Practice Owner’s Manual Series, Part 3 - Financial Mastery With Adam Robin

[00:00:00] The one metric that really helped me is the percentage of income being spent on payroll, right? Because my buddy Will, he told me one day, he said, there's one expense line that will bankrupt you and it's your payroll.

[00:00:16] If you get the payroll number right, like, oh, it's almost hard not to make money. Like you got to be silly, right? It's like if you get your payroll up to like 60, 70, 80 percent, you're going to be broke. Welcome!

[00:00:31] You've entered the Physical Therapy Owners Club podcast where your host, Nathan Shields and other successful PT owners and leaders share their experience and insights on how to build successful PT businesses. They'll share the stories of their paths to success and show you how you can also obtain

[00:00:47] greater freedom and more profits from your business. That's what the PT Owners Club is all about, greater freedom and more profits. There's plenty of room for you as well, so come on in and join the club.

[00:00:59] Hello everybody and welcome back to the next episode in our series of the quintessential bulletproof practice owners manual for success. Hopefully you appreciated the previous episode, took lots of notes, did some homework. Now get ready to do some more work on your business.

[00:01:20] Get out pad and paper and let's go! Hello and welcome to the Physical Therapy Owners Club. Nathan Shields here with my buddy Adam Robin and we're now in the part three of our PT Manual for Success. How's it going? Yep, man, it's going good.

[00:01:36] I had a great day. I've been sick for like four or five days. I don't know, like I'm the kind of guy that I got to be going. If I ain't going then I'm not happy.

[00:01:44] I was in a little bit of a slump but today I got up, I was able to get my run in, got my meeting, met my team this morning. I'm freaking just excited that I'm back on my saddle.

[00:01:55] I'm excited about this topic because these are some of my favorite episodes. I've had Eric Miller of Econologics on the podcast so many times. He's a frequent flyer for sure. But I keep bringing him back because I love talking about these topics and today it's

[00:02:09] all about financial mastery as a practice owner. And so today we're talking about finances and how to set yourself up. It's interesting how blind many owners are to some of the details in the financials that can make thousands of dollars of difference in profit each month.

[00:02:27] Little things, looking back, knowing the difference between AMA versus Medicare billing guidelines, eight minute rules, how some CPT codes reimbursed better than others and then the MPPR factor on those codes. All that stuff can make such a huge difference.

[00:02:44] We're not going to get into that much detail in this episode. If you want to talk to us about getting into details like this can reach out to us directly, but we're going to talk about the overview stuff and the

[00:02:54] importance of the important things related to the financial aspect of your clinics. And it's really just about like developing good financial hygiene or financial habits, right? And actually being the designer of your financial situation as opposed to the victim.

[00:03:13] It's like create a system that works for you where you can have more clarity and control over where your money is at, what resources you have available and more importantly, like what leverage you can pull in your business to affect the bottom line.

[00:03:24] It's not all about like how can we like get rich? It's like how can we put together some systems that allow us to have predictable financial health in our personal lives as well as in our business? That's something has to be created.

[00:03:39] It's not something that just going to happen because you have a sign, you know, you have a building with a sign on it, you know, like you have to actually design that. Yeah, a couple of things come to mind as you're talking about some

[00:03:49] of the overviews regarding financials. And this goes back to, and you can listen to some of the podcast episodes with Eric Miller, but a couple of things stand out from past episodes. And that is number one, you have to force profits from your company.

[00:04:03] It is your job as the CEO to force the profit to come from your company in whatever way that is. You have to push the profits. You can't just lay back and expect the profits to come to you.

[00:04:15] And simply in a private practice setting, our margins aren't that great. You have to drive the profit. And the other is the mindset that the clinic should be working for you instead of the other way around.

[00:04:28] It's that typical mindset of you don't own a company, you own a job, right? When you're small business owner, you can get really stuck as to how that organization should look. And and honestly, if you were to put your to map your life

[00:04:43] into an organizational chart at the top of the organization is your household. It's not your company. It's your household and below your household is your business. And the business serves the household and the money that's created by the company should be driven towards your household

[00:05:02] along those same lines as an organizational chart. And having those two mindsets, I think, puts you in a more powerful, proactive, change agent position instead of being passive about it and saying, oh, you know, whatever's left over, I'll take home. I'll pay myself last.

[00:05:20] No, that's not the mindset you need to take if you're going to be profitable in your business. It's like this business is here to make me and my household money to prepare me for retirement and set up my kids for a successful future. That's why I did this.

[00:05:35] And that's not selfish to say that. Yeah, as I heard you talking and I haven't really described it like this before, but it kind of just came that division kind of came to my head. But like, I imagine like everybody has in their house like that cheese grater.

[00:05:48] It's like that silver thing with a handle on it. And there's like big holes on this side and there's little holes on this side. And it's like, you have a block of cheese and you want to create you want to shit, red some cheese.

[00:05:59] And it's like, if you want to create shredded cheese, you have to push it through the holes that you design. Otherwise, you're not going to get shredded cheese. You're going to get something different. You might get some crumbles and some blocks and some chunks or none at all.

[00:06:14] But like you have to create some friction, like an avenue of friction that you have to push your efforts through in order to create the product that you're looking for. To get the cheese. To get the cheese, man.

[00:06:26] Like in this instance, it's like you're operationalizing, if you will, like the cheese grater. You're pushing your efforts and your energy and your onboarding and your training and your all these things and through this to this product. So at the other end, you get the product of profits

[00:06:41] that you can reinvest in the back into your business, into your family, into your people. Not like you just wake up and you got shredded cheese everywhere. You got to create it. Come on, people. Let's go.

