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5 Different Types of Employee Bonus Programs

Does your small business give employees bonuses? If it doesn’t, here’s a thing to consider. As a small-business owner, you know employees are your greatest asset. Showing your appreciation helps keep your best and brightest on the payroll. Employee bonuses serve the dual purpose of motivating employees to do their best while rewarding them for their contributions. Learn how you can start doing it below.

Does your small business give employees bonuses? Almost three-fourths of companies do, according to PayScale’s 2018 Compensation Best Practices Report. Giving bonuses (also called “variable pay”) allows companies to reward top performers without increasing their fixed costs for salaries. Top-performing businesses are more likely to offer bonuses than the average business (79% vs. 70%), PayScale reports. According to a 2018 WorldAtWork survey, bonuses are becoming more popular, especially among small and midsized companies.

Employee Bonus Programs

Here’s a closer look at the most popular types of employee bonus plans and how to make them work for your business.

Annual Individual or Team Incentive Bonuses

Annual incentive bonuses are given to individuals or teams that achieve goals set at the beginning of a performance cycle. More than two-thirds of companies in PayScale’s report use individual incentive bonuses and 23% use team incentive bonuses. Team incentive programs are best used when group effort is required to lead to a measurable result and individual efforts are difficult to quantify.

To Create a Motivating Annual Incentive Bonus Program:

  • Set clear, consistent and measurable goals that are tied to the individual or team’s roles.
  • Employees should understand how their actions relate to the overall goals. Team incentives can cause problems when “moocher” employees who don’t work as hard as their teammates benefit from the group effort. To avoid this, make sure that achieving the goal you set requires the efforts of the entire team.

Spot Bonuses

PayScale says 39% of companies use spot bonuses, which, as the name suggests, are given on the spot to reward desirable behavior. For example, you might give a spot bonus for going above and beyond, or for providing exceptional customer service.

At big companies, spot bonuses can be several thousand dollars. But for small businesses, you’ll want to keep them reasonable — $25 and up will work.

To Create a Motivating Spot Bonus Program:

  • Create different levels of spot bonuses. You might give out very small rewards, like a $25 gift card, for being the most energetic person in the company trade show booth, on up to $500 or more for a truly above-and-beyond action.
  • Set a budget. Giving out spot bonuses could quickly eat up capital if you don’t set a limit. Create an annual budget for spot bonuses and don’t feel like you have to use it all if you don’t see deserving employees.
  • Make it count. Give spot bonuses for truly exceptional behavior, not just for doing the job.
  • Make it a surprise. If spot bonuses become rote — employees know every week two employees get one — they lose their power to motivate. Keep employees guessing and give spot bonuses irregularly.
  • Publicize it. Part of the reward of a spot bonus is getting singled out in front of your teammates for your work, so make sure you award spot bonuses in front of the rest of the staff. You can also publicize it by sending out a company-wide email or making an announcement.

Referral Bonuses

Referral bonuses are used by 39% of companies, PayScale says. They’re offered to employees who refer job candidates who get hired and complete a probationary period with your company. The theory is that birds of a feather flock together and, if someone is referred by a good employee, there’s a strong chance they’re likely to be a good worker themselves.

To Create a Motivating Referral Bonus Program:

  • Develop a policy. Do you want to offer referral bonuses for every job, or only for certain positions? Do you want to have an ongoing referral program, or just alert employees at specific times you’re looking to hire and ask for referrals then?
  • Determine how you’ll handle payouts. Some companies pay out part of the referral when the employee is hired and the rest after they complete a probationary period of three months or six months. Others give the entire bonus at the completion of the probationary period. Either way, make sure your policy is in writing.
  • Consider offering higher referral bonuses for:
    • Referring candidates who increase staff diversity.
    • Referring candidates who turn out to be high performers.
    • And referring candidates for hard-to-fill jobs or with unique skills.
    • Depending on the difficulty you’re having finding candidates, you could even offer a very small referral bonus (like $25) for referring people who are worth calling in to interview, but don’t get the job in the end.

