An accurate, useful budget can help physician owners and medical practice administrators make sound, strategic, and disciplined choices. Unfortunately, too few practices actually take the time to create a meaningful budget, instead seeing the endeavor as a complex, time-consuming process that likely will not be used.
If you’re continually seeing failure at budgeting, the best place to look is usually at the fundamentals. It only takes a fundamental misstep or two to transform a well-planned and well-formed budget into a complete disaster. Budgets should be realistic, flexible, and consistent with practice goals and objectives.
Here are three keys to consider that will point you on the right track toward success as you build your budget:
- Know why you are budgeting. If you’re developing a budget just because someone says it’s a good idea, it probably won’t help very much. Similarly, if you’re just following the steps in a practice finance workbook because it suggests this is a great way to move towards financial success, budgeting won’t help much at all. The reason for budgeting is to help you spend less than you earn. It shows you where your spending weaknesses are and provides the structure for you to get stronger in those areas.
- Be realistic. It’s not going to work if you make huge, unrealistic assumptions right off the bat. Small steps work; big steps result in failure. Operating a practice can be unpredictable at times, and things happen that are out of your control.
- Be flexible. There will usually be moments when you’re learning to budget when you discover that some element of your budget is just not right. It’s not realistic because you forgot about some key piece of information while making your plans, and that means the budget you developed doesn’t really work. Don’t panic. Don’t abandon your plans. Just go back to your plans, make the needed adjustments, and start over again. This is normal, it happens to everyone. It does not mean your budget was a failure at all, it just means it needed to evolve a little bit.
An accurate, useful budget can be a valuable decision-making tool to analyze potential business threats and opportunities and help physician owners and practice administration make sound, strategic, and disciplined choices.
When properly executed, a practice budget will quickly become one of the most valuable resources in a practice’s decision-making toolbox. A proactive, comprehensive budget gives a practice the ability to properly track results, identify areas of concern, and quickly intervene when issues arise.
Contact ABISA, a consultancy specializing in solo and small group practice management. Visit us at ABISALLC.com.