[00:06:50] Yeah. Unfortunately, a little bit of his naivety as a small business owner because what we know is whatever function we're working in, physical therapists, optometrists, veterinarians, we can do that really well. But owning a business is relatively new for everybody. Pushing the profit wasn't necessarily taught to us.

[00:07:07] And that's why we're doing this today, right? So I would do on it. That's why we're here. That's why we're doing it. Let's get started at the very top and start with some of the KPIs that are important to know when we're talking about KPIs.

[00:07:19] The traditional ones come up, whether it's visits per week or a number of new referrals per week, that kind of stuff. General revenue numbers are there, but there's more to it that I think people really need to know.

[00:07:33] And these should be readily available in your EMRs at this point. And if they're not, I'd highly recommend you talk to customer service person that runs the software. But average reimbursement per visit. This and average cost per visit go hand in hand

[00:07:49] and you need to know these two things. Your average reimbursement on average needs to be higher than your cost of running the business. That you know you're making a profit on each visit. Those two things are just the basic KPIs that I would start out with.

[00:08:03] No, for sure. For totally, I network with owners all the time and I'm almost positive because I've been doing it for long enough that if you ask any owner who's in network, especially what are some of the biggest challenges they're facing right now and it's declining reimbursements?

[00:08:20] How do I create profitability in my business? And then the next question is like, great, like what's the spread between your cost per visit and your reimbursement per visit right now? How do you create this? You can't manage what you don't measure. You know what I mean?

[00:08:33] Like, you've got to know that. Like, if you don't have clarity on that, I'm going to smoke you. You've got to have clarity on like, what is your average reimbursement per visit like predictably based on the patient demographics that you're seeing,

[00:08:45] the insurances that are coming that you're seeing on a month by month basis. And you put all those together. What is the average reimbursement you're getting every visit? Likewise, what's the cost? It's a really simple formula. Very simple. Take your gross revenues divided by the total number

[00:09:00] of new patients in the previous six months, 12 months, whatever it is. And your cost per visit, same thing. If you need to meet with a CPA and figure that out, go ahead, but take your gross expense line divided by your number of new pay,

[00:09:13] same number of new patients in that they need to get your cost. And because we don't know this one part is what insurances use against us unknowingly for the owners. And that is they're going to offer us a contract if we want to be in network with them.

[00:09:31] And if we don't know our cost per visit, then we don't know if we're making money on that contract or not. Like if people went into in the physical therapy space, the typical United Healthcare contract might be 60 to 65 dollars per visit flat rate.

[00:09:46] And you can't even project what your cost per visit is going to be when you open up your clinic. You're just going to unknowingly or ignorantly sign that contract because it gets me patients. That's what, you know, people around here take United Healthcare

[00:10:01] or doctors or renaissance patients who have United Healthcare and blindly we're signing these contracts that are below our cost per visit. Some people might say, well, that's a loss leader. If you're OK with that, then you might be better served

[00:10:14] by just letting that patient come in and giving them $20 each time they come in. Say that nice major see you later. Thanks for coming. Why don't we just save each other's time? And let me give you this $20 and see it on Wednesday.

[00:10:28] Right. That's one thing that works against us in that particular scenario, because we don't know our cost per visit. And if you don't know your cost per visit, you don't have the business yet. Well, that's why you build out a pro forma.

[00:10:41] I don't know if we talked about that before, but building out a pro forma with your CPAs help if you need one or a bookkeeper that assesses. Maybe these are the costs that we're looking at going forward.

[00:10:51] This is going to be the average cost based on the number of visits we're predicting what's that cost going to look like. There's easy ways to come across those numbers, but they're also super valuable in knowing what contracts you're going to want to sign up for or not.

[00:11:02] Yeah. And at the end of the day, like our purpose really is like helping owners regain control. It's like we're helping them regain control. Like let's take the reins and this right here, like setting up your KPIs,

[00:11:16] especially your financial KPIs is like that tool, like the one tool that you have to like regain control of what you really want to create. Because once you have clarity there, you can do all kinds of stuff. You can set your productivity expectations with your team objectively

[00:11:33] and not emotionally like we need to do X in order to achieve Y. Like that is a math problem. It's not an emotional problem anymore. It's a math problem. There's a lot of power that comes from that. Not only that, but like we can project revenue.

[00:11:46] We can project collections. We can project things so like we can have more certainty about the money that's going to be coming into the bank every month or the money that we're going to have to spend every month.

[00:11:56] That gives you a lot of power as the owner and power in decision making. If I know the data, then I can make a good decision. Yeah. If you know the data, you can create certainty. If you can create certainty, then you're going to take action

[00:12:08] and you're going to take decisions. You're going to make decisions through that certainty. Right? If you have lack clarity and there's a lot of fear and security around your money, you're going to get paralyzed. You're going to be in that fear zone.

[00:12:19] And that's where a lot of owners stay. They're in that zone and they feel like, oh, it's because new grads don't want to work for less and I can't make money. And this and that. And it's like you really just don't have control. You know what I mean?

[00:12:32] Like you don't have control. Like once you get control, like there's a whole new mountain of possibility that you can climb. Just know your numbers. Know your numbers, man. Profit margin is I think that's one that business owners should know in general.

[00:12:43] If you don't know how to get it again, talk to your CPA bookkeeper. They'll teach you, pay them, sit down with you for an hour and go over it. That's going to be one of our recommendations later on.

[00:12:53] But for the sake of the KPI section, you know, get to know your profit margin. In general, I want to say in the physical therapy space, if you're in the 10 to 12 percent profit margin, you're about average. If you're in the single digits, you're below obviously.

