I learned this secret early on: Not many people fully understand how to use a budget…

Creating and maintaining a comprehensive budget is crucial for private practice owners to effectively manage their money.

Here’s my advice for you:

Understand what funding sources come into the practice.  When you fully understand each of the service fees and rates, only then can you make an informed decision about the revenue coming into your business.

For example, you indicate that your usual fees are $245; however, some EAP work might pay you $220 (Question: how many sessions do you actually see at this rate in a given week?).

Workcover may pay you $155 (Question: how many sessions do you actually see at this rate in a given week? And how much time does the paperwork take you?).

Categorize your expenses, including rent, utilities, staff salaries, subscription fees, marketing expenses, and professional fees.

It's important to track both fixed expenses, which remain relatively stable month to month, and variable expenses, which may fluctuate (a good example of a variable expense is your contractor fees or your fees from your practice management system if you pay separately for SMS).

These could include reducing debt, removing a service that you provide (see above the workcover example that pays considerably less than the other services and requires more paperwork),or increasing your client attendance.  .

For more ideas on this, check out our 5 days to fill your books program here.

Once you have a grip on where your revenue comes from, think of how you will break down the revenue into a few categories.

Cost of Sales: This amount is what you will pay to contractors.  It is a variable rate and isn’t usually considered in your profit.

Wages: This is your biggest expense as a private practice owner and you should have your own salary included in this!

General Expenses: You can and should track these expenses and keep them under control.  For example, if you are paying $110 a month for your phones, when can you consider alternative phone options and what other options do you have available to you? (Hint: for $40 a month you can get a belong mobile number that allows you to call internationally, roll over your data AND share data with ANYONE on the belong network.  Find out more here. Use our referral code and get $20 off your first month IAFXBLAB9)

Don’t be afraid to use technology to minimise the administrative burden of private practice.  You can automate systems and still provide the individualised quality you boast about.

Make sure the amount of money you set aside for your business line item (ie phones) hasn’t been exceeded. Remember that every dollar you spend is a dollar less you earn in profit. 

Use a scorecard to understand your practice numbers.  Remember that your numbers tell you a story.

Here’s a free video where I talk about analytics and private practice wastage.