3 Daily Financial Strategies for Your Physician Practice
The finances of your physician practice should be more than numbers haphazardly scrawled on tax documents–they are the story of your success. But it takes daily action to have pristine bookkeeping. We tell our clients: run your business like you’re preparing to sell it. Keep your costs of goods sold, fixed costs, cash flow, industry-standard comparisons, and future plans as up to speed as possible. Thus, when tax season or a merger & acquisition opportunity comes around, you will be prepared to share the story of your DSO or MSO.
You can enlist the help of your teammates or a dental or medispa consulting group to accomplish these daily financial strategies. As Henry Ford once said, “If everyone is moving forward together, then success takes care of itself.” With you and your team working in daily synchrony, your practice’s finances will lead you down the road to your goals. Here are three financial strategies you should implement daily:
1. Review KPIs for Your Physician Practice
Key Performance Indicators (KPIs) are a roadmap to your MSO or DSO’s success. Reviewing your KPIs daily (or at least, weekly) allows you as the business owner to make informed decisions and foster accountability among your team. Skytale Group can help you identify the key metrics that drive and predict revenue. Pay special attention to the following measurements to keep your business on the right trajectory:
Number of new patients.
Track the total number of new patients each month to understand growth and opportunities. Or, get a head start by tracking every day. Is your growth marketing spend bringing a return? By what percentage do you hope to grow in new patients this year, and are you on track to reach that goal?
Productivity per operatory.
The value of an operatory, an individual room that hosts your dental or medical services, drives your business’s capacity. According to research by the Journal of Public Health Industry, increased productivity by dentists correlates to efficiency. Costs per output reduce with scale. Thus, more dental services can be offered with the same level of dentist workforce. This translates to med spas, as well.
You can also calculate your capacity percentage to identify scheduling and staffing opportunities for growth and efficiency. Divide hours worked by each provider by available hours by each provider. Monitor these numbers daily, weekly, and monthly to help providers maximize their productivity.
Ratio of employee expenses to revenue generated.
Compare your business’ expenses for employees to the actual revenue you generate. Is this ratio sustainable? Does it align with your financial goals? A day-by-day and month-by-month comparison of this ratio can demonstrate in the long run whether your employee costs are producing the value needed to grow your DSO or MSO. This format allows you to understand whether you’re spending too much on payroll or too little on marketing while allowing you to compare and measure short or long-term progress.
Once you commit to tracking KPIs daily, weekly, and monthly, you need a system to track them. We call it a Scorecard–a spreadsheet that tracks KPIs by month and by provider. Delegate team members who will track and report KPIs on a predetermined schedule.
Harvard Business Review offers a reminder that’s especially relevant to a physician practice: KPIs are about relationships. Your providers are the client-facing employees, and ultimately, the ones who offer value to the patient. As the business owner, you can use KPIs to motivate employees. But employees who interact with KPIs can also track how well YOU are delivering on your promises to them. With accountability and historical records, the real value is generated, and everybody wins.
2. Track Your Physician Practice’s Expenses
Your practice’s budget is one of the simplest tools that DSO consultants and MSO consultants implement to get your practice on its way to meeting financial goals. And a critical part of the equation is those expense line items. Tracking your expenses helps you understand two factors:
Do I have enough money?
Am I making a profit?
Some expenses carry over each month, like rent and payroll. The expenses you want to track daily may include costs of supplies, equipment, training, marketing, etc. These costs ultimately detract from your profit. A daily look at your expenses will lead to a better understanding of how your revenue is being spent. And once your expenses are mapped out, you can anticipate what funds remain to invest in your business’s growth.
After tracking your expenses daily, look at your profit to determine your cash flow. What value came into the practice, and what came out? Understanding how your company makes a profit will impact day-to-day activity. You can work with financial consulting services or your CFO to create a dashboard for your office that monitors your P&L.
3. Check In With Your Financial Modeling Consultant
Enlisting financial consulting services from a medispa consulting group like Skytale turns complex numbers into a roadmap to success. We check in with clients daily and weekly to help ensure their KPIs, expenses, and Scorecard are on track. A financial modeling consultant offers a fresh set of eyes to help you identify pain points and unseen opportunities. There are a few things you should look for in DSO consultants or MSO consultants:
- Do they understand your vision?
- Can they create a financial roadmap?
- How will they measure your progress?
- How long do their client engagements usually last?
In particular, growth strategy consulting keeps a pulse on the industry to help you calculate your value in the market. An M&A advisory can guide you through the process of cleaning up your finances for buyers, going to market, accepting LOIs, and choosing a private equity firm to merge with. This process takes daily upkeep, and sales move fast. So having outside growth strategy consulting from a company like Skytale makes your life easier and ensures the best deal for your business.
Skytale Group can provide a physician practice the roadmap you need to build out DSOs or MSOs, grow existing practices, centralize services, expand your footprint through acquisitions or start-ups, and position yourself for the exit. We assist with the daily strategies and eventually teach you to fully execute your vision for success. Want to learn more about working with us? Get in touch today!