[00:13:07] If you're getting above 15 percent profit margin, then you're doing really well. Honestly, if you're not making a double digit profit margin as a business owner, then I question whether or not it's worth it to for all the risk and headache that you're taking on.

[00:13:23] But if you don't see a way to get that double digit profit margin either, then man, you might want to consider different ways of doing business. I mean, you can stay in the space, but maybe you need to modify some things.

[00:13:36] Little addition that I want to add there is there are situations in which single digit margins are appropriate, but you better be scaling your business very rapidly. Right? Like it's going to cost you money to grow your business, but like you better be opening up clinics every year

[00:13:51] and still having those single digit numbers. Yeah, because your expense line is high because of marketing. Correct. Like you're hiring therapists every month and like if those types of things are happening, that's a different story. Different story. We're talking about just like operational capacity. Stabilized. You're leaned out.

[00:14:06] You're stable. You should be 20 percent margins. This is very achievable even in network, even with UHC. You can do it. You can do it. Definitely. Any other KPIs that stand out to you outside of those? Yes. Oh, yeah, we missed a couple.

[00:14:20] Yeah, not that we have to like dive into like all of them because there's a bunch that we could, but the one metric that really helped me is the percentage of income being spent on payroll because my buddy Will, he told me one day,

[00:14:37] he said there's one expense line that will bankrupt you and it's your payroll. If you get the payroll number right, like it's almost hard not to make money. Like you got to be silly. It's like if you get your payroll up to like 60, 70, 80 percent,

[00:14:50] you're going to be broke. 60 percent of revenue we're talking about. Right. So like if you're making 100 bucks, you can't spend more than 60 on payroll. Right. When you say payroll, it's payroll plus benefits. Everything you're spending on employee payroll, benefits,

[00:15:04] transaction fees, all that stuff, all the employee stuff, all the employee stuff. Right. Like we need to keep that number back in the day. It was like under 50 percent. It's a lot harder to do nowadays, but like I think even somewhere is like below 60 percent is totally achievable.

[00:15:22] If you're really lean right on 55 percent and you can do it. But if you keep that number around 55 percent, you still got 45 percent to work with being different. Right. You got some freedom. You got some flexibility.

[00:15:34] It's going to be important for you to make sure you're not paying your therapist more than you could afford. And you're offering benefits packages that fall within that framework and also you establish a production level, whether that's units per visit,

[00:15:50] units per week, units per month, whatever it is that you decide that satisfies that metric that keeps that expense line under 55 percent. You solve that problem. That's the biggest problem. You solve that problem. It's like you got a lot of money to play with now. Right.

[00:16:05] Yeah. And now you know what your acceptable salary range is for a physical therapist. Exactly. Now going back to noting the numbers and the power it provides, like someone says I want $80,000. If you know your numbers, you can think in your head, well,

[00:16:19] if I'm going to pay them $80,000, they need to be producing this much. I can come back and say, OK, if you want $80,000, I can do that. And I'm just throwing numbers out there. I'm going to need to see you see 65 visits a week

[00:16:32] with an average four skilled units per visit. Can you do that? If you can, then I can pay you $80,000. I can justify an $8,000 salary. And that's the power of it. Or if someone says I want to raise, then you could say, OK, that's fine.

[00:16:45] Either they there's room for them to receive a raise at their current production level or you need to say, OK, if you're going in order to get a raise, can you do these things for me and improve production in order to justify the raise?

[00:16:57] That's the power of knowing these numbers in your negotiations as it pertains to salaries. But I could definitely see in those that percentage number would vary month to month. The biggest determining factor would be if we had three payrolls that month instead of two.

[00:17:12] Yeah, there's two months out of the year where you're going to really. You're going to always hit it. Well, we just had one. There was this past month. And then the other one is low production months. We measure this on a monthly basis.

[00:17:23] I don't know about you, but we measure it on a monthly basis. And so on those low production months, that's when the average payroll related to salary percentage would skew to like 65 percent. And we're like, yeah, we didn't we hardly made anything that month.

[00:17:39] Maybe it was a thousand dollars in the negative. But I'm glad that you tied not just salaries in there, but also two production levels like pushing production levels drives this number down. The more patients they see, the more they generate, better that percentage comes in.

[00:17:54] That's right. You could focus on revenue generation. Right? Yeah. So that number was big. Once you measure that number, we measure the number monthly as well. And once you measure like three, five, six months in a row,

[00:18:05] you can start seeing like, well, if I did this, that would give me this. Great. Now you can start putting together an up plan. Right? It's like you could actually build your business around it. Right? It's like now you're in control, right?

[00:18:22] You have an objective and then you can set goals. You can even set bonuses on that kind of stuff. It's like, hey, like let's get the team involved. Big metric is percentage of revenue being spent on payroll.

[00:18:31] Before we start press play, there was a handful of others that I talked about. Number one was your break even number. Break even number. Break even numbers really big. You want to tell them a little bit about what that is? Yeah. Break even number.

[00:18:42] Usually people look at break even. Again, I learned this one from Eric Miller. I also learned it from Mike McCallow. It's profit first. Great book. I would recommend it. But usually when you think of break even, like how much revenue

[00:18:54] do you need to generate in order to cover all your expenses? Eric Miller and Profit First would say, listen, you're not in business just to cover your expenses. Again, your business serves your household. And if you're just covering your expenses, then your household has nothing to live on.

[00:19:07] Covering expenses plus 10% is going to be the break even number. You always want to build in the profit margin because that pressure that you put on the business with the additional 10% surprisingly, it starts to generate that for you.

