3 End-of-Year Things You NEED to Be Doing - E22
It's the end of the year and I am going through my normal checklist. The way I see it, there are 3 things every private practice owner should be doing at this time to end the year right and prepare for a great year ahead.
Limit Your Tax Liability
Now realize I am not an accountant or a lawyer, so you need to consult yours before doing anything, but let me give you the simplified version. The IRS expects any private practice owner/self employed individual to make quarterly tax payments. You need to be within 90% of your gross revenue to avoid a penalty. Even if you make good faith payments, but have a banner year and are not within the 90%, you will be fined. The way around this is by paying 110% of last year's gross revenue. If you pay that amount no matter how far off you are, you will not get fined. Well 110% is a lot and any way you can limit that the better off you will be. Let me give you some examples:
- Section 179 of the tax code
- Again I am not a CPA, but essentially if you buy a piece of equipment, you can write off the total amount for 2020. That means if you buy an OCT for 30k, you save roughly 9k dollars! The reason for this is if you waited until 2021, that 30k would be subject to tax and 9k would go to Uncle Sam! So buy stuff on a discount and save on your tax bill.
- Contact Lens Bank
- If you use a contact lens distributor such as ABB or WVA ask them if you can get a contact lens bank set up. This allows you to pre-purchase your lenses, anywhere from 3k to 15k in advance. The beauty of it is you do not have to keep inventory, you lock in your pricing based on 2020 vs the new 2021 prices, and you again lower your net income on something you are going to purchase anyways. It's a win all around.
- Pre-Pay rent
- If you are leasing a space, you are going to pay rent regardless. Well, if you need to cut down your net income, you can talk to your landlord and let them know you want to pay 2021 up front. Now make sure you have a good working relationship and they come through in regards to snow removal, maintenance, etc. If you have any doubts, do not give them reason to ignore you.
Set Your 2021 Budget
I say it all the time, “the grass you water is the grass that grows”. You need to look at the past and let it help guide you in the future. So sit down and take a real hard look and see where you want to be in 2021.
I always recommend looking at your Cost of Good Sold and Payroll. These are the two areas you need to be very familiar with. I always say your COGS should be 30% or less of your gross revenue. If it's not, you need to start looking at your pricing, contact lens suppliers, or lab bills.
In regards to payroll, my suggestion is to keep your non-doctor payroll to 25% or less of your gross revenue. In addition, you should have 1 full-time equivalent staff for every $150k gross you do. If you are overstaffed or understaffed, it is going to affect your bottom line/overall product, so let your budget be your guide.
Set Growth Areas
This is the fun part. You need to take a step back and set up a plan for 2021 in regards to the areas you want to improve or add to the office. Whether it is increasing your second pair sales, adding a new specialty, or growing some aspect you added in 2020, you need to have a plan. I think this is the best way to avoid burnout and keep your staff focused in 2021. If you do not write it down, it means nothing. Write it down, prepare for it, and get ready to enjoy the fruits of your labor!
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