What's going on with your practice finances?

As primary care navigates its way out of the post-covid income protection, practices are seeing reduced profits and tightening cashflow. It is hard to manage vital issues like cashflow unless you know what is happening in real time, therefore, it is important that practices have effective financial management information and tools that enable them to report against budgeted figures. 

Our previous articles have highlighted the importance of digital accounting software solutions and their impact on timely financial insights. Budgeting is directly linked to this and is another tranche of financial data analysis available through digital software solutions.
 

Using a budget

Setting a budget is the finance equivalent of a plan for the year: your finances are unlikely to go exactly to plan but they are a guide to work from. Budgets can be set by finance teams in consultation with practice partners, NHS guidance and advisers. You can then use real-time data to compare your practice position and profitability to that predicted at the start of the year and any variances can be identified promptly. Income and expenditure comparisons can help to highlight any unexpected cost increases or income reductions, so that proposed solutions can be discussed, and action can be taken swiftly.

Pro-active practice decision making that may flow from reporting on budgets could include:

• Tightening of credit control
• Chasing of missing claims
• Advancing or delaying investments and recruitment
• Explore supplier options around higher costs
• Staff structure analysis
• And a wide variety of other practical actions that practices may deem appropriate

 

Perhaps the main benefit of budgeting for GP practices is to use reports as the basis of cashflow forecasts to extend these predictions of profit into cashflow.
 

Getting your drawings right

Budgeting is, therefore, fundamental in the calculations of partner drawings and distributions. Budgets can be used to predict future position and thus enable practices to make decisions upon projects, distributions, staffing levels, etc. If your adviser provides profit projections as part of the year end work, then these can be integrated with your accounting software to provide timely reporting results.

A number of budgeting tools allow for multi-budget set up. Therefore, whether you are a multi-site practice, wanting to consider new practice staffing models or deciding on the impact of projects, there is a budgeting option for all scenarios. These pre-set options can be chosen in reports when calculating the variances of actuals against budgets.

Several of the cloud-based accounting packages, along with a full suite of API integrated third party applications, allow for both effective and efficient budgeting, along with reporting on these results. Using cloud-based applications can enhance interactions with your advisers, allowing for advanced and pro-active support for your business.

If you would like assistance with digital accounting software or your options regarding budgeting for your practice, please get in touch with our team.