As a doctor, your deepest desire is to help people live healthy lives. In order to do that, you also need skills to keep your employees paid, your clients happy, and your business up and running.
But in between seeing patients and making sure they’re feeling better, you just don’t have the time to master everything you need to know about running your business.
We have good news: you only need the time it takes to read this blog!
At Every Single Bean, we know that in order to have a successful practice, you need to also have a successful business. And the basics of managing your business are pretty simple if you know what to look out for and how to plan for success.
In this blog, we’ll cover basic business coaching for doctors—everything you need to know to run a practice that is mindful of profit, expenses, and budgets, all while providing quality care to your patients. Think of this as a 101 course for doctors on how to run their business. You won’t become an expert just by reading this blog, but all you really need are these simple tips to get you started on the right path.
Understanding Your Finances: Terms to Know
You don’t need an accounting degree to understand the ins and outs of your business’ finances. With a little bit of business coaching we’ve designed for doctors like you, we can get you going on the right foot. Let’s first take a look at a few key terms you should know:
Revenue vs. Profit
First, we should clarify the difference between revenue and profit. They might sound the same, but there is a significant difference.
- Revenue is the total money your company brings in before taxes and other expenses (also called gross profit.)
- Profit is the actual money your business keeps after taxes and other expenses (also called net profit.)
When you think about revenue vs. profit, most people think in terms of taking expenses and taxes out of your revenue, with the final result being profits. At Every Single Bean, we flip that. We’ve found that the Profit First approach optimizes your profits and in turn minimizes your expenses.
A Crash Course on Profit First
We love the Profit First method so much here at Every Single Bean that we want to teach it to you! Once it makes sense to you, it can make managing your finances so much easier.
Here is a quick overview of the Profit First model, first designed by Mike Michalowiz in his book Profit First: Transform Your Business from A Cash-Eating Monster to a Money Making Machine.
The traditional approach to making a profit as a business is expenses subtracted from sales equals profit.
The Profit First approach subtracts profits from sales, resulting in expenses.
Let’s break it down in 60 seconds:
When you use the Profit First method, your priorities change from taking care of expenses first to pocketing the same amount of money each month and using the rest for expenses. You get paid more—and your expenses shrink!
Using the Profit First method effectively involves consistency and looking ahead. You can find more practical tips for implementing Profit First into your business here.
The Next Step: Keeping Track of Your Finances
Now that you have a few key terms under your belt, let’s explore how to keep track of your finances in a way that’s effective and doesn’t cause you more hassle in your day-to-day as a doctor and business owner.
What to Monitor
The best way to understand your business’ finances is to keep frequent tabs on them. Never let a day go by without checking your bank accounts. Some aspects you should keep a close eye on include:
- Expenses: Keep track of how much money is going out, including taxes, payroll, rent and utilities, and other administrative costs (printer paper doesn’t pay for itself.)
- Revenue: Keep track of how much money is coming in, but remember revenue is your gross profit before taxes and other expenses.
- Profits: Have an understanding of exactly how much money you’re pocketing each month after taxes and expenses are said and done.
Tools for Your Business
You may be thinking, “I have a practice to run and patients to treat. I don’t have enough hours in the day to do anything else.” We understand that adding one more thing to your plate can be stressful. Thankfully, there are great tools out there that can help you manage your business’ money.
Investing in payroll software is a good strategy for your business. When you have the right software, your employees will get paid their share and the proper payroll taxes (like Medicare and other employer-paid taxes) will be deducted, because nobody wants an IRS audit! At Every Single Bean, we use Gusto, but there is plenty of payroll software out there that’s worth your investment.
We recommend doctors we work with have a working knowledge of Excel or other spreadsheet software. Not only does it keep data organized, but you can also include rules and equations to keep it up to date with little to no hassle.
Very few people like to budget. And when you already have a personal budget, it can be hard to keep track of a business budget on top of that. Here’s our advice for keeping a good budget using the Profit First method of managing your revenue and expenses.
