Five Financial Practice Tips
By Lance Moore, James Steele and Matt Kafka
Start 2021 out by ensuring your financial house is in order. Now is the time to make sure the financial success of your practice is not compromised and will remain strong. Here are some key considerations for your business.
1. Don’t underfund your business
Plan on having at least three months of operating funds available as a cushion. Running out of money is the most common reason a new business fails. If you are self-funding, understand that you should have saved enough before you started the business and not depend on your projected sales revenue to get you through the initial months. If you are buying a business, remember that you will likely have bills and payroll due before your cash flow turns positive. If you have a mature business ensure that you build a cash reserve for challenging times. Understand funding is a core competency of the Phonak Corporate Development Department and we stand poised to help you with your financial needs.
2. Manage your accounts receivable (AR) so you don’t have to worry about your accounts payable (AP)
Uncollected revenue (accounts receivable) can look like a savings account on your balance sheet, but it can choke out your cash flow, crippling your ability to pay your bills (accounts payable). If you have built your business model around extended trials and low-pressure collections, you will need to have a lot more cash to handle your expenses. If you currently allow patients to leave your office without paying, at least consider charging them a down payment equal to what the device cost your business and collect the balance when their trial is complete.
Another strategy is to utilize party financing. You will often get paid in less than 30 days and the patients don’t start paying until the sale is complete.
It is worth noting that third party reimbursements and insurance claims can be slow payors and need to be actively managed. Someone on your staff should be actively pursuing payments. If you are a solo practitioner, you need to block off some time every week, or at least twice a month, to monitor and chase these funds. You have earned and need these dollars – go get them!
3. Resist the temptation to spend your cash
Invest in your practice as funds become available. New equipment, remodels, expansion and new signage can be important and feel satisfying, but they should be purchased when you have ample cash reserves. Sometimes, used equipment and a personal paint job will do the trick. Adding a new office and additional employees should not come at the risk of damaging your cash flow at your current office. In lieu of directly funding these expenditures, consider reaching out to your Sonova team for assistance. Your Sonova Corporate Development team can help you stretch your dollar.
4. Hire a professional financial advisor/accountant
No matter the size of your business, we recommend you have an accountant/bookkeeper that understands your business model and can help you keep accurate records. They can help you understand your cash flow, prepare your taxes, and ensure you are staying within the legal accounting standards for your business. Audits, tax liabilities and legal proceedings are never good for your bottom line.
5. Plan, monitor and react
None of us can predict what will happen next month, let alone next year. A complete business plan has established Key Performance Indicators (KPI). If you set them at the beginning of the year, make sure you revisit them every week, at minimum, so you can change behaviors if they need adjustment. Common KPI’s revolve around close rates, ASP, third party attendance, private pay mix, unit goals, etc. Some owners manage their KPI’s daily, reviewing them with their staff each morning. The things on top of mind tend to get accomplished. Having the ability to adjust your goals or behaviors to meet your financial needs will set you apart from your peers.
If you would like more information or have a need for loans and funding, please contact your Phonak Representative for more information