By Gerri Detweiler
The COVID-19 crisis has forced many businesses to adapt, and healthcare businesses are no different. “The COVID-19 pandemic has forced the entire healthcare industry to shift its long-standing business models, and owners of healthcare businesses had to financially prepare for the next major emergency while tackling the current pandemic head-on,” says Mark Claster, Managing Partner at Carl Marks Advisors.
It’s been a tough year, and everyone is exhausted. But business owners who continue to tackle these challenges head on are likely to emerge stronger than before. Here are 6 ways to streamline and organize your healthcare business finances as we wrap up 2020 and head into a new year:
1. Review and negotiate
Find time to review and, when necessary, renegotiate your business relationships. “Providers should take a close look at existing agreements with supply chain partners, consider renegotiating delivery schedules and prices, and make sure they have contingencies for future disruption,” Claster advises. He also recommends practice groups collectively review reimbursement levels with insurance companies and renegotiate when appropriate.
While you’re at it, review the tech supporting your business, including financial management. “Ensuring your tech and software is performing as it should is essential to simplifying your finances for the coming months,” says Kim Montgomery, VP Healthcare Originations Leader at TIAA Bank. “Evaluate these costly infrastructure system upgrades now, while financing options still have competitive interest rates. Taking the time now to understand how to boost productivity and reduce costs will set your business up for success in the coming year.”
2. Reorganize your receipts
“You’ve probably been organizing your tax receipts the wrong way,” warns Sylvia Inks, small business coach at SMI Financial Consulting and author of Small Business Finance for the Busy Entrepreneur. She speaks from her experiencing working with small business owners in a variety of industries, including healthcare. She says that business owners often don’t know how to set up their accounting properly from the beginning, and they miss out on valuable tax deductions.
Her tip: Visit the IRS website at IRS.gov and search for “Schedule C.” The form lists categories of business expenses. (More details on those expenses can be found in IRS Publication 535, business expenses.) Use those categories to store your receipts online.
“Don’t save receipts by month,” Inks says. Instead, create a folder for each type of business expenses and save receipts in the appropriate folder. For example, create a folder named “8-advertising expenses” (the 8 refers to that category on the Schedule C) and save your advertising receipts in that folder. If you are audited and the IRS requests all advertising receipts for a certain period of time, for example, you’ll quickly be able to find receipts for that category. By the way, Inks prefers Microsoft 365 for online storage because she says it’s the only major cloud storage service where the customer retains ownership of everything they store there.
3. Review your payment methods
If you use business credit cards for the rewards they earn, you may want to consider whether you’re still carrying the right cards. If you’ve focused on earning travel rewards in the past, you may find those points accumulating without a plan for how to use them. Some issuers have adjusted options for using rewards; for example, by making it easy to redeem travel points for online purchases. But it’s still worth taking a look to see if the cards you carry are still the right ones for your business.
And if you use a business debit card, keep in mind that credit cards carry superior fraud protection in the case of loss or theft. The Truth in Lending Act, a federal law, limits liability for fraudulent business credit card purchases to $50. No similar law covers business debit cards.
Regardless of the type of card you use, make sure you’ve set appropriate spending limits for employees and alerts to warn you of suspicious activity.
4. Diversify revenues
Although adding new revenue streams would seem to complicate your finances, they can actually provide more flexibility and increase income, both of which can help provide more peace of mind in this time of uncertainty.
“When you build an integrated clinic, as opposed to a chiropractic or family medicine center, you expand the scope of service to your patients and your potential patient base,” says Jono Lo Bue, VP of New Client Expansion at Advanced Medical Integration (AMI) a consulting group that has helped more than 500 family medical and chiropractic practices transition into medically integrated clinics. “By offering a variety of services, you are less likely to become the victim of changing insurance rules. And because of the increased number of codes you now have access to, the integrated clinic will collect more money from insurance while making your practice more accessible to more patients.”
And when you increase revenues, your business becomes more attractive to lenders, as revenue is one of the top three factors considered for most small business lending decisions. (Credit and time in business are the other top two factors overall.)
5. Review Your PPP Paperwork
If your business received aid in the form of a Paycheck Protection Program (PPP) loan, Economic Injury Disaster Loan (EIDL) grant or loan, or any other Covid-19 relief program, make sure you have properly documented how you’ve spent that money. “Careful financial documentation and review of the conditions of the funding is critical,” Claster warns. “Running afoul of any one of the many complex conditions in the CARES Act may trigger an audit or other enforcement – which has the ability to ruin a practice financially more effectively than a lockdown.”
After a flood of applications for these programs—of which some have already been identified as fraudulent– government officials are starting to closely examine these loans. You need to make sure that you can identify how you spent the loan proceeds and ensure you used them for acceptable expenditures, among other requirements. SBA advises borrowers to keep receipts and contracts for all loan funds spent for 3 years. PPP documentation must be kept for 6 years after the loan is forgiven or repaid in full.
Tip: Treasury and IRS have recently released guidance indicating that while PPP funds are not taxable, borrowers may not deduct expenses paid with PPP funds, even if they anticipate forgiveness but have not yet received it. Talk with your tax or financial advisor to understand how this may impact your business.
6. Prepare for anything
It’s never been clearer that business owners need to be prepared for anything. “Continuity and disaster plans need to be in place and new technologies that can mitigate the risk of ransomware and cybersecurity threats need to be evaluated and implemented,” says Marcus Wagner, CEO, AcctTwo which helps small and mid-size healthcare companies streamline their financial and account operations through technology. He’s right to raise the alarm: the IRS and the National Cybersecurity Alliance have been warning about increases in business identity theft.
Another way to ensure greater peace of mind is to have adequate savings. “In an uncertain economy, cash is king,” says Montgomery. “As much as you’re able, build up a cash reserve so that if lockdowns and suspensions of voluntary procedures return to effect, you have a buffer. Also, if you are incurring large expenses on fixed assets like equipment, consider a lease rather than buying in cash, which can help preserve your cash flow.”
As business begins to pick up again (or even if it never slowed down), revisit your financial strategy and make sure you are setting aside adequate reserves for the unknown. Business owners who went into this year with extra cash on hand were no doubt thankful for that cushion.
About Gerri Detweiler
Gerri’s been guiding individuals through the confusing world of finance and credit for 20+ years. She is the author or coauthor of five books, including her most recent, Finance Your Own Business: Get on the Financing Fast Track. Today, Gerri serves as the Education Director for Nav, an online platform that matches small business owners to their best financing options and gives free access to personal and business credit scores.
Healthcare Business Today is a leading online publication that covers the business of healthcare. Our stories are written from those who are entrenched in this field and helping to shape the future of this industry. Healthcare Business Today offers readers access to fresh developments in health, medicine, science, and technology as well as the latest in patient news, with an emphasis on how these developments affect our lives.