Advice on Preparing for the Economy Ahead: Cash is King
By Tannus Quatre PT, MBA
While the immediate direction of our economy is uncertain, I believe the recent changes in the United States housing and stock markets warrant the attention of private practice owners within our profession. In periods of even mild economic turbulence, the importance of cash is heightened, and efforts to generate and preserve cash are important.
In light of the current changes I believe there are a few areas that should receive additional consideration by private practice owners in an effort to concentrate on cash over the near term: collections, operations, marketing, and growth.
Collections
Many individuals and businesses are experiencing cash crises from a combination of factors in the housing, stock, and credit markets. When this happens, practice owners should be on the lookout for increased aging of accounts and bad debt. It is always prudent to pay close attention to collections from patients and insurance companies, but when cash crunches are hitting your payers, know that it's only a matter of time before your practice is affected as well. To confront this, focus on collecting as much cash as you can up front in the form of co-pays and responsible portions.
Operations
Operations must remain lean during tight times, and finding ways to convert your fixed costs to variable costs that will fluctuate with your business may help lessen your expense risk, and hence your cash flow. Operations that do not add direct value to your patients or referral sources may be more cost-effectively provided off site with no consequence to your customers. Examples of this may include billing, payroll, transcription, or bookkeeping.
Marketing
It is easy to neglect marketing when the financial straps are tightened, but remember that an absence of good marketing means an absence of new volume to your practice. Know that economic variables pose challenges across the board, and those practices that continue with their efforts to generate new business during the more difficult times will be more adequately poised for growth when opportunity arises.
Growth
Growth is important during all types of economic cycles. It is important, however, to watch where your growth occurs, especially when cash is tight. Growth in areas of your business with better margins and faster payment will help your practice in the face of economic challenges. It is important to know where these areas of your practice are, so that you can effectively navigate your practice through all that our economy has to throw at you.
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Tannus Quatre is a principal and co-founder of Vantage Clinical Solutions Inc., a practice management and consulting firm located in Bend, Oregon. Quatre can be reached at tannus@vantageclinicalsolutions.com.
Article reprinted with permission from the American Physical Therapy Association. This material is copyrighted, and any further reproduction or distribution is prohibited.