[00:19:22] It's like some universal known truth that once you apply that number to the business and work for it, it starts to generate the added 10%. You take your average monthly expense rate, add 10%, that's your break even. Now, you can look at the breaking even number in terms of dollars.

[00:19:42] And that's where you'll initially go. What you'll want to do, what I would recommend you do is also break it down by visits, the number of visits in a given month, I would say. Take that break even number for a month, expense line plus 10%,

[00:19:58] divide it by the average reimbursement per visit. And that'll tell you how many visits per month you need to see to break even. And then if you want to go further, you divide that by 4.2, which is typically how many weeks there are in a month, business weeks

[00:20:13] or business days there are in a month. Anyways, and then you can get your weekly break even. And that helps a ton, is that gets me back to how many visits does this clinic need to generate?

[00:20:22] And if I'm going below that number, now I know that the alert, the sirens need to be going off and that we need to start having some conversations. Right. We need to have some conversations and some marketing wheels need to start spinning.

[00:20:33] Everyone knows that this is the black line. We do not go below this black line, right? And that's the power of that is you can look at your schedule for the week and say, okay, we are recovering expenses plus 10%. Now let's look for this. There's our next goal.

[00:20:49] Yada, yada, yada. And if you want to break it down further, you can tie that into the number of providers that you have and how many they need to see per week in order to hit the break even number and set those expectations as well.

[00:21:00] I wouldn't set provider expectations based on the break even number. I'd add a cushion it a little bit more and not just leave it at the break even number, but you know, there's a minimum expectation there at least. No, that's great.

[00:21:11] I mean, I think that it's think that we've covered that pretty well. Bottom line is creating a system in which you can start measuring more specifically how to create more profits in your business and give you a ton of control.

[00:21:28] Hey, everybody, let me cut straight to the point with this one. If you're looking to sell your business, your clinics in any way over the next two to five years, you need to reach out to my friends at multiple exit.

[00:21:38] Will Humphries and Scott Fritz are uniquely positioned to help you get the most out of your business when it comes time to sell. And if you are looking to sell the next two to five years, now is the time

[00:21:49] to prepare. You need to reach out to them now. There are a number of things you need to consider. There are a number of things that you need to do to get the optimal value from your sale. So reach out to my friend, Will Humphries,

[00:22:01] co-owner of multiple exit to maximize your future sale. Email him at will at unlock HBA dot com. That's will at unlock HBismboy A dot com. Or call, text him even at 480-248-519. If you're looking to sell your clinics, now is the time to prepare.

[00:22:23] Reach out to them now. We didn't start this one off with like we have in the previous two, and that is get out your paper, get out your pen because you're going to take notes. Take some notes. We're on chapter three. Yeah, exactly.

[00:22:45] And at the end of this, I'm keeping my notes myself and I'm going to wrap this up into a bow and you're going to have some homework. And I'm going to expect that you're writing down some action items

[00:22:55] that you're going to start implementing into your business because we want to see you. Right. Chapter three under chapter three, right at the top, financial mastery, KPIs is the first section. Talk about average reimbursement per visit, cost per visit, profit margin.

[00:23:08] We talked about percentage of salary, payroll versus gross revenues percentage and also break even numbers. And more importantly, maybe not more importantly, but also as important, developing a disciplined rhythm of measuring that every week, month, quarter

[00:23:27] and documenting like all the formulas on how to measure it, where to get the information. All of that's documented, all of that's on paper and committing to making decisions based on the data. You do those things like check, check, check, give me a year

[00:23:42] and your whole business will change. You do those things like you're going to be outperforming 90% of most clinics. We usually measure them monthly and we had two separate meetings. We had the billers meeting that had to do with like the average reimbursement and the break even number.

[00:23:57] Did they meet the break even? And they're focused on other things as well. What's in the AR aging and whatnot, that kind of stuff. That's a different conversation. But then the CPA visit, some people might have a CPA,

[00:24:07] some people might have a bookkeeper, whatever it is that you're looking at some of these other numbers monthly, the profit margin, the profit and loss statement, the balance sheet. If you don't know how to read them, spend an hour each month

[00:24:18] with your CPA or bookkeeper to read them and have them teach you. And then also knowing your profit margins and looking over proformas, projecting forward, that kind of stuff. These are the things that you should be discussing on a regular basis with your CPA and your billing team.

[00:24:34] Yeah, like chapter three section B is biller billing team because how many times have you heard people complain about their biller all time? All the time. Here's the thing, guys. It's still an employee that you have to manage, even if it's outsourced. It's your fault. It's your problem.

[00:24:53] You ain't going nowhere. Grab the reins. Take control. Step one. Email your biller right now. Stop. Press pause. Email your biller and say we are going to start meeting every single month and we're going to put it on the calendar and it's not moving.

[00:25:07] And in that month, I need you to let me know financial health of my account. Right? So there's some key statistics that you'll probably start measuring like projections, how much did you collect? Reimbursement per visit, aging report.

[00:25:23] You need some information from them and you need to be able to hold them accountable. Big piece. So like that's really, really important. I think that's where people fall short is there's two things. You said one really important thing. Meet monthly.

[00:25:37] I see a lot of owners just simply receive the billing reports via email. More than likely don't know what they're reading and they just get maybe a short quick summary in the email. Rarely do I see owners having in person virtual billing meetings, reviewing the reports.

[00:25:54] There's one part that I see that's wrong with most owners. The second is that they don't know how to hold an account. They don't know what they're looking at. So they don't know what's good and what's bad.

[00:26:05] What needs to be a red flagged and what is something that's normal. That education is important. And that's, I don't know if we can get all together into it today in this episode.

