Creating a budget for your practice is more important than you think. And, it’s easier than it looks. So why do so many practices fail to develop budgets and embrace them as valuable management tools? Let’s just call it the BFF – budgeting fear factor.
BFF mitigation
Budgeting is a logical, methodical process. You can mitigate the fear factor by starting with a vision, developing assumptions, allowing sufficient time, developing a timeline and process, and empowering practice staff.
Start with a vision
A budget is simply a price tag for a plan – a plan that’s based on a vision as well as assumptions. In order to develop a budget, you must have a vision for the practice. What does success look like in the future? How do you define it? Your budget is one way to measure that. Start with a vision, then develop the plan and assumptions.
Develop the assumptions
Ask questions – many of them – and answer them. What do your physicians want to earn this year? How much are they willing to work? What will the patient volume be? What types of patients will the practice see? Who are your payers? What are your patient demographics? Will you add staff? Will you purchase new equipment? What must be done to keep the office in tip-top shape? Ask these questions, develop answers, write them down and then – only then – begin to work on the budget.
How much time does it take to develop a budget?
Developing a budget takes more time than you think. And it has to happen while daily practice operations are ongoing. Work back from the goal. I usually allow three to four months for budget development – longer for larger organizations.
Develop a timeline and process
The budget process is methodical and orderly, and takes time. A basic straight-line process would include:
Empower practice staff
Managing the budget is easier if you have staff buy-in. Including the staff in the budgeting process is an excellent approach to securing their engagement in the process. Push the budgeting process down through the organization and invite participation at all levels. You’ll be far more successful at developing a viable budget in this way.
Budgeting doesn’t have to be as difficult as we make it. Yes, it takes time and planning, but the end results are well worth it. Your budget is a valuable management tool. Use it for course corrections throughout the year, to alert you to trends and as an important tool to assess the practice’s operational performance.
For more budget tips, contact me at khertz@mgma.com.
Learn more about the consulting team.
BFF mitigation
Budgeting is a logical, methodical process. You can mitigate the fear factor by starting with a vision, developing assumptions, allowing sufficient time, developing a timeline and process, and empowering practice staff.
Start with a vision
A budget is simply a price tag for a plan – a plan that’s based on a vision as well as assumptions. In order to develop a budget, you must have a vision for the practice. What does success look like in the future? How do you define it? Your budget is one way to measure that. Start with a vision, then develop the plan and assumptions.
Develop the assumptions
Ask questions – many of them – and answer them. What do your physicians want to earn this year? How much are they willing to work? What will the patient volume be? What types of patients will the practice see? Who are your payers? What are your patient demographics? Will you add staff? Will you purchase new equipment? What must be done to keep the office in tip-top shape? Ask these questions, develop answers, write them down and then – only then – begin to work on the budget.
How much time does it take to develop a budget?
Developing a budget takes more time than you think. And it has to happen while daily practice operations are ongoing. Work back from the goal. I usually allow three to four months for budget development – longer for larger organizations.
Develop a timeline and process
The budget process is methodical and orderly, and takes time. A basic straight-line process would include:
- Gathering historical data
- Creating a budgeting team
- Developing assumptions
- Testing the assumptions
- Retesting the assumptions
- Creating the budget
- Matching the budget to the assumptions
- Reworking the budget
- Revisiting the assumptions if necessary
- Approving the budget
- Monitoring and managing the budget
Empower practice staff
Managing the budget is easier if you have staff buy-in. Including the staff in the budgeting process is an excellent approach to securing their engagement in the process. Push the budgeting process down through the organization and invite participation at all levels. You’ll be far more successful at developing a viable budget in this way.
Budgeting doesn’t have to be as difficult as we make it. Yes, it takes time and planning, but the end results are well worth it. Your budget is a valuable management tool. Use it for course corrections throughout the year, to alert you to trends and as an important tool to assess the practice’s operational performance.
For more budget tips, contact me at khertz@mgma.com.
Learn more about the consulting team.
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