Although the economy is in a slowdown, clinic administrators can take actions today to speed up the health of their businesses and come out of this slump better and stronger than before. Now is an excellent time to examine your clinic’s balance sheet and income statement to identify opportunities for improvement.
Diagnose your balance sheet
How healthy are your patient accounts receivable? As your patients feel the effects of this downturn, their ability to pay you may be in jeopardy. Review your accounts receivable list for potential problems.
Contact your patients and if needed, work out a payment schedule that is manageable for both sides. The longer you wait to address potential accounts receivable problems, the more you reduce the probability of collecting. Work to speed up your collection time by being the squeaky wheel.
Examine short-term debt (payable within one year). Try to negotiate a better rate if possible. By doing this, you speed up the time that you pay off your short term debt and reduce your interest expenses.
Look at your long-term financing arrangements. Examine the interest rates you are paying and consider negotiating better terms. It generally takes a difference in interest rate of about 2 percent for a refinance to make sense.
Also, you may have a prepayment penalty which could prohibit you from refinancing, but it is worth investigating. If you obtained the financing more than two years ago, chances are you can refinance at a better rate today. By lowering the interest rate, you speed up the time it takes to repay your loan(s) and reduce interest expense.
Examine your income statement
While increasing revenue in a downturn is problematic, looking for ways to cut variable and fixed costs will improve the health of your business.
Variable expenses, such as inventory, office supplies or taxes, fluctuate with production. While you can’t do much about taxes, you can audit how office supplies are ordered and create a procedure that minimizes waste. This also applies to inventory. Holding too much inventory is like storing cash on your shelves.
Fixed costs, such as insurance premiums, equipment leases or depreciation expenses, don’t typically fluctuate with the economy. Although your lease (or mortgage), utilities, or continuing education costs may be fixed, you might have other fixed expenses that you could reduce.
By committing time to take a close look at your fixed expenses, you could find “fat” to trim and improve your bottom line.
Another fixed expense that you may have some control over are the fees you pay your financial institution. If your banker has not reviewed these with you lately, ask for an analysis to see if there are services your bank can provide to help you reduce fees or improve cash flow.
Make sure your cash is working for you
Financial institutions have cash management products to help businesses get their cash in the bank faster, put it to work harder and help improve efficiencies.
Services such as lockbox, remote deposit capture, investment sweep accounts, loan sweeps and positive pay can help you manage your clinic’s cash while protecting it from fraud.
Glenda Michael is vice president and relationship manager for First Independent, and leads the bank’s Healthcare Services Group. She can be contacted at Glenda.Michael@firstindy.com or 360-619-4477.
