What is the difference between making or losing 27k in 15 minutes? That's just the situation that faced one of my clients. How would that make you feel? What about if it was just the odd £50 now and then?
In the healthcare profession, the topic of money is a veritable minefield. Naturally it's a profession that attracts caring, nurturing people. Nice people who want to help everyone and make the biggest impact that they can to humanity. Highly skilled individuals who are trained in improving the highest assets - someone's health and wellbeing. I mean who doesn’t want to make sure everyone feels better?
However, in the private healthcare sector there needs to be a financial transaction, and this can be challenging for many. Three topics reoccur time and time again;
The Money Mindset
Understanding the Maths
Accountability from Bank to Budget
One of my favourite team meeting exercises is understanding the mindset of money.
Quick fire round – how would you complete the following;
Talking about money is ……….
The value of our service is ……….
Asking for money is ……….
Spending money is ……….
Opening up the conversation of our internal money beliefs and how these are affecting the conversations in clinics is a great starting place for discussion. For those of you who find yourself unable to resist the story of someone who could desperately benefit from your services, but just couldn’t afford it, ask them what they could afford. You are then in a stronger position to adapt your recommendations.
In the extreme circumstances you still find yourself wanting to financially contribute to care, you could let them know that if they are able to contribute X, you will be matching their investment. Their awareness that you are paying for the additional amount is valuable for you both.
Please always avoid the word FREE; we will discuss the importance of wording in another post.
Just because they are not walking out of your practice with a physical item, doesn’t mean there are no production costs. A bankrupt practice is o no help to anyone. Trust me when I say that 90% of all objections are directly related to the value that you, and your patient, are placing on the outcome you can deliver.
It is also vital that all of your clinical assistants receive training; they are your sales team, and whilst it can work fabulously in that they are able to explain and promote the financials, it is important that you check with yourself that you are not handing this over as a way of avoiding the money conversation rather that you have a great system that works.
Knowing the maths is vital
How many of us have memories of hideous algebra exams or personal finances where we would rather shove the statements under the sofa? The secret is keeping it simple and dealing only with the actual data. Here are just a few of the ways you can increase your money management.
Calculate the cost to you to deliver your service This is done by calculating all your current expenses into a weekly amount. Most importantly including paying yourself! Factor in annual bills, memberships, taxes, training, contingency plans. Average out your adhoc payments - these would include stationery, marketing, uniforms etc. Then when you have the weekly amount for all of the above, divide the number of patient visits per week by this amount. This gives you a ‘cost to deliver price’. This should be reviewed regularly, and as you get busier, if you're managing it correctly, your profits should be increasing. Using this method can help you set your capacity targets, financial budgeting and it's fantastic information to understand when you are tempted to lower your value.
Care plans, packages or memberships These are a fantastic way of rewarding loyal customers, increasing retention and creating financial stability. The trap here is setting the discounts on a percentage that sounds enticing not on the actual financial data. You are not competing with the January sales of the high street here. Let's assume you decide on giving 10% off a block of 10 sessions you will need to know; a) the cost to deliver the treatment and b) the cost of discounts when applied to the cost to deliver.
10 treatments @ £30 each = £300
10% discount on 10 treatments = £30
If the cost to deliver was £25 per treatment then the discount would leave £2 profit per session. Play around with the options. Would selling 2 packages of 5 with a 5% discount be a better option? Can you reduce the cost to deliver? How many people leave after only one or two sessions and what impact could this have on retention?
3. Increasing cash flow This can come from many sources. What is the value of the stock you are holding? What is the petty cash used for (and are you the responsible person for the never balancing accountability sheet)? What is the value of outstanding invoices (particularly if you are dealing with third parties?) When was the last time you reviewed your suppliers? Without making any alteration to your prices or capacity you can increase the money in your account.
So remember the practice with the missing 27k? Sadly for them, this figure came to light when reviewing the annual figures. After many sleepless nights of wondering why the increase in services could lead to less in the bank, they came to the most obvious conclusion; there must be some fraud or theft afoot. A deeper look showed a quite different story.
In the previous year they introduced care plans. The care plan offered a 20% discount on a course of care paid for in advance Sounds great! But, as we just mentioned, why did they decide on 20%? Because it sounded like a good number; missing puzzle piece number 1. The discounts had no data foundation of treatment cost vs profit to calculate the discount. This obviously brought about fantastic success and they incentivised the team in the promoting and selling of care plans; missing puzzle piece number 2. There was no measure of how the increased patient visits or the lifespan of the existing patients effected the clinic. As the finances were not part of the teams goals, and their focus was to increase the sales and keep customers happy, all the data went sitting unnoticed for a year; missing puzzle piece number 3. The final missing puzzle piece was that over the year operational costs had risen. In failing to link the daily activity to the bigger picture, the practice was actually in the simple equation of less in and more out. So why was the account so much lower than the previous year? Simple maths.
To find the missing amount we simply calculated the number of patient visits by the amount that would have been generated if they had paid full price and then calculated the amount that they were now actually paying per visit once the discount was applied. We then compared the annual operational figures from the previous year and right there before us the "missing" money was found.
Introduction of packages, blocks of care and memberships are a fantastic idea. Giving less transactional conversations, more repeat care and ultimately better results for the customer, just make sure they are working for you.
Budget to bank
Do you know how much you would to earn? Many people don't even feel comfortable thinking about this question, let alone start working towards it. Do you know the difference and impact between your net turnover and your profit turnover? It sounds cliche but setting a strong financial foundation will not only help set valuable targets but will ensure you can avoid many of the financial pitfalls and stresses.
Software systems are a fantastic way of easily tracking this data. Simply use them to show that your delivered services match what you have physically taken for the value of your services on a daily basis. Busy clinics should be checking the balance throughout the shift to save hours looking at the end of the day. Make sure the team are well trained to find and resolve discrepancies. It's then really important to make sure that these reports match the bank account, this can be done on a weekly or monthly basis. It's amazing the amount of discrepancies that occur at this level, technology is not foolproof.
Invest in expert help. Interview accountants and bookkeepers to find the right person to support and educate you in your money management. Make this part of your budget and plan regular communications. They are working with you not for you.
This article is in no way meant as financial advice. There are so many elements to improving your financial health these are just some of the practical practice management tools used.