Budget Concerns for Upcoming Year

End of the Year is typically a good time to review your finances and plan your adjustments for the upcoming year. The holidays offer some “down-time” that can be used to take an overall look at how the money is flowing.

Reviewing 2021

2021 is a tough year to judge growth because 2020 was so weird. Most practices are comparing 2021 to 2019 and finding little to no growth. Practices that are showing growth tend to be the ones that took advantage of the “down-time” to incorporate new services or invested in new equipment.

Financially, our practices are fairing this down-turn in stride because we received a great deal of help in the form of PPP’s. Income is down but so are expenses thanks to decreased cost of goods and fewer staff people. We are finding some respite in the slower pace without the pressures of increased expenses.

During the pandemic, Leadership OD’s Financial theme was “Unemotional Pessimism.” The logic is to resist the urge to let emotion guide your financial decisions, but expect that these tough times will continue and plan accordingly. We recommend continuing this mindset into 2022.

Why Pessimism?

When it comes to money, pessimism means being wrong is actually a good thing.

We expect the effects of the Great Resignation to continue throughout the year and good people will be harder to find than ever. And when we do find them, we expect them to cost more. Plan to be short-handed AND see an increase in staffing costs.

We expect inflation. The cost of everything will be going up consistently throughout the year. The backlog of ships in the ocean will take time and all costs will be increasing in the meantime. We also expect vendors to pass those expenses along to us in the form of “transaction” or “transportation” costs.

These financial implications will affect everyone, not just us. We expect that people will be more hesitant to spend money that they don’t have to. More patients will want “just what the plan covers” and less will be asking about second pairs.

For practices that don’t make significant adjustments, we expect another flat year of income growth.

It’s OK - Just Be Ready

If you have lost employees, spend some time with the remaining team exploring the possibility of NOT replacing them. Could the rest of the team share the extra work? Could the saved salary be shared in return? Could the schedule be thinned out somehow to require less people?
Consider dropping that plan that you hate. We expect patients to become more stingy, let’s drop the stingiest of them now.
Take this opportunity to take a deep dive into your Cost of Goods:

Start with an overall look at your expenses and then audit yourself. We recommend randomly selecting 20 patients and look at every document related to their purchases.

Were they billed properly?
Did your team order correctly, using your package pricing?
Did the lab bill you appropriately?
Were there new charges that you don’t understand?
Are you charging the right amount for contacts?
Was were the shipping charges for those trials?

This exercise always gives you something to fix.

Consider the reserves that you have accumulated and decide if you will save it for the next pandemic or invest it in something new for the practice.

For a complete financial plan for the upcoming year, please schedule a call with one of our consultants.