Establishing a medical practice involves many opportunities but also many challenges. Understanding how to start a medical practice the right way can save you much heartache (and money) down the track.
As a chartered accountant advising small businesses for the past 20 years, I've gained some insights into human nature and how emotion tends to influence people's decisions when starting businesses of all kinds.
Many of my clients have approached their new business with rose-coloured glasses. They don't want to think that bad things could happen. For example, when starting out, they don't want to think about problems that could arise with business partners, employees or service providers.
They also tend to think a lot about their cash flow, and are often very concerned to control expenditure in establishing their business. This is both sensible and understandable, as fit-outs, equipment and computers can eat up a lot of money if spending isn't well managed. But it's also important not to scrimp on other important, less obvious elements that I believe every good business needs.
My advice to medicos setting up in private practice is dream of (and prepare for) the best, but also to plan for the worst. Start on a firm foundation by mitigating your risk exposure.
Four essentials to put in place when starting your practice
Four of the most important things to put in place when setting up in private practice are:
1. Legal agreements - Professionally prepared legal agreements will protect you when employees and partners leave, whether that is their decision or yours. These agreements should cover expectations for all parties and the how exiting the practice is to be undertaken. Without these, potential complications could be significant and costly. Don't rely on agreements prepared on the back of a napkin. You need legally binding documents prepared and reviewed by a qualified legal representative. Otherwise, agreements can be easily overturned. These agreements will protect you and your business at its outset and into the future.
2. Software programs - A good practice management software program isn't cheap but it's a vital investment. Your software program will maintain patient records, billings and receipting. Many offer extra features that can make a major difference to your practice. For example, the Genie program (which costs $10,000-15,000) will also transfer patient billings to various health funds for payment with receipts from those funds automated. These programs can save you and your staff time and help you manage debtors. You don't want to have to recover bills three years down the track.
3. Procedures manual - A good procedures manual is also an important tool. This should detail doctors' expectations: what they need and expect to happen to ensure an efficiently run practice (i.e. when they need stock reordering, billings to be delivered, receipting completed). Your procedures manual is a living document that should develop as the business grows. The main thing is to ensure that all the tasks that are essential to the business are covered. It can also be useful to help manage staff as it sets out the performance required of them.
4. Staffing arrangements - You should always keep in mind the need for a backup plan. The worst thing you can do is have one full-time person in a practice whom you depend on completely to keep things running. If that main person gets sick or leaves unexpectedly, you need to have someone else who knows how to help maintain the business. One simple strategy is to make sure your reception role is covered by at least two people. And, as your business grows, a practice manager will be essential. Make sure you recruit somebody with the right skill set for any role. After all, there's no point having someone who has only reception skills if you also want them to cover bookkeeping duties.
The best strategy for starting a medical practice the right way is to spend some of your cash flow at the outset to cover these four essential items. It's a worthwhile investment to put in place safeguards that will protect what you will spend years building.
Remember: dream of the best - plan for the worst.
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