Practices that don’t develop and regularly review a budget are missing out on a tool that can provide warning signs of financial trouble.
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…