Managing Medical Practice Finances: Key Tips for Doctors and Health Professionals

by Armond Shoostovian, CEO at Medical Finance Group

Running a successful medical practice in Australia is not just about providing excellent care; it’s also about managing finances and expenses effectively. Whether you're a GP, specialist or allied health professional, proper financial management is key to maintaining a healthy practice and achieving long-term financial success. This article provides key tips for managing your practice finances, covering everything from budgeting to tax obligations and staff costs.

Practice Financial Management:

  1. Creating a Realistic Budget: The first step in managing your practice’s finances is setting up a comprehensive budget. This includes estimating both fixed costs (rent, utilities, and staff salaries) and variable costs (medical supplies, marketing, and equipment maintenance). By understanding your expenses, you can set realistic revenue targets and better control your practice’s cash flow.

  2. Managing Cash Flow: Cash flow is critical for any business, and medical practices are no exception. It’s important to keep track of accounts receivable and ensure timely payment from patients, insurers, or Medicare. Implementing a system to regularly follow up on unpaid invoices can help avoid cash flow disruptions. Consider using practice management software, such as BP Practice Software that integrates accounting and billing for smoother cash flow management.

  3. Setting Competitive Pricing: Setting competitive pricing for consultations and treatments is crucial to both attracting patients and ensuring your practice remains profitable. Consider researching what other practices in your area charge and adjust your prices accordingly. Be mindful of Medicare rebates and private health insurance contributions, as they may affect your pricing strategy.

Taxation and Compliance

  1. Understanding GST Obligations: If your practice’s turnover exceeds $75,000 annually, you are required to register for Goods and Services Tax (GST). Ensure that you’re complying with GST regulations, which involve collecting and remitting tax on taxable supplies, such as consultation fees. A professional, licenced tax accountant with experience in healthcare can help ensure that you meet your GST obligations and avoid costly penalties.

  2. Tax Deductions for Medical Practices: Your practice may be eligible for various tax deductions, such as expenses related to equipment, staff wages, rent, and utilities. Keep detailed records of all expenditures to claim the appropriate deductions. Hiring a tax professional who understands medical practice finances can help you identify eligible deductions and minimize your tax liability.

Managing Staff Salaries and Expenses

  1. Efficiently Paying Staff: Staff salaries, including those of medical assistants, nurses, receptionists, and other healthcare professionals, are often the largest expense in a medical practice. Develop a payroll system that ensures staff are paid on time, with appropriate tax withholding. In addition, ensure that you comply with Fair Work Australia regulations regarding employee wages and conditions.

  2. Managing Overhead Costs: Overhead costs, such as rent, utilities, office supplies, and equipment, are inevitable in running a medical practice. Look for opportunities to reduce these costs without compromising patient care. For example, negotiate with suppliers for better rates, consider shared office spaces, or implement energy-saving measures to lower utility costs.

Running a successful medical practice goes hand in hand with effective financial management. By creating a realistic budget, managing cash flow, optimising tax deductions, and carefully controlling overhead costs, you can ensure that your practice remains profitable and sustainable. Regularly review your financial strategies with a licenced accountant to stay ahead and improve your practice’s financial health.

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