Financial Advice for Your Practice in 2024

Small practice owners, including those in dentistry and aesthetics, may be preoccupied with finances at this time of year, and not just because of holiday spending. However, strategizing for the future through budget planning can aid in setting financial targets and contemplating expansion. Explore these financial recommendations for 2024 and receive guidance to equip your practice for the upcoming year.

How Can I Develop My Practice’s 2024 Budget?

Crafting a budget stands as a straightforward method to establish and attain financial objectives. If the idea of working with spreadsheets seems daunting, fear not. Here are three straightforward steps to take:

Establish revenue objectives: Predicting your practice’s monthly income accurately is invaluable. To forecast this figure, consider factors such as patient volume, fee structures, and operational hours. For instance, if you anticipate serving 200 patients in January with an average bill of $500, you can project revenue of $100,000 for the month. However, adjustments must be made if patient numbers drop, such as during a provider’s vacation.

Account for expenses: Historical financial data can aid in estimating monthly expenditures. While fixed costs like rent and payroll remain consistent, variable expenses like supplies and marketing may fluctuate. As revenue grows, so do costs. Nevertheless, generating a surplus after subtracting expenses from revenue translates to profit—an essential resource for investing in personnel and equipment to foster practice growth.

Chart a course: The clarity gained from a budget facilitates addressing subsequent questions, such as hiring timelines, affordability assessments, and more.

Is Hiring a New Provider Viable?

Are existing providers consistently booked well in advance? Do staff absences trigger panic? Are patients seeking care elsewhere due to appointment unavailability? Symptoms such as these often signal one solution: recruiting a new provider.

Enlisting a new provider can potentially double the size of a medical spa or dental practice, enabling increased patient care, brand recognition, and revenue generation. However, the process of adding a new team member demands time and financial investment. Crafting a hiring strategy—such as collaborating with recruiters and crafting job postings—can alleviate some of the pressure. Moreover, maintaining three to six months of reserve funds can offset the new hire’s salary expenses. Over time, as patient numbers increase, returns on this investment become apparent.

Upon identifying the suitable candidate, determining appropriate compensation becomes imperative. Whether a fixed salary or commission-based model is adopted hinges on the individual’s experience. Consultation with an accountant, coupled with reference to the established budget, can aid in ascertaining the practice’s affordability.

Can I Finance New Equipment?

Acquiring new equipment for your practice typically involves two options: leasing or purchasing. Given the substantial costs associated with high-value items, assessing affordability is crucial.

Leasing entails making tax-deductible payments for equipment usage, with the option to return it at the lease’s end. These payments are often more manageable than outright purchase costs. However, the expense of interest must be factored in, potentially making leasing more costly than loan payments.

Alternatively, purchasing equipment usually involves securing a loan. Ownership rights and tax deductions for depreciation are advantages of this approach, potentially accompanied by favorable interest rates. Nonetheless, if cash flow constraints or equipment obsolescence risks are prominent, purchasing may not be the most suitable option.

Decision-making hinges on the practice’s budgetary considerations. Consistent monthly profitability may enable outright equipment purchases. However, if financial stability fluctuates, leasing might be a more prudent choice.

How Can I Enhance My Practice’s Cash Flow?

If budget projections fall short of expectations, assessing cash flow becomes imperative. Utilizing percentages and benchmarks aids in comprehending financial data. Each expense item can be calculated as a percentage of monthly revenue, facilitating comparison with historical data, industry benchmarks, and key performance indicators.

Moreover, identifying and addressing potential sources of financial leakage is essential. Several common areas where funds may be mismanaged include:

Supplies and inventory: Over-ordering or wastage due to expiry can result in unnecessary expenses. Implementing inventory management software streamlines procurement and minimizes waste.

Provider vacations: Managing provider time-off schedules and arranging patient appointments with alternative providers during absences can maintain appointment schedules and revenue streams.

Seasonal fluctuations: Preparing for seasonal slowdowns, such as during summer months, through proactive cash flow management or year-round promotional strategies can mitigate revenue declines.

Consult Fullcycle CFO for Further 2024 Financial Insights

If your next query pertains to implementing these financial strategies for 2024, consider leveraging Fullcycle CFO’s expertise. We specialize in simplifying financial management and fostering practice growth, allowing you to focus on patient care. Schedule a complimentary financial analysis for the upcoming year by contacting us today.