An important aspect of a successful chiropractic clinic is close and consistent control over expenses. You will almost always find that profitability of a successful practice will go hand in hand with smart budgeting.
In order to be successful at setting and keeping a chiropractic clinic budget, you need to understand the two main components of it. These are fixed expenses and variable expenses. Once you have a clear idea of the difference between the two and how they fit into the budgeting process, you are well on your way to understanding how to tame your variable expenses.
Fixed expenses such as rent, salaries, insurance payments and loan payments don’t fluctuate too much although they may change over time. Nonetheless, with fixed costs you more or less know where you stand.
Variable expenses are what I call your X factor. This is more of the unknown because as your clinic continues to do business (and hopefully grow) you’ll keep increasing these variable expenses. Variable expenses become an issue because of their typical elevated fluctuation that will creep up on you until one day you start questioning where all the money is going at which time with a little analysis you realize that it is going all over the place. That’s why I call it the X factor.
Little things will sneak up on you. One time I looked back at my bills and realized we were spending $600 a month on storage. I also found we were paying $500 a month on banking fees. All these things, they just sneak up and now you are spending thousands of dollars on things that are really completely unnecessary.
Unless you learn to keep an eye them and keep them in check, variable expenses can literally break the bank. They have a huge appetite and will grow to the point that they destroy your profit margins.
Follow these 3 simple steps to tame those variable expenses:
1- Review the Past
Your clinic expense history can help you put a finger on where your variable expenses get out of hand. Go through your expense history over the past year and list all the variable expenses from those balance sheets. Look at the highest amounts paid and the reasons for them and if they were really justified. This may include costs of linens, supplies, banking or credit card fees, etc. You can often easily renegotiate these expenses to get them under control or perhaps get rid of them altogether.
2- Plan Ahead
With an increase of patients in your clinic you should expect your variable expenses to grow and prepare for that budget-wise. For example, if you have 1 massage therapist that you pay on a ‘per patient worked on’ basis and you get busy enough that you add an additional one, you can expect the variable cost of supplies and payroll to directly increase accordingly.
Another example may be as simple as realizing and preparing for an increase in your electric bill during certain times of the year depending on where you practice.
3- Re-evaluate Your Needs
Scaling back is tough because it is easy to believe an expense you have paid for so long is just a normal part of doing business for you. However, try to look at them with an objective eye to ensure you are paying for what you need, not what you want.
A personal experience with a variable expense that, while it’s not of money, just bites me occurred when I bought a clinic and I inherited a lease payment on a big fancy printer/copier machine. You could go down to your local office supply store and buy something that will work fine for at least the first couple of years for $150, and it does just what this thing does. Anyway, I absorbed this lease at $150 a month for three years.
On top of that, I didn’t realize that I needed to cancel the lease prior to it ending, so it automatically defaulted to one more year of lease payments at $150 a month; followed by a buy out that was $500 a month. Granted, I have this awesome all-in-one machine that’s paid off but my point is that it was a completely unnecessary expenditure that in my case I didn’t want or need. It was a waste of money and it would just kill me every month to see that payment go out automatically to them. Had I paid closer attention then that is something that I could have demanded be removed prior to clinic purchase or that I should be compensated for in some way to offset what I felt was an unnecessary expense.
I give you that example just so you can begin to take a very vigilant attitude and approach to recognizing and even finding unnecessary variable expenses and cutting them out. Trim the fat so to speak!
Commit to controlling your variable expenses and you’ll enjoy the results of a smooth running budget which will reward you with a well-run clinic and the satisfaction of knowing you are in control of your finances.
