That about sums it all up – the three most important things for the business side of the medical practice.
The economic mess is still unfolding, but what we do know is that it will be difficult for several months, at a minimum. How long the recession will last is always a question mark, and this time is no different. The big difference this time is that credit has gotten very tight, bank lending is being disrupted while acquisitions are digested, and the stock market takes repeated falls.
When working with a client, as a matter of course I usually recommend that a practice set up a line of credit with their bank. Every business should have ready access cash, whether in the form of reserves on hand, a line of credit or some other means. We all read the papers, and times are not good out there.
Ok, so what now? Well, I would go see your banker and plan to talk about your business, the plans you are working on, and feel them out about the availability of credit for you. You may find that the practice’s shareholders will have to be the “bank” for new investments, or at least a larger proportion than once would have been the case. Work with your accountant to make sure that the loans – or invested capital in, if that’s a better way to treat the cash inflow. You may also decide to defer some of the profit and re-invest it in the practice, to meet routine working capital needs and to fund needed investments.
All of this circles back to the need to plan. Over the next month, get together as a management team (include your practice manager/administrator in this) and lay out your plan for the next 2 years, at a minimum. A cash flow projection should be prepared for this period, and you should assume that reimbursement will be flat, reimbursement will be slower, and that patients will have more difficulty in paying your bills. Then invite in your accountant and practice consultant (as needed) for review and discussion. From your outside advisors (disclosure – I’m one) look for independent advice and their perspectives – some of the “big picture” to factor into your decision making.
Whatever you do, don’t panic. Work through the next few months, and you will be OK. It will be a wild ride, but we will all get through it.