[00:26:15] I have episodes with Will Humphries where I go over it and from a few years back, we can even reach out to us again and we can talk you through some of those. But yeah, it's projecting forward. What were they supposed to collect in the month?

[00:26:27] Say we're in June right now. Well, it's the first part of June. You should know what to expect from your biller based on May's visits. If you had 500 visits and each visit average reimbursement was 100 bucks, then you should know in June roughly you should be collecting $50,000.

[00:26:47] And if your billers off of that, I'm more than 10 or 15 percent and they have question, they need to answer some questions, right? So there's looking forward. There's the average reimbursement rates. There's the average bit charge per visit. That should stay pretty steady unless you make some changes.

[00:27:04] Like if you're going to start billing therapeutic activities a little bit more, you should see that number start ticking up a little bit higher than previous years. You look over the AR aging report really quickly. It's the 85 510 rule zero to 60 should be 80 percent of your outstanding AR

[00:27:21] five percent and 60 to 90, five percent and 90 to 120 and 10 percent in 120 and above for AR aging. That's a really rough one and catch it. Write it down 85 510. And then we always look at denials. That's a big one. I was waiting for you to hit on.

[00:27:38] Yeah, look at the denials. Even if you don't know anything about billing, look at your denials either by patient or I would recommend by payer. Blue Cross Blue Shield, we've got $15,000 sitting in the 120 plus day AR aging report with Blue Cross Blue Shield.

[00:27:55] What's happening with those and why are they so late? Blue Cross Blue Shield usually pays within three to four weeks, for example, maybe some cases it does really quickly. But why is all this money sitting in 120 plus? And what are you doing about it?

[00:28:08] That's where they need to be reporting to you. Like these are the calls that we made. This is what's being said. This is what was sent. I need that accountability from my billers to know exactly that regarding the payers and the patients,

[00:28:22] especially those that have like $500 balances, $1,000 balances. How are you? When was the call made? What did they say? How many letters have been sent? All that stuff. I want to know that in my monthly billing meeting. Yes. What I'm hearing is chapter three, section B is the biller.

[00:28:38] Two big component, two big questions is, number one, when are you meeting with them? Establish a meeting rhythm. Number two, how are you going to hold them accountable? And maybe the first phone call with them is like, hey, I don't know what I'm doing.

[00:28:52] How do I hold you accountable? They should be able to teach you. I had those exact questions for my biller. I would ask her, how are you going to steal from me? Yeah. Good question. I would say if you wanted to hide money from me,

[00:29:03] where would you hide it in these reports? Yeah. And this is when I was, dude, I was 14 years into business at this point when I finally got my crap together around meeting with my biller. Surprising, well, not surprisingly, that's when I profit at the most towards the end

[00:29:18] when I finally held my biller accountable. But yeah, is looking at projections for the upcoming month. May you had so many visits. I everyone says, well, all the entrances pay on a different schedule. I'm like, I know, I know, I know, but it all works out.

[00:29:32] You got to take the law of averages, right? Law of averages. And we're not looking month to month. We're looking over six months that all kind of just averages out just worked out that way. So when I had 500 visits at $100 visit,

[00:29:44] I could expect in say in this month, I'm going to get around $50,000 give or take. Right. If it was $40,000, they've got some questions to ask. If there's no 10 percent variable, right? That exists. It doesn't exist. You just got to say what's going on and why?

[00:29:59] Where was the hiccup? And if we got $60,000, OK, did something that we have like a lean patient that came in we weren't expecting reimbursement for or something like that? Workers comp big payment, whatever. You can look at some of those averages. But the AR aging is important.

[00:30:16] The average reimbursement per visit is important. The charge per visit, that's important. And then the denials by payer, I think are super important. We didn't really go over the balances of the patients all that much unless they were over $1,000 each or individually.

[00:30:30] That's when we really focused on the patient balances. But it should be zero. It should be zero. And I'm going to say it here. Go back and listen to my podcast video with Kristi Plunk. Get credit cards on file for every patient.

[00:30:44] And you will never have to worry about patient balances again. That's all I'll say. It would make you so much money if you do that one. If you listen to this episode and did that one thing caused every patient to put their credit card on file

[00:30:57] and paid and charged their balances at the end of each month. Dude, game changer. I would venture to get you make another 5 to 10 percent in revenues just by doing that one thing. Amazing stuff. I'm going to make the next section like super easy

[00:31:11] and it's your accountant and you hit on that on that stuff. So your accountant is that other person on your financial team that you never talked to and you don't know what they do. And it's like all that stuff, right? Just like your biller.

[00:31:24] Copy all the things that you're doing with your biller and paste it on with your account. Right. So it's like monthly meeting or your bookkeeper, right, on your financial team, right? Monthly meeting and the meeting is like, teach me. Show me what I need to know.

[00:31:37] I want to learn what you know. What's a profit and loss statement? Like how do I read that? What are the trends? How many taxes do I owe? What are the things I should be considering from a financial perspective in my business this quarter?

[00:31:48] Those are all really important conversations that you should have, right? Everything you're doing with your biller do with your accountant. Is there anything I missed? Yeah, meet monthly. They're going to charge you for it. Plan on paying them for it. This is the cost of education.

[00:32:00] Just put it under education. It's part of being a business owner. You're going to meet with your bookkeeper or CPA. And again, a noticeable change in my capabilities as an owner and my confidence, my power as an owner increased once I did this with my bookkeeper.

[00:32:14] And I had to be the one that reached out to him and said, listen, I don't know what I'm looking at. I've owned my business for 10 years at that point. It's a shame. Can you teach me how to read this?

