Budgeting 101: An Essential Education for Canadian Health Professionals
The Importance of Budgeting
The word ‘budget’ sounds scary to some people, as it makes them feel too limited. On the contrary, budgeting for health professionals can actually be quite liberating.
Without a budget, you are at risk of overspending or underspending in areas of your healthcare business. Whatever your health niche and whatever your financial goals might be, a clear budget allows you to spend without feeling guilty!
Business expenses are a natural part of owning a flourishing health practice, and they simply cannot be ignored. A solid budget will help you manage your business finances much better, including everything from salaries to rental payments, student loans, medical equipment, paying suppliers on time, and meeting tax deadlines. Think of budgeting for health professionals as the most important stepping stone to running a financially sound and successful business in the long term.
Have you ever made a big purchase for yourself after hearing an outstanding sales pitch, only for the purchase to fall short of your expectations leading to regret later? In this blog, we will take you through budgeting basics and some scenario analysis to see how budgeting for healthcare professionals really works in real-life situations.
While your budget might look great on paper, how does it actually translate into practical examples? Are you sticking to payment deadlines and spending limits? Are you distributing funds adequately between departments?
Here’s a closer look at what we will discuss in this blog:
Budgeting Basics: Better Something Than Nothing
The Power of Regular Budget Review
Bookkeeping and Budgeting: A Match Made in Finance
Practical Guide: How to Use Your Budget Effectively
Planning for Best and Worst-Case Scenarios
Embrace the Power of Budgeting
Ready to start budgeting? You can start by downloading this FREE budgeting checklist for health professionals from Tyagi Group. It’s a great way to help you organize your budget and stay on track in the months to come.
Budgeting Basics: Better Something Than Nothing
You may be surprised to know that many health professionals in Canada are unaware of budgeting basics and do not budget at all. Some may admit to having a ‘mental’ budget, and only very few actually “put it down on paper.” A mental budget may seem like the easier way out, but it could seriously disrupt your business. Not having a physical budget can lead to costly mistakes, fines, unhappy and unpaid suppliers or staff members. Neglecting the importance of budgeting can also increase stress for you as a business owner. For example, without a proper plan, years from now, you will have little or no retirement funds or money saved for emergencies. So, here is a simple guide to get you going.
How to Start with a Basic Budget
To avoid an unpleasant scenario, we strongly recommend having even a basic budget as opposed to nothing at all. And NO! Mental budgets do not count! Here’s how to do it the right way:
Calculate your monthly and yearly after-tax income-tax earnings.
If you have any deductions, such as health insurance, subtract these from your total revenue.
Make a list of all other expenses for immediate needs
Write down your short-term and long-term business goals, including renovations, adding more staff and purchasing equipment.
Write down personal financial goals, such as planning for retirement or vacation.
Use the 50/30/20 rule.
What is the 50/30/20 Rule?
Let’s get down to the budgeting basics. If you are entirely new to budgeting, the 50/30/20 rule is one of the simplest strategies you can use. The ‘50’ means that from your total income after deductions, set 50% aside for your immediate expenses, the ones that cannot be ignored, such as staff wages or topping up your prescription drug inventory.
Then comes your ‘wants’: the vacation that you want to take, the sports car you’ve been dreaming of, or any other items you’ve been wanting to splurge on. Set aside 30% for this. The last 20% is your savings. Consider this your emergency savings fund and place it in a separate interest-bearing account.
New to Budgeting Basics? There is Help!
The good news is that Tyagi Group has a host of free online resources to help new business owners get their health finances in check. If you are just starting out, you might want to download our free guide to business registration. Then, to kickstart your budgeting, we have the FREE budgeting checklist that helps you put all your financial goals and planning in one place.
If you still have questions about the importance of budgeting or different strategies, head over to this blog on how to create a solid budget for your healthcare business.
The Power of Regular Budget Review
Once your budget is in place and you're happy with how you have planned to distribute your funds, don’t make the mistake of leaving it on the shelf to collect dust. A budget is useless if it’s not used and reviewed regularly. This is the key to effective budgeting.
