Cash flow problems are often the number one financial stress for PT practice owners. They prevent your business from running smoothly. They’re a source of constant worry, distracting you and limiting your ability to achieve goals. When you’re worried about having enough money to pay your bills, how can you concentrate for long on anything else?
Budgeting helps take the guesswork out of financial management. Put in the time to create a budget now, and you avoid the cash flow dips that jam up your business and your life.
With a budget, you’re suddenly working with a financial plan for the year that’s tied to your actual revenues and expenses, and takes into account where your business is today. That helps you get where you want to go, fulfilling your practice vision and your strategic plan. You’re not panicked about money all the time, so you can focus your time and attention elsewhere—that can translate into big productivity gains for you.
These common budgeting mistakes leave many PT practice owners with cash flow troubles:
You don’t create a budget at all
A lot of busy, overwhelmed PT practice owners don’t take time to make a budget. Practice owners face a constant time crunch—but that’s often only part of the reason budgets don’t get made.
For many of us, financial planning can be emotionally reactive. The stress and fear that’s tied to our thinking about money often runs very deep. I know this from my own experience. What I also know? Putting your head in the sand about money only makes things worse. Not budgeting leaves you and your team flying blind through year, and much more likely to run up against cash-flow problems.
You don’t start early enough
Too often, budgeting for the upcoming year gets squeezed in as an end-of-year task. Tackling budget for the first time in December makes for a rushed process. You risk having your finished product be less accurate and much more likely to fall short of giving you roadmap you need to avoid cash flow squeezes. NOW is the time to be working on your budget for next year.
You work off hopes, fears, assumptions–not DATA
Projections are rarely perfect—but meaningful, useful projections are impossible without objective data. Tracking monthly revenues and expenses gets you the information you need to forecast future revenues and expenses and create an accurate, informed budget. When you sit down to create a budget, do your best to have at least 3 months of data to work with—a full year is even better.
You don’t build in contingencies
One thing we all know as PT practice owners? Things don’t go exactly as planned. Additional expenses come up. Unexpected revenue shortfalls happen. It’s critically important to identify and address the underlying issues that are inflating your expenses and holding back your profits. At the same time, a smart, solid budget plans for uncertainty and the unexpected. That way, when an out-of-the-blue cash-flow issue arises, you’re covered.
You don’t track your budget throughout the year
Your budget isn’t just a thing you make because you’re supposed to—it’s a living document that helps keep you out of cash-flow trouble. If you let it, your budget can be your financial guide and roadmap for the year. How do you make that happen? Track your actual revenues and expenses against your estimated ones. As the year progresses, make adjustments to your budget as needed. Paying close attention your budget alerts you to an impending cash-flow issue before it becomes a crisis.
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