[00:32:25] Look at cash flows, all that kind of stuff. And then we would sit there even as I got really comfortable with profit loss, we would pull up the screen and look at it with each other and compare expenses month to month.

[00:32:38] This previous year, we'd look at the profit margin trend. Then we'd talk about what taxes are going to look like this upcoming year. Prior to that, my conversations with my bookkeeper were tended to be around tax time and I'd get the, hey, you had an amazing year.

[00:32:56] Congratulations, dude. You know, $40,000 of taxes. Yeah, can you send a check? I think one year it was, can you send $60,000 to the IRS? But I was like, what? Yeah, I never wanted to be in that spot ever again.

[00:33:11] That's where we started doing this and take control, being proactive, saying, hey, based on my revenues from this past quarter, how much should I set aside for taxes in April? Or how much should I pay if you're paying quarterly

[00:33:23] to make sure we're on pace so I'm not coming out of pocket a lot when April 15th comes around? Those conversations were super important. And take it a step further. Hey, I'm looking to hire a physical therapist. This is the salary I'm projecting.

[00:33:37] How does that change my break-even point? How much more revenue do I need to generate per month and how many more visits do they need to see per month in order to justify this new salary? Those kind of conversations.

[00:33:47] Or at the beginning of the year, hey, can let's build out a performer, a budget, if you will, for the next 12 months. What does that look like? How much do you predict to grow over the next 12 months and how are your numbers going to change accordingly

[00:34:00] and that kind of stuff? What can your profit margin look like? And then going back and looking at the current month's financials against what your budget was or what you were predicting on your performer. There's a lot you could do with your CPA.

[00:34:12] And the important thing I would say is if you're looking at and this is a good rule of thumb for the CPA and for the billing collections team is find one that will communicate with you. If they're going to ham and ha, I don't really do that.

[00:34:25] Well, I can find someone else. Thank you. I want someone who's responsive to my emails. They're going to communicate with me when I say, hey, I need a quick call. They're like, yeah, let's get together on the next day or two.

[00:34:35] Here's my schedule and I want to meet with you monthly at this point in my life. Those are givens. Like if you're not willing to do that for me, you're not going to be part of my team.

[00:34:44] Yeah. As I heard you talking, I just heard like just be a leader, be a leader in those relationships. Like you are the leader, you the leader and you are the person who's in control of that relationship. Like and they're serving you. That's right.

[00:34:58] Sometimes you get into those meetings that can be they're teaching you and that's fine. And you can feel like you're submissive on, oh, what do you need next? And no, report to me. This is you are my vendor. Report to me your efforts for the past month, please.

[00:35:12] I would say like look at them as if like just like anybody else that's on your team, they're a tech or they're a PT or they're a front desk person. It's like you don't go into your business. I hope not asking permission from your team what you to

[00:35:25] make decisions on how things should be going. Right. It's like when you enter into those conversations, it's like, Hey, listen, this is what I need from you. Is there anything you need for me to move forward? Like you're taking ownership of that.

[00:35:35] Can you have these reports ready for me and be ready to explain them? Yeah. Yeah. I need this stuff ready. Exactly. Be ready to explain them when we meet, please. Yes. So like step up with your bill or in your account and be a leader.

[00:35:46] Last thing I want to cover. And by the way, I'm not a financial expert, but I've learned a handful of things from Nathan and Kaiser a lot smarter than me, but managing cash is important. Cash comes and cash goes. Right.

[00:35:59] A lot of things changed for me whenever I got a little bit more structured and disciplined on how I was managing the cash that I had in my business. Things like setting up more than one bank account, like more than one checking account for specific purposes

[00:36:13] in your business, like an operations account, like this is the money in and money out. Maybe you have a tax account, like every month I'm transferring money into my tax account depending on what my CPA is telling me. And then maybe you have some type of business expansion

[00:36:27] account or a savings account, where you're taking all the leftover profits and you're putting it into account planning for that next investment, whether that's a piece of real estate that you're looking at or expansion in your business or you're hiring a new

[00:36:39] PT. So like plan for those things via moving your money and being a little bit more disciplined about your money. Really, really important. Is there anything that you would have that you'd love to share? Yeah, I did a full episode on this with Eric Miller back around 2020, right?

[00:36:54] Cause there were plenty of financial concerns during that year. I don't know. Remember why? But he broke down exactly all the accounts that you should have as a business owner. And it would, yeah, the operations account definitely won the tax set aside account is definitely one.

[00:37:11] And these can be just like regular flat payments as you get comfortable with knowing the overall number that you need to pull for your taxes. But if you know you're going to set aside $20,000 for taxes in a given year, then yeah, you're

[00:37:24] going to set aside what is that 15 or $1,600 a month. That's not big chunks every few months. Just put set aside $1,600 a month and you'll have your $20,000 at the end of the year. The operations account where money comes in and come that's where expenses get paid.

[00:37:37] That's where reimbursements come. Then you take from that and put in your tax account. Yeah, that's like your research and development. Every normal company has a research and development arm, right? And that's where you put those money set aside for growth.

[00:37:51] And then there's always the rainy day fund. We had, we wouldn't take any distributions from our companies unless we had, unless our rainy day fund was there. And for us, I think we decided that was three or four payrolls worth.

[00:38:06] So we took the amount of payroll on average and times that by three or four. That was our rainy day fund because if we got rid of all the expenses and just really slim down, we knew we could make it for a couple of probably more months.

[00:38:17] But that was just the general rule of thumb. Some people will say six months of expenses and that kind of stuff. Fine. Keep building it up, especially as the bigger you get. People during COVID, man, they wish they had 12 months of expenses. Right? Yeah.

