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Build an Effective Practice Budget Today

Follow These Simple Steps to Build an Effective Practice Budget

 

Create a budget

Create a budget

Today’s ever changing marketplace calls for a meaningful creation of budget. The health care reforms, reimbursement challenges and economic uncertainly are a few reasons why practices need to have a strong handle on their finances.

A clear budget is often referred to as the foundation for any practice. While budget should have clear-cut goals, it should also include some additional elements that help in decision making and analyzing potential business threats. In essence, a budget should be specific, measurable and realistic.

Writing down this budget helps crystallize the strategies and choices of a physician owner and practice administration and bring their financial goals into the realm of possibility. Unfortunately, very few practices actually implement this task simply because they see it as an endeavor that is too complex and time-consuming. Below, you will get an idea about how to create an effective practice budget.

 

financial goals

financial goals

Effective Practice Budget

A budget should primarily incorporate a practice’s strategic financial goals. It is a way to create and establish financial expectations and compare actual performance with the set amount. There are many good reasons to have and use budget as a management tool. As long as a practice maintains control, budget is a convenience that can simplify various aspects of the business and allow it to acquire items/assets sooner than it might otherwise. However, if this budget is out of control, it can become one of the greatest obstacles to achieving financial independence. In essence, creating a working budget requires accountability from owners, physicians, practice administration and key stakeholders.

 

baby steps

baby steps

Steps for Creating a Budget

A simple budget process can be divided into various areas as follows:

– Review historical financial statements and reports concerning productivity
– Assess future changes that will affect the budget directly. These include changes in providers, professional fee reimbursement, new service lines, future capital purchases and much else
– Predict future operating expenses and productivity levels
– Incorporate standard budget with monthly report

Components to Create a Practice Budget

What is essential to creating and maintaining a meaningful practice budget is focus and attention. The below guidelines will help any practice weave its way through the process of budgeting and build a sound firm well-equipped for the future.

 

components

components

The Initial Step

A formal budget should begin at least two to three months prior to the upcoming fiscal year. This will allow the administration to forecast productivity and expected results and plan accordingly.

Involving Key Stakeholders

Involving key stakeholders means letting the members of the practice – employees and management – participate actively in aligning the goals for the financial success of the business.

Assessing Historical Data

It is important to gather and review historical data and records pertaining to the practice before setting the budget. This process includes employee productivity reports, payroll reports, financial statements, lease agreements and marketing plans.

Forecasting Provider Productivity

Another important factor to consider while budgeting is to calculate prior year’s net revenue as well as patient encounters. This will give a general idea about an active physician’s productivity level.

Reviewing Staffing Levels

Accurately forecasting costs related to staffing is crucial for a practice because wages and benefits to the employees form the major expenditure at any given time. Meaningful budgeting therefore requires scrutinizing future salary and benefits of each individual working for the practice. This process is also an opportunity to review the system and look for hiring potential and more suitable candidate for the job.

 

costs

costs

Reviewing Occupancy Costs

After payroll comes the occupancy-related costs such as building lease, rent, utilities and maintenance. This step involves going through lease agreements and making necessary changes in favorable of the practice.

Forecasting Variable Expenses

One of the best ways to avoid surprise costs associated with the practice is to develop a structural budget that will evaluate variable costs much ahead of time. These relate to surgical supplies, equipment and materials used during the job.

Identifying Other Expenses

Estimating expenses related miscellaneous items involves reviewing each category to identify potential changes to price and value and comparing it with historical levels. Here the accountant needs to pay special attention to major categories such as health insurance and marketing as well.

Incorporating Other Profit Centers

Practices are free to budget ancillary services such as laboratory and optical services just like the main clinic. The same principles apply to these services as well. Variable expenses such as lenses and frames can be calculated on a per-use basis. This amount will vary depending on the anticipated growth of the practice.

 

implementation

implementation

Integrating the Budget

The final step to creating a meaningful practice budget is to integrate or compile it similar to profit/loss statement. This can be shown in the form of monthly report that will have data pertaining to results from the prior year. All these information will help monitor the performance of the practice and identify variances to create corrective plans wherever needed.

We appreciate you reading this post. If you have comments, please post them below. If you are looking for the CMS 1500 form 02/12 for filing patient claims, visit www.JustCMS1500Forms.COM. You’ll find no better provider of the New CMS 1500 form than them. Even if you prefer using software to file your claims, they offer software for that as well.

