Predicting Your Practice's Cash Flow
Ok... so you're not Dell Computer, Verizon, or Coca-Cola. But that doesn't mean you shouldn't be focused on your company's KPI's.
A KPI (Key Performance Indicator) is a measurable value that demonstrates how effectively a company is achieving key business objectives. Organizations use KPIs to evaluate their success at reaching targets.
A characteristic of a KPI is that it is non-financial in nature and can be measured daily yet can have a significant impact on operations. Now that might be a “head scratcher” for some of you, as you have always heard me speak of a P&L Statement and Balance Sheet as the metrics that need to be measured. Those financial statements are merely the scorecard for the results of the KPIs. P&L statements and balance sheets are what is known as "lagging indicators". Lagging indicators identify and confirm long-term trends. Conversely, KPIs are "leading Indicators" and tend to communicate change in the environment. They try to be predictive in nature.
So what measures of performance and leading indicators can we use in our practices to identify potential issues? This blog will provide some examples. First, let's take a look at some leading indicators that other companies utilize. Here is a sample that was provided by Best Practices LLC 1999 survey in CFO Magazine. Though dated, I am sure many of these are still in use:
I have always professed that nothing is more important to the health of your practice than your cash flow.
Therefore, the leading indicators (KPIs) that are predictive regarding your billing and collection process are the following:
If your practice is missing these important Billing and Collections Indicators, it might be time to go back and read my previous blogs on outsourcing!
You might not be Coca-Cola or Verizon, but nothing is more expensive than trying to do “the real thing” if you are not good at it. You might be losing LOTS of money. “Can you hear me now”?
If you are interested in finding out if outsourcing is for you, please email me at firstname.lastname@example.org
for your FREE Cost/ Benefit Analysis performed on your billing process.
Note: * “It’s the real thing” and “Can you hear me now” are registered trademarks of Coca-Cola and Verizon respectively.