As a graduate, you feature in the top 10% intellectually in the world. Yet, there is so much we don't know about the world we live in. Do I know how a light bulb is made? How does WIFI work? How does a combustion engine work? In our general sphere of existence, there is the stuff we know how to do, such as reading and writing, and there is the stuff we know we don’t know, such as perhaps doing a tonsillectomy or flying an aeroplane, but then there is the stuff we don’t know we don’t know. This is the stuff that can hurt us badly in business. Ask yourself which area of your business you don’t have detailed insight into. The likely answer is accounting and financial management. Your counter may be, “I’m trained to be a clinician, not an accountant.” The truth is, if you own a practice, you are both a clinician and a business manager. Fair enough, you can’t do it all, so you delegate. You may delegate, but you still retain the responsibility that things are done right. When you abdicate, you relinquish the responsibility. This is what often transpires in an optometric practice as far as financial management is concerned. The optometrist abdicates from the responsibility of the financial well-being of the business. In other words, her only involvement is being handed a report at some point. This, I suspect, mainly happens because the financial information is not currently presented in a format the owner can relate to and use as a proactive management tool. This, in turn, places one in the position of “ I don’t know what I don’t know”. There is a big difference between maintaining financial control and being the accountant in a practice. The key to it all is having the right software package in place. At the end of the day, nobody else is ever going to care for your business as much as you do. Horror stories abound about healthcare practitioners being defrauded of massive amounts.
Take, for example, gross profit percentage. You have heard of it, but you don’t know, you don’t know the many factors that can affect GP%. These are the factors you should be controlling because they can erode your net profit. If we don’t know what it is, and if we can’t measure it, we can’t manage it. We won’t realise that it is one of the things in business that poses a very big threat to profitability. For example, the factors that influence the gross profit percentage can only be managed by those people working in the practice, and not by the bookkeeper or auditor who reports on what has happened in the past in the business. But this does not only apply to the GP%. Many elements in a business can fall into this category. Some are listed below.
What you don’t know you don’t know
- What is my GP%?
- What percentage of net profit did I make last year?
- What turnover am I going to make this month?
- What is my rent as a percentage of turnover?
- How much stock do I carry right now?
- What are my expenses as a percentage of turnover?
- What is the value of my average invoice?
Having an up-to-date measure of your gross profit percentage is an incredibly valuable management tool. It is a valuable red flag to shrinkage. The key to protecting your GP% is by being proactive instead of acting once the horse has bolted. Humint can provide a daily report on GP%.
There is a tendency among us humans to resist change. It is easy to let your business wallow in a state of mediocrity and comfort. I say, don’t ever succumb to the momentum of mediocrity. It may seem like a bridge too far to go paperless or change your software because your staff are comfortable with the programme that has been in place for twenty years! In business, doing the right thing is not always comfortable, but it is always right!
One of the common failings in an optometric practice is not doing a monthly stock take. A monthly stock take authenticates your financial management reports. Yet, with the right structure in place, such as barcoding, it becomes a seamless task.
I am not suggesting that the optometrist should also be a hands-on financial manager, but you should at least be in the category of, I know I don’t know, in terms of the business. Then you at least know about the potential dangers lurking that can vaporise your net profit, if noticed too late. The key to taking control of your practice's financial well-being is to have the right information at the right time, in a format that you, as a clinician, can relate to. This means setting up timely reports that can allow you to keep your finger on the pulse of your business, with minimal time spent. Humint software was developed with this in mind by people with an intricate knowledge of the optometric industry.
One of the common problems I have encountered is that the accountant or bookkeeper rides roughshod over the optometrist. Humint boasts an integrated accounting system that is extremely valuable. However, the accountants insist on using their software accounting package, which nullifies what Humint brings in this regard, and adds unnecessary costs. This, I suppose, is because the optometrist finds himself in a domain of, I don’t know what I don’t know. My response would be to find a bookkeeper who will do it my way.
In conclusion, the essence of it all is that if you can’t measure it, you can’t manage it. It is about having the right information, at the right time, in a format that you can relate to. AI technology is bringing a wave of uncertainty to our profession. There is no more room for complacency with business as usual, and the owner’s role cannot be confined to the consulting room. More than ever before, it has become essential to have your finger on the pulse of your business, so that you can make informed decisions to future-proof your practice.