Ben Lynch: Ahoy. Hello.

Jack O'Brien: Good afternoon.

Ben Lynch: Oh, back.

Jack O'Brien: The band is back.

Ben Lynch: Band is back. G'day, good people. Welcome to the Grow Your Clinic podcast by Clinic Mastery. Here's what's coming up inside of this episode. Why should clinic owners stop grouping their expenses alphabetically and start grouping them functionally?

Hannah Dunn: Just on that accounts receivable, I think it's so important that people understand what is seven days overdue versus what is 60 days overdue because that is one of the areas in which we find clinic owners don't have an understanding of that.

Ben Lynch: Let's get to some screen share of some examples of the profit and loss structured into functional categories.

Jack O'Brien: Clinic owners, let me speak to you. Your profit and loss is as simple today as it will ever be.

Ben Lynch: Hannah, should clinic owners do their own bookkeeping?

Jack O'Brien: Um, I mean… Yes or no, Hannah? Yes or no?

Ben Lynch: Well… This episode will be right up your alley if you want to make better financial decisions so that your clinic is more profitable in the coming months. Stick around for when Hannah talks about how she overcame her fear of the numbers. Plus, you'll get a ton of insights when Jack breaks down how to structure your profit and loss in a way that makes it meaningful for clinic owners. Before we dive in, today's episode is brought to you by AllieClinics.com. If you're the kind of clinic owner who loves to feel organised and stay ahead of the chaos, you'll love Allie. Think of it as your digital clone. It's the single source of truth for all your clinics, policies, systems, and training. Test it for free at AllieClinics.com. And in other news, applications are now open to work with us one-on-one at Clinic Mastery. If you want support to grow your clinic and bring your vision to life, just email helloatclinicmastery.com with the subject line podcast and we'll line up a time to chat. All right, let's get into the episode. It is episode 312 and the band is back. Hannah, welcome. You had some time off on the slopes. How was it? What was a highlight?

Hannah Dunn: It was so good. I think the highlights just seeing the kids get better and better. Like, um, our six year old was, we're being told was almost ready for Black Runs and our Four-year-old was out on some blue runs and our nine-year-old just getting more confident and out there as well. So it was just super fun to watch their progression.

Ben Lynch: Nice. That is good. Well, Jack O'Brien, I need to actually pick your brains on the skiing stuff because keen to get on the slopes. Welcome back, everyone. I mean, you could pick Hannah's brain. Well, I could. Are you a regular, Hannah? It sounds like you are.

Hannah Dunn: No, we're a once a week, one week a year.

Ben Lynch: One week a year. OK. I can still pick your brains.

Hannah Dunn: We started 10 days without any contact from clinic, which was amazing.

Ben Lynch: Nice. Very nice. Well, also good to have you back in the seat. Business partner, co-host, should I call you Tommy Hilfiger or Kristen Dior or something like that? You're handing out fashion advice last episode, Jack O'Brien. Bit rich from you.

Jack O'Brien: Yeah. Oh, yeah. Fashion. You can come to me for advice on many things, but not fashion.

Ben Lynch: Ski slopes. I'll definitely be doing that. Okay. Well, before we dive in today, we're going to be talking about profit and loss. We're going to talk about money. We're going to address the often taboo subject, enlighten how we look at the all-important financials of your business and do a bit of a deep dive because, Jack, on a previous episode afterward, you said, ah, we didn't get enough time to go deep. We sort of covered some superficial things. So today, I'm going to grant you your wish and we're going to go deep. We're going to do some screen shares as well with some examples. Before we do, I got a couple of welcomes for folks on Allie and Jack. I know you've got a couple of notes as well, but just a quick welcome to Nick, Adrian, Ruth, Atif, Kirsty, Kate and Mandy, thank you for testing out Allie and installing it into your clinics. JOB, what else have you got on your desk before we dive in?

Jack O'Brien: Yeah, two things would love to welcome to our business Academy, Belinda and Ryan, really excited to help them grow their clinic. And I've got a couple of comments on Spotify then to mention it. And for listeners, please feel welcome to connect with us on Spotify, Apple podcasts, wherever you listen, we get them, we see them, we read them and super grateful. So Ellis. said, I enjoy this podcast. The team delivered useful, timely information in an easy to digest format. The episodes are engaging, clear, and always relevant. Perfect for practical insights in a straightforward and accessible way. And Louise said about our mastering your clinic numbers, the KPI episode, she said a super powerful episode packed with value. And in fact, I just got off a coaching session this morning with Nelson, who said he listened to our episode just released this week. And he's actually given me a bit of a question for this podcast. I told him, Nelson, we're recording about ABC. What have you got? And he said, oh, I've got a question you need to answer on the podcast. So thanks for that, Nels. Looking forward to tackling that.