Tyagi Group has years of experience helping health professionals in Canada with effective budgeting reviews on a monthly, quarterly, or annual basis. We often find that too many business owners neglect this step in the budgeting process. Effective budgeting is more than writing down numbers on a spreadsheet. It’s about how you can practically apply that to your business and your personal life to achieve the short- to long-term financial goals you want.
How an Irregular Budget Review Can Lead to Ineffective Budgeting
A budget review matters more than you might realize for your business. It helps you identify when you are going off track with your spending and when there is that could be used for other important things, such as saving or investing in an emergency fund.
We often talk about the reasons you need to budget, but let us look at some things that could happen when you fail to do a budget review.
Overspending and unplanned splurges can cause an unwanted budget dent.
You will likely be late with payments.
Expect poor distribution of resources in different departments.
Your business will be unprepared for emergencies.
Run the risk of getting deeper into debt, which is never good.
Likely to underspend in areas that require more resources.
You will realize you have a lack of cash flow and adequate savings at a time when it's needed most.
Risk of having a dormant income that could have been invested elsewhere, like an emergency fund.
The Correct Way to Review a Budget
The best way to conduct a good budget review is not to make mental notes. Track every bit of spending either on a printed spreadsheet or on your digital budgeting template. Keep this budget nearby and accessible at all times.
Explore different technologies out there that help you track and edit your budget template in real time so it stays current. It’s recommended to adjust your budget as soon as you’ve done any spending so that you don’t forget. Leaving it for too long might lead to missed details, which can throw you off course later on.
After each deadline has been met, tick this off on your budget template. Effective budgeting also means that if you have gone over your budget at any time, you need to write it down. Don’t try to pretend it never happened because it did, and this will affect your overall budget calculations. To avoid nasty surprises down the line, be honest and diligent about tracking all spending and saving.
In this budgeting 101 guide for health professionals, Tyagi Group has included an excellent budgeting template, a great example of how an organized, carefully designed tool can help you keep a clear budget. Everything you need is included, so you don’t have to worry about missing out on any important budget review details. Download this free budgeting template now and see the difference in your sense of financial freedom.
Bookkeeping and Budgeting: A Match Made in Finance
If you are struggling to create or stick to a budget as a health professional, it may be time to consider hiring a professional bookkeeper to help you. Though it is often overlooked, bookkeeping is, in fact, an essential part of any budgeting synergy.
How Bookkeeping and Budgeting Work in Synergy
Think of a bookkeeper as an extension of your budget. The budget is the physical or digital plan that maps out how you will utilize your funds for a specific period, and bookkeeping shows you the best route to take and helps you stay on course, keeping accurate records of your moves along the way. As a health professional, you may not have time to constantly review your budget or fine-tune your spending. Your focus is on your patients’ health goals. This is where bookkeeping comes in.
By hiring an accredited and experienced bookkeeper, you can still stay on track with your budget while giving 100% of your attention to your clients. Your bookkeeper will help you identify areas in which you can cut back on spending, such as luxury purchases, or show you how to save, for example, with income taxes.
Health-care professionals are not always in the know when it comes to refined budgeting and saving techniques but effective bookkeeping and budgeting can work in synergy to give you the best results for the sustainable future of your health business.
Utilize Bookkeeping Resources
There are also bookkeeping software options available to health professionals in Canada. If you feel confident enough to handle your bookkeeping on your own, explore these options. But whatever you do, don’t neglect bookkeeping in synergy with budgeting.
Tyagi Group provides bookkeeping and budgeting for physicians and health professionals, so consult with our team for expert assistance when it comes to keeping your finances as healthy as you are!
Practical Guide: How to Use Your Budget Effectively
Effective budget use will get you closer to your financial goals. Here is a practical guide to help you give your budget real meaning in your business as a healthcare professional in Canada.
Putting Your Budget into Action
Cut down on debts: Set aside a portion of cash in your budget to pay off debts and avoid getting further into debt. Reduce credit card spending, too!
