Five Tips to Manage Practice Expenses
If you are interested in stability and positioning your practice for long-term financial success, check out these five tips to help you manage your practice expenses.
Tip #1 Staffing
Payroll is one of the largest expenses a business incurs, so it's a good place to start when analyzing operating expenses. Your staffing plan should be looked at from as many perspectives as possible. Think beyond how things "have always been done" to assess if you have the right staffing model for current needs and ask yourself questions such as:
- Are all your employees essential to the practice?
- Is anyone working overtime? Is there a way to reduce overtime?
- Are there processes that would improve with additional staff?
- Do you have anyone working full-time at a job that could be redesigned to be outsourced or handled by a part-timer?
A staffing review doesn't mean you are "looking to get rid of anyone;" it's part of a regular assessment of your business needs.
Tip #2 Employee Salaries
Recruiting and retaining staff is exceptionally difficult right now, and physicians are paying more than ever to attract and keep top talent. While the average practice has had to increase base pay, you should assess how your pay rates compare to other employers in the area and create salary ranges for your positions. There is a fine line between staying competitive and overpaying.
Tip #3 Track Expenses
Tracking expenses helps you create budgets, take advantage of tax deductions, manage and improve cash flow, identify cost-saving opportunities and compare your practice to industry benchmarks. To easily track expenses, you should have policies in place, such as:
- Approved Vendors
- Ordering/Receiving Inventory
- Bill Payment and Tracking
- New Item Requests
- Budget Variance
Tip #4 Vendor Management
A key piece of successful practice management is managing vendors. Proper controls here allow a practice to reduce costs and maintain excellent service. Every practice should keep a list of vendors that outlines service categories, contacts, contract expiration dates or specific terms. This log is a living document that should be updated in real-time as representatives and vendors change.
Conduct a vendor review and analysis every one to three years. Each vendor should be reviewed to assess service levels, billing accuracy and cost compared to similar vendors.
Tip #5 Understand ROI
Tracking Return on Investment (ROI) helps you evaluate if what you're doing makes sense. One of the biggest opportunities for improvement is accurately measuring the ROI of marketing efforts. Vendors routinely approach plastic surgeons about products and services that promise additional volume and revenue, but too often, these vendors don't measure the effectiveness of their services.
A successful practice knows where each patient comes from and how that relates to expenses incurred. Tracking referral sources and leads significantly impacts a physician or manager's ability to make business decisions that determine a practice's financial success.
PS2 can conduct a detailed financial analysis to help you understand practice expenses, how you compare to the industry standard and cost-saving opportunities. Click here to learn more.