Increase your revenue with a Bonus System

by | Aug 15, 2013 | Uncategorized

You can also watch our six minute YouTube presentation of this?article here.

?Are You a Doctorpreneur?”

That’s generally the first question I ask to new clients who own medical and dental practices. While doctors help their patients with some aspect of their health, entrepreneurs run businesses, trying to maximize the long-term profitability of that business.

Whether you own a practice, work at someone else?s practice, or work at a hospital, you need to remember that every healthcare office is a small business that needs to be managed as a business. Nothing that happens within your office should happen by accident. If any aspect of the practice isn?t the absolute best that it can be, you should have a plan in place to address and improve that part of the practice.

One recommendation we routinely make to our practice owner clients is to implement a Simple Incentive Bonus System. For short, we call this SIBS.

For a bonus system to work, it needs to be:

  • Easy to understand.
  • Attainable, but not automatic.
  • Something that the staff members feel they can impact

As an example, SIBS works well with dentists. Most dental practices are staffed by a relatively small team that must work well together for the practice to routinely hit its goals.

  • Front desk person ? Fills the doctors? and hygienists? schedules and collects money from patients and insurance companies
  • Hygienists ? Validate treatment planning presented to patients. and can also provide additional services which add top line revenue and profits
  • Assistants ? Help improve patient flow efficiency

Implementing SIBS

Implementing SIBS is pretty easy. Simply figure out your annual goal, divide that figure by twelve, and that?s the monthly goal. (Obviously this will only work if your practice doesn?t have seasonal fluctuations.)

Any month that you hit the goal, give each team member a $100 bonus. Hit 110% of the goal, and increase the bonus to $200 or $250.

Don?t worry about sharing the practice?s financial information with the staff. If the goal is based on monthly collections, make sure to remind your staff that even though the monthly collection goal seems high, the practice overhead is high as well. Remember, there are staff expenses, occupancy costs, lab fees, dental supplies, debt payments, equipment to buy and maintain, insurance, computer hardware and software, and all sorts of other costs, and then the practice still needs to pay your salary.

You should also periodically adjust the threshold used to calculate the monthly bonus. A good time to adjust the goal is around the time you hand out raises

SIBS Examples

Here is an example of SIBS. Let?s say that you set your annual collections goal at $900k, so the monthly goal is $75k. You have a meeting, and explain to your staff that any month the practice collects $75k, each team member gets a $100 bonus. And if the practice collects 110% of that goal, or $82.5k, everyone gets $250

You then remind the staff that while the monthly collections seems high, you have a ton of expenses to pay each month, and after paying your salary, there is not a lot of money left over. Trust me, after a few times of telling them this spiel; they will start saying it to you whenever you bring up the monthly collection goal. That’s what happens at my office anyway.

Improve SIBS

Here are a few suggestions to make SIBS even more effective:

  • Don?t lump the bonus check in with the regular payroll that gets directly deposited into each staff member’s bank account.
  • Instead, issue a printed check from this bonus, and personally hand this check to each employee. (This will also allow your employee to cash this check and use the money for something special such as going out to dinner and to a movie or shopping for something they’ve been waiting to buy.)
  • At that time, thank each team member for their hard work in helping the practice achieve the monthly goal.

Just think how powerful a statement you are making to your staff if you hand them a check for their bonus payment, and personally thank them for helping the practice reach its goal.

As a reminder, you then do need to call this manual check into your payroll service since the income belongs on each employees? W-2.

Caveat Owner

Like everything else these days, there are a few pitfall of SIBS. For starters, this bonus plan can lose it?s luster over time. So, keep it fresh by changing the focus of the bonus over time. Maybe switch from monthly collections to new patients brought in to re-care efficiency, and then go back to collections. However, no matter what practice variable you use, always make sure to align the goals set within SIBS to the long-term goals of your practice.

You also need to be careful that your staff doesn?t game the system. I saw this at one client where the front desk person stopped depositing checks once the maximum goal was met, and held those checks to deposit the following month. Make sure to tell your staff the bonus will end immediately if anyone tries to beat the system by pulling a stunt like this.

Win-Win With SIBS

We?ve had a lot of practice owner clients implement SIBS, and they often see an immediate increase in collections Plus, the staff at these practices end up making a little extra money too, which keeps them focused on reaching the stated goal each month. Hopefully you?ll realize similar results.

TEACH YOUR TEENS FINANCIAL RESPONSIBILITY WITH PASS CARD

by | Jan 10, 2013 | Commentary, Planning, Savings

I’m a CPA and my wife is a CFP (Certified Financial Planner). Even so, I think together we’ve done a lousy job teaching our two kids – Jonathan (age 14) and Lizzie (age 13) – much about personal finances. We have also done little to help them learn anything about exercising fiscal discipline.

Over the years, we’ve toyed with monthly allowances and paying our kids for doing their household chores. The problem is that we have never been consistent with doling out the promised $20 per month or with enforcing the rules they need to follow to even be eligible to receive their allowance. So my family’s allowance system has evolved to something like this:

Child: “Dad and/or Mom, I’m getting together with friends. Can I have some money?”

Parent: “Sure thing, Jonathan and/or Lizzie. Will $20 be sufficient?”

Well, as my kids continue to grow up, we have reached the point where this conversation happens pretty regularly. Our kids have no incentive not to ask us for money, since we have a track record of giving them money whenever they ask. And they also don’t have an incentive to try to earn any money on their own, since we have gladly been supporting 100% of their spending.

That’s all about to change. Financial responsibility for the Schwartz Clan, here we come. As a parent of a teenager, you might be asking, “How will you pull this off Andrew?”

For Christmas/Chanukah, we gave each child a Pass Card issued by American Express These cards are only available to kids 13 or older.

According to American Express, “Pass is a prepaid reloadable Card parents give to teens. It’s safer than cash, and unlike a debit or credit card, teens can only spend what’s preloaded on the Card.” For my two kids, we loaded each card with $100, and then will reload the card on the tenth of each month with their $25 allowance.

Pass cardholders can spend money on the prepaid card pretty much anywhere that takes credit cards. And while parents do have the right to deny their kids access to cash from ATMs, we decided to set up the cards to allow ATM withdrawals. We can change this setting at any time, however. The first ATM transaction each month is free for each kid, and then there is a charge of $2 per withdrawal.

In theory, when either kid spends all the money on the card, they are out of money until they next receive the $25 on the tenth of the month. Here is where my wife and I will need to exercise some parental discipline and not just dole out more spending money. Instead, we need to try to use this opportunity to remind Jonathan or Lizzie that if they want to spend more than $25 per month, they can always babysit, shovel snow or rake leaves for our neighbors, work at my office during tax season, or try to find another job that hires 14 year-old kids (Lizzie will be 14 in the summer) to earn extra money .

Other Advantages

For parents, the Pass Card has a nifty web interface that allows parents the opportunity to view balance and purchase history online at any time, transfer additional funds into the card, or tweak the amount or frequency of the automatic reloads. Teens will also be able to logon to the Pass website under a separate login to monitor balances and activity.

According to the site, the Pass Card also provides your child some additional benefits similar to the benefits that come with the AMEX card, including:

  • Purchase Protection if an item purchased with the Pass Card breaks within 90 days
  • Roadside Assistance if your child’s car won’t start
  • Global Assist Services to provide your child with emergency services while traveling

I hope the Pass Card works out well for my family and helps my wife and I teach my kids a little about personal finances and fiscal discipline. Check back next fall or winter, and I’ll definitely give you an update on whether the Pass Card helped my family make progress towards these two goals.