Do you live beyond your means? If you are serious about reducing your overhead, you’ll have to control your spending habits. Don’t assume that your practice will turn around and you’ll out-earn your debts. Take these 26 practical action steps to nail down your practice’s costs.
Are you losing patients to HMOs, PPOs, Managed Care, etc? Have you noticed a drop in patient volume and income, but no drop in overhead? Does a significant portion of your take-home income go towards paying for credit cards? Do you only pay the minimum amount on your credit cards? Are you late paying bills? If so, you need to reduce your overhead and reduce it fast.
Let’s face the facts.
High overhead comes from the compulsive disorder of “buy, buy, buy.” If you are serious about reducing your overhead, you’ll have to control your spending habits.
Commit yourself to make whatever sacrifices are necessary to achieve and maintain solvency. You’ve got to be willing to pay the price, which means cutting excess expenditures. Don’t assume that your practice will turn around and you’ll out-earn your debts. People who think they can out-earn their debts go bankrupt. Don’t become a statistic.
Rule #1
Pay off all interest-bearing bills. First pay off the interest-bearing bill/note that has the shortest pay-off time. When you see yourself quickly eliminating bills, this increases your confidence. Then pay off the interest bearing bill/note that has the next shortest pay-off time. Continue this effort until all interest bearing bills/notes are eliminated. You can also pay off your interest-bearing bills by using the double payment method I described in the May/June 1997 issue of Chiropractic Economics.
Rule #2
Consider a consolidation loan. Sometimes it’s wise to consolidate all interest-bearing bills, interest-bearing notes, charge cards and automobile loans. Be careful: Don’t add non-interest-bearing bills to a bill-consolidation loan. If you do, you will now be paying interest on a non-interest bearing bill. Remember, interest is one of the cancers that caused your high overhead. Therefore, don’t add interest to a non-interest bearing bill.
Caution: If you have a year or two left on your automobile loan and the rest of your interest-bearing notes won’t be paid off for six years, do not include the automobile loan in the consolidation loan because you’ll end up paying double the price of the automobile.
Rule #3
Convert all short-term loans to long-term loans. Thirty, sixty and ninety day notes usually are not paid off on time and the interest accumulates. It’s always wiser to borrow long and pay off short. Pay these notes off by the double payment method.
Rule #4
Possibly refinance your practice rent/mortgage payments. If you can refinance your office and save 2% of your interest or more, do so, and refinance it for a longer term. Today’s interest rates should be 8 – 10%. Try to avoid fifteen-year mortgages or making mortgage payments every two weeks. Mortgages of this type put too much stress on you by forcing you to make higher payments. Borrow for as long a period of time as possible, then pay off your loan with the double payment method.
Rule #5
Cut up your credit cards. Only keep two charge cards, one gas charge card and one major credit card (to register for seminars). Don’t use these cards for anything other than these purposes.
Whenever you use a credit card, you’re spending $1.20 on every item that costs a dollar. And, the average person spends $1,500 in interest per year on their credit cards. Credit cards are a cancer. You need to get them out of your life. Stop charging and pay cash.
Rule #6
Reduce the interest charges of the charge cards you keep. Banks today are very competitive. Look in Money magazine or the business section of your local newspaper to see which bank has the lowest credit card rates. Then call your bank and ask them to match the rates. They’ll fight you a little, but they’ll reduce your interest rates rather than lose you as a customer. Play hard ball. It’s your money. Don’t take no for an answer.
If your bank doesn’t want to work with you, check the previously mentioned sources for the best deal on a credit card. Look for the lowest interest rates, no annual fees and a 30-day grace period before any interest is added to your balance. Many banks today are charging interest the second you charge something to your charge account. Don’t accept this type of card. Make sure you have a 30-day grace period. Once you decide on the cards that you want, establish an iron-clad policy of paying off the balance each month.
Rule #7
Cut back your telephone bills. Buy rather than lease your phones. Eliminate dedicated lines for modems, computers, faxes, etc. Cancel service contracts on your phones because they almost never break down. Eliminate the following special features on your phone- call waiting, call forwarding, unlisted telephone numbers, speed dialing, conference call capabilities, directory assistance, automatic dialing, automatic call return, automatic busy redial, VIP alert, “Smart Ring”- all of these perks run up your phone bills. However, caller ID and “Personal Secretary” services are excellent features for a DC’s office.
Cancel your car phone, cellular phones or beepers. What a waste of money. You’re not running a Fortune 500 company. It’s not essential that you have your toy phone with you.
