
during tough times.
A budget is nothing more than a breakdown
and plan of how much money your practice
has coming in and where it goes. It should
be done at least yearly. Most annual budgets
are also divided up into 12 months and can
be updated with actual expenditures and
revenues each month so that you know you
are on target.
Business planning is most effective when it
is part of an ongoing process. By putting
together a budget, your practice is helped
by anticipating future needs, spending,
profits, and cash flow. It can also help you
spot problems early on, so you can make
necessary adjustments before it is a much
bigger challenge down the road. This
allows you to act quickly where necessary,
rather than simply reacting to events after
they have happened.
If you do not have the discipline to sit down
and assemble a practice budget, you may
not have insight into how your practice is
performing from year to year, or whether
you have the needed funds to purchase that
new equipment or EMR system you have
been wanting. You may want to consult
an accountant in preparing a budget, but it
also may be something you can do yourself
with small business financial software and/
or some of the free budget worksheets and
templates available online. There are other
reasons for putting together a budget, too.
Bankers and other financiers may want to
see a budget when you ask for a loan.
According to the U.S. Small Business
Administration, a budget can be used to
indicate some of the following:
• The funds needed for labor and/or
materials;
• For a new business, total start-up costs;
• Your costs of operations;
• The revenues necessary to support the
business;
• A realistic estimate of expected profits.
There are
Components:
profits.
three Basic Budgeting
revenue, expenses, and
Patient Revenue: Try to make these
estimates as accurate as possible, but err on
the side of being conservative. The best
starting point for your projected revenue is
last year’s revenue, assuming you have not
added or lost any