3 simple ways to reduce overhead costs

September 25, 2012

The economy still isn't doing well and overhead costs are increasing. How can you give yourself some breathing room?

A: The drive to control operating overhead never ends, but monitoring a few aspects of practice operations and changing them when necessary can bolster the effort. Start with a financial analysis that compares overhead as a percentage of collections. Next, compare it with prior-year statements (total expenditures and per category expenditures) and benchmarks. After you've completed that comparison, look for areas where costs can be reduced. Here are three places to start:

Centralize your purchasing by designating one employee to make or approve all purchases for your practice. Under no circumstances should anyone order supplies without going through the designated purchaser.

Carefully scrutinize any exclusive relationships you have with vendors, because they may not offer competitive prices. Develop a list of needed supplies and costs, then request bids from various vendors. Explore purchasing from online vendors as well.

LEASE AGREEMENTS

MISCELLANEOUS EXPENSES

Small costs can add up and therefore should be monitored and evaluated regularly. Examples:

■ Bank charges and penalties. Review your practice's bank statements to ensure you're not being dinged.

■ Outside billing. Determine a potential collection rate, minus expenses, for internal billing and compare it with the same figures for an external billing agency.

■ Telephone costs. Monitor long-distance calls to ensure that they are business-related and that you are not paying for lines and services you don't use.

■ Professional fees. You may be able to lower your costs for professional services, such as legal and accounting, by negotiating with your current providers or seeking providers that charge lower fees.

Controlling operating expenses requires constant vigilance, but it's worth the effort.

Answers to our readers questions were provided by Reed Tinsley, CPA, CFP, CHBC, a healthcare accountant and business adviser in Houston, Texas.

Send your money management questions to medec@advanstar.com
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