Keep your expenses in check
The challenges of running a business, seeing patients, and staying on top of the financial bottom line can be challenging. Growing your practices top line revenues is critical to the success of growing your practice, however keeping your expenses in check is just as important and can help you sustain your practice while you continue to build your revenues.
Having a process where you review and analyze the details of where you are spending the most on your business expenses will help you keep your costs down and in line with industry standards. Here are the expenses that will yield the biggest bang for your buck and definitely worth investing time reviewing to reduce your costs:
Is always the largest expense for most practices and it’s easy to ignore. If you are over-staffed then you are reducing your chances of sustaining your practice and providing you and your team with the stability and security that you desire. Look at each category of staff, Doctors, Techs, Optical, Admin. Assess their productivity and how many headcount your practice can actually sustain based on industry averages. If your payroll is too high, you should tweak to better fit your current practice’s ability to retain quality staff long term and in the process reduce your payroll costs.
2. Inventory/Cost of Goods Sold
After payroll, cost of goods sold is typically the largest expense for optometrists. Make sure you have an inventory tracking system in place. Review your costs of goods sold each month as a percentage of optical sales. If it’s not where you need it to be, time to take a deeper dive and figure out why it’s not producing the desired results.
3. Insurance Collections
Most optometrists outsource this because of the complexities involved with submitting across dozens of insurance plans. Analyze the collections as a percentage of insurance billings and see what percentage you are paying. If it’s higher than you expect, time to review the collections agency’s performance. It’s possible they are either underperforming or you are paying too much.
4. Credit Card Fees
When was the last time you took a look at your merchant fees? Better yet, how about converting credit card payments into ePayments where the fees are a fraction of the cost. Give your clients better options to pay that don’t have high merchant fees.
When was the last time you calculated your ROI for the various expenses you incur on Advertising and Marketing? Many practices have recurring charges that are not returning very little if anything at all to the practice. Time to get rid of these charges and tighten up your advertising and marketing budget.
6. Equipment Rental/Leases
New equipment for new procedures to generate new revenue streams in a common event for optometrists but having the wrong lease on your equipment rentals can cost you in higher interest and it adds up over a 3-5 year term. Make sure on new leases you shop around for the best financing and don’t just go with what is offered because it is convenient. Also, make sure you have a capital budget plan in place each year to account for new equipment and the cost that comes along with it.
7. Professional Fees
How many 3rd party consultants, professional service providers are you paying? Are the services they are performing helping you achieve your strategic goals? When was the last time you calculated the ROI and value each one is providing? If they are not helping you achieve your desired results you need to re-evaluate the expenditure.
By putting a process in place to review your largest expenses on a regular basis you can achieve the cost reductions that you desire.