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2021.1 RCE and 2021.2 AKT results release on 1 September and 2021.2 KFP results release on 30 September 2021.
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General practice tool kit
Your practice finances
Last revised: 24 Oct 2019
So that your fees remain fair and provide you with an appropriate income, regularly dedicate time to identify, assess, and control the costs associated with delivering quality health services.
In most practices, the two largest costs are wages for health professionals and administrative staff (which includes tax and superannuation) and occupancy expenses (rent or mortgage and associated costs).
Other costs include:
Many of the costs in medical practices are fixed and do not vary much or at all, regardless of how many patients you see.
Examples of fixed costs include rent, some insurance premiums, wages for permanent staff, cleaning services, and website hosting.
Some fixed costs may increase at regular intervals (eg your rent might increase after three years).
Generally speaking, you can do little to control your fixed costs, although you can aim to reduce some of them by, for example, negotiating with the premises’ owner, and “shopping around” for cheaper providers.
Examples of non-fixed costs include utilities and consumables, which can vary depending on how many patients you see and what their needs are, how many hours your practice is open, and purchase practices (eg buying printed stationery in bulk to reduce unit costs). You can control some of these costs by asking staff to turn off equipment and lights when they’re not in use, compare costs of different suppliers before ordering, and to not waste consumables.
Your breakeven point is the point at which your total revenue equals your total expenses.
Remember that revenue is what you use to pay costs, therefore generating $10 does not equal $10 gained or $10 of profit. In fact, if your costs are $10, you have made no profit at all. However, if you reduce your costs to $7, you generate $3 of profit.
By identifying your practice’s breakeven point, you develop a better understanding of your practice’s financial viability.
Don’t be afraid to ask ‘Is that the best you can do?’
Wherever possible, negotiate with suppliers and ask them to submit quotes and tenders whether they are providing goods (such as premises, electricity, telephone, office supplies, and medical supplies) or charging fees for professional services, such as banks, insurance companies, and accountants.
Wherever possible, “shop around” to find the most cost-effective option that doesn’t compromise your practice’s ability to deliver quality services.
Remember: every cost you reduce is a saving that you can invest into your practice or take as profit.
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