By P. Daniel Ward, MD, MS, FACS
Accounting and bookkeeping are significant functions of running a business. And many physicians make the mistake of attempting to do bookkeeping themselves. Although the responsibilities of accounting and bookkeeping are not difficult, the practice of doing one’s own bookkeeping should, I believe, be discouraged. This is particularly true for busy plastic surgeons.
As plastic surgeons, you have many tasks that require your attention. And they’re often more urgent than bookkeeping. However, few of them are likely more important than bookkeeping. In addition to making sure that ends meet financially, keeping track of your finances also helps you avoid problems with the IRS. Staying on top of your financial situation is the best way to provide an accurate accounting of your finances to the IRS in a way that helps optimize risk and save tax dollars.
A Better Accounting Formula
I believe another key principle for the financial health of your practice is to pay yourself first. It’s something Mike Michalowicz detailed in his book, “Profit First.” In the book, Michalowicz explains a very simple concept—and one that changes the way business owners should operate. Typically, we think of profit according to the following formula: Revenue-expenses=profit. But Michalowicz argues that this formula is not the correct way to run your business.
Instead, he believes the formula should be as follows: revenue-profit=expenses.
It’s a very simple mathematical switch. But it’s a big change to how you run your business—and it can be very uncomfortable at first. By putting profit first, you’ll become more conscious of how and where you spend money, and you’ll be able to budget better since you know how much you have to spend on the business. You will also have the peace of mind that comes from knowing how much money you can count on for your personal spending and budgeting.
I hope you find this information helpful. If you have any questions, please feel free to reach out to me at [email protected].
P. Daniel Ward, MD, MS, FACS, is a double-board certified facial plastic surgeon and owner of Ward MD and Form Derm Spa.
