Every business needs solid financial systems, and a medical business is no different.
You can benefit from our years of expertise in helping Doctors to develop appropriate support systems for your practice.
Most importantly - how should you plan your finances?
Below is an extract from an article written by us, published in a medical journal, which gives you a flavour of some of the ways we might work with you and your management team.
Business Planning for Doctors
Failing to plan? Are you planning to fail?
At difficult times of budgetary constraint like these, it is inconceivable that so many GP surgeries do not prepare Business Plans to be agreed in advance with their partners and teams.
Preparing a Business Plan is quite simple - it is the implementation that is hard.
You might be surprised, but I advocate the following method of planning for the year ahead - you must adopt the same methods as for strategic planning for a commercial business, i.e. using What, Why, How, Who, Where, and When:
First - What? - Decide what goals and objectives you want to achieve for the year ahead.
Famous management guru Stephen Covey, who wrote best selling book “7 Habits of highly effective people” emphasised the importance of “starting with the end in mind” to have any chance of being effective.
If you do not decide in advance what exactly you are tying to achieve in the year ahead, how will you know when you have got there?
In my experience, too few medical businesses plan ahead; they just appear to hope to do better than last year (whatever better means?)
Too many doctors seem to be happy leaving the planning for “others” to do, preferring to get stuck into usual daily and monthly activity, what Michael Gerber (Author of E-Myth for Doctors) refers to as the “tyranny of routine” – they prefer to get stuck into the “how” before having decided “what” they want to actually achieve in the year ahead.
Lets face it, very few even prepare a detailed financial budget – which is part of the reason why claims get missed by the management team.
Free Financial Planning Model for our clients (Ask us for a copy today)
In my firm, we have a model we recommend, and the first figure we ask to be entered is the Profit the partners feel they should be generating for the work they do – that figure should be the first figure that goes onto any budget – NOT the income to be generated by the surgery.
Second = Why? – Be very clear why you have chosen those goals or that figure for profit – is it realistic, and will all the partners be committed enough, wanting the profit hard enough, to make it happen?
If not, change it – this is meant to be a real life task, not simply a theoretical exercise to be ignored once it has been put to screen or paper.
Third - How? - Only once all the partners and team are clear and happy about all about your “what” and “why”, can you decide “how” you are going to make that desired outcome really happen.
This is fundamentally different to what most surgeries who plan (in my experience) actually do i.e. they list out their income and expenditure that they think might happen and then see what profit is left for them.
Psychologically, there is a big difference in the two methods – my way has been proven many times to work. It helps partners focus on what they have to do to achieve their desired profit – which after all, is the main reason why they should be doing the exercise each year.
Finally - The “who”, “where”, and “when” are merely subsets of “how” - so back to the “How”
HOW? - Having listed your desired profit, break that down into quarterly figures and then monthly, if your practice manager is willing and able to monitor the results that frequently (which I believe they should).
Having done that, now summarise quarterly/monthly the totals under each “overhead expense category” (e.g. wages, repairs, light and heat etc) that you expect to be incurring, provided nothing unexpected happens in the year ahead.
Now add in the expenditure on non-expense items like new equipment you hope to buy, that will not be paid for by the NHS, together with any loan repayments you need to make.
Working backwards, by adding the figure for the profit you require to the total of the expenses and other payments you think you are likely to have to cover, you will now have a figure for the income you need to generate to make that profit manifest itself.
This income should be split down into appropriate categories of income that you would normally expect to receive (e.g. global sum, Rent, QOF, PBC, DES and LES) and this will then leave any unallocated balance of income to be generated from new sources of income, or increased income from existing sources.
If you need to generate more income, define where you are most likely to generate it and identify if you will incur any more costs in doing so.
Failing that, you will have to identify what costs can be reduced to achieve that all important profit figure the partners require and deserve.
Now decide “who” in your team will help and be responsible “where” and “when” for implementing the strategies to make the plan come true.
Team - Do you need to change the make up of your team to be able to achieve your objectives – easier said than done with today’s increasingly inflexible employment laws? - Include any desired changes in your plan.
Finance - will you need any temporary financial assistance from your bank, eg to finance an extension or refurbishments? If so, include it in your plan.
Implementation - There’s your plan – now the hard bit – to implement that plan effectively, you will need to make sure you have the necessary systems to monitor “actual” results monthly / quarterly in each category, so that timely management decisions can be made to address any drifting from plan.
Finally, all GPs should be paying attention to their own personal financial planning, including tax planning. In order to help you do this, we have produced for doctors a detailed 70-point planning checklist, and also a Personal Balance Sheet planning tool.
Mike Ogilvie is a chartered accountant in Eastbourne with X5 Accountants, specialist medical accountants and members of AISMA – email him today (email@example.com) for your free 5 Year Forecasting model, your free Personal Balance Sheet planning tool and also for our 70-point tax planning checklist for Doctors.