Ben Lynch: Very nice. Well, keep it on the docket. We're going to open up with the P&L side of things. J.O.B., I'll start with you because you love this. You love a spreadsheet. You love a number. You're a bit of a nerd with this stuff. So the question I've got is why should clinic owners stop grouping their expenses alphabetically and start grouping them functionally?

Jack O'Brien: It's very functional to do so.

Hannah Dunn: You answered your own question.

Ben Lynch: Describe functionally relevant for a clinic owner. How do they make their profit and loss highly relevant so they can make decisions as clinic owners?

Jack O'Brien: So think of your profit and loss or your accounting software like a multi-tool, Swiss army knife, if you will. And different people can use your Xero account or QuickBooks, MyHub, whatever you use. Different people can use your profit and loss for different purposes. And alphabetical order is what accountants love and the tax office love. They just love things in order. And that's great, that works for them. But it doesn't help you as a business owner, functionally manage and lead. And so we want to group like expenses so that we can see how our business is in buckets. And so typically that might look like your therapist, wages and expenses, your product as in saleable product. costs and revenue, we can go into some of the more specifics. I'm sure you'll share that in a moment, but what it does, when we bucket those things together, it means we can make informed decisions about the allocation of cash or the allocation of resources. A, to improve how we are spending money, therefore to improve our efficiency and increase our profitability. but also be to help bring us more into line with our ideal clinic arrangements. You know, our allocation of resources is a reflection of strategy. It's a reflection of what we are looking to build. And so we want to make sure how we're spending the dollars aligns with what we're trying to build.

Ben Lynch: Hannah, what was your experience making the transition? I remember for the first time doing this, changing the P&L to be functional in these groups, and we're going to share specifically and screen share soon. And it was just like a light bulb moment where you thought, this is so practical to look at the P&L in this way. What was your experience making that transition in your own clinic?

Hannah Dunn: Yeah, absolutely. Like, it was absolutely a lightbulb moment of being like, how have we not been doing this previously? So for us, we are one company across three different sites, but we had like, all of our costs, just like electricity here, or like team wages here, whereas now they're separated out into Werribee, costs for team and Bandura costs for electricity and Footscray costs for even things like welcome gifts or whatever it is so that we can attribute all the costs to each clinic individually, even though we are still one company and they all get paid from the same pot of money. Being able to see where there were opportunities for improvement was way easier to see, which just saying it now, of course, we needed to know which clinics were functioning better than others, but back then it just seemed like, oh yeah, it's just all electricity, we can review electricity, we can review these rates.

Ben Lynch: It's a great point because there are so many clinics that have multi-site locations, and it sounds like you've set up essentially almost a profit and loss for each location, but it's within the 1-0 account. Jack, I remember you sharing this with me years ago when you were running multi-site clinics. Just talk through to someone who's never done this, they've never set it up, just highlight how to do it or some of the steps in doing this really well so that they can separate their expenses and their income.

Jack O'Brien: Specifically in Xero you can set up tracking categories and so that might be a location tracking category or it might be a type of income or a type of expense and so What you find, Ben, is that when you are reconciling your account in Xero, you have to add one or two more pieces of information or pieces of data to each reconcilable transaction. But that additional piece of data means that we can segment and granularise our profit and loss. To make better decisions, because the truth is that better data means better decisions. Otherwise we're just flying off our gut feel or our perception or intuition. And that's lovely. And there's a place for those things in leadership, but not typically when it comes to finances, we don't need intuition. We need hard data.

Ben Lynch: Well, it's a good point. A lot of clinic owners have said to me, I'm sure to the both of you, that they really rely on their bank account as the guide for how their business is going. It's like, is there money in the bank account or not? And then I kind of know I never really log into my Xero or my MyOB. Maybe I do it once a quarter or once a year with the accountant, but I actually just look at the cash in the bank. And what we're looking to do here is be a bit more proactive, a bit more thoughtful moving forward about Where are the opportunities for growth? Where perhaps are we overspending or underspending? So, Hannah, how have you used some of those categories in your decision making?

Hannah Dunn: Yeah, definitely around how many leadership hours we can afford to have and where those leadership hours fall because they end up being, in a traditional sense, like a non-revenue generating, even though they can have impact on our revenue. And that's been really helpful in helping make those decisions and really seeing what the true cost of putting those hours in place have been. And it highlighted for us a lot of subscriptions too, like whether we were doubling up on subscriptions, whether we needed to get rid of some subscriptions. And they're the things that come to mind first.