Take care, and look out for my next post.

The AICPA Strives to Disrupt Audit Data Standards

The Latest Tech Disruptor: The AICPA

For the last several years, it has been apparent that there is a considerable gap between enterprise resource planning (ERP) systems and the various different types of technologies and tools that are used to analyze a company’s information and data. It was common at one time for consumers in this area to utilize the services of IT professionals to develop new applications inside the ERP system or to manually create customized extraction features to accomplish specific and relevant tasks. Recently, however, the AICPA issued the Audit Data Standards (ADS), which promises to be a disruptive technology that impacts this process.

enterprise resource planning (ERP) systems

enterprise resource planning (ERP) systems

 

A Closer Look at Audit Data Standards

Business information customers understand that the ERP process can be costly and can be a drain on your time. The ADS has been developed in an effort to generate data on demand. This innovation is designed to benefit companies that utilize ERP systems, as well as internal and external auditors. In addition to benefiting those who work on these systems, there is an inherent improvement in the quality and reliability of the data in this type of system. The ADS also enables anyone who has been authorized to access the data to do so, and this includes managers, accountants, analysts and others. These individuals do not have to be IT professionals or auditors, which is generally the case with the current type of ERP systems available.

Audit Data Standards

Audit Data Standards

The Projected Evolution of ADS

ADS has already been released to the delight of auditors and others who deal with ERP systems, and this is because these systems offer true benefits. For example, the first release included base standards for a variety of purposes as well as accounts receivable, general ledgers and more. These were suitable for use in commercial and retail environments. A new release of the ADS system was recently issued, and this new system took the original system to the next level. It includes procure-to-pay processes and order-to-cash processes. This is a new system update, so the assurance services department for the AICPA is requesting feedback. Those who have feedback that may lead to improvements for future revisions of ADS should submit their feedback and responses by the end of February 2015. Keep in mind that there are future revisions planned for ADS that are suitable for other industries, such as financial services, health care.

How Audit Data Standards Work

As a first step to take when working with ADS, you will need to define the target. Then, you can map the data standard to the ERP system. From this point, the data extract process can be established so that it is automated and repeatable. In addition, edit checks will be created into the system so that the accuracy and comprehensiveness of the data will be improved. The fact is that the system is designed to be very easy to use, and it can even be completed with a few clicks of a mouse. After the system has been set up, it will run automatically. More than that, the process is entirely secured with password protection and encryption. Anyone who is an authorized user can access the data as desired, and the data is no longer kept inaccessible from the other users in the company who may need to access it.

define the target

define the target

Customization Features and Options

Those who utilize ADS with their ERP systems will be able to customize design reports and download them to an Excel worksheet, and they can update them for analysis. From this point, the data can be used for a wide range of purposes, and this includes SAP systems and database solutions. Both Microsoft and HP have worked on these systems, and HP has been instrumental in making an improvement to a process that has drastically improved the customization abilities of the program.

customization

customization

The Future of ADS

ADS is most commonly used in the United States in a select number of industries. The new revision that has been released has expanded the options for ADS, but there is ample room available for new revisions to be made. As the new revisions are made, ADS will become available for use with more industries. This will also expand the reach of ADS to markets outside of the United States on a larger scale.

The fact is that the latest technology disruptor is ADS, prepared by the AICPA. If you are not yet familiar with ADS or if you are not happy with your current ERP system, you should take time to learn more about ADS. Keep in mind that ADS is a work in progress, and new revisions are already in the works.

I hope you all found this article informative.  For those of you in the tax and accounting industry, I’d like to share a quick tip that’s making my CPA business run smoothly during the tax season so far. I manage a portfolio of 40+ clients who are mostly local contractors.  I am usually bogged down having to efile 1099 and W-2 forms for their employees and the host of contractors they usually use.  Over the last few years, managing all the legwork with printing and mailing forms to recipients has consumed the majority of the time I’d prefer doing the taxes for my clients.

I wised up this year and searched for a more time-efficient way to file 1099 online. After some exhaustive searching the web, and asking peers for recommendations, I found eFile4Biz.com. They take on the burden of the printing and delivery of the forms to employees and contractors after I do the efile using their website. It’s worked out better than taking on new employees to manually do the work I don’t like to.  Check out their video above. And happy tax season guys!

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