Where is Your Net Profit?

  1. You’ve worked hard all week; the office atmosphere is rife with discipline and brisk efficiency. The staff have been getting along with one another and you are proud of the team spirit they’ve both individually and collectively demonstrated. In fact, your staff has almost read your mind and anticipated your every need. All of the patients have arrived on time for their appointments, and the majority of them have even heeded your advice and accepted your treatment plans!

    Now it’s Friday afternoon; the staff has received their paychecks, which reflect production bonuses that you’ve doled out in appreciation of their contribution to the overall increase in production. But then you look at your bank balance and you’re surprised and sorely disappointed at the lack of funds left over for you. What happened?

    Where is your net profit? Did you work hard all week just to earn less money? The bank balance should be going up, not down!

    You wonder if it’s worth all the effort. All of that increased production might just have landed you into a “higher office-overhead/higher tax-bracket” situation. It’s that frustrating income vortex — the place where, despite producing and collecting more, you take home the same amount or less. And following a few of these “successful” weeks, you shake your head and realize that if you endure much more of that kind of success, you’ll go broke! So, what should you do?

    Let’s start by taking a look at the myriad of possibilities of what might have occurred that resulted in your not having any profit for yourself:

    Management Issues:

    • Could you consolidate loans for equipment and/or your practice into just one loan, in order to reduce your monthly loan payment and possibly the interest amount?
    • Can you reduce the amount of inventory the practice maintains?
    • Are you collecting your Accounts Receivables with minimal aging? Do you collect at least 97% of the amounts billed?
    • Do you have any sort of monitoring system that helps you to know at a glance, statistically, who is productive and who isn’t?
    • Do you have written office policies that are known and enforced?
    • Does each position in the office have a fully delineated job description?

    Staff-related Issues:

    • Does your staff work overtime, thus causing you to pay time-and-a-half or even more? Do you have systems in place to prevent that from happening without your express authorization?
    • Do you have redundancy in your staff schedule or are you scheduling to ensure efficient use of your personnel? For example, do you have five staff members on duty when four will suffice during the slower periods of the workday?
    • Do any staff functions needlessly overlap?
    • Do you have an office communications system that facilitates efficient communication and deters staff members from interrupting one another when they are doing their jobs?
    • Is gossip and rumor commonplace in the office?
    • Are there any problem staff members who aren’t being handled?
    • Do you conduct job reviews on a regular basis?
    • Do you know how to screen and hire job applicants to ensure you assemble the best possible staff?

    The management and staff-related issues are just some of the facets of your practice that you should be monitoring every day to help you with running your practice and to ensure that you can spot and handle any problems with regard to your net income.

    Your net should lie somewhere between 25-55% of your gross income. Your specific percentage will of course depend on your profession, length of time in practice, demographics, etc. If your net income is not currently within that range, there’s something w­rong with the management of your office.

    The best way to increase the net income of a practice is to increase the efficiency of the staff. Accomplishing that begins with you, the practice owner. YOU have to put the appropriate, effective systems together and you must ensure that monitoring, training and the needed corrective actions occur in order to bring about efficiency in your staff.

    For example, if your training consists of verbally telling someone how to do something, you are leaving it up to “selective memory” that he will thoroughly understand what you are trying to teach him. You need to have very detailed job descriptions in place for EVERY aspect of your practice so that people have something IN WRITING to which they can refer when learning and training. You will gain compliance and consistency from your staff in that way.

    A job done only once is a job done efficiently. The more efficiently the staff works, the less people it will take to do the jobs in your office.

    Efficiency = Profitability. It’s just that simple.

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