27 Aug The Power of Budgeting in Uncertain Times
Without truly understanding the purpose, creating a practice budget can seem like a daunting – or even pointless – project to take on. But think of the difficulties faced by the pediatric practices that did not have a budget when COVID interrupted their business in the Spring of 2020. For that reason, it’s important to understand the purpose and power of budgeting, especially in uncertain times. Here are some top benefits.
Gain Financial Control
I don’t think I’ve ever met a person that enjoys feeling out of control. And when it comes to finances, living even a little out of control can lead to major problems.
- Budgeting keeps everything in check, and puts you in the driver’s seat of your finances.
- Instead of letting your financial life just happen to you, you can take the rains and direct it where you want to go. And the more disciplined you are with your budget, the more your money will behave.
Reduce Financial Stress
I’m going to take a leap of faith here and guess that you don’t enjoy financial stress – or any stress for that matter. The good news is, budgeting can take a lot of the financial worries out of your life.
- Create a plan for your finances each month, and know exactly what you can and can’t spend your money on. You are then eliminating most of that unknown.
- This will help you to feel like you are more in control, which will in turn, reduce a lot of your financial stress.
Help Make Informed Decisions
Easy right? Not always. But having a clear budget plan can help drive these decisions with actual facts.
- See what’s ahead of you – 1 month, or 6 months – this will allow yourself to feel more confident in whatever decision you make for your practice.
Plan for Cash Flow Lumpiness
For most practices, cash flow lumpiness is hard to get a hold of. Some months may have larger than normal influxes of cash while others may have large outflows.
- Being able to account for this will allow you to budget how many patients you may need to pick up that month in order to account for the cash outflow. You don’t want to have a flat revenue forecast if you know your cash flow is lumpy.
- In addition, with low potential visits in Q1 2021 and even Q2 due to the pandemic, you may have to forecast and budget additional revenue to offset some of those fixed costs during that time so come mid-year you begin to see normalized margins.
Identify Wasteful Spending
Identifying (and eliminating) wasteful spending is one of the best ways to increase your margins. Margin is what grows your practice!
Make Investment Decisions
The more you focus on budgeting, the more you will begin to place priority on your financial goals. When you take time each day to track your expenses, reconcile your budget, and make sure you are staying on track, it is like a little reminder to stay focused on what really matters – investing in you, your practice, and your patients!
Grow your Practice
Isn’t the goal to grow your practice and serve more children and families? Having a clear budget and outline for the year can steer the ship in the right direction month after month and provide insights much faster in case a big wave is coming your way. It allows you to see how well you stacked up against your initial plan.
And the Good news? A budget never has to stay the same, in fact I encourage you to reforecast as the months go by.
Pro Tip – A budget should fluctuate and change with the ever-changing environment and be custom to your specific practices needs. Look what happened in 2020. Nobody saw this coming. But having a budget allows you to get ahead of it and stay on top of the wave rather than get wiped out. Last, taking the time to go through the motions and budget the known parental leaves or upcoming bonus payments can very much allow you to gain that Financial Control and ultimately Grow your Practice.
No Margin – No Mission
There are so many moving parts, but once all the hard work and time is done – you have a finished masterpiece. As I mentioned earlier, Margin is what ultimately grows your business, it’s your profit. It’s Profit that allows you to hire more providers or invest in technology, etc. The power of margin is very important.