Ben Lynch: I want to jump onto that point around the separation of wages. And we'll come back to subscriptions in a moment, J.B. I know this is one of your pet peeves, but also great practical opportunity. So let's go with the splitting of the hours.

Hannah Dunn: Yes.

Ben Lynch: Actually, Jack, on a previous episode, you spoke about separating admin wages and practitioner or therapist wages, because the default option is wages typically just get lumped all into one. So that was a key distinction. But Hannah, what you're saying is even with the therapist wages, for those that are in senior leadership or management positions, you're actually separating out the hours that they get paid for that part of their role.

Jack O'Brien: Allie does this super well. It allows us to allocate the worked hours of our practitioners into clinical time or non-clinical time and gives us great visibility over the utilisation of their clinical time. Specifically, Hannah?

Hannah Dunn: This is how we've got it broken down with admin, wages and salary, superannuation, our virtual assistant, any paid parental leave, office works falls under admin in regards to what we're spending there. And then our employees and therapy team and our management team.

Ben Lynch: Okay, so what we're looking at, because for those listening, maybe you're on the treadmill, however you're consuming the pod at the moment, get over to YouTube and watch this. So you've got an admin category, and then there's what, maybe seven or eight individual items, line items in there. wages and salaries specific to admin, superannuation for admin, virtual assistant fees, and then a list goes on. And you'd be able to then see the total dollar spend in that admin category.

Hannah Dunn: Yes.

Ben Lynch: And do you have like a benchmark that you're working towards? Or how does the total admin help your decision making?

Hannah Dunn: Jack 10 to 12% is what we're aiming for here.

Jack O'Brien: Yeah. Look, I mean, benchmarks is a slippery slope, but yes, generally speaking, we want our admin in the vicinity of 10% plus or minus 2%. It depends on the style of clinic that you run, but also an internal benchmark is the most useful benchmark, right? If you're at 11, make it 10. If you're at 10, try and get it to nine, you know, comparing and improving yourself is the most important benchmark.

Ben Lynch: Sorry, on that point, sorry, Hannah, around the percentage is of what? Can you just do that?

Jack O'Brien: Yeah. Of your revenue.

Ben Lynch: Of revenue. So the, the total dollars we've spent in this entire admin category as a percentage of the total revenue. And so that's where you've referenced 10% sort of plus or minus two, but always use yourself as the benchmark to begin with. Yeah. Go for it, Hannah.

Hannah Dunn: And I was just going to say on that, just for a little side note, Our admin does sit around that 12% and there are some clinics in Clinic Mastery who've made a decision to reduce their admin costs by automating a whole lot of their front desks. But at DOTS we made a really conscious decision that part of what we offer our team and part of what we offer our clients is having a person sitting at that front desk, even though it means that we've got someone across each site. So we know that we're at the top end of that admin. We know we could reduce it, but it doesn't align with the values. We tried it. It didn't work. We tried a few different things. And so for us, we realised that's what our team needed. And I think when Jack's saying, like, you've got to make sure that it's right for your clinic and right for different clinics, different things, that's what we mean. That sometimes it's okay to not have someone at a front desk was okay to have a check-in on an iPad, for us in a paediatric OT clinic was not the feel that we were going for.

Jack O'Brien: And I really like that, Hannah. It summarises the clinic mastery community so beautifully in that there are many ways to be right. You just need to be aware of your right and the consequences or second or third order consequences of that. If you choose to have a clinic that is high touch, high experience, that comes at an investment of dollars and that's okay. If you're a clinic owner who maybe you only work a day a week, right? If that's your choice, you're probably going to have a higher management team cost because you're not there managing it. And so all of these things are okay. You just need to be aware of your profit and loss reflecting your reality.

Hannah Dunn: Yeah. And you might have a adult clinic where adults come in, sit down and play on their phone. We've got kids coming in, parents burnt out. They want our admin team to offer a colouring sheet. They want our admin to engage in them to get a break.

Jack O'Brien: Yeah, exactly. I mean, there's clinics that have zero admin team and their therapist team pick up a lot of that ad hoc admin work. What you'll find is that those clinics have a slightly lower clinical utilisation rate because their clinicians are doing non-clinical things. So it kind of all comes out in the wash somewhere. You need to be confident in the choice that you're making reflects the values and style of your clinic.

Ben Lynch: Hannah, talk me through then when you're reviewing that specific category of admin, how do you think about making decisions around that, whether to increase or decrease? Just talk me through actually some of the thought processes that you have when you do review this area, because you're saying, okay, we're okay to spend a little bit more broadly here, but there's always gonna be an element of being efficient and being a good steward of your money. So just talk me through how you would, Open up your Xero, see the admin category, and then what? What's your thought process?

