There have been plenty of reports recently of delayed or incorrect payments to practices from the NHS. In some cases this has led to salary payments bouncing, direct debits being returned and plenty of headaches and extra work for practice managers.
The problem appears to be getting worse and many PMs are saying that they’re not being adequately warned of changes to usual payment dates, so what can be done to effectively manage finances and ensure cashflow doesn’t become a problem?
Have a plan B
Commenting on the Practice Index Forum Robert Campbell said: “Practices might need to build up reserves to cover known payments. I agree this might not go down well, but a failure to pay staff – including salaried doctors – if funds are not available on the last banking day of the month or on the date shown in staff contracts might result in a major grievance from all staff.”
Another PM pointed out that it’s not just salaries that need to be covered. “It’s worth always keeping a float of at least one month’s essential expenditure – salaries, telephone bill, indemnity etc. – basically anything that could affect business continuity. If you can keep two months all the better. It’s what I was taught 10 years ago by my mentor when I first moved into a PM role and it has kept us in a safe operating position throughout all the changes over the last few years. Our LMC even sent the same warning last year when payments started to fall apart. There have been some tough times when we have had delays affecting big payments combined with tax bills but we have never actually run dry. It’s tough but we all need to have contingency funds in place.”
Another popular financial management tip put forward by PMs is to try and use inbound cash received the following month. Another comment read: “We get our payment on the last day of the month – but that is used for the following month so there’s no problem.”
It could also be worth arranging an overdraft, just in case. “Years ago, at a different practice, I negotiated an overdraft just in case, and used the balance of QOF to show how we could pay it off if we were into the overdraft at the end of year.”
Without wanting to sound like financial advisors, overdrafts are great as a safety net, but effective financial planning should come first. A detailed budget is an absolute must and, most importantly, it must be kept up-to-date.
Compiling a detailed budget of ins and outs, and seasonal variations in income, can also focus attention on the overall financial health of your practice – which in so many ways needs to be treated like a business. What money will be coming in and when? What’s going out? How will you ensure payments are received on time? Where can costs be saved? What other work can you charge for to boost income? These are just some of the questions you could ask.
Don’t miss out
Another PM pointed out that, when finances are tight – and especially while ‘rainy day’ funds are being built up – practices need to be checking payments thoroughly. Increasingly it seems payments are missing or delayed, so check all statements in detail and claim accordingly.
Knowledge is everything when it comes to cashflow. Exactly how healthy are your finances at a given time? Technology can be a real help; online banking is probably the simplest way to see what the situation looks like, but accounting software can also be of major use in instantly providing a longer-term picture. Online/Cloud-based systems are becoming the norm and could be well worth the modest investment. They’ll probably save time too. Let us know by commenting below if you’ve used any good packages.
Review receivables regularly
Every week look at payments that are due from customers, if applicable. It shouldn’t take much time at all to see what’s outstanding. If any amount is overdue then don’t be shy about phoning up and asking for immediate payment. Sadly, if you aren’t firm then people will take advantage.
Make payments easy for customers
Following on from the above, making payments should be made as easy as possible for customers. Faster online payments are clearly a preferred option.
Keep the bank informed
If unforeseen outgoings crop up, keep your bank informed. Find out who your banker is and try to keep them in the loop, good or bad.
Focus on your core strengths
For most practices, financial security comes from having a patient list that’s large enough to bring in enough money. You should know how many patients you can manage without overstretching resources (when costs start to rise), so aim to have a list that’s as close to the magic figure as possible. Great care and customer service will ensure you retain patients, which has to be your primary concern. Any new ones you can add is a bonus!
Keep it simple
None of the points mentioned above are rocket science, but that’s really the main point. On paper, at least, with a bit of financial planning that’s constantly updated and kept on top of, nasty surprises such as late or missing payments shouldn’t be too much of a problem.
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