Shop around to reduce bills: Save money by shopping around first for the best deal before you purchase office equipment, supplies, furniture and more.
Negotiate with suppliers to save: Suppliers offer seasonal discounts and bulk purchase discounts, so use these to help you stick within your budget.
Be disciplined with leisure expenses: We all love to splurge every now and then, but by saving now, you can afford that sports car later on!
Separate accounts: Keep your savings accounts separate to help you track your spending more easily and stay on budget with ease.
Generate extra income: Boost your marketing or social media campaigns to generate more income that will help you meet your budget goals. For more ideas, read this blog about how to break down your income to earn more money.
See the Results of Effective Budget Use
By applying this simple and practical guide to effective budget use, you will begin to see results in no time. If you’ve set yourself deadlines for certain financial goals, tick them off as you achieve them. Soon, you will notice how well-planned budgeting works to get you to your destination ‒ and on time, too!
With effective budget use as opposed to a non-existent or ineffective budgeting strategy, you will be able to make payments on time, spend what you need with a clear conscience, and feel confident that you will reach the end of each financial period with enough in your savings account. Planning for retirement, a vacation or a renovation for your health spa? This practical guide to budgeting 101 for health professionals will take you there!
Planning for Best-Case and Worst-Case Scenarios
Forecasting your best and worst-case scenarios can help with your budgeting process as a health professional. In this section, we will help you with a scenario analysis that you can apply to your own business when budgeting.
Best-Case Scenario
As a possible best-case scenario analysis for a health practice, let’s imagine that a dentist has a surge in bookings for a three-month period. This kind of peak in income could be estimated based on historical data and previous client behaviour patterns. For example, you may notice that before the holidays, more people want to get their teeth cleaned and problems fixed so they won’t interfere with their vacations.
In this case, budget for extra temporary staff to accommodate the patient influx. Include a budget for extra supplies and possible overtime hours. Based on a higher income prediction, allocate a portion of your budget to settling credit card debts or investments.
Worst-Case Scenario Analysis
As a worst-case scenario analysis, we have only to remember how the COVID-19 pandemic affected the world, and especially the heavy demands it placed on health professionals. Many were not prepared and had no way to cope financially. As a worst-case scenario, you could predict a global economic slump.
The most effective budgeting technique for health professionals is to set up an emergency fund and contribute a percentage of your operating budget towards it every month. Ask an experienced bookkeeper or financial advisor like Tyagi Group how to set up an emergency account and maintain it regularly without disrupting your operational expenses.
Embrace the Power of Budgeting
In creating this guide to budgeting 101 for health professionals, we have discussed in depth the importance of budgeting and the power of budgeting when used effectively. With these practical steps, you can take control of your finances as a health professional in Canada, being prepared for the best and worst-case scenarios.
Take Control of Your Finances ‒ You Might Enjoy It!
Don’t leave your financial success up to chance ‒ it never works. You’ve come this far and opened your very own health business; why cross your fingers and hope for a financial miracle when the power of budgeting is in your hands?
At Tyagi Group, we’ve helped many health professionals just like you overcome their budgeting blocks, set up a budget using our budgeting template, and put it into action with regular monitoring and bookkeeping. By following this expert guide, you, too can see the rewarding results that are made possible by the power of budgeting.
Let’s Recap
Having a basic budget in place is better than nothing at all.
Revisit your budget monthly or quarterly to review your living expenses.
Forecast your best and worst-case scenarios to be prepared.
Use bookkeeping software or consult with Tyagi’s bookkeepers to help you stay within your budget and get the most out of it.
An Online Business Foundation Budgeting Course For Canadian Health Professionals
Eager to experience the power of budgeting? Try our Business Foundation Budgeting Course to gain more insight. Tyagi Group is offering this unique opportunity to all health professionals in Canada to gain confidence and shed the stress of business finances.
Sign up now and be guided by our deep knowledge of accounting basics and budgeting mastery. With these budgeting foundations, you will be able to watch your business grow from strength to strength while you focus on your patients’ well-being.