Hannah Dunn: Yeah, our thought process, particularly if someone resigns or we've got someone moving on, it's a good opportunity to review what is happening there and see whether there is opportunities for change or savings there. also looking at, um, a different.

Ben Lynch: Just sorry to interrupt. Like you're practically looking at say rostering as an example, like, do we need, you know, how many hours do we need on the front desk across our weekend and across this location? Okay.

Hannah Dunn: Yeah. So I'll give you a pro an example that happened recently. Um, so we had Caitlin and Eleanor and, um, I love both Caitlin and Eleanor and I wouldn't have done this again but at the time I made them both practice managers of their own clinics as well as Caitlin managing our third clinic because of the sizing. Anyway, Caitlin is now moved into a different role and she's finished with us and that was an opportunity for me to say we had a huge overhead in our admin costs because I'd put both of them as practice managers Is there an opportunity here for us to review? Do we put someone on that front desk at Bandura who is admin and just make Eleanor the practice manager over all clinics, which is what we did. But we felt like, do we really need someone there full time? And we've toyed with the idea of trialing students previously. And so we said, yeah, let's trial this. And so we looked at the profit and loss. We said, yes, we can save some money here that we can invest somewhere else. Let's get students in for four hours instead of the 7.6 hour day and let's see how it goes. Now we did that and our team felt like they were isolated. We've got four clinic rooms there. It meant if people were out on community, they didn't have someone else in the clinic room at times. that there was two of them sometimes when they were used to having five of them, sometimes six of them there. And so we've reallocated those roles and we now have Olivia who is now back to full time on that desk. So I think for us it's about looking at the numbers and then doing some trial and error and having a short term We put them both on for 12 month contracts instead of doing ongoing, because we didn't know how it would go. But I think it's about using the numbers to make decisions and then trialing those and then coming back to the numbers. And we said, okay, we'll have a higher percentage because that's what works for us.

Jack O'Brien: So I really like that, Hannah, because one of the things that I often encourage clinic owners to do when they're coming to their P&L is have a specific question that you're looking to answer or hypothesis that you're looking to test. So in your case, it might be, I'm coming to my P&L trying to wrestle with how do I find some efficiency in my admin or management team. For others, you might be looking at your P&L and going, how can I find ways to earn on my investment in products or team CPD? So we're coming with a specific question to answer or problem to solve. It's a really good framework to think about it. This also reminds me of Nelson's question who we mentioned at the top of the episode, clinic owner in our Elevate community. He's one of the best. And so his question was, well, when I come to my profit and loss, I've taken the Clinic Mastery advice of recording my own video. So we would encourage clinic owners to pull up your profit and loss, hit record on Zoom or Loom or whatever you use. and record yourself narrating your profit and loss, almost as if you're presenting your financials to your board. For me, I would do it for my wife, my spouse. I'd record a video and kind of run her through what's going on. And so you could either come with a problem to solve. So I've got three things for you. Come with a problem to solve. You're coming to observe trends. And sometimes that can be tricky. So you might be looking at this for a month. You might be looking at quarter on quarter. You might be looking at this time, this year versus last year. You might be comparing to budget. So you were looking for trends and commenting on trends. And then thirdly, you might come looking for efficiencies. And so you might not necessarily have a specific admin efficiency that you're looking to solve, but we're just looking through each category and going, okay, for our office expenses, is there a way that we could add some efficiency to that? I know my wife, Christina, when she was controlling our finances at our clinic, she'd go, our office expenses are just a little bit too high. We're going to go more paperless, or we're going to invest in some tech that can reduce some of our consumable demand. Maybe you're looking at your CPD investment or we're looking at our marketing investments. So we're looking at our support services and going, how can we increase our revenue to find an efficiency in those costs? So questions to answer, trends to observe or efficiencies to uncover. But I would encourage every clinic to record yourself doing a video.

Ben Lynch: It's a great practice because we talk about the narrative behind the numbers. There's only so much you can glean. And part of this, a lot of clinic owners will say, I want to be more across my numbers. I don't really understand them. part of understanding them is getting in the detail and actually understanding here's what happened and could I explain this to my business partner, my life partner, someone on my team as to why this happened or played out the way that it did. I do have an interesting question, but you look like you're about to say something, Jack.

Jack O'Brien: Well, I've observed it a few times for you. I've seen you just practice getting in these numbers. And over time, you become more literate just by exposure. And so it's like the practice is the way. By doing the practice, you become literate. You find the things that need to be found. You don't know it at the start. You just have to practice it. And Nelson mentioned that as well in our coaching sessions, like just by recording for the last few months, I've figured out why we do this. Get the reps in.