Signing or Hiring Bonuses

Signing or hiring bonuses (given upon hiring) can attract and motivate new hires — 34% of companies in PayScale’s survey use them. Although they’re less likely to be used by small businesses, signing bonuses might be a good idea if:

  • They are standard in your industry. For instance, signing bonuses are common with IT employees.
  • You need to attract a candidate with hard-to-find skills.
  • You need to motivate a desirable candidate to move from another state.

For small businesses on a budget, a signing bonus can enable you to land desirable employees at lower starting salaries. Of course, signing bonuses can also backfire if candidates use them to job-hop.

To prevent this, it’s a good idea to stagger your signing bonus. You might pay half of the bonus at signing, then one-quarter after the employee has worked for six months and the rest at the end of the year. Some companies also institute “clawback” provisions where employees who quit a job before a year is up must return a percentage of the signing bonus.

However, don’t expect to rely on signing bonuses as your sole attraction and retention tactic. You need a comprehensive plan of employee development to keep these desirable workers motivated and loyal beyond the first year.

Profit-Sharing Plans

Profit-sharing is more popular among small and midsized businesses than their larger counterparts — 22% of small companies in PayScale’s 2018 Variable Pay Playbook use it. These plans give employees a percentage of the company’s quarterly or annual profits. If you have a better-than-usual year, employees benefit. Profit-sharing plans can be tied into your company 401(k) plan, with the profits distributed as contributions to the retirement plan or can be on a cash basis.

To Create a Motivating Profit-Sharing Plan:

  • Profit-sharing plans tend to be very motivating because they give employees a sense of ownership in the business. Make sure employees understand how the profit-sharing plan works.
  • Set parameters for who can participate. Typically employees must have been with a business at least one year before taking part.

Profit-sharing plans, especially if tied to 401(k) plans, have specific regulatory requirements, such as keeping certain records, meeting reporting requirements and setting up a trust for the funds. Talk to your accountant or a third-party financial advisor to get assistance. Read the Department of Labor’s Guide to Profit Sharing Plans for Small Businesses for more information.

Bonus Structure Tips

  • Know how much money you have available for the bonus plan. In the case of spot or discretionary bonuses, this might be a dollar figure (you set aside $5,000 a year). In the case of longer-term bonuses, such as incentives or profit-sharing, this could be a percentage of profits or earnings.
  • Base the plan on quantifiable, measurable results. Specify what the goals are, how progress toward goals will be measured, and how often.
  • Consider setting “tiered” goals so that employees can reach different bonus levels by achieving more difficult goals. For example, a worker might get $X amount for reaching the minimum goal, but $XX for reaching the maximum.
  • Put your bonus plan in writing.
  • Make sure employees understand what they have to do to get the bonus. Review the plan with the entire staff as well as with individuals (in the case of team or individual incentive bonuses).
  • For long-term bonuses, setting milestones along the way and reviewing progress toward the end goal quarterly can help keep employees focused. You might even want to give small bonuses at these checkpoints.

You don’t need to do everything on your own. From billing to marketing, including credentialing and patient eligibility verification, Perform Practice Solutions can help. Give us a call today at (833) 764-0178 and join our Facebook community for more physical therapy billing solutions and ideas.


Reference: [https://smallbiztrends.com/2019/05/employee-bonus-small-business.html]


20 Ways to Communicate Effectively With Your Team

It’s essential for every PT practice to provide clarity around the company’s vision and mission to inspire their teams. The point of working as a team is to share ideas and boost productivity. Encourage a peaceful work environment by following the tips below.

Effective communication in the workplace is imperative in a leadership role. An age-old aphorism goes, “It’s not what you say, but how you say it.” Good communication is what separates a poor leader from an exceptional one. Having effective communication skills is the key to good leadership.

When you communicate well with your team, it helps eliminate misunderstandings and can encourage a healthy and peaceful work environment. Efficient and open communication with your team will also let you get work done quickly and professionally.

The moment you get the lines of communication open with your team, the process of carrying out tasks and projects will most likely go by smoothly. Plus you will be surprised how meeting targets will become a whole lot easier.

