In this present time where the competition for various industries gets stiffer, even in the medical field, it is imperative that practitioners are aware and knowledgeable of effective cost management and control.
Cost management is the continuous process of planning, monitoring, and controlling the cost of operations. This is vital in order to maintain financial control over your business activities. This process also entails forecasting and/or budgeting for major expenditures so you can plan ahead.
To focus on the important areas, you should look at your main cost centers. These are the units within your business in which costs are usually recorded. Here are four cost centers to which you should monitor and control:
Running a medical clinic is not easy. No one is expected to be able to do all the job on his/her own; therefore, a big chunk of your costs is attributed to personnel. It is important that the personnel you hire meets your standards and possesses the skills and qualifications needed for your business. The important thing is to establish performance measures, evaluate performance based on established measures, and provide feedback as appropriate to ensure that each individual contributes to the business objectives.
One more thing that takes a huge chunk out of your financial spend is your supplies. Supplies are used on a daily basis in your business. Managing this cost may actually be trickier as there are more factors to consider. Price is not the only factor, quality also comes into play, as well as the storage. You should always keep an adequate amount of supplies in order for you to operate your practice smoothly and efficiently. Below are some of the best practices to consider on your supply/inventory management:
o Monitor usage based on certain parameters (e.g. number patients seen, average monthly usage, etc.).
o Based on historical usage, establish the most economical order quantity and reordering level (the supply quantity level that will trigger you to reorder).
o Monitor the average supplies expense monthly as a percentage of gross receipts. Determine if there are significant fluctuations and investigate further. This may be due to several factors such as wastage, improper usage, etc.
o At least on an annual basis (if possible), negotiate pricing or better payment terms with your preferred vendors using the volume of purchase and payment performance you have made from the previous year/s as your leverage.
• Facilities and Equipment
First of all, you cannot operate your medical practice if you do not have the facility to do your business in. Accordingly, you cannot operate a medical facility properly if you lack the necessary equipment and that specialized equipment when you practice a particular field of medicine. There are also many considerations here but very important is how you can provide the best possible medical care to your patients using the best facilities and equipment. You can purchase new equipment, lease, refurbish or upgrade an existing equipment. With all these options, you have to consult with your bookkeeper or tax advisor on the financial impact and the tax impact to your business to make the best and informed decision.
• Other Areas
The above cost centers are actually the major areas of concern that affect the profitability of your practice. But other costs such as telephone, utilities, laboratories, and legal and accounting costs should be taken into consideration as these costs may also pile up. At first, these costs might be taking little by little until you notice that it actually takes a bigger chunk than the other major cost centers. These costs are best monitored closely because even though they might seem trivial, it plays an important role in running your business efficiently. You should try to break down these costs and have a flexible budget for you to be able to prepare for paying for these expenditures.
Cost management and control is necessary to keep your business gears oiled up and running!
If you need help with your cost management, as well as bookkeeping and tax preparation for your practice, contact us today at firstname.lastname@example.org or 832-437-0385.
We help you plan, forecast and analyze your financial data
so you can get on top of your finances today to grow your
small business big tomorrow.
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