Ben Lynch: But Hannah, how do you then wrestle with, we're talking here about percentages, and it's all anchored to income. So how do you just have a check year that, okay, well, the percentage looks massive, because income has dropped at school holidays in a paediatric OT clinic, or it's Christmas and New Year, it's a lull period for a lot of clinics. So how do you make sure that you take both sides of that equation and go, actually, I've got a growth problem, I need to grow my way, because There are those clinic owners that are just trying to scrap every expense, like tear it back to its bones. And some of these are not all expenses. Some of them are investments. We'll get to that in a moment. How do you just balance the equation for your decision making?

Hannah Dunn: Yeah, I was thinking about that when Jack was just talking about going paperless in the clinic and things like that. Using the numbers to also have a look at what is the other cost. So an example of that being that we now text message out our waitlist when we've got an appointment available. We use some form of messaging. We had to look at the cost of what those messages were costing us versus the time that it was taking our admin team to be able to make those calls. And so understanding how long it was taking and how much quicker this is. So while it might seem like an increased cost to use a texting service, it's actually saving us a whole lot of time where we can do other jobs in that other area. So… Like what? Like what? like being able to support the clinical team with faxing of documents or being able to refine their schedule or look at community visits while we've got people calling us to book those appointments in. We also have a system in which we are exiting clients off our wait list if they're not being there after, you know, three connections or whatever. And so not having to spend the time on that and being able to look at policies, procedures, refining other areas that make us more efficient. And you spoke, Jack, to looking at the trends. I think even before like recording yourself, really getting to know how Xero works, like knowing that you can compare year on year, month on month, time periods. And Ben, we're not going to assume school holidays are going to be less. We're going to use that time effectively and prep for it. And so I think all those things come into play in regards to how to use your profit and loss. And then when you feel uncertain, I think that's when coming to those numbers and getting confident because we hear all the time, like, I got this tax bill and I didn't know it was coming. It was fine. I had money in the account. people don't know that you can actually predict what your tax bill is going to be. And so having that information and that knowledge. And then the other thing we hear is that when people get confident in their numbers, that they're like, my accountant didn't tell me this. It's like your accountant doesn't know what you don't know and you don't know what they know. And there's a whole lot of things. And if you both have all that information, you're going to get a whole lot further in where you're going.

Jack O'Brien: And I think this is really pertinent because clinic owners, let me speak to you. Your profit and loss is as simple today as it will ever be. Your business as it grows, will grow in complexity. That is the nature of the beast. And so now is the best time to get ahead of it because it's as simple as it will ever be. And the complexity is a good thing over time. As your business grows, you have more team, more locations, more services. more expenses, more investments. Complexity is a good thing. I liken it, Ben, to flying a plane. Now, I'm no pilot. In fact, I've never flown a plane.

Ben Lynch: No, you're a fashionista. That's what you are.

Jack O'Brien: Thank you for reminding me. I've flown paper airplanes. Apparently, they tell me when you learn to fly, those old Cessna fixed wing, fixed single prop planes, they got nothing, no dials, right? You just look to the left, look to the right, look to the horizon, make sure the wings are level. Bob's your uncle. And that's how you fly a plane. That's how you start a clinic. Just have a go and see patients generate revenue. That's the main thing. But as you fly bigger and bigger planes, you no longer can see the wings nor can see the horizon. You have to fly by numbers. You have to have your dashboards in front and you've seen the cockpits of some of those ginormous jets. They've got, you know, dials. coming out their ears. And so when it comes to your profit and loss as a clinic, you need to get familiar with it now, because over time, financial management becomes more complex, you need to look at ratios, you need to look at your balance sheet, we need to look at cash flows, we need to look at all sorts of different, more complex arrangements. So get familiar with it today.

Ben Lynch: Let's go there with rhythms. I know, Jack O'Brien, you're probably in zero three times a day, but what would you advise clinic owners who want to get a handle on their numbers, or maybe they've got a reasonable hand on it at the moment, but they're looking for the next edge, the next level to go to with this? Just talk through the cadence of the calendar. Never had that alliteration before, but that sounds good. Anyway, what are the right rhythms for getting into zero or myob and understanding your numbers? And maybe just give like a headline reason or purpose as to why that frequency.

Jack O'Brien: Hmm. With the Goldilocks principle, right? You don't want to be in there too much, but you also don't want to be in there too little. You just got to be just right. And so, you know, that's likely a short check-in on a fortnightly basis and a proper deep dive on a monthly basis.