Ways to Create Effective Communication in the Workplace

1. Open Meeting

It is easier to communicate your passion and how you feel to your team via open meetings. In this kind of forum, they will not only hear what you are saying, they will also see and feel it. This approach still remains one of the best approaches to communicate effectively with a team.

2. Emails

In official settings, communication via email remains potent. It will enable you to pass messages to members of your team without pulling them out of their workstations.

3. One on One

Experts have been able to prove that some people understand better when you take them aside and talk to them on a one-on-one basis. Ensure that you maintain eye contact with them to enable the message to sink in.

4. Create a Receptive Atmosphere

To effectively communicate with your team, you must create a receptive atmosphere. Avoid a tense environment at all costs because when you communicate in an overly intense manner, the message you are trying to share might not be well understood or retained.

5. Communication via Training

Your training should be tailored towards communicating certain information to your team members. Most employees take training serious, especially when it’s part of their appraisal.

6. Display Confidence and Seriousness

Ensure that you display confidence and seriousness to ensure that you will not be taken for granted. When your team members notice any uncertainty and lack of seriousness when you’re communicating with them, they are likely to treat the information with disdain or disregard.

7. Use Simple Words

The truth is that everybody cannot be on same page when it comes to vocabulary. Therefore, to be effective in your communications with your team members, use words that can be easily understood. When ambiguous words are used, you can be misunderstood and/or waste precious time having to explain yourself.

8. Use Visuals

Place visuals at strategic positions around the workstations of your team. They should not just hear the message, they should also see it. This gives room for better comprehension.

9. Listen to Your Team Members

Communication is intended to be a two way street. Don’t just talk because you are the leader without listening to anyone else. Encourage them to open up so you can be well guided when communicating in the future with them. You have two ears and one mouth –so you must listen more than you speak.

10. Use Body Language

Your body language will pass your message faster and better. Master the art of using body language when communicating with your team. Stand/sit up straight, use smiles, handshakes and eye contact.

11. Act Out Your Message

Someone once said, “Tell me what you want me to do and I might forget it, but do it in front of me and I will never forget it.” Acting out your message is a very potent way of communicating with your team. Let them see you do what you want them to do, and watch their excuses disappear.

12. Use The Appropriate Tone of Voice

One word can mean a different thing when said in a different tone of voice. Make sure you use the appropriate tone of voice to communicate your message to your team so that you won’t be misunderstood and discourage or demotivate members or cause them to shut down completely out of fear.

13. Avoid Unnecessary Repetition

If you want your team members to take you serious, never sound like a broken record and don’t beat a dead horse. Tell your team members what you want them to know or do and ask them if they are clear about it. If they are not, only then do you repeat what you have said.

14. Use Presentations

Some people grasp messages easily when pictures and sounds are involved. Using presentations like Microsoft PowerPoint to communicate with your team will give them the opportunity to refer back to it if they aren’t clear about certain things.

15. Be Humorous

Using friendly jokes when communicating with your team members will help pass your message along in a more relaxed way. This method of communication has been proven to be a highly effective way of dousing tension. When the atmosphere is unfriendly and intense, being humorous does the trick. If you must use jokes, please don’t overdo it. Remember, you are not a stand-up comedian.

16.  Be Articulate

Communication is indeed a skill that must be learned by all, especially if you want to lead any group of people. Being articulate  when you communicate to your team members makes it easier for them to understand your message.

17. Avoid Mumbling

Your team members should be able to hear you clearly. When communicating with them, try as much as possible to speak clearly and not mumble words. When you mumble words or speak too quickly, you may assume that they are clear on the subject. But the truth is, they might not be. It also shows a lack of confidence on your part.

18. Encourage Feedback

Don’t just talk and walk away. Give room for feedback so that you can measure the effectiveness of your style of communication. It will also afford you the privilege of knowing if your message was well understood.

19. Gesticulate

Use your hands to demonstrate your message. Make hand motions and signals to establish the seriousness of your subject matter when communicating with your team members. This shows that you understand what you are trying to relay to them. Just don’t let your body movement become too exaggerated and intense.

