More than 99 percent of America's 30.2 million companies are small businesses.1 The majority (88 percent) of these small businesses have fewer than 20 employees and nearly 40 percent of all enterprises have under $100,000 in yearly revenue.1
As business owners, we all need enough incoming revenue to pay employees, overhead costs and ourselves for the services we provide. Business owners need to pay themselves first or at least around the same time as they do their employees, but we often pay ourselves only if there is money left over after we have paid all the bills. So despite our businesses being unique, our concerns, especially financial, are similar to those faced by other small business owners.
The financial health of a business three weeks after any crisis may indicate the financial health and survivability of that business for possibly the next three years. Accordingly, what podiatry practice owners do in the next three weeks is crucial. The first thing to do as we prepare our re-emergence from the shelter-in-place orders is to assess and more clearly define what financial cards the crisis has dealt due to two to three months of closure or reduced patient volume.
The COVID-19 pandemic is a public health crisis, but that is not the only crisis at hand. Now many private practice owners are wondering how they will pay their bills and continue to stay in business.
The coronavirus pandemic, “reopening” and the “new normal” has led to similar questions for many private practice owners in podiatry.
• Will I be able to open and when can I do so? Will there be a limit to how “open” my practice can be?
• How will I conduct business? (i.e. taking temperatures, limiting numbers of patients in the office at one time, who needs to use a mask)
• Where will my employees be working from or will I even have employees who will return to work?
If we assess where we are now in terms of the medical part of the COVID-19 pandemic, we may be thankful that none of our patients, staff, family or ourselves became ill from the virus. If any of you did have a personal experience or connection with someone affected, I hope and pray that those of you are doing well now.
That said, we also need to take this time to assess where our businesses are financially and to prepare in the event that there is another wave of this pandemic in the near future.
1. Start by reviewing your current bank balances. Review current balances including business, savings and personal (not retirement) accounts. Why do we want to include our personal accounts? Some of us are sole proprietors who already intermingle business and personal finances. Those of us with limited liability corporations (LLCs) or S-Corps still see our business as not separate from who we are. Our practice is our baby, our dream that we have poured our hearts and souls into building over the years.
2. Review the last 30 days of banking activity.
3. Review your last bank statement.
4. Review accounts receivable for your practice.
5. Review accounts payable for your practice.
6. Review your last payroll details.
I put an Excel spreadsheet together to look at these numbers. You can use the following categories to determine your current cash in hand.
Cash In The Bank. This includes your business account, any other business accounts (such as a payroll account), personal account and savings. Do not include your retirement account. This gives you your total current cash position. This is your starting point for how you will continue to pay bills until your sales/patient volume returns to its pre-COVID-19 level.
Major outflows. Look at your payroll reports to determine your next payroll cost, including money due to your employees and all payroll taxes. Determine the amount of the next rent or building mortgage due. Total all of the next loan payments due for the business. This could include interest payments, business loans or car loans. What automatic withdrawals are scheduled to come out in the next three weeks? Look at last month’s bank statement to help determine this. Those bills on your desk, even if they are unopened, also fall into this category as accounts payable. Then total these major cash outflows. These are your biggest concerns at this time.
Expected money inflow. This is your total accounts receivable that is actually collectable. In medicine, we know we will not collect everything “owed.” I use approximately 50 to 80 percent of the total stated in my account receivable report, making necessary adjustments for fee schedule, contracts and portions unpaid by patients. Patient balances may be even more difficult to collect at this time due to furloughs or job instability. This amount then becomes the potential near future money collections.
Available credit. We need to now look at potential sources of financial support available to the business and to you personally. This can include both business and personal available lines of credit as well as available credit card balances. These numbers comprise your total available credit or the funds you can access
I am hearing from financial acquaintances that banks and credit card companies are starting to call in their lines of credit or reduce existing lines of credit. I have also heard of credit card companies reducing credit limits to what you may have as your balance right now. The concerns I read and hear are that they know we/business owners will have a more difficult time repaying them so they are protecting their exposure.
Determine your total financial position in the next three weeks. This is the sum of your cash flow, minus major outflow plus your expected inflow and available credit funds.
Now you can start to prepare and reassess every three weeks to see where you stand and take the necessary actions to continue your personal and financial dreams.
Dr. Aung is Chief of the Podiatry Section of the Tenet Health System/St. Joseph’s Hospital and a panel physician at Tenet Health System/St. Mary’s Hospital Outpatient Wound and Hyperbaric Center in Tucson, Ariz. She is a member of the APMA Coding Committee, the APMA MACRA/MIPS Task Force and is on the Exam Committee of the American Board of Wound Management. Dr. Aung is also on the Editorial Review Board for Wound Management and Prevention. Her website is www.healthy-feet.com.
- U.S. Small Business Administration. 2019 Small Business Profiles For The States/Territories. Available at: https://advocacy.sba.gov/2019/04/24/2019-small-business-profiles-for-the-states-and-territories/. Accessed May 29, 2020.