Our last blog article listed the six responsibilities of the practice owner’s spouse or trusted long term partner. Having the owner’s spouse physically present working in the office is a controversial subject. Many spouses feel they should be completely involved with the financial aspects of the business by doing the books or managing the practice, while most employees feel it creates bias and sometimes a hostile work environment.
The responsibilities of the owner’s spouse include being supportive of the doctor, treating the staff with respect, letting someone else manage practice finances, being involved with community outreach or marketing, staying away from office politics, and preparing for the unexpected. Our poll asked “In Your Opinion, do You Think it is a Good Idea to Have the Owner’s Spouse Working in the Practice?” Eighty-eight percent said “No” while 12% said “Yes”.
In this article, we would like to focus a little more on the sixth responsibility of the owner’s spouse or trusted long term partner; Prepare for the Unexpected. This week, we will be specifically discussing what your CFO expects the owner’s spouse to be educated on. Illness, injury, or death of a practice owner is never something that is anticipated, but it is imperative to be prepared in case of an unfortunate occurrence. The spouse may be expected to carry on with the business aspect temporarily or forever depending on individual circumstances.
Though our recommendation in the previous article was that we recommend someone else take care of finances, we do recommend that the owner’s spouse be educated on certain things involving financial aspects of the business. Below is a list of what the practice’s Chief Financial Officer (CFO) expects the spouse to know in case of an unfortunate event that leaves the owner incapable of being able to carry on normally.
Know Locations of Accounts
- Know login and password for bank accounts and lines of credit such as; credit cards, business loans, and equipment loans. A product like LastPass.com will make this process easy.
- It is best to have as few bank, credit card, insurance, etc. relationships as possible.
Be Educated on the Difference Between Cash Flow and Profit
- Profit is net income after taxes and expenses.
- When including lines of credit and investment accounts, the cash from profit may be used up.
- So just because you are profitable doesn’t mean you have cash flow for loans, etc.
Know How to Interpret Profit and Loss Statements
- A basic knowledge of how to understand this report is important.
- Know the definitions of revenue, expenses, gross income, and net income.
- Consult your CFO or CPA about what the report means regarding the practice. Is it profitable?
Attend Monthly or Quarterly Reviews
- This will prepare you to hold these meetings without the owner if need be.
- Being involved helps the practice and if done correctly helps the relationship.
- Being present for these reviews will help you to understand reports and what they ultimately mean for the practice.
Maintain a Relationship with Office Manager
- Having a good relationship with the practice manager is critical.
- They should be able to answer questions concerning the practice and its employees.
- Practice managers are very resourceful and can guide you to an answer if they don’t directly know.
Have a Will
- This should be a high priority if a will does not exist.
- Update the will as necessary.
- Include a buy-sell agreement for the business and have a plan A and perhaps B of who you can sell to if you are not going to maintain the practice.
- Life Insurance – Protects the family in the event the owner can no longer financially provide for them.
- Practice Overhead Insurance – This is a form of individual disability insurance that will temporarily pay bills and employee compensation should you not be able to practice your specialty due to illness or injury.
An owner has many responsibilities towards the business outside of the clinical setting. Should they get severely injured or ill to the point where they can no longer practice medicine or dentistry, someone will need to take over. There is no one better to inherit these responsibilities than the doctor’s spouse or long term partner, as long as they are educated on the items in the list above.
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The reason we are publishing these articles is so that your office can increase its success. We appreciate your feedback on how we can help you more and love it when you pass these articles along to other practice owners and office managers.
Developing a management report is not easy and Doctors CFO currently has a robust model for most practice types that is customized for our monthly and bi-monthly clients. If you have questions on how this model applies to your practice or you are interested in applying the Doctors CFO model in your practice, via one of our annual, bi-monthly or monthly assessments, please contact us.
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