[00:38:32] I mean, you can look at rainy day fund as putting in a certain number of months of expenses in there. If you added to it, and this is what we had behind that rainy day fund was a line of credit.

[00:38:43] And I think our line of credit was like $250,000. You're not paying for it unless you use it. There was an annual fee of maybe a couple hundred bucks. I don't know if that's changed much since then, but we had access to a ton of cash

[00:38:54] if we ever needed it. And that was also partially our rainy day fund, not just the cash that we had. And then the retirement fund. This is the big part about profit first and Eric Miller's big fan of this, not that he's a red profit first, but he

[00:39:08] spouses this as well. And that is set aside 10% of your revenues off the top every month into a retirement account. It's usually a savings account that's a little bit harder to get access to. But if you make $50,000 in a given month, you put $5,000 in the

[00:39:23] retirement fund. And if you can't figure out how that's going to work initially, start with two or 3% and then build up a percentage point each month. I saw this happen with one of my coaching clients, Graham. And this was during he started prior

[00:39:37] to COVID and kept it up during COVID. And it wasn't an issue for him at all. He started with like three or four or 5%. By the time COVID, he was setting aside 10% and he kept doing it. He was still religious about it. And he's like, Nathan, I've got

[00:39:52] 40 something thousand dollars sitting over here in this little retirement account. What am I supposed to do with it? They set aside for retirement. It's not to go out and buy a new car or that the money's purpose should you be intentional about it is to be

[00:40:06] put into some kind of growth vehicle that's going to make you money. That's going to give a household. It's going to pay the household, not just your salary, but set your household up for retirement. Those are some of the most important accounts that I can think of.

[00:40:18] I think if you listen to the episode, we might have talked about six or seven different accounts. But those are the main ones. If you're hitting those, then you're doing really, really well. Yeah, man. I mean, each of those topics like we're doing an overview

[00:40:32] of these things and we're trying to cram a lot of information into a short time. But like we could have multiple series of episodes on all of those things on each one. Yeah. Right. What I'd like to do is like I did last episode, just kind of wrap

[00:40:46] this up into a bow where people could walk away with some tangible action items that they can implement into your business. By the way, these are the small things that add up over time that lead to massive results. Like it's not like Nathan's famous

[00:41:02] saying is like we're hitting singles here, right? Or it's like we're hitting singles and stuff. All these little small things are getting the flywheel moving. And you know, a year from now you keep doing these small things that things going to be

[00:41:12] moving so fast and you can't even slow it down. You have your owner's manual. You flip it over. Page three, the top bits, financial mastery, financial system. Part one is you're going to set up a KPI dashboard in your business, all the key statistics that are important

[00:41:28] in your business from front desk to clinical to financials to all those things. And you're going to develop a rhythm of measuring them of measuring cadence, right? Either weekly, monthly, quarterly, annually. Document that. Write that down. Also included in that is the formulas to each of those

[00:41:45] things where to find them in your EMR on your profit loss so that way you can train others that could get them for you and then commit to making decisions. What is your decision-making framework going to be with using those statistics? Right? So that's

[00:41:58] section one. Okay. Section two is your biller. And anything went over tons of great stuff you can do with your biller. But more important, the big takeaway is number one, you're scheduling a meeting rhythm with them, whether that's weekly, biweekly, monthly, I would say at least monthly.

[00:42:13] It's got to be monthly and making it a set time and day makes it really easy. Yeah. Like first Monday of the month, every month at eight o'clock, whatever. Yeah. That makes it easy for everyone. So you're not like looking at the calendar every month.

[00:42:24] Yeah. Correct. And then the project becomes I'm going to lead the biller and I'm going to hold them accountable. How do I hold them accountable? You need to know enough about billing to be able to hire your own bill and hold them accountable at some point.

[00:42:37] So that's your project. Section three is the same thing with your accountant. You're going to be meeting with them at least monthly, going over some key statistics and you're going to be learning from them and how do you hold them accountable and with their job. And then lastly,

[00:42:50] you're going to have a cash management system. Nathan talked about a ton of things, but the main things we're going to set up some accounts. You're going to go to the bank, open up some checking accounts and name them. Right. If you need more

[00:43:02] clarity on how to name them and all those things, go back to a previous episode, which Nathan talks about that stuff a lot. You're going to schedule routine transfers from your big account into these accounts every month. Automate them if you have to automate it. It's going to

[00:43:16] wait 10% in this account, 5% in this account, whatever it is. Right. But you're going to set it up and you're going to commit to it. Also making sure that you're saving for a rainy day fund and opening up a line of credit, having that on tap at all times,

[00:43:29] all times. If you, man, you do those things, you're crushing it. You're freaking crushing it, guys. And it's like now you know what to do. Like just do it. If you just do it, take action towards those things. Even if you don't fully understand them, email me,

[00:43:45] shoot me a DM, join the Facebook group, ask questions like you can figure those things out. So just get busy doing those things and I promise you it'll make a massive impact on your business. It will. Can I, do we have time for one more thing?

[00:43:58] Of course we do. Because this thing alone will probably make you another, if you did Christie Plunk's thing by keeping all credit cards on file makes you another 5% to 10% in your business. This will make you another 5% to 10% gross revenues in your business. And that is managing your over-the-counter

[00:44:15] collections at the front desk. The front desk, and I've talked about this with debills on the podcast plenty of times, but the front desk responsibilities are to get patients in the door and pay for that service at the time of service. And don't let it

[00:44:28] and don't let it slip. Like the percentage of money that you should collect at the time of service should be 100%. And I'm including deductibles, co-insurances and co-pays, all of it. And people are like, well, how do I know how much to collect for a deductible?

