BUSINESS

  financial foundations

Applying the SMARTER Method

Set and achieve your financial goals to increase your profitability.

DAVID MILLS, O.D., M.B.A.

Last month, I discussed how to utilize the SMARTER (specific, measurable, attainable, relevant, time-bound, evaluate and re-evaluate) method to reach your financial goals.

We, as business owners, all want to earn more net profit this year than last. To accomplish this, we must collect more revenue and/or reduce expenses.

Here, I discuss three areas of your practice that lend themselves to using the SMARTER method of goal setting.

1 Revenue per patient

Take the 2013 total net collected revenue (the monies you deposited in the bank), and divide that by the number of comprehensive visits billed (typically the number of unique patients examined) to give you the net collected revenue per patient.

In setting the 2014 goal, evaluate ways you can increase revenue. You may decide to offer more varied services, such dry eye treatment, to your existing patient base, or develop strategies to increase patient revenues derived from product sales, such as increasing the number of patients who purchase annual supplies of contact lenses.

Make your goals specific and measurable — setting a goal of a 7% to 10% increase from the 2013 value can be easily attained if you correctly structure the goal. One way is to attack the goal in small increments, such as 3% in the first quarter, then an additional 5% in the second quarter.

Evaluate your progress toward each goal on a monthly basis.

2 COGS

Start by evaluating your fee schedules. Concentrate on the service codes as well as the product side to determine whether your fees should be updated. Current fee schedules for products should reflect recent changes in operational costs associated with the optical and contact lens sales.

Also, assess the acquisition costs you pay for the goods you sell. Be sure you are taking advantage of all discounts and bulk-purchasing opportunities. For example, if you are not a member of an optometric buying/consulting group, investigate whether joining one is worth the savings.

Ultimately, your COGS should be around 25% of the net collected revenues. If this is a drastic change to your current value, consider doing it in steps. For example, if your 2013 COGS was 33%, setting a goal of 25% might not be attainable and could result in frustration if the goal is not achieved. Instead, try to lower COGS by at least 4% this year.

3 Accounts receivables

Setting strategies with your staff to decrease the aging of accounts receivables has a very positive effect on your cash flow.

Review your accounts receivable aging report to determine the average number of days for both your insurance and patient accounts. The overwhelming majority of patient accounts should be less than 30 days aged, and insurance accounts should be less than 45 days.

One strategy to consider is designating an employee to review the electronic insurance claims correspondences daily to identify claims needing corrective measures before they are approved to pay. This will dramatically reduce the aging of the claim compared with traditional “snail” mail.

More than “SMART”

To succeed with the SMARTER method of goals setting, evaluate and reevaluate your progress toward each goal on a monthly basis. OM

DR. MILLS PRACTICES AT OCEAN STATE EYE CARE IN WARWICK, R.I., AND HOLDS A M.B.A. FROM PROVIDENCE COLLEGE. E-MAIL HIM AT MILLSD@NECO.EDU, OR SEND COMMENTS TO OPTOMETRICMANAGEMENT@GMAIL.COM.