20. Be Appreciative

After every communication session, via whatever means you have decided, always remember to thank your listeners for their time. It will cost you nothing and it’s a simple courtesy.

Remember that the point of working as a team is to share ideas and boost productivity. When effective communication in the workplace is hampered, it can sidetrack the entire effort.

You must work hard at these communication tactics and create ground rules to keep everyone up to date, which helps avoid confusion and ensure the completion of the project with ease.

You don’t need to do everything on your own. From billing to marketing, including credentialing and patient eligibility verification, Perform Practice Solutions can help. Give us a call today at (833) 764-0178 and join our Facebook community for more physical therapy billing solutions and ideas.


Reference: [https://smallbiztrends.com/2013/11/20-ways-to-communicate-effectively-in-the-workplace.html]


12 Essential Strategies For Building A Sustainable Business

Most businesses don’t have a thorough understanding of sustainability. From a broader perspective, a sustainable company is one whose purpose and actions are equally grounded in financial, environmental, and social concerns. The road to sustainability for most businesses is not easy. Below you can find some ways to shape a more sustainable future for the company as well as their community.

Every business decision has an impact on the longevity of the organization. That’s why each decision by leaders must be carefully made, considering the perspectives and direct feedback from the employees and consumers being impacted.

Sustainability is the true goal and without a plan, leaders run the risk of building something that won’t be able to withstand the storms of the business industry. To help entrepreneurs create and maintain sustainable organizations, 12 members of Forbes Business Council share their tips for building a business that can last long term.

1. Remain Focused But Flexible

The key to building a sustainable business is having crystal clear goals, yet staying flexible enough to evolve when internal or external factors illuminate the need for a different or more nuanced approach. Also, welcome the reality that success no longer equates to the relentless pursuit of profits at the expense of people, communities and the planet. – Erin Boyd Kappelhof, Eat Well Global

2. Put People First

Sustainable businesses depend on invigorating and energizing team members to think long term and prioritize positive externalities and gains for the community beyond purely self-oriented growth. This requires leaders putting their people’s well-being ahead of other objectives. Doing so creates a virtuous feedback loop that drives sustainable thinking across the organization. – Manik Suri, Therma°

3. Constantly Innovate

The key to building a sustainable business, especially in technology, is the constant focus on reinvention and innovation. Every major business decision must reinforce the belief that we are building a learning organization that is focused on innovation. This is innovation not just in technology, but across the organization as well. – BK Nayak, SPIKEWELL

4. Invest In Your Team

Nurture and develop your people. Ask your employees what they want to do and how they want to grow both personally and professionally. Invest in training for them. Show authentic interest in their interests and family. Make sure the business is doing excellent work that they are proud of. Compensate them well, surprising them from time to time with meaningful gifts or experiences. – Natasha Miller, Entire Productions

5. Integrate And Maintain Your Strong Core Values

Strong core values that you integrate not only with your team, but also with your customers are key. When identifying our target market client, we focus on the psychographics of the clients we want and ensure they align with our values. When we take this approach, our relationship with our customers is deeper and longer lasting, which also contributes to the growth and sustainability of our business. – Jaime Taets, Keystone Group International

6. Practice Patience

Recognize that not every aspect of building a business is a sprint; it’s more often a marathon that requires patience, due diligence and an unwavering allegiance to your core values. Speed is overrated and at some point it becomes reckless, so building from the vantage of being in it for the long haul can pay dividends over time. – Chase Warrington, Doist Inc.