[00:44:43] Well, what's your average reimbursement for is it round that up or down to a nice even number and collect that at least. But man, I recognized how much money was lost and probably honestly stolen once I finally figured out how to manage the cash flow across

[00:45:01] at the front desk by having a spreadsheet of what was expected to be collected versus what was collected every day. And that was reconciled every day to what they received in cash, checks and the credit card battery seat. Doing that and putting it in an envelope

[00:45:18] and then throwing that in the safe every day, sending the report to me and the biller every day. So it all reconciled on the EMR as well. I was like depositing lots of money in the bank account. I'm like, I never had this money before.

[00:45:31] Where did it come from? Number one, we weren't collecting it before. Number two, there might have been some pilfering, but nonetheless made a huge difference in my cash flows honestly, because we collected everything at the time of service and that was a KPI to hold the front desk

[00:45:49] accountable. 100% was the expectation 100%. And if it was 95, you needed to tell us and have a really good answer and a way in which to collect the money by the next visit, right? Like they forgot their credit card. Well, did you get the credit card on file number

[00:46:06] one? Number two, why don't you call them right now and get that payment instead of waiting for them to come in? Right? I'll just say that look for over the counter collections opportunities, hold them accountable, have a spreadsheet that they reconcile on a daily visit

[00:46:21] or daily basis at the end of the day. And then looking at the next day, write down all the expected collections for the upcoming patients that are coming in tomorrow and then use that same sheet for tomorrow's patients and check off who collected what and in what form

[00:46:36] and what was the balance by cash credit card and check and make sure that reconciles and put that in the safe every night at the end of the next day. That's another way to make a huge amount of increase in your cash flows

[00:46:48] if you're not doing it already. You hit on something right there that was really important. You highlighted some of the limiting beliefs that owners might have. Oh, how do I do this? How do I do that? Right? Yeah, I get it. I totally get it.

[00:47:03] You're not the only person that has those beliefs. I have them. Nathan has them. We all have them. And what I'm telling you right now is there are people out there who are way less qualified than you who are rushing it right now because they're willing

[00:47:18] to push through that and do it anyway. They're making bigger impacts. They're making they're giving their team more opportunities. Their team is going. So like if you can find a way to just tell that voice to just shut up and just do it anyway,

[00:47:31] even if it's scary or uncomfortable and just commit to it, you will grow into a more powerful leader, a more powerful owner and like you'll get way more of what you're trying to create. Yeah, I had a patient do this exact thing with the credit cards on file

[00:47:43] thing. He said we're going to collect credit cards on file. And if you don't want to do that, I'm sorry, we can't see it because what he recognized is the people that wouldn't do it are the people that weren't paying their balances and ending up on the

[00:47:56] hundred and twenty day aging report with six hundred and eighty dollars that they weren't able to collect. Those are the people that weren't willing to put their credit card down. And he actually got on the phone with one of them and said we need

[00:48:07] payment or you got this balance. I'm going to charge your credit card that we got on file. No one else does that. Why would you ever do that? I've never had this before. We're in charge anyway. Well, you give Amazon your credit card Amazon.

[00:48:22] There are more online sites that have your credit card information than me. It is not abnormal in two thousand twenty four to leave your credit card on file with many websites in many places. We're just not willing to take we're not a bank anymore and

[00:48:36] just leave balances with us. We're going to charge you now. And he's like, dude, that one thing immediately cash flow up. Yeah. And you deserve it. That's right. That's awesome. Great. Like I said, I love this discussion and I probably rambled

[00:48:48] on a little bit too much, but I get excited about this stuff. Yeah. Heck yeah. This is low hanging fruit or it should be low hanging fruit. And it's part of being an owner. And why else did you open up this clinic? Yeah. You have a bleeding heart

[00:49:01] because you treat really well and you're a great practitioner. But you did it. Expecting some kind of financial return, which you translate into freedom and possibility. And these are ways to get there. I was been the physical therapy owner that's worried about

[00:49:15] financials in the past and had a hard time covering payroll at times. And I don't want anyone to be in that situation again. There are opportunities and there are ways to avoid that all together by just doing some of these simple things. I'll give them a sneak peek

[00:49:30] next week when we start talking about management, operations, systems, onboard training, policy procedure, job descriptions, board boards, all that fun stuff. That's a lot like in one episode. Heck no, it's going to take a few. But if you're one of those owners which I know you're out there

[00:49:46] because I talk to you guys all the time, you find yourself working 80 hours a week and not able to get home to your kids. You need to be listening to the next few episodes. Get your book out, get your pen out and like commit to this

[00:49:59] and I promise we can change your life. If you have questions on some of the details like, hey, I want to watch that episode. I couldn't find it. Reach out to me or Adam Nathan at PTO Club dot com Adam at PTO Club dot com.

[00:50:10] And if there are other details you're hoping for, let me know. But we referenced the bills great at the front desk and helping their profit first by Mike McHallow it's is a great book to look at. And then previous episodes that I've had with Will Humphries

[00:50:23] about managing your billing team. Eric Miller regarding some of the financial stuff. There's plenty of resources out there outside of just reaching out to us individually as well. Absolutely, man. Thanks, bro. I love the conversation. Yeah, absolutely. We'll see you in a week. All right. Peace out.

[00:50:41] Thanks for joining us today in the physical therapy owners club, the resource for stability and freedom in your PT practice. Reach out and join the network today. Subscribe to our podcast. Get links to social media and access all of our episodes with show notes at PTO Club

[00:50:57] dot com.