Practice Budget: Stick to a Financial Plan and Increase Profits

Gina M. Wesley, OD, MS, FAAO

August 16, 2017

To manage your practice professionally, as opposed to managing by instinct, you need to create a practice budget and live by it.

A practice budget allows you to set benchmarks for success, and to think in advance about the needs of your practice on a yearly basis. You know how much leeway you have to spend money, and what it will take to achieve profitability.

Practice Flexible Budgeting
I create a budget for the coming year typically in early January of that same year because I want to make sure all year-end financials are in. However, I do what comes down to flexible budgeting. You can’t just set a budget and not analyze it as you are moving forward. For instance, if your sales in optical are higher than projected, or services have grown more or less than projected, you may have to adjust associated expense category budgets. If I do adjust, I typically do so quarterly.

Balance Industry Guidelines with Practice Needs
First, I look at industry guidelines for what major categories should be. For instance, cost of goods (COGs), gross revenue and staff expenses are all areas I monitor, but the industry guidelines are just that—guidelines. There are certain categories where I know I spend less or more due to the structure and operating goals of my practice. Given my high-end services, and the need for staff to attend to high-end customer service, I’m fine with my staff expenses being greater than what’s considered “normal” for a practice of my size (approximately 19-22 percent of total gross per MBA). Or, in a year where my growth is outpacing my goals, I’m fine with advertising being less than 2 percent of total gross.

Align Spending with Practice Growth
Last year, when I had an associate join the practice, I spent more dollars on marketing and promoting to help fill her schedule because we were expanding our patient schedule. Another example of approval of more spending is when I’m acquiring new equipment to expand a specialty service, like dry eye diagnosis and treatment. I projected the growth in revenues to help offset the increase in spending. It’s important to remember that budgeting is as much a goal of what revenues you want to bring in, as well as the expenses you are trying to control. We sometimes can get lost in the thought of “expensing our way to profitability,” and you can’t run a practice efficiently on that premise.

Optimize Tools to Help You Budget
Simple spreadsheets are great to track budgeting. I run reports from my EHR system, I get financials from my CPA and QuickBooks. In addition, I use spreadsheets from my open-book management system, the Great Game of Business, to project numbers. Support-staff members are each given a practice metric to track and report on, so together we can brainstorm ways to improve profitability. Staff is valuable in pointing out how and when we purchase supplies and products, and they receive bonuses based on how profitable we are.

My staff and I both track the metrics, but the analysis of those numbers, and the related decisions on spending, fall solely on my shoulders.

EDITOR’S NOTE: Click HERE for a look at how The Great Game of Business can enhance staff engagement in an optometric practice.

Be Specific in Items Listed in Budget
I now break down my budget into the following categories: Frames, Ophthalmic Lenses, Contact Lenses, Staff Expenses, Advertising, Occupancy, Miscellaneous (sales of products such as omegas, lid hygiene, warm compress masks, etc) and Office Overhead. When I first started my practice, though, I wasn’t this specific, and it worked pretty well at the time.

I only broke the budget down to Staff Expenses, COGs sold, Occupancy, Advertising and Office Overhead. I’ve broken it down into more detailed categories because I wanted a better idea of what I was spending, and planned to spend, in each area. I look at the previous year’s numbers and then try to anticipate what each category may be, especially within the context of practice growth. I keep in mind that if I can shave a percentage off that total budget number for whatever category it may be, that’s a percentage that goes to my bottom line.

Budget for Major Investments
Purchasing a topographer was a specific investment I budgeted for. I knew I wanted to grow my orthokeratology fits and services, so I was easily able to determine how many I would need to do in that first year to justify (or more than justify) the purchase. Again, budgeting has as much to do with projecting revenues as it does expenses.

Reevaluate Quarterly
uarterly evaluation is important to see if you are on track. For instance, every category has a monthly budget. If we see that our frame sales have been really high one or two months running, we may need to increase the frame budget for the quarter to allow us to replenish accordingly. This just happened to us. I then challenge my staff to find the best deal we possibly can to get as close to the budget as possible, or beat it. In this case, revenues justified the needed expenditure. It was a good “problem” to have.



Gina M. Wesley, OD, MS, FAAO, owns Complete Eye Care of Medina in Medina, Minn. To contact her:

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