7. Communicate Transparently With Clients

The key to building a sustainable business is through accelerated communication. I define accelerated communication as maintaining real-time transparency between a business and its clients. Whether execution of a sale goes as planned or faces challenges, a client should always be kept up to date. – Jesse Singh, Maadho

8. Balance Business Needs

The key to building a sustainable business is to create balance. Successful companies constantly monitor their environment, take calculated risks and look for ways to innovate to find the perfect balance. The most important thing in finding this balance is to measure what you’re doing and listen carefully. You might be overlooking an opportunity or not understanding the market’s current needs. – Chakri Toleti, care.ai

9. Aim For Continuous Improvement

There are multiple factors involved in building a sustainable business, such as hiring the right talent, having milestones and a long-term growth plan, finding the risks and opportunities quickly and more. But in order to succeed in any of those, you have to implement a continuous process of improvement for all of your departments as well as for the quality of your service or products. – Ali Payani, LookinLA

10. Seek Customer Feedback

Build for and by your customers. Too many organizations make finite business decisions for short-term profit and loss benefits. Leading brands utilize customer feedback to steer business decisions for their top stakeholder: customers. – Zack Hamilton, Stingray Group, Inc

11. Create Diversified Revenue Streams

Prepare to survive ups and downs in the market by creating diversified revenue streams to mitigate high concentration in one area or dependency on a single customer. Pinpoint succession candidates for your key positions to prevent disruptions to operations. And lastly, invest in the diversity of backgrounds and experiences at all levels of your company to enable the building of innovative services at a faster pace. – Dana Kohut, The Prime View

12. Be Consistent

Consistency with long-term strategy is the number one differentiator between good decisions and bad ones. Leaders should be wary of making decisions from a place of stress or fear, rationalizing “temporary” measures. This is the definition of short-sighted decision making, and all too often will undercut key pillars of their strategy. – Dustin Snyder, Wayforward Associates

You don’t need to do everything on your own. From billing to marketing, including credentialing and patient eligibility verification, Perform Practice Solutions can help. Give us a call today at (833) 764-0178 and join our Facebook community for more physical therapy billing solutions and ideas.


Reference: [https://www.forbes.com/sites/forbesbusinesscouncil/2022/02/25/12-essential-strategies-for-building-a-sustainable-business/?sh=5232aa347d5e]


8 Tips and Resources for Managing Your Business Finances

Managing finances can be a challenge for any small business owner. Often, the reason your small business is successful is because of the skills you bring to the table — you know, the ones you went to school for and which are more up your alley — like PT! If you don’t have a lot of experience with managing business finances, it can feel like a chore and you could be slipping into bad financial habits that could one day (soon!) harm your business. We’ve selected some of the most important things to consider — and if you want some assistance, do set up a call to speak with us. We’ve done this successfully for hundreds of practices! 

One area many business owners struggle with is keeping track of their finances, but it is one of the most important areas given that cash flow is the lifeblood of the business. Small mistakes and a lack of knowledge and resources can be costly and problematic.

We’ve selected some of the most important things to consider and provide these tips and resources.

