Financials

This week, a friend posed a simple question, "What do you mean when you offer clients financial assistance?" Well, the answer is both simple and complex. First, let me tell you what it isn't. It is not related to personal finance, nor, is it an alternative to your accountant. Instead, financial services are related to the everyday "operations" of the practice. In short, financial services entail evaluating any number of expense ratios to aid the practice in better financial management.

For example, every business, including medical practices, has marketing and advertising expenses. Yet most practices have not real idea as to what constitutes the proper marketing and advertising expense budget. The answer lies within established benchmark values. In general, medical practices should budget 1-5% of net income for their marketing and advertising budget.

There are multiple metrics a practice can use to evaluate their current financial performance; yet looking at one metric is not advisable. My experience demonstrates that these benchmark should be viewed in the context of the practice, and, how one metric relates to another. In our marketing and advertising example, a practice could spend more or less depending on a marketing initiatives, how well known the practice is (or isn't) or the general desire of the owner. I know a doctor who insists on having the most aesthetically pleasing office in town. While he may be a little "over the top" in decor, he simply made the choice not based on financial sense, but instead, personal desire. A good consultant would not criticize this doctor's choice, but instead, simply point out the financial consequences of the decision.

Knowing and understanding these metrics is the first step in financial management. If you have not done so, please consider benchmarking your financials as compared to prior years. By doing so, you can easily see trends you may choose to ameliorate.