To cut expenses, follow some simple steps

One of the biggest challenges most of us face is the hard-to-find balance between being caregivers and business owners. At the end of a year, our income is determined by what’s left over after all expenses. The goal of this article is to help all of us consider the expenses of our practices and evaluate what can be eating up our bottom line.

When considering where we can cut costs, we shouldn’t forget how important public perception is of our staff, facility, and the experience we create for the customer. The last thing we want is for our patients to feel as if the clinic is run on a shoestring budget.

But you can cut costs without hurting that public perception. Here are some steps to keep costs down and improve your bottom line.

Own Your Building
The US Small Business Administration is counting on businesses like yours to expand and is offering great long-term rates on business expansion, especially on hard assets like buildings and real estate.

This may not be an option for some of us, but the benefit is obvious when we look at what our lease is costing us per year versus the asset we could gain in 10, 15, or 20 years with ownership. Options may include being a partner in a professional building or joining in ownership with another professional or professionals.

Negotiate Your Lease
If buying or purchasing a building is not an option, or the place you’re in is where you want to be and stay, consider negotiating a longer lease term. It is in the building owner’s best interest to have a long-term tenant instead of a short-term one.

A building owner would rather not have to deal with the lost revenue from a vacant office space. Be careful to consider expansion options, and remember that options still exist for terminating your lease early.

Share Your Office
Often, our practices and the equipment in them are not being utilized 100% of the time. Remember, the time our space is not being utilized means lost revenue, whether it’s your practice or someone else’s. Hiring an associate to fill in the lower utilization periods, or finding another chiropractor or professional to share office space, is a great way to cut costs, and the renting practitioners also win by keeping their costs low.

Set a Budget
This may sound like business owning 101, but most of us do not actually set a budget for our practices. This leaves us with no accountability for sticking to a plan. Remember, failing to plan is planning to fail. For example, this year’s marketing budget in my office is 6% of last year’s gross revenues.

The categories to consider are payroll and professional salaries; rent or lease amount; office supplies; marketing and promotions; phone and Internet; general improvements; continuing education and seminars; professional dues and license fees; and donations to local and national chiropractic associations. Having a budget and sticking to it may save you more than you think.

Evaluate System Efficiency
Look at every position in your clinic, and group it into departments, such as front desk, chiropractic care, rehabilitation, insurance, marketing, and accounts payable. Break each department down step by step, and research products and ideas to make each department run as efficiently as possible.

A great example in our clinic is that after reviewing our clinic software, we decided to upgrade to a more chiropractic-specific software. This change was an expensive initial investment, but it has saved us time and money. It has eliminated double data entering and has quickened the generation of weekly and monthly statistics, which used to be a timely process. Billing and accounts-receivable tracking used to require a lot of input hours, but that has been cut down because of user-friendly electronic billing and accounts-receivable tracking programs. Another example is the implementation of our note-taking software. Again, our old barbaric way of manual note taking was very time-consuming and from a detail standpoint, it was marginal at best. Implementing the new software again initially took time and money, but now it has cut down enough time that it has allowed me to treat patients on Thursdays rather than spend the day processing record requests and doing other miscellaneous tasks that require my personal attention. Many products on the market are available to help increase the efficiency of our clinics and directly affect our bottom line. Get over the “what works doesn’t need to be improved upon” mentality, and welcome the new technologies that are out there to help us and in the end to save us money.

Order Supplies in Bulk
This again seems basic, but a lot of us order products and supplies on an “as needed” basis, which may cost us as much in shipping as it does for the product. Ouch! A few things to consider ordering in larger amounts would be: nutritional supplements, orthopedic pillows and supports, rehabilitation products, ice packs, headrest paper, copy paper, and toner cartridges. If you are unsure of the discounts that are available for your most commonly ordered products and supplies, simply call the supply and product companies and ask. The worst thing they can say is no. The suppliers commonly run specials on bulk orders and offer free shipping to help move more product, so taking advantage will definitely decrease your costs.

Stock Inventory That Sells
A common mistake many of us make early on in our practices is to order too much product and let it sit on the shelves or in a back closet collecting dust. A simple way to avoid this is to keep an inventory of the products you have and run a report of how much of the products you sold in the past month.

By doing this, you can see what products sell the best and you can stock accordingly. Regarding nutritional supplements, in our clinic we used to stock a lot of products that reached their expiration date before they were sold. Ouch! Now we just stock the items we know are sold frequently, such as multiple vitamins, Vitamin C, glucosamine sulfate, anti-inflammatory products, and essential fatty acids. If patients want specific products, we special order the product for them with our next routine order. If our product order totals over $200, we normally get free shipping or we can have the product sent directly to the patient’s home and have the patient pay the shipping cost.

Strategize Cash Flow
This is another sore subject for most of us, but it can be a huge area for potential saving in our clinics. Most of us are aware of the “upside-down” world of consumer debt we live in. This trap should be avoided at all costs. An applicable solution would be to stick to the 10, 10, 80 rule: The first 10% of the weekly deposit is the “give-back” category. For my practice, this money is set aside for giving back to the chiropractic profession, as well as to local charities and churches. Specific examples of entities needing your donations are state and national associations, chiropractic colleges, and local charities. The second 10% goes into an emergency fund and savings category. This money is set aside for unexpected emergencies. For my practice, it amounts to 3 months of working capital. Above the set-aside “emergency fund” is “savings” for purchasing new equipment and updating the facility. These reserves allow us to spend money on new equipment when the money exists and the need arises. More importantly, it prevents us from spending if the money doesn’t exist.

The leftover 80% goes to everything else it takes to run the clinic, including professional salaries and payroll. The goal of this tip is to help you budget rather than overspend and acquire debt that will eventually affect your bottom line in a huge way.

Consider Hiring a Coach
Hiring an expert who is experienced in all the areas I have touched on may save you thousands of dollars in the long run. A good coach is well worth the investment to help analyze all of your clinic’s expenses and determine what needs tweaking and what may potentially need more capital invested in it. One thing I will challenge all of you to consider is: At what level are you currently operating? Your bottom may look a lot different when the revenue you generate is 50% to 100% more. When we implement systems that a coach can help us with, we all stand to increase efficiency, which in the end brings up our earning potential.

My wife, who is also my clinic’s manager, kindly told me after I had been practicing for 8 months that unless I did something very different, “the ship was going to sink.” Those were tough words to hear so early into practice. I realized that I could take one of two paths: I could decrease overhead, or increase volume. At that particular time, few ways existed to decrease overhead, so the right answer was to increase patient volume. Thankfully today, my answer to that question was correct, and I was able to increase the patient volume. Take the challenge to look at all of these categories and evaluate where work is needed. I also again encourage you not to compromise the public perception of your facility and the experience you create for the customer. CP

Tom Schmidt, DC, practices in Lakeville, Minn. Contact him at dr.tschmidt@life-chiro.com.