Ben Lynch: Okay. So let's go fortnightly. What are you doing?

Jack O'Brien: Yep. We're looking to make sure things are reconciled first and foremost, our reconciliations to get, uh, snowballed out of control. We want to make sure our accounts receivable is short and we want to know what, uh, particularly what bills are coming up. And so really this is more about a cashflow check-in than anything, making sure our accounts receivable is short. We are reconciled and we know what bills we have coming up in the following two weeks. Is that what it looked like for you?

Hannah Dunn: For me, I would say monthly, we are looking at it. Not to say, we are looking at it monthly, but we're not deep diving every fortnight. Warwick would be in there, who is our finance manager. Yeah.

Jack O'Brien: And that's right. It might be for someone on your team to do that on a monthly basis, or if your clinic's maybe at an earlier stage, you do that yourself.

Hannah Dunn: Yes. Just on that accounts receivable, I think it's so important that people understand as well, like what is seven days overdue versus what is, 60 days overdue because that is one of the areas in which we find clinic owners don't have an understanding of that. And it's those, if it's seven days and you've got a whole lot of funding bodies paying you, then that's understandable. It's those ones that are 30, 60 days that are easier to target because they are actually outstanding.

Ben Lynch: They're one of those ones that, Jack, to your question, to Hannah before, what are your admin doing alternatively to managing the waitlist? One of those is typically what are your accounts receivable at and can we get the money in the door that we're rightfully owed for services delivered? And as a bit of a rule of thumb, J.O.B., what do you reckon accounts receivable should be for a clinic?

Jack O'Brien: It is somewhat dependent on the types of patients you see if you're a cash paying type clinic, seeing a lot of private patients versus an entirely third party payment type clinic. It should be better than whatever it currently is. It should be better than that. That's the most important benchmark. However, again, if we're looking for a rule of thumb, think about your monthly turnover, and let's say round figures, you're doing 80k a month, you're a million dollar a year clinic, you're doing 80k a month, your accounts receivable should be less than 10% of your monthly revenue at any given date. And so if you're doing average 80k a month, at any given time, your accounts receivable should be $8,000 or less.

Ben Lynch: And that's agnostic of whether it's seven days or 60 days, it's just total, in total, that's outstanding.

Jack O'Brien: It is overdue.

Ben Lynch: Overdue. It's a really good point. In an ideal world, which we don't live in, but in an ideal world, you're getting paid straight away, right? But there are third party payers. So one of the… simple changes that we advise people to do is as soon as the service is delivered, you're sending out that invoice because the clock starts ticking once it's sent, received. So don't, you know, wait till the end of the week or the end of the month to send them out, get them sent straight away at the end of the day or immediately.

Jack O'Brien: Send them straight away. And a nice little hack that the clinic owners have found works really well. We've been, we did like decades ago was change how long your accounts are. Now I can hear people already go, Oh, but you don't understand. We're in a gazetted system where they work cover say they'll pay on 30 days. Well, that's great because your invoice and you decide your terms. So just put net seven on it or net five days. And then after eight days, it's overdue. Now they might say they'll pay it in 30 days, but you get to determine the terms of your invoice.

Ben Lynch: Hannah should clinic owners do their own bookkeeping?

Hannah Dunn: Um, I mean, well, I think most people would say no, but we do our own.

Ben Lynch: When you say we do our own, what do you mean?

Hannah Dunn: I mean that we don't have an external bookkeeping service that we have, um, uh, virtual assistant, um, who does a lot of our reconciling. We have, um, Warwick who, and prior to Warwick, we had Lisa who were internal and employed by us to, do our bookkeeping and we have an accountant, so we still have an external accountant.

Ben Lynch: But that's a good nuanced answer. Like, yeah, it's done in-house, but it's not done by you as the clinic owner or you have an admin person doing it. Is that what I'm hearing?

Hannah Dunn: Yeah.

Ben Lynch: What about you, Jack? Should clinic owners do their own bookkeeping if you are under

Jack O'Brien: 50 to 80 K a month? No. If you're a larger clinic, most likely, yes, do it yourself as in do it internally.

Ben Lynch: Internally. Right. And then what about go to those early stage clinics where you're the main therapist, you're building up your base. You so often work with them in elevate and they're like, Oh, it's easy. I just do it while I'm watching maths or something. You know, I do it at the cafe. You know, it's super easy. I can't, you know, it gives me a finger on the pulse. Tell me, Jack, should they be doing it?