  • Find the best local credit union. Given their frequent willingness to provide loans, finding a credit union that understands the needs of your business can go a long way. There are many online tools to find credit unions based on specified criteria. Many local credit unions require membership in an affiliated organization, often listed on their website, but costs to join are usually minimal and well worth it. Here are a few tools to start with: Find A Credit Union, Credit Unions Online, Credit Union National Association.
  • Find a trusted mentor. Access to free help is just a click away, with sites that help connect entrepreneurs with mentors fitting their needs. Having a mentor assist with setting up finances can be invaluable if the person is trustworthy. One resource is the Association of Small Business Development Centers, which provides access to full-time business counselors around the country, often former entrepreneurs or M.B.A. graduates. Other sites for finding mentors include SCORE (affiliated with the Small Business Administration), iMantri and MicroMentor.
  • Choose the correct accounting software. While software is a mainstay of small business finance, sorting through dozens of choices isn’t easy, since there may be better options for your specific needs than the popular QuickBooks program and related packages. Find Accounting Software is a free tool that helps find exactly the right solution through a detailed questionnaire. TaxSites provides extensive resources including a list of software for small businesses.
  • Consider hiring a bookkeeper. A good, trusted bookkeeper can handle all of the mundane tasks that go along with keeping finances on track. Be sure to understand the various types of bookkeepers and how to avoid fraud. A free bookkeeper hiring test (to be taken by prospective hires) can be requested.
  • Accelerate cash flow with mobile payment systems. Mobile payment systems can allow faster and easier acceptance of payments for products and services. A system called GoPayment from Intuit allows acceptance of payments through mobile phones and can directly download the data into QuickBooks. To monitor transactions, users can access Intuit’s online Merchant Service Center to search, view and create reports.
  • Look into factoring receivables. Accounts receivable financing allows immediate payment for invoices, rather than waiting 30 days or longer and tying up working capital as a result. Factoring services advance the amount of the invoice minus a “discount,” or fee (advances of 80 to 90 percent are common), and provide a “rebate” when invoices are paid – the amount depends on how long it takes the customer to pay. FactorFind provides a directory of factors specializing in small businesses. Businesses can be matched with the most appropriate factors at the International Factoring Association, BuyerZone, and Resource Nation.
  • Understand and measure capital versus operational costs. The goal often is to drive down the totals on the capital costs side of the spreadsheet and move more over to the operational side of the equation. Operating costs don’t require complex depreciation calculations and are more easily adjusted from year to year. Outsourcing is one way to do this because it sits on the operating cost side and helps to free up cash by not tying it up in capital investments (such as IT infrastructure, servers, etc.) or tasks like head hunting and payroll management.
  • Measure bottom line impact by looking at the service budget year over year. Are the costs for delivering a service going up, staying the same or dropping? Figure out how much it costs to deliver specific services to the business such as recruitment, payroll or benefits management. Understanding cost-to-serve offers the business great insight into projects and tasks, how long it actually takes to do them, and as a result how much they cost. If you want to pare back on the budget, there are hard numbers to work with that show exactly what the impact on quantity and quality of service will be if resources are reduced.

You don’t need to do everything on your own. From billing to marketing, including credentialing and patient eligibility verification, Perform Practice Solutions can help. Give us a call today at (833) 764-0178 and join our Facebook community for more physical therapy billing solutions and ideas.


Reference: [https://smallbiztrends.com/2009/09/tips-resources-managing-business-finances.html]


‘Learn To Fish’: Why Management Skills Are More Crucial Than Cash

Solid management practices — rather than focusing solely on money-making endeavors — can imprint a huge difference in your company’s performance. Work on managing your practice well and watch how it impacts your opportunities for the long haul. Keep reading, and learn how to place a focus on management practices in your practice. 

According to Facebook’s data, nearly one-third of all small businesses permanently shut down during the pandemic. If you asked the owners of those businesses why, I’m willing to bet they would list “money”–or lack thereof–as the reason for their closure.

Every independent business owner thinks money is the number one thing they need to survive. While it is crucial, what they really need is a clear focus on management practices in their business.

In my world, here at American Management Services, those practices are boiled down into something I call The Four Solid Management Practices:

  1. Profit Planning
  2. Know True Costs
  3. Discipline In All Aspects (Manage By The Numbers)
  4. Key Performance Indicators (KPIs)

I’ve gone into detail on most of these practices in prior articles, but here’s a quick recap:

1. Profit Planning

Most owners, especially ones we meet with, think that whatever money is left over at the end of the year–after all expenses have been paid–is considered their profit; this is residual profit. Residual profit relies on ‘hopium,’ or false hope to turn a profit.

At American Management Services, we believe profit should be the first line item of expense. Named ‘Pre-Determined Profits,’ this means every set number of pennies from every dollar you incur is marked as profit.

How many pennies your business generates from every dollar is determined by your business model and management practices.

2. Know True Costs

Do you know what it truly costs to run your operation: By the hour; employee; or by line of business?

Understanding your actual operating costs will allow you to set realistic pricing in your bids/estimates/quotes. You could be seriously underbidding your products and services without it, leading to disastrous results.

3. Discipline – Manage By The Numbers

Once you understand where you should be, you now need to establish a goal to generate sales at that margin. Eliminate any guesswork around where you think you should be versus where you really are.

Your plan should be aggressive but maintain a degree of realism. And I can’t stress this enough: Make sure this is written down and communicated amongst those directly involved in turning goals into realities.

Break this down further by implementing KPIs and tying key managers to pay-for-performance.

