Are you working longer and harder yet your practice’s profit margin continues to move in the wrong direction? Has your practice suffered patient loss due to HMOs, PPOs, managed care, etc.? Does most of your earned income go toward paying an ever-increasing debt? Are most of your bills past due? Do you find yourself worrying more about paying bills than taking care of patients? If so, you need to take control of your practice overhead immediately.
One of the most common causes of high overhead is ego gone astray. Each of us wants to feel worthy of our desires, and if we are able to achieve something we desire, then it follows that we must be worthy. In the sense of practice overhead, if we are able to purchase that shiny, new state-of-the-art equipment, or rent that large, ultra-modern office space, we feel that people will recognize the worthiness that we have bestowed upon ourselves, whether real or inflated. Although it’s true you should make an effort to look successful if you want to be successful, there is a distinct line between looking competent and killing yourself with unnecessary overhead expense.
You alone are responsible for your practice’s overhead: not your CA, office manager, associates, etc. If you are sincere about taking control of your overhead, you must commit to making the personal sacrifices it will require. I can almost guarantee if you reduce unneeded or excessive expenses in your practice (and personal life), the increased energy and positive outlook you will regain will bring you success. Stress is a burden that robs us of energy and ambition. Reduce your stress and take back what is yours – the confidence and ability to succeed.
You may be thinking, “Nah, I don’t have to give up my Porsche, or expensive dining out every week, or buying new equipment that impresses my patients, even though my existing equipment is adequately providing the care they need, etc. I’ll just earn more.” If so, get ready to take a number. You are almost assured a spot in the national statistics of professionals who try to out-earn their expenses instead of controlling them, and fail.
Start by tackling these methods of reducing your overhead, and you will be well on your way:
- ·Pay off interest-bearing bills. Unless there is a huge difference in interest being charged, pay off the interest-bearing expense that has the shortest pay-off time first. This doesn’t mean you let your other interest-bearing bills ride while you pay off one. It simply means you pay the minimum amount due on the others, while you pay a greater amount on the one with the shortest pay-off time. When you have paid off one interest-bearing bill, don’t replace it with a new interest-bearing bil, and start paying a greater than minimum amount on the interest-bearing bill that has the next quickest pay-off time.
- Consider a consolidation loan. Look into the possibility of consolidating your interest-bearing expenses into one, easy-to-manage package. How-ever, do not add non-interest bearing bills into an interest-bearing consolidation loan. Also, do not include an interest-bearing bill that is due to be satisfied a lot earlier than your consolidation loan would be. For example, your car loan is due to be paid off within two years, but your consolidation loan has a six-year pay off. In this case, if you were to include your car loan in the consolidation, you could end up paying more than twice what you presently owe on the automobile.
- Borrow long, pay off short. By borrowing with a longer pay-off time, you reduce the stress of having to pay large monthly amounts. And when your practice collections increase, make double payments on the loan, thus paying it off sooner and saving on interest charges.
- Consider refinancing. The rule of thumb is if you can save at least 2% in interest (be sure to consider all those add-on refinancing expenses when determining your savings), it’s time to refinance. This rule applies to loans on your office and home as well as installment loans.
- Say good-bye to your credit cards. Keep the two charge cards that will keep you in business, a gas card and a Visa/MasterCard for practice management and license renewal seminar expenses. Do not use these cards for any other expenses.
- Ask for lower interest. Banks and credit card companies are extremely competitive today. They want your business, and if you have a good credit rating they will work to earn and keep your business. With credit card companies, you will be given priority consideration if you regularly carry a balance and always make payments on time. Find out the lowest interest rates being offered by looking in the business section of your newspaper, reviewing the credit card promotions in your mailbox, searching the Internet, and looking in financial magazines like Money and Inc. Then ask your current credit card companies if they can match the best rates, or even do better. The same holds true for home equity loans. First find out what’s out there, and then ask lenders what they can do for you.
- Trim the telephone fat. Call waiting, call forwarding, unlisted telephone numbers, operator-assisted dialing, automatic call return, smart ring, VIP alert, automatic busy redial, conference calling – all of these services are unnecessary extras that do nothing to increase your income. Do you have a car phone or other cell phone? Trade it in for a beeper that will digitally page you when you have an emergency. Eliminate all unnecessary long-distance calling. Use toll-free numbers whenever possible. Check out your long-distance carriers, and look for those that do not charge a monthly “service fee,” offer no penalty for early termination, plus cover the costs if you decide to switch back to another carrier.
- Zap your electricity expenses. Your greatest users of electrical power in your office are the hot-water heater, the clothes dryer, the air-conditioning system, the air-heating system and the refrigerator. To cut your hot-water heater electricity expense, turn the thermostat down to about 120 degrees, and make sure your heater is well-insulated. Also, with today’s laundering detergents, cold-water washing is efficient and often recommended to prolong the life of most natural fabrics. Never wash or dry a “partial” load. To further reduce clothes dryer costs, select a dryer with a sensor that shuts the machine off when items are dry.
- Reduce wasted air-conditioning and heating expense by keeping your thermostat at a set temperature throughout the day, and at 80 degrees at night and over the weekend. Change your air filters once a month, maintain the weather-stripping around windows and doors, use energy-efficient window film, close off rooms that are not being used, and use ceiling fans. When choosing a refrigerator for the office, choose a small, under-the- cabinet size with a freezer section.