How Profit First Helps Your Budget
We’ve just barely scratched the surface with Profit First, but we wanted to take a moment to emphasize how important Profit First can be when it comes to your budget. When done right, Profit First can help minimize expenses when you use money left over instead of the bulk of your revenue. One of the ways you can keep track of this is to have separate bank accounts to keep your money organized:
- Owner’s pay
- Operating expenses
Then, be sure to track allocation percentages. Here are the ratios recommended by Profit First:
- Profit (5%)
- Taxes (15%)
- Operating expenses (30%)
- Owner’s pay (50%)
Using Profit First when you set up a budget can equip you for success as you grow your business and increase your revenue.
Now let’s get into the fun part of finances—getting paid. Unfortunately, getting paid involves a less-sexy step—sending out bills. If you’re a naturopathic doctor, you’re probably running a cash-only practice, and if you’re not, you probably should.
Why Cash-Only is King
While insurance typically makes it easier for patients to pay for their treatment, working with insurance companies can also prevent patients from getting the care they need. As a naturopathic doctor, you’re concerned with getting your patient well again. What you don’t need is for your patient to wait months on an insurance claim just to find out their plan won’t cover their treatment.
Cash-only might feel strange to new patients, especially when they have great insurance that they pay into. But the fact is, a cash-only practice can offer more types of treatment to its patients. Read more about cash-only practices here.
Here are a few tips to make cash-only easier on your patients:
- Create a written policy and have each patient read and sign it.
- Have a simple billing process in place that’s easy for patients to understand and your staff to use.
- Post reminders that payment is due at the time of service in your office.
- Train your staff to answer patient questions and concerns clearly and politely.
Making Room for Error
The risk of a cash-only clinic is that your patient might not pay on time or won’t be able to pay at the time of service. Take this into account in your budget so you’re not surprised by late payments. Some clinics will also offer payment plans so it’s easier for patients to pay back. And remember, as a cash-only practice, you can also accept credit and debit cards, HSA funds, and other means of payment.
When you earn revenue, it’s important that you give your employees—and yourself—the pay you deserve. But that can be hard to do when you’re also trying to treat patients and navigate the other ins and outs of owning a business. Payroll can seem straightforward, but when you factor in taxes, benefits, and other factors, it can get complicated quickly.
At Every Single Bean, we recommend outsourcing your payroll. That gives you more time with your staff and patients—the heartbeat of your business. A payroll expert can make sure you and your employees are compensated fairly and that payroll is compliant with federal and state taxes.
If you don’t want to outsource your payroll, here’s what else you can do to make payroll easier:
- Have a single payroll account. Don’t draw payroll out of your normal expense account. Instead, keep a separate account that you draw from each pay period, so you have your expense account for just that—other expenses that may arise.
- When it comes to pay periods, less is more. While payday is always a great feeling, having too many pay periods per month can be a hassle. Payroll is no small task, and it takes a significant amount of time.
Read our blog on how to make payroll easier for more tips and tricks.
Other Business Areas: Bookkeeping
Now that we’ve covered the basics of making money, saving money, and spending money as a business owner, we can look at the day-to-day of managing your business’ finances.
Here are a few tips to help you get started.
- Separate your business accounts from your personal accounts. This simply comes down to knowing where your money is and where it’s going. Separating your business account helps you be more intentional about your own salary, have a better idea of business cash flow, and can help build credit for your business.
- Schedule regular checkups. Now we’re speaking your language! Just like regular check-ups keep your patients healthy, check-ups on your accounts, spending, and saving keeps your books looking healthy.
- Know your taxes. Have a working understanding of taxes, including the federal tax deadline, what kind of business you are registered as, how your employees are classified, and reimbursable expenses.
- Plan for the unexpected. If the last few years taught us anything, it’s to be prepared for anything. Set aside an emergency fund that you do not touch unless an emergency arises (unexpected closures, equipment repairs, economic downturn, etc.)