4. Key Performance Indicators (KPIs)

Key Performance Indicators, or KPIs, measure goals against quantifiable data over a specific period.

Also known as flash reports, KPIs offer a way to track how you achieve your goals on broad and minute levels.

A KPI measures the goals of the business against the actual, quantifiable data over a specified period. Set goals for each aspect of your business in your pre-determined profit plan, then monitor your performance with KPIs and make the necessary adjustments.

Key indicators can differ for multiple businesses; a distributor’s KPIs will differ from a manufacturer’s, and so on and so forth. Even like-companies can have varied KPIs as not every business shares the same goals and metrics.

A New Approach To Managing Your Business

I mentioned the Four Solid Management Practices because if you implement them-and do so correctly-you will undoubtedly reap benefits.

It’s not a lack of money that kills businesses, it’s how they manage every aspect of their business that does them in.

Remember the old “teach a man to fish” adage? The same philosophy applies here.

While money is crucial for paying your employees and expenses, think of cash as a “fish.” I’ve seen owners borrow against their lines of credit to stay alive. That doesn’t solve a problem, it just adds to it.

Owners need to focus on solid management practices instead of hoping their business makes money. Essentially, for you owners reading this: “Learn to fish.”

Has to make you sick to borrow, run up line-of-credit, get federal handouts, et cetera. Follow the four principles I mentioned above to have the peace of mind most owners wished they had. If you need help, feel free to reach out to me via LinkedIn.

You don’t need to do everything on your own. From billing to marketing, including credentialing and patient eligibility verification, Perform Practice Solutions can help. Give us a call today at (833) 764-0178 and join our Facebook community for more physical therapy billing solutions and ideas.


Reference: [https://www.forbes.com/sites/louismosca/2022/01/04/learn-to-fish-why-management-skills-are-more-crucial-than-cash/?ss=small-business-strategy&sh=208f97b35b7a]


HOW TO PREPARE A BUDGET FOR AN ORGANIZATION: 4 STEPS

Creating a business budget is a crucial step toward success. Many people think of budgeting as their least favorite part of running a business — but if you want to be successful, creating and maintaining a proper business budget will be a critical component of that success. Don’t turn away from it! Here’s a step-by-step guide for how to create a business budget. If you want to save money in some places and make more in others — that’s where we come in! A quick consult at no charge to you — and you’ll quickly see where we can help you trim the fat and increase margins and revenue — FAST. 

An organization’s budget dictates how it leverages capital to work toward goals. For this reason, the ability to prepare a budget is one of the most crucial skills for any business leader—whether a current or aspiring entrepreneur, executive, functional lead, or manager.

Before preparing your first organizational budget, it’s important to understand what goes into a budget and the key steps involved in creating one.

WHAT IS A BUDGET?

A budget is a document businesses use to track income and expenses in a detailed enough way to make operational decisions.

Budgets are typically forward-looking in nature. Income is based on projections and estimates for the periods they cover, as are expenses. For this reason, organizations often create both short- (monthly or quarterly) and long-term (annual) budgets, where the short-term budget is regularly adjusted to ensure the long-term budget stays on track.

Most organizations also prepare what’s known as an “actual budget” or “actual report” to compare estimates against reality following the period covered by the budget. This allows an organization to understand where it went wrong in the budgeting process and adjust estimates moving forward.

Budget vs. Cash Flow Statement

If the definition above sounds similar to a cash flow statement, you’re right: Your organization’s budget and cash flow statement are similar in that they both monitor the flow of money into and out of your business. Yet, they differ in key ways.

First, a budget typically offers more granular details about how money is spent than a cash flow statement does. This provides greater context for making tactical business decisions, such as considering where to trim business expenses.

Second, a budget is, quite literally, a tool used to direct work done within an organization. The cash flow statement plays a different role by offering a higher-level overview of how money moves into, throughout, and out of an organization.

Instead of thinking of the two documents as competing, view them as complementary, with each playing a role in driving your business’s performance.

STEPS TO PREPARE A BUDGET FOR YOUR ORGANIZATION

The steps below can be followed whether creating a budget for a project, initiative, department, or entire organization.

