6 Ways to Control Your Private Practice Cash Flow
If a dentist collected $100,000 a month over a 25-year career, $30 million would flow through their checking account. What’s frightening is that many private practice owners still end up broke and in debt.
Whether you’ve been in practice for 25 years or you’re just getting started, controlling your private practice cash flow is a critical part of your business. We coach and train hundreds of doctors each month and have turned around many cash-poor practices. Check out these six ways to get control of your cash flow that you need to implement this year.
#1. Know Where You Stand in these 5 Areas
There are only 5 places where money goes – living, debt, savings, taxes, and giving. You have to pay your taxes and your debts, and you have some amount of living expenses that are a necessity. Many people aren’t able to save all of the time. But most people aren’t even aware of, nor do they track, all five of these areas at the same time. Most never even get around to giving, which is really what provides the most joy, and some never eliminate debt, which – once eliminated – allows you to allocate more money to the other areas. You need to be aware of and track each of these areas consistently and forever. This is a crucial component to getting a handle on your private practice cash flow.
#2. Eliminate Debt
Debt is not bad when it is used strategically, but the excessive use and dependency on debt is not a good thing. Debt is part of owning a practice and is necessary for growth. Most private practice owners will have to acquire debt at some point in order to build their practice. The key to taking on debt is to set a payoff date and layout a payoff plan before you take any debt on. Make this process an automatic payment so that you are never tempted to defer payment.
#3. Never Delegate Your Checkbook
We see a lot of doctors turn their entire practice financials over to their office manager, only to wake up one day and realize that they don’t have any money. This doesn’t mean you have to handle your finances all by yourself. It simply means you need to delegate with controls. Someone else can prepare all the checks to be signed, but you need to physically see them and sign them. Someone else can balance the checkbook but they shouldn’t have unrestricted access to any online accounts.
#4. Take Responsibility for Providing Value over Collecting Money
Have you ever heard the quote by Henry Ford, “A business that makes nothing but money is a poor business?” If you really focus on giving more value to your patients than what they pay you, you will always be providing great service. This will set you apart from any would-be competitors and win you customers and referrals for life. Great service doesn’t just make the patient feel good – it equals reward in the form of increased revenue. There’s nothing wrong with making a lot of money if you are taking great care of your patients and giving them what they need.
#5. Move to a Performance-based Incentive Model for Your Team
We are huge proponents of incentivizing team members for many reasons, but one of the biggest reasons is because performance-based incentives keep fixed costs at a minimum while still growing your practice. If everyone on your team is paid a high base salary, that increases your guaranteed overhead. The typical office has a payroll that is made up of around 95% guaranteed payroll, which is a fixed cost, and only 5% incentives, which is a variable cost. The ideal office has less than 70% guaranteed payroll and 30% or more incentives. This doesn’t mean you should become a cheapskate or lose great people with low pay. It just means that your team gets paid out of the profit they bring the practice. We teach exactly how to do this in a win-win way in our Gold Membership program. Click here to learn more.
#6. Never Stop Paying Attention
Private practice cash flow problems occur when you don’t pay attention. If you take your eye off the things that affect your cash flow – payroll, payables, daily revenue – you will end up simply spending more money than you make. Enormous amounts of money can flow through a checking account with little to none ever moving over to the doctor’s personal income if you are not always paying attention to what is coming in and what is going out. You should also be looking for any “leaks” in your revenue streams. We have found that thousands of doctors have a blind spot in their practice, and they don’t even know about the $10,000 – $50,000 leak in their revenue it is causing for them every month. Don’t let this be you! Find out if you have a blind spot in your revenue by clicking here.
These 6 ways to control your private practice cash flow will definitely help you, but if you really want to learn how to make more money in your practice now or sell for maximum value in the next 3-5 years, come to our semi-private event in May with Jay Geier! We have heightened safety protocols that will keep you socially distanced and healthy while you’re with us. Visit www.JayGeierEvents.com to learn more about this event and all the health and safety measures we are taking!