Progress Notes Issue 66: Do you know your Numbers?
NP Business Tip: Do you know your Numbers?
When it comes to your clinical practice, you know that a lab report with a potassium reading of 2.9 indicates that the patient is heading toward trouble unless the proper medical intervention occurs.
When it comes to your practice, do you know what numbers to rely on to tell you how your business is doing? Do you know if you are even collecting the proper information so that you can assess the financial health of your business?
If your answer is a quiet "No", rest assured you are not alone. While this may not be much comfort to you, it is true: most business owners don't know how to assess the health of their business, or at best only have a vague idea.
Small companies often run their business from their checkbook. They assume that as long as there is enough money in the account the business is doing alright. So, what is wrong with this assumption? After all, don't we do the same in our personal lives?
While it may be just fine to rely on our checkbook to handle and manage our personal finances, business finances differ in a number of ways. A business may have to track employment taxes, inventory, general business expenses and marketing costs, to name just a few. Unless your business is a very simple one, it is best to utilize some type of book keeping or accounting program to help you manage the numbers.
While this article can only scratch the surface, here are a number of points to keep in mind to make sure you are collecting the proper information (because we all know, garbage in means garbage out).
- Use a dedicated credit card(s) for your business. Don't mix business and personal accounts and credit cards to pay for business expenses. Aside from being confusing, it is easy to forget and miss out on using all business deductions.
- Make sure that all your business data gets recorded on a regular basis and that all accounts get reconciled as scheduled. The sooner any discrepancies are discovered, the "easier" it is to make adjustments and corrections.
- Know and closely monitor your practice expenses. Keeping your overhead low will affect your bottom line.
- Know and monitor your accounts receivables. Make sure that your AR is worked regularly, based on a predetermined schedule.
- Run and review the financial data of your office, your "financial health record", on a regular basis.
Even though most of us may not regard this as the most exciting topic, we believe that discussing financial issues is essential for practice owners. Watch for more financial topics in future issues of Progress Notes.
©2010, Johanna M Hofmann, MBA