A waiting room with chairs and green plants. A hallway next to the waiting room with doors and more plants supporting Brentnalls Health.

Budgeting In a Private Practice

Budgeting is the foundational business discipline that high performing practices use for optimising financial performance.  

Historically, medical practices have not had to worry about budgeting, but as profit margins have tightened, cashflow management has become a significant concern.  

Why Budget?

  • The purpose of budgeting is to provide a forecast of revenues and expenditures, i.e. construct a model of how that business might perform financially if certain strategies, events and plans are carried out.
  • This allows the business to plan its cashflow according to the expected peaks and troughs.
  • It also enables the actual financial operation of the business to be measured against the forecast and variances highlighted and managed. i.e. If the financial performance is below expectations, budget comparisons enable practices to identify the source of any problems and promptly implement remediation strategies.
  • The budget can also be used to predict the impact of a major change to practice operations to support effective decision making e.g. the addition or loss of a practitioner, and the impact of temporary closure.

The diagram below shows an example of typical cashflow forecast for a profitable general practice, with the quarterly income peaks being the months the Practice Incentive Payments are received. Even though the practice is profitable, there are several months throughout the year a deficit is forecast. The budgeting process enables the practice to manage their cashflow so that there is sufficient funds in hand to manage through the less profitable months. 

Diagram is example of typical cahsflow forecast for a profitable general practice..

Budgeting is not difficult and once the process is established, it is easier in subsequent years.

Where to start?

  • Either summarise the most recent financial year on an Excel spreadsheet or use your accounting software budget manager tool to bring through last year's income and expenses in the budget.
  • Incorporate the projected adjustments to income and expenditure.
  • Convert the annual budget (Income & Expenditure) into per month amounts.
  • Establish a monthly reporting schedule to review the budget against your actual performance.

An advantage of using the accounting software over Excel is that the periodical reports are embedded in the product and can be produced without needing to extract the data to an Excel spreadsheet, and it's also a much simpler and quicker process.

Income Considerations
  • Expected Patient Fees 
    • GP staffing levels - will this remain stable or change in the upcoming year?
    • Income estimate on per doctor approach?
    • CPI or other increase factor? 
  • Practice Incentives Income – are there any expected changes?
  • Other income (rent received, training subsidies) - are there any expected changes?
Expense Considerations
  • Staffing Levels – will there be changes?
  • Increased wage costs (CPI or award changes)
  • Rent – CPI increase or known change?
  • Computer / IT expenses – staff licences, hardware requirements, software renewals?
  • Occupancy costs – electricity increases, rates, significant repairs required?
  • Medical supplies – CPI increase or change re anticipated usage, cost savings?
  • Other costs – CPI increase or other calculation, cost savings.
  Black boxes, a pen with red ink ticking off the box

Once the budget has been established, your accounting software (or Excel) can be used to measure actual performance against the budgeted amounts. There are also programs available such as Fathom, that can extract the financial data from your accounting software to prepare automated financial reports. 

It is important to review any variances (particularly significant ones) monthly or quarterly and investigate the reasons for these variances. Regular monitoring of the budget position is the most important discipline of budgeting and provides the insights that enable businesses to optimise financial performance. By
keeping track of expenses and variances to budgeted amounts, businesses can be more proactive with managing costs where they exceed budgets and placing cost saving strategies into place when required.

How can Brentnalls Health help?

If you would like to discuss budgeting in your private practice further, please contact Brentnalls SA and ask to speak to one of our health advisors. Our objective is to see you and your business thrive now and into the future.

If you would like to print this information please click here for PDF format.

The information provided in this information sheet does not constitute advice.  The information is of a general nature only and does not take into account your individual situation.  It should not be used, relied upon, or treated as a substitute for specific professional advice.  We recommend that you contact Brentnalls SA before making any decision to discuss your particular requirements or circumstances.

Our Services

Our services go beyond compliance to find out more about your goals, your priorities and establish plans to grow and protect your future wealth. We will take the time to listen, ensuring we meet your goals, as well as guide you so you have a better understanding of the financial decisions being made. Our services include:

Accounting & Tax
Business Advisory
Wealth Creation & Preservation

Our People

Our Partners & Principals want to be part of your team that drives your future success, that provides you with solutions to your challengers. More importantly, who listens and knows exactly where you are going and what you want to achieve financially. 

"Helping you achieve your dreams, is our passion, and our strength is in our dedicated professional team."


News & Resources

Our priority is to ensure your kept up-to-date on trends, industry legislations, accounting and tax updates, business advisory information, superannuation and much, much, more. All of which, may have an impact on you and your business. Our resources provide additional supporting information in the following areas: 

Fact Sheets
News Articles
COVID-19 - Information Sheets
COVID-19 - Brentnalls SA Response

Our Location

255 Port Road

PO Box 338
Welland SA 5007 

View location map

P: (08) 8241 8444
F: (08) 8241 8488

E: [email protected]

Connect with us on Facebook. Connect with us on LinkedIn.