Should I Outsource My Bookkeeping?
Outsourcing your bookkeeping is a great option if you don’t feel comfortable having yourself or a member of your team do it for you. Outsourced or even cloud-based accounting can help you focus on your practice while still knowing your employees and bills are getting paid on time. Find a partner like Every Single Bean to manage your bookkeeping, and you’ll have one less business hassle to worry about every day.
Read more bookkeeping tips here.
Other Business Areas: Operations
You might not think operations immediately ties in with what we’ve talked about so far, but operations are actually the machine that keeps everything running smoothly, from the machinery in your office to the coffeemaker in the breakroom. The more efficient your operations are, the more smoothly your business runs, and the more profit you’ll have in your pocket.
Here are a few helpful tools that can streamline the daily operations of your business while keeping employees and patients happy.
- Fielding phone calls. An automated phone service can give patients access to you without giving away your personal phone number. You can also protect your off-hours by shutting off notifications from an automated phone number.
- Email hosting. An email domain will elevate your professionalism among your patients when they see the name of your practice in the email address, not just @gmail.com or @yahoo.com.
- Chatbot. While they may seem impersonal, installing a chatbot on your website can help answer curious patients’ questions and point people in the right direction. A chatbot can even connect someone to a real representative.
- Electronic medical record. Gone are the days of filing cabinets full of loose paper from a patient’s many previous doctors. Electronic medical records (EMR) keep all the information in one, consolidated place, including medical history, immunizations, and post-visit summaries.
- Practice management software. Software that manages appointment scheduling, billing, and staffing can take a load off your employees in their day-to-day work.
Learn more about how these tools can grow your practice here.
Assessing the Health of Your Business
Assessing the health of your business is similar to assessing the health of your patients: it takes time and understanding to do it well. The better you know your expenses, profits, and everything in between, the better you’ll be able to track how you’re doing.
Using the Profit First method, you will typically know the amounts you need to pay for expenses well in advance. This helps you do the math to figure out what expenses you need to cut back on, how many patients you need to cover costs, or how much money you need on reserve before you hire someone new on your team.
How to Hone Your Financial Skills
Before we wrap up this blog post, we wanted to offer a few more tips on how to hone your financial skills, even as a doctor. You don’t have to have a master’s in accounting to run your business—just an understanding of how much you’re making, how much you’re spending, and how to plan for the future.
How to Succeed in Business Every Day
- Have a working knowledge of Excel. Spreadsheets are your friend when it comes to managing finances. It will keep your numbers neat and tidy and has automatic functions that make calculations easy.
- Understand algebra. No need for a graphing calculator, but knowing the fundamentals of algebra like dividing fractions is vital for running a business.
- Know where your money is going. This means having a budget and giving each dollar you make a job—save, spend, or otherwise.
- Know what the numbers mean. Understand that financial data is a reflection of your business—that means you need to monitor revenue vs. expenses to ensure you have enough money at the end of each month.
- Consistently report data. Regularly report data, including income and expenses, so you always know the financial health of your business.
- Consistently review data. Don’t let your Excel spreadsheet go unopened for too long. Monitor the data, look for trends and find opportunities to either cut back or invest.
- Forecast. Predicting the future will never be foolproof, but if you see trends in your data, you should also be able to determine and define where your business is going, and course correct if needed.
- Budget. A budget helps you visualize where your money is going. (Don’t forget the Profit First approach!)
- Measure progress. Establish metrics like monthly income, total expenses, or number of patients to see how your business is (or isn’t) growing.
Read our blog on the 9 essential finance skills to learn more.
Good Practice for Your Practice
This blog covered some basic business coaching for doctors like you. It doesn’t require any special certification or degree, but it can still be a drain on your time and energy. If you want help, enlist a master. Dan, the founder of Every Single Bean, is a Master Certified Profit-First Professional and can help your practice do what it does best—care for people. We’ll take care of the rest. Learn more about how Every Single Bean can help you succeed today.