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Show Me The Money

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Show Me The Money

  1. 1. Show Me the Money The Importance of Cash to Medical & Dental Practices Michael L. DeVries, CFP ® , CHBC, EA
  2. 2. Is the Business Healthy <ul><li>Profit? </li></ul><ul><li>Gross Charges? </li></ul><ul><li>Number of Patients? </li></ul><ul><li>Number of New Patients? </li></ul><ul><li>Physician Work RVU compared to peers? </li></ul><ul><li>Compensation to Personal Productivity? </li></ul><ul><li>Non-Owner Productivity? </li></ul><ul><li>Cash is Critical! </li></ul>
  3. 3. Cash - 5 Golden Rules <ul><li>Know how to measure it </li></ul><ul><li>Know the Causes of Cash-Flow Problems </li></ul><ul><li>Build Strategies that can Maximize Cash Flow </li></ul><ul><li>Prepare for the Worst </li></ul><ul><li>Grow Smart </li></ul>
  4. 4. Measurements <ul><li>Balance Sheet – Point of Reference </li></ul><ul><li>Cash Flow Statements </li></ul><ul><ul><li>Reflects movement of money over a period of time </li></ul></ul><ul><li>How long does it take for cash to be collected </li></ul><ul><ul><li>Collection Percentage </li></ul></ul><ul><ul><li>Number of days in A/R </li></ul></ul><ul><ul><li>Percentage of A/R over 90 Days </li></ul></ul>
  5. 5. Strategies for Maximizing Cash <ul><li>Minimize Fixed Expenses </li></ul><ul><li>Right Size Staffing – be creative </li></ul><ul><ul><li>Job Descriptions </li></ul></ul><ul><ul><li>Outsourcing </li></ul></ul><ul><li>Finance Equipment / Improvements </li></ul><ul><li>Set Payment Expectations – Financial Policy </li></ul><ul><li>Good Collection Procedures </li></ul>
  6. 6. Causes of Cash-Flow Problems <ul><li>Investment in Equipment </li></ul><ul><li>Investment in Leasehold Improvements </li></ul><ul><li>Slow Collections – Patients or Third-Party Payors </li></ul><ul><li>Reduction of Charges </li></ul><ul><li>Doctor Bonus Compensation </li></ul>
  7. 7. Prepare for the Worse <ul><li>Get a jump on financing </li></ul><ul><li>Match sources and uses appropriately </li></ul><ul><ul><li>Short-Term – line of credit; short-term loans; credit cards </li></ul></ul><ul><ul><li>Long-Term or Secured Loans – only for purchase of long-term investments (Equipment / Leasehold Improvements) </li></ul></ul><ul><li>Conservative Bonus Computation </li></ul><ul><li>Working Capital Reserve </li></ul>
  8. 8. Grow Smart <ul><li>Consistent Growth </li></ul><ul><ul><li>Marketing Plan </li></ul></ul><ul><li>Strategic Planning </li></ul><ul><ul><li>Look Back and Forward – where are you going? </li></ul></ul><ul><li>Goal Setting </li></ul><ul><ul><li>Establishing Targets </li></ul></ul><ul><ul><li>Establishing Benchmarks </li></ul></ul><ul><li>Investment Rate of Return </li></ul><ul><ul><li>Cash Flow Forecasting </li></ul></ul><ul><li>Hire a Certified Healthcare Business Consultant </li></ul>

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