The rising cost of doing business alongside declining reimbursements means a much leaner cash flow. A problem with claims and major payers can reduce or eliminate revenue for a few weeks. To maintain reserves, you must remain alert to financial fluctuations. Here are five things you can do to reduce cash-flow problems.
- Benchmark accounts receivable A/R, staffing and line-item overhead expense ratios to keep expenses within norms for the practice. Benchmarking information is available through the Medical Group Management Association or from the American Academy of Ophthalmic Executives.
- Monitor practice health with profit/loss reports. Each line-item expense on these reports should have a column next to it dividing the number into revenue received each month and cumulative year totals to help determine the percentage of revenue each item represents.
- Complete an internal profit/loss statement, A/R report and collection-ratios report within five days of each month’s end. These reports can be used to hold billing staff or your service, if you outsource billing and managers or associates accountable for achieving benchmarked goals and maintaining a steady cash flow.
- Prepare a budget by November of each year with revenue and expense projections for the following year. It is usually best to underestimate revenue and overestimate expenses, leaving a cushion for emergencies. This will help eliminate cash-flow issues during the year.
- Implement separation of staff duties involving cash transactions to eliminate temptations to embezzle, which could trigger a major cash shortage. Keep cash secure by safeguarding check-signing procedures and restricting online access to bank accounts.
Understanding Financial Statements
Budget and Financial Advice
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About the authors: This article was adapted from the original piece, which appeared in a publication of the American Academy of Ophthalmic Executives. Debra Phairas is president of Practice and Liability Consultants, a nationally recognized firm specializing in practice management and malpractice prevention. Her background includes medical clinic administration and loss prevention management for NORCAL Mutual, a physician malpractice insurance carrier in northern California. She has presented seminars and lectures nationwide for state and local medical/dental associations, management organizations and specialty societies. She will be on the 2014 YO Program panel “Practice Building: Finding the right building blocks.” Christi A. Foist is YO Info’s managing editor and a communications manager for the Academy.