Increasing monthly collections is a business goal common to most chiropractic practices. Unfortunately, in today’s environment of managed care and low reimbursement rates, that goal can be difficult to attain. One way to compensate for collection problems created by managed care is to establish a goal for overhead control that will parallel the goal to increase collections. Cutting expenses can increase profit margins. Remember, the amount of income retained is more important than the amount generated.
Here are some suggestions that could help you reduce your overhead by hundreds of dollars a month. Most are simple and can be implemented immediately.
1. Survey accounts payable for unnecessary expenditures.
A quick survey of your accounts payable for the last 12 to 18 months can easily identify expenditures that are no longer wanted or necessary. Examples include dues for clubs and organizations you no longer attend or subscriptions to newspapers you don’t read.
When making charitable donations, study all previous donations to identify those you feel strongly about and wish to continue supporting. This becomes the practice’s donation list for the next year. Review the list annually. If a new charity piques your interest, invite the group to provide information for consideration in next year’s budget.
Special services for the office may no longer be worth the money. Examples may include a snack, coffee or bottled water service for the employee break room.
Many of the items you identify as unwanted or unnecessary can be dropped immediately, while others will have to expire and not be renewed. Either way, you should provide the information to the accounts payable clerk for follow-up.
Be sure to check the list of automatic withdrawals from the office checking account. Services and products may have been discontinued without stopping the automatic payment process.
2. Get rid of unneeded equipment.
Virtually every office has equipment that is not being used. Diagnostic instruments are sitting in the corner of the exam room, an adjusting table is stored in the basement or garage, therapy units are gathering dust, old computers are on the floor under a desk, or spinal screening equipment is in storage.
If you’re not going to use the equipment, sell it and use the money to pay off debt. If the equipment is leased, sell the equipment in order to pay off the lease, or find someone who wants the equipment and is willing to assume the lease. You may have to take an immediate financial loss on leased equipment. However, the net loss will probably be less than continuing the lease.
3. Decrease or make better use of office space.
Most practices require more and more space as time goes by. However, there is nothing wrong with downsizing if you have too much space. You may have leased more space than you needed, based on future plans or expectations that never materialized. You can also benefit from downsizing if, for example, you were in a space-sharing agreement and the other doctor moved out, leaving you holding the lease for a large office.
If room for patient care is comfortable but storage becomes a problem, do not move into a larger office just to increase storage. Rent space at a storage facility instead. Moving into a new office may increase the monthly rent or mortgage payment $400-$600, while rent for storage space may cost only $400-$600 for the entire year.
If you have excess space, make good use of the space. Add revenue centers. Set up a rehabilitation suite or hire a massage therapist. Another option may be renting the space to a family counselor, an acupuncturist or another professional. The rent will offset the rent or mortgage payment the office pays.
4. Release an unneeded or unproductive employee.
Would you be happy if your least- productive employee quit? If the answer is “yes,” it may be time to make the move. It is not uncommon to have someone on staff who is unproductive; or perhaps the position is no longer necessary. Instead of terminating the employee, you may continue his employment because you feel obligated. Loyalty is admirable, but it could hurt your practice financially if it’s misplaced loyalty.
It’s never easy to terminate someone. In the long-run, releasing an unproductive staff member is best for everyone involved. If the employee’s position is no longer necessary or she is unproductive, you won’t be likely to promote the employee, increase her salary significantly or provide additional employee benefits. The employee is in a dead-end job. Releasing the employee may allow her to find a more rewarding career while decreasing your practice overhead.
5. Learn to say no.
Saying “no” has become a lost art in America. The inability to say “no” results in over-commitment and high levels of stress. Maybe it is because no one wants to be left out or excluded from anything. Regardless of the reason, no one can participate in every event, belong to every organization, have every piece of equipment, play in every league or attend every seminar.
Commitments of time and money should be controlled in much the same way as charitable donations. Determine which commitments you feel strongest about and stick with them. Requests of time and money for other activities you are not interested in should be politely turned down. Over-commitment deprives your practice of energy, focus, finances and fun.
In almost every project there is a limiting step. If this step does not go well, it will adversely affect all other steps in the process. If the step goes well, you will be on your way. The limiting step in decreasing practice overhead is an ability to take action. Review your overhead and profit margins this week to set the process in motion.
