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Tips to Get Ahead of the New Year

With a new year comes new fees (see our article on page two) and, just as important, a new budget. If you haven’t already spent time planning for 2014, it is imperative that you do so now. While only about 10% of doctors nationwide have a written practice budget, their practice profits are dramatically higher than the remaining 90% who do not. Here are a few tips to get you started planning for 2014:

Marketing
For marketing, the amount of time, energy and money devoted to these efforts should be inversely proportional to the level of your optimal capacity. Looking back and ahead, many doctors have reported the previous years’ declines in new patients as turning into a positive. Whether your practice has not yet experienced a turnaround, or you’re planning to maintain growth, investing in marketing is imperative.

It is suggested that if you are operating at 80-90% of optimal capacity, 2-3% of collections should be devoted to marketing. If you are operating at 70-80% capacity, 3-4% of practice collections should be spent. Finally, if you are operating below 70% of optimal capacity, you should be spending 4-6% of collections, if not more, on marketing in order to boost practice production.

Fee Schedule
In addition to finding ways to attract new patients, you must also review your fee schedule and determine what level you will set your fees for 2014, particularly because this drives collections. Our second article of this newsletter addresses this topic in depth.

Overhead
From here, overhead expenses must be reviewed on a line-by-line basis. Your 2013 expenses should be reviewed against 2012 results to determine areas of significant increase. Looking ahead to 2014, expenses in every category should be scrutinized for possible savings. It is also important to monitor expenses to ensure they stay within an acceptable range.

Staffing
You may also consider changes in practice staffing and compensation. In practices that are down, this may involve laying off an employee, or replacing a full-time employee with a part-time employee. In practices that are growing, it is important to grow responsibly and not overstaff. Moreover, you have  probably already made modifications in staff compensation (the highest portion of your overhead), but if not, or if making considerations later in the year, be sure to consult our recent article on staff compensation.

Procedure Mix
Finally, changes in your production and procedure mix should be reviewed to determine how they may impact 2014 lab and supply expenses. Note that these costs increase every year, which is another justification for an annual increase in your fees.

Once the income forecast has been completed and the overhead expense percentages have been converted into dollars, your practice budget can be finalized. You can then determine the optimum way to distribute the projected practice profits among salary, dividends (S-Corporations), retirement plan contributions, fringe benefits and professional expenses.

Your practice budget is vital for the ongoing success and health of your business. A little time now will save stress, and dollars, throughout the year.

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