Eliminate long distance telephone calls. Only call businesses that have toll free (800 or 888) numbers. Check with discount telephone carriers to get the lowest long distance rates. Ten cents or lower per minute any time of the week should be your goal. When you utilize a discount carrier, call them every month to see what specials they are offering that month, ie, free long distance calls on weekends, etc. Take advantage of the specials and you’ll save money.
Rule #8
Curtail your electricity usage. The majority of your electric bill is caused by heating or cooling your office, heating water and your refrigerator. Therefore, turn your hot water heater off. You don’t need hot water in a chiropractic office. Wash your gowns in cold water. If you insist on using a hot water heater, put an insulating blanket around it to stop the heat from dissipating. And, when washing clothes, turn the hot water heater on 30 minutes before you wash your clothes, then turn it off when you are through.
Lower your air conditioning bill by changing your air conditioning filters once a month and having your air conditioners serviced once a year. Place governors on your air conditioning units to keep your staff from turning the air conditioner too cold in the summer or too hot in the winter. Turn your air conditioners to 80 degrees at night and don’t turn your air conditioners off, leave them on automatic.
There’s no need for a refrigerator in a chiropractic office. Eliminate it. Use ice packs that don’t require refrigeration.
Turn off room lights, copiers, computers, x-ray processors and coffee machines when not in use. Place a timer on your outside office lights and sign. Have the timers turn your lights off at 10:30pm.
Add window coverings and a protective film coating on your windows. This prevents heat from getting into your office, thus reducing your air conditioner’s usage. Install ceiling fans throughout your office. This will reduce the amount of necessary cooling in the summer and heat in the winter. Close off seldom-used rooms so you don’t have to heat and cool them. Ask your electric company for an energy management inspection to see what additional steps you could take to reduce your electric bill.
Rule #9
Restrict your practice’s accounting fees. Change your accounting methods. Do all the bookkeeping yourself. Use a computer program to keep track of your expenses. At the end of the year, give your accountant a copy of your computer records for him/her to fill out your income taxes.
Negotiate fees with your accountant. Everything is negotiable. When you ask your accountant to do a project ie, income tax negotiate the fee in advance. Don’t let him/her build-up billable hours.
When you bring income tax information to your accountant, make sure everything is orderly, labeled correctly, etc. Don’t make your accountant look for anything. Remember, you’re paying him/her by the hour. Keep copies of all records given to an accountant because they frequently misplace them and charge you their hourly rates to find them. If you send him/her a copy of your copies, you’ll save money.
Rule #10
Keep your nutritional supplements to a minimum. Don’t buy 12 bottles of vitamins in order to get one free. It’s not a good deal. Never have more than a three month supply of anything that you use. Purchase one-size-fits-all braces, cervical collars, etc. Don’t order rarely used items, ie, wrist supports, etc. Refer the patient to the drug store.
Rule #11
Practice comparative shopping. Vendors who are friends usually charge you more. Ask for price breaks and discounts on everything you purchase. See if one vendor will match the prices of another vendor. Pay attention to sales and you’ll save a lot of money. Buy from catalogs. They are usually much cheaper.
Rule #12
Diminish your seminar and convention attendance. If you are severely in debt, quit being a seminar junkie. Usually, when a chiropractor has high overhead, s/he attends all kinds of seminars hoping the guru teaching the seminar will give one idea that will dramatically turn the practice’s finances around. It never has happened. It never will. All you need to attend are practice-building seminars and your state license renewal seminar. These seminars will help you build your practice and keep you licensed. All other seminars should be eliminated.
Rule #13
Slash postage expenses. Don’t use UPS, Federal Express or similar services. The post office is cheaper. Fax rather than mail. Write off dead beats. Review your monthly billings. For those patients that you know cannot afford to pay you, quit wasting money billing them. Write them off and you’ll save 32 cents plus CA time for every month you’re billing.
Rule #14
Drop all maintenance contracts. Do the work yourself. You can clean your own carpets, change your x-ray fluids and clean your own office.
Rule #15
Eliminate your answering service. Cancel your answering service and replace it with “Personal Secretary” voice mail from your telephone company.
Rule #16
Lower your bank fees. Watch out! Your banks may be ripping you off. Determine every fee your bank is charging you. Then, go to your banker and ask him to remove those fees. Tell him the bank down the street will do everything your bank is doing, but at no charge. If he refuses, find another bank. You can expect banks to automatically give your first order of checks at no charge, free deposit slips, monthly fees waived for six months to a year no matter what your balance is, and reducing the returned check fee to $5.
Negotiate for these additional services- free checking, no monthly service charges, no per check charges, no minimum balance requirements, free overdraft protection, free ATM cards, free Visa/MasterCard, no fees for American Express money orders and cashier checks and no holds on checks that are deposited. Smaller banks and credit unions will usually give you the best deals. And don’t buy your checks through your bank. Order them from a private printer, they’re much cheaper.
