• linkedin
  • Increase Font
  • Sharebar

    How to use a budget to boost practice performance

     

    For many small practices, creating a budget is an annual exercise that culminates in a binder that sits on the shelf and collects dust for the remainder of the year. But experts say practices that don't develop and regularly review a budget are missing out on a tool that can provide warning signs of financial trouble and fraud, and help to make large purchases less disruptive to cash flow.

    “If you think of a practice as a living body, the budget is like a vaccine,” says Rick Gundling, CMA, senior vice president for healthcare financial practices for the Healthcare Financial Management Association. “Having one doesn’t mean your practice’s health won’t go off track, but the risks are minimized. And when you check in on a periodic basis, that’s like your financial stethoscope.”

    A solid, regularly reviewed budget sparks conversations between the physician and staff about potential trouble spots within the practice. “It keeps you informed instead of surprised and lets you take action before something becomes a problem,” Gundling says.

    Janet Burns, business manager for University Family Medicine Center, a two-physician primary care practice in Orlando, says the need for budgeting and watching overhead is not always obvious to physicians, because they don’t understand the value they can get from it. “By looking at monthly numbers, I am able to find things that are happening that I otherwise would not be aware of,” she says.

     

    Creating a better budget

    An effective budget does not have to be complicated, but should be designed to match the management style of the physician, or else it won’t be effective experts say. 

    Doctors who prefer high-level overviews with minimal details of the business should work from budgets with those same traits. Doctors who are detail-oriented may be interested in a budget with more line items that show expenses in greater detail, says Cindy Nyberg, CPA, CMPE, chief financial officer and strategic planning consultant for Fulcrum Strategies, a physician consulting firm in Raleigh, North Carolina. For example, medical supplies could be one broad category, or broken down into specific subcategories for greater detail.

    Melissa Lucarelli, MD, a primary care physician in Randolph, Wisconsin, tried a detailed annual budgeting process but didn’t see any return on the time and cost involved in creating it. “For a small practice like mine, I don’t have the luxury of saying, ‘We’ll go into the red this month and make it up next month.’”

    What works for her practice is a simpler accounting review of monthly expenses compared to what the practice has spent in the past. “We are just looking at how much do we have, how much are we getting in and how much do we need to pay each month,” says Lucarelli, a member of the Medical Economics Editorial Advisory Board. “To me, it feels more agile and less stressful.”

    Todd Shryock
    Todd Shryock, contributing author

    0 Comments

    You must be signed in to leave a comment. Registering is fast and free!

    All comments must follow the ModernMedicine Network community rules and terms of use, and will be moderated. ModernMedicine reserves the right to use the comments we receive, in whole or in part,in any medium. See also the Terms of Use, Privacy Policy and Community FAQ.

    • No comments available

    Latest Tweets Follow