Jack O'Brien: Permission to step onto the soapbox. Go for it. Okay. So every decision you make, particularly as a smaller solo startup clinic, if you're doing less than 40 or 50K a month, every single allocation minute of your time needs to be tested against, would I be getting new clients in this time? And so you could spend 30 minutes doing your own reconciling while you're sitting, having a glass of wine and watching maths, probably Moscato, if you're watching maths, but never watched maths ever in my life.

Ben Lynch: I just hear people quote it.

Jack O'Brien: You could sit and watch maths and do your reconciling, or you could get new clients. You could do some marketing, nurture a referrer, create some social content, reactivate your database. You could do all sorts of things. And that 30 minutes could generate two more new clients, which might be worth $2,000 to your business. Or you could tick a little green box on zero. Like stop it and go and get new clients.

Hannah Dunn: And not only new clients, but thinking about if you want that growth, like how are you going to support the next clinician? How, what's that going to look like?

Jack O'Brien: Yeah. You could recruit, or you could attract, or you could reconcile. I'll tell you which one will grow your business and which one won't.

Ben Lynch: It's great. And it'd be better off if you had someone reconciling your accounts in that 30 minutes was you combing through the P&L and looking for opportunities. Where should I invest more?

Jack O'Brien: Like 30 minutes of you reconciling as a numpty who isn't trained, Or you could pay someone to do it. Who's good at what they do. And it might take them six, seven, eight, 10 minutes. So it's quite inefficient for us to do it ourselves, particularly in that stage of business where you need to be laser focused on what grows your business.

Ben Lynch: It's a great point. Let's get to some screen share of some examples of a profit and loss structured into functional categories. This is where you'd want to hop off the audio only version and come over to YouTube. If I'm not selling that hard enough, tell me. But come over to YouTube, hit subscribe, see the awesome content that we keep publishing. It's super practical. Anyway, what I'm going to start with is a simplified version, an overview on a Google Doc. That's what I'm sharing right now. And then, We have the more in-depth spreadsheet over here, Jacoba, and you'll remember this version. We've made a few edits over time to help people really see, like, show me what it actually looks like. Show me the money. Show me the money. Okay. Here we are looking at this Google Doc available for members check in the Learning Portal, Functional Structuring of your Profit and Loss Statement. There's, what have we got, 13 pages, the first 12 of them. prescribe the specific actions for you, ideally your bookkeeper, to set up your accounts to look like this. So the mechanics behind all the things we've been discussing so far. But here is a guide to the headline categories and what a benchmarking report could look like in your clinic. J.B., do you wanna just talk us through this from head to toe, and then we're gonna dive into the spreadsheet in just a moment.

Hannah Dunn: And I just want to say, before Jack jumps in, you guys are there saying like, show us the money, which I just know there are people that were like me 10 years ago who were like, don't, I don't want to know. Like, I just want to put my head in the sand and know that it's just working itself out because I've saved my bank account. And I'm a total convert and here now, and I just encourage you, as Ben said, to just even look at the YouTube video and it is going to look overwhelming, but I think it's the first step to just getting familiar with it. You can revisit it a hundred times.

Jack O'Brien: And what was the first thing that changed for you from being an ostrich head in the sand? What was the first thing that changed your mind?

Hannah Dunn: I think feeling empowered to know where the money was and what decisions we could make with that. And about four years have been saying, look at your profit and loss.

Ben Lynch: Only four years. Persistence pays, quite literally in this case. And to J.B., it's a really great point. And thank you, Hannah, for bringing that up, because there are two people that come to mind, you know, several years ago that I worked with. One of them had outstanding accounts, and I put this in the book, the CM book, and it was somewhere in the range of 100 grand plus. And JB, to your point, they were generating about $60,000 or $70,000 in revenue. So it was enormous, and they were feeling the pinch. And the other clinic owner, a different clinic, opened their zero, and they had 1,200 unreconciled items. So we couldn't even look at their numbers and their P&L because it wasn't reconciled, it wasn't complete. And this took a number of months for us to clean up the books so that we could actually do this analysis. And I know there are people out there like this. I spoke to one the other day who's like, I haven't logged into my Xero in like years. I'm just like, OK, this is a great opportunity for us to do it, but I know why. You're scared of it. You're not sure. So I'm here to help you and hold your hand. And we've all been there. We've all been there.

Jack O'Brien: It's an interesting point, and I know you shared the screen, but we haven't spoken about the share screen just yet, Ben. For people like Hannah in your case, if you're listening along and you think, oh, I don't have any confidence, this is all a different language. What we know that the best clinic owners do is they embrace those seasons when they know nothing, right? When you're learning something new for the first time, it feels clunky and uncoordinated. Learn to fall in love with that feeling. Don't resent or resist that feeling of incompetence because the competence breeds confidence, right? And if you are incompetent, practice makes you competent. These are skills that you can learn. You're not innately born with the ability to read a P&L. You learn how to read a P&L. And as you grow in competence, so you will grow in confidence.

