Many successful medical practice administrators, like Debra Oselett, know that one of the core components to running a profitable medical office or business is to be superior at budgeting. Budgets serve as a measurement for doctors and staff to evaluate financial performance and identify operational concerns that need further attention.
One method of medical office budgeting that emphasizes clarity is the process of separating the variable revenues, those streams that change month to month, from the fixed revenues, those that are more consistent on a monthly basis. The office administrator can look at all large revenue streams and group them initially in larger categories; eventually, these larger categories can be dispersed into smaller, more specifically labeled groups. The administrator will look closely at the revenue streams and examine the adjustments to revenue in particular, due to the regularity of collecting much less than the amount charged to insurance companies. Additionally, this step is also one that addresses any refunds credited to clients.
The second aspect of this budgeting approach is the evaluation and record of expenses. Keeping track of expenses can be difficult, but is an important part of proper budgeting. Knowing how much is being spent helps you to learn where it is being done so in excess. An administrator for example, will divide the expenses into variable and fixed sections. Typically, the difference between these two categories can be determined by examining what expenses would terminate if the medical office were to close for a month. Expenses involving staff (clinical ad office), utilities, maintenance, and office supplies would therefore count as variable expenses.
Fixed expenses include those that would be unchanged if a medical office were to close for thirty days. These expenses many include advertising expenses, loan repayments, fixed management salaries, subscriptions or dues, and lease payments. The breakdown of variable and fixed expenses will vary from medical practice to medical practice.
The next step involves that office administrator defining the net income, or the total expenses subtracted from the total revenues. The net income is what determines the profitability of the medical practice or office.
Office administrators like Debra Oselett who desire a successful, profitable office and practice always create a budget, follow it, but also revisit and revise it if necessary every year. Forecasting revenue and expenses can also help a savvy office administrator better prepare and create the yearly office budget. Administrators often look to technological platforms to make the process of recording and using revenue and expense information more readily and easily. Also, monitoring the budget of a frequent basis can keep the administrator apprised to how close or far the practice is from the forecasted budget. Finally, many administrators also keep a line of credit available to help alleviate any unexpected cash flow issues.