- Additional electricity savers include turning off lights, the photocopier, computers, coffee machine, and X-ray processor when not in use. Also, have timers on your exterior lights to turn them on at dusk and off at 10:30 p.m. Also, take advantage of a free energy inspection by your local electric company. Most also offer cash-saving incentives to increase your energy efficiency.
- Make your high school math teacher proud. You can save a bunch by doing your own bookkeeping, and it’s no more difficult than understanding the concepts of plus and minus. Be sure to speak to your accountant prior to selecting your in-office computer bookkeeping program. You will save additional accounting expenses if your bookkeeping program can merge data into your accountant’s program, without someone having to physically input it.
- As a business owner, you are well-advised to hire an accountant to prepare your income taxes and provide expert advice on tax-saving measures. Be sure you know what your accountant’s hourly rate is prior to hiring him or her, and don’t hesitate to ask for an estimate on certain work he or she may do for you, like preparing your income-tax return.
- Manage your inventory. Maintain a two- to three-month supply of nutritional supplements and health aids. Do not purchase significantly larger quantities to get a lower price or free bonus. Buy only what you need. Never purchase items that you rarely use; refer those patients to the drug store with a written description. Remember: an asset converts to an expense if it sits on your shelf beyond a certain amount of time.
- Know your vendors’ competition. Ask your vendors for discounts and special price breaks. Know what the other companies are offering, and ask your supplier to do the same for you. Take note of special or seasonal sale prices. Be sure to shop the catalogs.
- Stamp out mailing waste. Avoid using special or expedited shipping services like UPS and Federal Express. If you run into an emergency and need to express mail something, use the U.S. Post Office, which is just as reliable and typically less expensive.
- Do your own maintenance. Do not pay an outside person to clean your office, change your X-ray fluids, or shampoo your carpets. You and your staff can take care of these responsibilities. Check with your accountant; you may be able to pay your children (to a maximum annual amount) to do your office cleaning and write it off on your taxes with no tax consequences to them.
- Use an electronic answering service. It’s a far greater expense to have a live person take your messages than a computerized answering device. To reduce your overhead, I recommend you cancel your answering service and replace it with a “personal secretary” service offered by your local telephone company. Indeed, a live voice is more inviting than a machine, but on the same hand, a machine never forgets or misunderstands a message.
- Money in the bank: not what it used to mean. Stop putting money in the bank that you can never take back out. Stop paying monthly service charges, high returned check fees, per-item deposit or withdrawal fees. Shop your local banks and you will be surprised at how much you can save by asking your present bank for the same perks the bank next door is offering, or by switching to the bank next door.
- Don’t pay more tax than you actually owe. If your state has a tangible tax, hire one of those firms that review tangible tax assessments on behalf of the tax payer. The same is recommended for your property taxes. These firms almost always save you in taxes, and they are paid on a percentage of what they save you.
- Let the air out of your auto expenses. If you don’t want to lose 27% of what you just purchased, don’t buy a brand new automobile. The second you drive a new car off the lot, it depreciates a staggering 27%. Buy a good-quality, well-maintained 2-year-old car with reasonable or low mileage. Quite often these cars still have some factory warranty left on them, and they are also less expensive to insure.
- Don’t give space to equipment that isn’t working for you. Any equipment that you do not use at least 20 times a week is not worth keeping. If it is under a lease, find someone to take over your lease payments; if you own the equipment, find someone to buy it from you. However, if you are not using valuable patient treatment equipment due to your lack of training or understanding, learn how to use it.
- Pay your CAs what they are worth. A good CA is not an expense to your practice. A competent CA is a practice-builder and generates practice income that pays for his or her salary many times over. You need to get rid of the poor CAs and pay your good CAs in accordance with how much they actually benefit your practice.
- Don’t hire more CAs than you need. Typically, an integrated practice will need one CA for the first 100 patient visits a week, a second CA for 101 to 175 patient visits a week, a third CA for 176 to 225 patient visits or more a week, and a fourth CA at 226 patient visits a week. A straight practice will need one CA for the first 150 patient visits a week, a second CA for 151 to 225 patient visits a week, and a third CA when the doctor’s practice exceeds 225 patient visits a week. As a general rule of thumb, your staff wage expense should not exceed 14% of your gross deposits.
- Do you really need an associate? If you are consistently seeing more than 200 patient visits per week, you need an associate. If you are seeing fewer than 200 patient visits per week, you don’t need an associate; you need to work to continue building your own practice.
- Save on insurance premiums. Insurance is a very specialized area that intimidates and frustrates the best of us. However, here are some simple steps to follow when looking for suitable coverage at the best rate: shop, get out and meet with several agents, take notes, get written quotes and coverage outlines; then compare. Increase your deductibles to a higher level, one that you might struggle to meet, but would not kill you. Car insurance for young drivers in your family can be reduced through good school grades and driving courses. Car insurance can further be reduced by having air bags, ABS brakes, a car alarm, or an older-model car. Life insurance policies can be tailored to your present needs to reduce expenses and later transferred to more of an investment-type policy; and you can sometimes save money by having all of your insurance needs grouped under one carrier.
- Make something out of nothing. If you find yourself “stuck” in a facility that is too large for your practice for now or the near future, consider renting or sub-leasing your empty space to another chiropractor.
Taking control of your overhead requires guts, willpower and determination on your part. It’s not an easy feat, but if you take the steps outlined here, you will start feeling more in control and less burdened by debt.