Struggling to Budget Effectively?

Let QuickBooks Online Simplify the Process

Creating a budget that truly works can be one of the most challenging aspects of managing your practice's finances. With unpredictable income and hard-to-estimate expenses, it’s easy to feel overwhelmed. But a well-crafted budget isn’t just a financial tool; it’s a roadmap to your practice’s success.

Maybe you’ve tried budgeting before and felt discouraged. It could be that you didn’t have the right tools or the right approach. QuickBooks Online offers user-friendly budgeting tools that, paired with these practical tips, can help you create and maintain a budget that supports your goals.

Understanding Key Budgeting Terms

Profit and Loss Budget:

A Profit and Loss (P&L) budget is a financial plan that outlines your expected income and expenses over a specific period. For a physical therapy practice, this type of budget helps you forecast revenue from patient visits, insurance reimbursements, and any other sources of income, while also planning for expenses like rent, salaries, and equipment. This budgeting format is commonly used because it provides a clear picture of your practice’s financial health and helps you track profitability over time.

Consolidated vs. Subdivided Budget:

When setting up your budget, you can choose between a Consolidated budget, which gives you an overall financial plan for your entire practice, or a Subdivided budget, which breaks down your finances by different departments, locations, or services. For example, if your practice has multiple locations or specialized services (like women’s health or sports therapy), a subdivided budget can help you track and manage the financial performance of each area separately.

Getting Started with Your Budget

To create your budget in QuickBooks Online, start by clicking the gear icon in the upper right corner and selecting Budgeting under Tools. Then, click Create budget. Most practices choose the Profit and Loss budget type, which helps you plan around income and expenses over a set period.

Here are a few key decisions you'll need to make:

• Time Period: Choose the fiscal year that aligns with your practice’s financial reporting. For instance, if your fiscal year starts in October 2024, you’ll select FY_2024_2025. This ensures your budget matches your financial statements and helps with accurate tracking and planning.

• Budget Format: Decide between a Consolidated budget, which provides a comprehensive financial overview, or a Subdivided budget, which is ideal for practices with multiple departments or locations.

• Pre-Fill Data: If you’ve been using QuickBooks Online for a while, you can choose to pre-fill your budget with data from previous years. This can be helpful if your practice’s income and expenses are relatively stable, allowing you to build on past performance. If you’re starting fresh, you’ll want to enter your data manually to create a custom budget.

QuickBooks Online guides you through the process to help you build the budget that fits your needs.

Filling In Your Budget

Before you begin, ensure that the information at the top of the page is correct—especially the fiscal year. If you’re starting fresh, turn off Compare reference data. But if you want to bring in past data, make sure it’s turned on, and QuickBooks Online will let you transfer your actuals or previous budget from a selected year.

Setting Up Budget Items:

When filling out your budget, think about the specific financial categories that matter to your practice. Common budget items for a physical therapy practice might include Rent/Mortgage, Salaries and Wages, Insurance Premiums, Medical Supplies, Marketing and Advertising, and Continuing Education. These categories will help you track where your money is going and identify areas for potential savings or investment.

Entering Data (Annual vs. Monthly):

You have the flexibility to enter your budget data in two ways:

• Annual Totals: Enter a total annual amount for each category, and QuickBooks Online will automatically divide it into monthly amounts.

• Monthly Amounts: If your practice has seasonal variations (e.g., fewer patient visits in the summer), you can enter different amounts for each month to reflect these fluctuations. QuickBooks Online will then calculate the total for the year.

This flexibility allows you to create a budget that accurately reflects your practice’s financial patterns.

7 Tips for Better Budgeting

1. Account for Seasonal Variations: Anticipate periods of increased or decreased income and expenses. For example, you may see an uptick in visits during the winter months when sports injuries are more common.

2. Set Realistic Goals: Prioritize essential expenses like rent, payroll, and insurance, and distinguish them from non-essential ones, such as marketing campaigns or new equipment. This ensures that critical operations are funded first.

3. Keep It Simple: Avoid over-complicating your budget with too many categories. Instead, focus on the major expenses that have the most impact on your practice’s finances. This keeps your budget manageable and your financial reports clear.

4. Build in Emergency Funds: Just like in personal finance, having a reserve for unexpected costs—like equipment repairs or legal fees—can protect your practice from financial strain. Aim to set aside a percentage of your budget each month to build this fund.

5. Overestimate Expenses: This conservative approach helps you avoid under-budgeting. For example, estimate your utilities slightly higher to cushion against unexpected rate increases.

6. Involve Your Team: Engage your staff in the budgeting process, especially those managing specific areas like office supplies or patient intake. Their insights can lead to more accurate budgeting and help foster a sense of ownership in the practice’s financial success.

7. Regularly Review Your Budget: Schedule monthly reviews to compare your actual income and expenses against your budget. This allows you to spot trends, adjust for unexpected changes, and make informed decisions for future planning. Starting with a short-term budget (e.g., quarterly) can help you better understand your practice’s financial dynamics before committing to a longer-term plan.

At The Profitable Therapist, we’re here to help. With extensive experience in budgeting and financial management for therapy practices, we can guide you through creating and refining your budget in QuickBooks Online. Whether you have questions or need more hands-on support, we’re just a call away.

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