Growth in revenue and patient visits declined in November 2023 compared to November 2022. (Note that November 2023 had the same number of workdays as November 2022.) November 2023 revenue growth was 7.0% compared to 7.8% in October; patient visit numbers grew just 0.2% in November 2023 compared to 0.9% in October. New client, active patient, and lapsing patient numbers continue to decline.
As we head towards the end of the year, planning for improvement in 2024 becomes important. One of the planning tasks practices should especially focus on is preparing or updating the practice’s budget. Thinking about budgeting tends to make people want to run away, but it doesn’t have to be boring or hard.
A budget is essential to:
- Improving the medical and surgical services offered by a practice
- Increasing revenue
- Setting fees
- Analyzing expenses
- Monitoring cash flows
- Specifying operational changes
A budget, done well, forces a practice to plan, and planning makes both medical/surgical and financial success possible.
Some of the key points to focus on in creating/updating a useful budget include:
- Use a basic spreadsheet program such as Excel. QuickBooks has a budget function but it doesn’t have nearly the flexibility that a spreadsheet does. Once the budget is completed in Excel, the final numbers can be entered into QuickBooks in order to generate budget to actual reports.
- Include each revenue and expense dollar amount as a percentage of gross revenue as well. Some expenses fluctuate with revenue instead of being a flat amount each year, and this will allow the practice to make better estimates for the following year.
- Clearly identify the financial changes expected in the practice during the following year and include these in the budget. For example, will the rent increase? Does the practice have a tech who has just been hired and whose salary isn’t included in the current year financial statements? How much of a raise is planned for the staff?
- Once the known financial changes have been identified, spend time thinking through the changes the practice would LIKE to see implemented in the practice next year. Identify both practice and owner goals, both personal and professional, for the next year. This shouldn’t be limited to goals thought of as purely financial. Everyone has goals. They may be as specific as “I want to take home $10,000 more next year.” or “I want to purchase an ultrasound during the next year.” Or they may be a little fuzzier, such as “I sure wish I made more money” or “How can the practice down the street afford an ultrasound and I can’t?” Some common goals to help start the thought process include:
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- Purchase of new equipment—ultrasound, new x-ray machine, laser surgery unit, etc.
- Attend a particular CE conference
- Hire more staff
- Hire a new veterinarian
- Give the staff a raise and more benefits
- Provide more training for the staff
- Take an exotic vacation
- Owner wants to send kids to private school
- Spend less time at work and more time at home
- Renovate the practice facility
- Build a new building
At first glance, some of these may not seem to have anything to do with budgeting, but they all can be achieved with careful financial planning. Some are obvious; if the practice is going to buy a new ultrasound, it’s going to cost $35,000. But where is the financial tie-in if an owner wants to spend more time at home and less at work? Think through what it will take. A relief doctor? A part-time associate? More support staff? Estimate the financial aspect of each goal.
A budget is an iterative process—the practice will likely change revenue and expenses and the corresponding operational plans several times before deciding on a final choice of goals for the practice in the next year. The final decision will depend on the net cash flow desired next year as well as the importance of individual goals. Remember to be liberal with expense estimates and conservative with revenue estimates and to leave room for surprises. No budget will ever correspond 100% to reality, and it is critical to have some cushion built in for unanticipated expenses or revenue programs that don’t meet their goals.
Start with a simple budget and then use it to calculate the effect of more complicated plans. A simple budget is better than no budget at all, and once everyone becomes more adept at using the budget, they will find it more and more helpful and use it more.
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Karen E. Felsted, CPA, MS, DVM, CVPM, CVA of PantheraT Veterinary Management Consulting, www.PantheraT.com, provides data review and commentary.
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