Rule #17
Compress your taxes. If your state has a tangible tax, hire a firm that challenges such taxes and the odds are they will reduce these taxes. The same is true of your property taxes. Find a firm that challenges these taxes and see if they can reduce your taxes. Firms of this type only charge you a percentage of what they save you. You’d be surprised at how much money you’ll save by having these firms fight for you.
Rule #18
Cut maintenance expenses. Instead of having a maintenance man in your office, pay your children to clean your office. You can pay each child up to $4,000 a year and pay no taxes on these amounts. If you don’t have children, have your staff clean your office. I practiced over 20 years and never paid a maintenance man.
Rule #19
Curtail your travel and entertainment expenses. Always utilize a good travel agent. Order your airline tickets months in advance. Use remote parking lots with a shuttle service. Book your hotels in advance. You’ll save a lot of money. Don’t use the in-room bar in a hotel. It’s a rip off. They charge you $5 for a 25 cent candy bar. Don’t call long distance from your hotel rooms. Use the lobby phones your call will be approximately 75% cheaper.
Rule #20
Lessen your automobile expenses. Purchase a two-year-old automobile instead of a brand new one. You’ll save the depreciation. FYI: The second you drive a new car off the lot your car depreciates 27%. Shop dealers. You’ll save a lot of money.
Rule #21
Diminish your practice equipment and furniture leases. Get rid of all unnecessary equipment. Anything that is not used 20 times a week does not belong in your office. Find someone to buy this equipment or have them assume your leases. If you have an equipment loan, refinance it at lower interest rates.
Rule #22
Reduce your CA salaries. This is one of the biggest expenses in a doctor’s office and usually occurs because the doctor has too many CAs. Use the following guidelines to determine if you have too many CAs.
How many CAs are enough?
Total CA salaries should not exceed 14% of your deposits. A mixer practice will need one CA for the first 100 patient visits a week. If you have 100 to 175 patient visits per week, you will need a second CA. At 175 patient visits per week, you will need a third CA, and at 225 per week a fourth CA. A straight practice will need one CA for the first 150 patient visits a week, a second CA from 150 to 225 a week and a third CA when the doctor’s practice is over 225 patient visits per week.
Pay by the hour.
Don’t pay your CAs a salary, pay them by the hour. Only pay CAs for the hours that you need them. If you don’t practice on Thursdays, you don’t need to have your front desk CA or therapist working your insurance CA can answer the phone and you will save two days’ salaries per week.
Use part-time personnel.
Hire part-time CAs instead of full-time CAs. You don’t have to include part-timers in your benefits program (insurance, retirement, etc.).
Eliminate overtime.
All work must be completed during work hours. Why pay extra when your staff should have disciplined themselves to get their work done on time?
Lease your employees.
This will save you a lot of work and money. Employee leasing companies can provide better insurance coverage at a lower rate.
Rule #23
Eliminate your associate salaries- don’t have an associate unless you have over 200 patient visits per week. If you’re seeing less than 200 patient visits per week and have an associate, this indicates you’re trying to have your associate build your practice. This won’t work it never has. Fire the associate and treat the patients yourself.
Rule #24
Abridge your insurance expenses. Get multiple bids for all your insurances. Usually when you buy all your insurance from one agency, there is a large price break.
Increase your deductibles to $1,000: You’ll save approximately 27% of the premiums. Determine the factors that reduce insurance premiums; ie, two cars with one insurance company, homeowners combined with car insurance, drivers training courses, children with good grades, safe driving records, children taking safe driving courses, air bags, etc. All of these items may reduce your automobile insurance.
Only purchase decreasing or level-term life insurance. Whole life insurance is nothing more than an overpayment of insurance. Buy your insurance through a volume discounter, you’ll save 10%.
Rule #25
Quit living high on the hog. Perhaps your high overhead is due to high personal expenses, rather than high office expenses. Your personal automobile expenses, including maintenance, payments, gasoline, etc., should equal only 10% of your take-home income. Your household expenses including principal, interest, taxes, insurance and maintenance should only be 25% of your take home money. If you are paying more than the above expenses, you need to downsize your home and car and live within your means.
Rule #26
Consider sub-leasing part of your office space to another DC. Utilize your facility to the fullest. The money you bring in from sub-leasing will help reduce your overhead.
Doctors, I hope this article helps you reduce your overhead. It takes guts, willpower and determination, but it definitely can be done. And, team up with a consultant to learn how to increase your practice. By decreasing your overhead expenses and increasing your practice, you’ll be in a net profit position quickly.
