Is your practice burning through money quickly? Does it seem like your income is not maintaining the needs of your practice? Are there perhaps some money leaks in your practice?
In this podcast episode, Alison Pidgeon speaks about the top 15 money leaks in your group practice.
Podcast Sponsor: Therapy For Your Money, Green Oak Accounting
Are you ready to make data-driven financial decisions for your practice? You’re in luck! Check out the Therapy For Your Money Podcast, a podcast all about money and finances for therapists in private practice owners, hosted by Julie Herres.
As an accountant and owner of Green Oak Accounting, Julie chats with industry experts about a number of financial topics, from KPI tracking to group practice compensation. Head over there to listen to the latest episodes, take a look at their therapist resources, and much more!
In This Podcast
- 9 general money leaks for any practice
- 4 money leaks for an insurance-based practice
- Money leaks for a self-pay practice
9 general money leaks for any practice
1. Paying staff too much compared to the average reimbursement rate
If you have W2 employees in your practice, you should not be paying them more than 50% of your average reimbursement rate.
If you have a contractor, you cannot pay them more than a 60%/ 40% split. Otherwise, you will not have enough cash flow to pay for their overhead.
My advice to you if you are just getting started with a group practice would be to definitely have an accountant to help you to figure out those numbers because you don’t want to be in a situation where you have to tell your staff “Oops, sorry, I’m paying you too much and now I have to pay you less” (Alison Pidgeon)
2. Not keeping credit cards on file
Make it mandatory to keep your clients credit cards on file, because it helps:
- You to reclaim a missed appointment fee more easily should your client not pitch up or not come to the first session, and
- To weed out the clients that are not that serious about their therapy.
3. You should review your expenses on a regular basis
By reviewing your expenses often, you can see where you can eliminate or reduce expenses that have been piling up in the background.
On a quarterly basis review your transactions list and see where your money flows to. It is easy to have things on autopilot but try to check occasionally because you may still be paying for something even though you are not using it.
4. Not collecting payments in a timely manner
This ties in with having your client’s credit cards on record. Immediately after a session a client can schedule the next appointment and make payment for the session that has just been completed.
If the payment does not go through, perhaps their credit card has changed, you can still collect or arrange payment since they are there with you.
We find this process to be so important in making sure you’re collecting everything you should be collecting because if you wait until later to run the card and there’s a problem, we find it takes much more time to have the admin call them … it seems to be so much more streamlined and easy that you run it in the session and if there’s an issue you can get an alternative form of payment. (Alison Pidgeon)
5. Paying too much money in taxes because you are not getting professional advice
Even though an accountant may seem like an expensive asset, consider hiring one, because they will end up saving you a lot of money if you choose to work with a professional instead of trying to keep tabs on everything by yourself.
Accountants know the ins and outs of the financial world and can give you valuable advice so that you do not end up paying more than you need to for your tax.
6. Not having a clear sliding-scale policy or pro-bono therapy services
You have to make it clear to your staff that there are procedures in place for them to offer pro-bono sessions to clients that are short on money or need immediate assistance.
Provide them with the reasons for assessing how a client can be a viable candidate for the pro-bono or sliding-scale services.
If you do not have something like this written out, it is important to create a clear policy that is written out and available to each clinician.
7. Not marketing consistently
Anticipate the slower times of the year and adjust your marketing expenses accordingly.
- This also means that you remain consistent with your referral sources and maintain that connection instead of getting in touch only once a year. Aim to connect with them every three months.
- The end of the school year is generally a slower time, so before the slowing-down period ramp up your marketing so that you can keep the same amount of clients coming through your door.
- When it is a busy time of year, generally during the school year, you can slow down on your marketing because you do not want to be constantly turning people away while you are still paying for marketing.
8. Not fully utilizing resources
If you are renting or own office space, you may be losing money on it if you are not making full use of the wide range of services or benefits it can offer you.
Have therapists share offices or use the space to see clients in person if need be.
9. Are your rents, taxes, and other expenses too high in ratio with your income?
- Rent: rent should be about 10% of your gross income. For example, if you are making $400k per year in your practice, then your rent for the year should be $40 000 or less.
- Overhead: if your overhead is more than 20% of your annual income, consider looking at what could be adjusted so that you can lower that percentage to free up some cash flow.
4 Money leaks for an insurance-based practice
1. Insurance-billing problems
If you are having problems with your billing it is probably causing a delay in your payments.
It is important that you are on top of your aging reports: the report that shows you which money is still outstanding after 30-days. Look at this about once a week.
2. Accepting too many insurances or Employee Assistance Programs
- The issue with taking too many insurances is that it can get confusing for the therapist with billing.
- EAPs are great because they bring you clients but the trade-off is that they are typically paying you a lower rate.
3. Not comparing payments on Explanation of Benefits forms
There should be a way to tell on your system if a claim never got to the insurance company.
If you do not get any information on claims, be sure to follow up on them so that they are not dropped.
4. Not regularly requesting raises from insurance companies
The worse thing that could happen is that they say no.
You are fully in your right to ask if you could receive a raise, and it is worth a shot.
Don’t underestimate the power of asking for a raise and even if it feels frustrating and you’re like “I’ve asked for a raise every six months for three years and I’m ignored” keep doing it, because if we all do it then we’ll all hopefully get a raise. (Alison Pidgeon)
Money leaks for a self-pay practice
If you do not regularly raise your rates you could be missing out on income. You can raise your rates:
- Once a year,
- If you are full and turning people away,
- To keep up with the increase in expenses to maintain the business.
Remember to bill the client during sessions to make sure that the credit card runs accordingly.
- Purchasing a Commercial Property for Your Practice with Noreen Iqbal | GP 79
- Group Practice Launch
- Group Practice Boss: www.practiceofthepractice.com/grouppracticeboss $149 a month
- Email Alison: email@example.com
- PoP Group Practice Owners Facebook Group
- Free resources to help you start, grow, and scale
- Work with us
- Consult With Alison
Meet Alison Pidgeon, Group Practice Owner
Alison Pidgeon, LPC is the owner of Move Forward Counseling, a group practice in Lancaster, PA and she runs a virtual assistant company, Move Forward Virtual Assistants.
Alison has been working with Practice of the Practice since 2016. She has helped over 70 therapist entrepreneurs start and grow their businesses, through mastermind groups and individual consulting.
Transformation From A Private Practice To Group Practice
In addition, she is a private practice consultant for Practice of the Practice. Allison’s private practice ‘grew up.’ What started out as a solo private practice in early 2015 quickly grew into a group practice and has been expanding ever since.
Thanks For Listening!
Feel free to leave a comment below or share this podcast on social media by clicking on one of the social media links below! Alternatively, leave a review on iTunes and subscribe!