There are two types of expenses you will incur when starting a small practice-start-up costs and operational expenses.
Start-up costs are the finances necessary to open your doors for business. Many of these are onetime only expenses. The easiest way to determine your start-up costs is to make a list of services and tasks you will be performing. The most common tasks are booking appointments, billing insurance companies, collecting patient fees, and paying bills.
By doing research and using some creativity, you can figure out your start-up costs and operating expenses, then decide on strategies for reducing these costs.
Next, make a list of the services you will offer. For example, in my women's health center, I perform gynecology examinations, measure height, weight, and blood pressure. I perform dipstick urinalyses, wet preps, pregnancy tests, lipid profiles, fasting blood sugars, and hematocrits. I also do colposcopies, endometrial biopsies, and intrauterine device insertions. Now list the equipment and supplies necessary to do these tasks. Use the Internet to find office and medical suppliers, and request catalogues with prices. Add these prices to your list.
When you analyze your list, decide what you must have to open your doors and what can wait. What's the most cost-effective way to purchase this item? Consider printing your own letterhead, envelopes, and appointment cards in the beginning. Compare the cost of this to having them printed by a vendor. Ask your accountant about helping you to select a computer, book keeping software, and a billing program. Compare the cost of doing this in-house to using a billing vendor. Be careful of making decisions based only on a sales person's evaluation of your needs. For big-ticket items, ask for references and check them.
Operating Expenses
Operating expenses equal the amount of money you need to keep going every month. When I set up my bookkeeping system, my accountant set up a list of expense categories that I also use for setting up categories to do my budget. It includes salaries, draw check (what I take out of the practice to pay myself), taxes, medical and office expenses, insurance (medical, disability, property, malpractice), telephone, accounting and legal costs, continuing education, rent, etc.
Some of these are bills that you will pay monthly and some are annual, such as insurance bills. I budget yearly bills by dividing the total yearly bill by 12 to determine the monthly cost of that expense. I'm less likely to be surprised by a large annual bill this way. I always add a little to my expected expenses so that I err on the side of caution.
Cutting Costs
Saving money is important when you first start out. I purchased some items used and others were top-quality. I bought the best examination table I could afford, and it looks as good now as it did 20 years ago. I added a full-size pillow from a local discount store and got fancy pillow cases at a bed and bath outlet. I purchased my desk and examination room chairs at a used office furniture store. I bought a set of decorative glass canisters from a discount store that act as holders for syringes, tongue blades, and gauze. Once a month, I go to the warehouse store and buy large quantities of paper goods, soap, and cleaning supplies at a great price and with no shipping costs.
By doing research and using some creativity, you can figure out your start-up costs and operating expenses, then decide on strategies for reducing these costs.
Have a question about starting your own practice? E-mail Nancy at [email protected].