1. Understand Your Organization’s Goals

Before you compile your budget, it’s important to have a firm understanding of the goals your organization is working toward in the period covered by it. By understanding those goals, you can prepare a budget that aligns with and facilitates them.

For example, consider a business that regularly experiences year-over-year revenue growth that’s offset by rising expenses. That organization might benefit from focusing efforts on better controlling expenses during the budgeting process.

Alternatively, consider a company launching a new product or service. The company may invest more heavily in the fledgling business line to grow it. With this goal, the company may need to trim expenses or growth initiatives elsewhere in its budget.

2. Estimate Your Income for the Period Covered by the Budget

To allocate funds for business expenses, you first need to determine your income and cash flow for the period to the best of your ability.

Depending on the nature of your organization, this can be a simple or complicated process. For example, a business that sells products or services to known clients locked in with contracts will likely have an easier time estimating income than a business that depends on active sales activity. In the second case, it would be important to reference historical sales and marketing data to understand whether the market is changing in a way that might cause you to miss or exceed historical trends.

3. Identify Your Expenses

Once you understand your projected income for the period, you need to estimate your expenses. This process involves three main categories: fixed costs, variable expenses, and one-time expenses.

Fixed costs are any expenses that remain constant over time and don’t dramatically vary from week to week or month to month. In many cases, those expenses are locked in by some form of contract, making it easy to anticipate and account for them. This category usually includes expenses related to overhead, such as rent payments and utilities. Phone, data, and software subscriptions can also fall into this category, along with debt payments. Any expense that’s regular and expected should be included.

Variable expenses are those your business incurs, which vary over time depending on several factors, including sales activities. Your shipping and distribution costs, for example, are likely to be higher during a period when you sell more product than one when you sell less product. Likewise, utilities such as water, gas, and electricity will be higher during periods of increased use. This is especially true for businesses that manufacture their own products. Sales commissions, materials costs, and labor costs are other examples of variable expenses.

Both fixed expenses and variable expenses are recurring in nature, making it easy to account for them (even if variable expenses must be projected). One-time expenses, also called “one-time spends,” don’t recur and happen more rarely. Purchasing equipment or facilities, developing a new product or service, hiring a consultant, and handling a security breach are all examples of one-time expenses. Understanding major initiatives—and what it will take to accomplish them—and what you’ve spent in previous years on similar expenses can help account for them in your budget, even if you’re unsure of their exact values.

4. Determine Your Budget Surplus or Deficit

After you’ve accounted for all your income and expenses, you can apply them to your budget. This is where you determine whether you have enough projected income to cover all your expenses.

If you have more than enough income to cover your expenses, you have a budget surplus. Knowing this, you should determine how to use additional funds best. You may, for example, move the money into a rainy day fund you can access should your actual income fall short of projections. Alternatively, you may deploy the funds to grow your business.

On the other hand, if your expenses exceed your income, you have a budget deficit. At this point, you must identify the best path forward to close the gap. Can you bring in additional funds by selling more aggressively? Can you lower your fixed or variable expenses? Would you consider selling bonds or shares of company stock to infuse the business with additional capital?

AN IMPORTANT FINANCIAL STATEMENT

The person responsible for generating a budget varies depending on an organization’s nature and its budgetary goals. An entrepreneur or small business owner, for example, is likely to prepare an organizational budget on their own. Meanwhile, a larger organization may rely on a member of the accounting department to generate a budget for the entire business. Individual department heads or functional leads might also be called on to submit budget proposals for their teams.

With this in mind, anyone who aspires to start their own business or move into an organizational leadership position can benefit from learning how to prepare a budget.

Perform Practice Solutions can help you optimize your day-to-day operations, from billing to marketing, including credentialing and patient eligibility verification. You don’t need to do everything on your own. Make the commitment to improve your clinic’s performance for real this year — and don’t look back. Visit our Facebook page or give us a call at (833) 764-0178.


Reference: [https://online.hbs.edu/blog/post/how-to-prepare-a-budget-for-an-organization]


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