Ben Lynch: Well said, JB. All right, let's actually talk about the screen share.

Jack O'Brien: Broadly speaking, on a profit and loss, you have three key areas. You have income, you have cost of services or cost of goods, and you have operating expenses. And that is, then we get what's called the bottom line is your operating profit. Now you can have some below the line expenses, some non-operating expenses, director's expenses, you can see here in the screen share, and that might leave you with a double bottom line or net profit. But broadly, we're talking income, cost of services, operating expenses and profit. And so in your income, we want to set our income into functional line items. Now, again, back to the accountant point, accountants love generally as fewer line items as possible in a profit and loss or in a chart of account. We want it, and hear the intent behind what I'm saying here, we want as many line items as possible so that we can be granular and specific And so we can see here in this example, consulting revenue is the lion's share of income. Uh, but we also want to know what revenue do we get from products and maybe what revenue do we get from other streams? And so we, we put in here the target ratio. So this is a budget moving forward, essentially what, what do we want this split to be? And so we've got 90%, 5%, 5%, which gives us a $2 million income clinic.

Ben Lynch: And broadly, a piece of advice for this, Jack, is avoid generalities. Try and be as specific as possible. Even here in this example of other revenue, we'd ideally like to give that some functional name, depending on your clinic.

Jack O'Brien: Oh, look, when it comes to profit and loss, Ben, other, miscellaneous, sundry, they're all swear words. General, general. Swear words, swears, put it in the swear jar. Swear jar. So we avoid generalities and we stay specific. So then when our cost of services is the direct costs incurred generating the revenue. So you think about a way to think about it is the lights at your clinic. The electricity is an indirect cost. The lights didn't generate the income. It's the therapist, the clinician that generated the income. And so your consulting expenses here are our therapy team expenses. And similarly, if we're selling products, it's the cost of buying the product that is the product expense here. Does that make sense, Ben?

Ben Lynch: Yeah. And so what we're going to do, these represent categories, and there's a whole bunch of individual specific line items, which we're going to share in a moment on the spreadsheet, that get grouped into here. And you could almost toggle, expand, toggle, contract them to see the detail. And that's important. I'll just nuance it even further, JB, because a lot of people like to benchmark themselves against someone else if they're speaking with peers or friends and colleagues. And you can see how much discretion there is in what you want to put in or leave out or change into a different category. So someone might say, oh, our admin expenses are 5%. but they don't include or allocate a whole bunch of things to it. And so it can be hard. That's why we often say it is hard to benchmark against others. That's why benchmarking against yourself is super important.

Jack O'Brien: Yeah. So we look at the categories here and specifically stay there, Benny, on the revenue piece. It allows us to then look at, say, our product expenses of $60,000, if you can see my yellow circle there. compared to our product income of $100,000. And so as what's called a profit centre, our products have a good gross profitability margin of 40%. And so that's important that we can compare those income lines against their direct cost of service or cost of goods sold. below our gross profit. And so our gross profit is an indication of scalability of your clinic. If your gross profit is too low, and that's relative for everyone, but if your gross profit is low, you have a real scalability issue because those cost of services continue to grow with us as we grow. And that can become a real hamstring or Achilles heel for us, pardon me.

Ben Lynch: Yes, thank you for speaking podiatry terms.

Jack O'Brien: Well, hamstrings above the knee, as you know, it's a nevertheless. So our below the gross profit line categories are here because the admin occupancy marketing and support services. Broadly speaking, these are the four categories. Some clinics have more, some have less categories, but these would be the non-negotiables.

Ben Lynch: where would you put team expenses if you're looking at, uh, you know, uh, investment in their CPD, their learning, um, anything related to team. I'll ask you, Hannah, how do you allocate team expenses or investments?

Jack O'Brien: Oh, it's a good, it's a good question. As Hannah finds the unmute button. It, the important thing here is that it's not a direct therapist cost. It isn't necessary to generate revenue, Hannah.

Hannah Dunn: Uh, yes, we have it under employee expenses.

null: Yep.

Jack O'Brien: So a non-operate, an operating expense category that is kind of team or employee expenses.

Ben Lynch: You have another. Yeah. We've got four here. You would have a fifth in this example called employee expenses.

Jack O'Brien: So you might put things like registrations, CPD, culture days, meeting expenses, although that's a gray one, gifts. Um, yes, that's where you'd put those expenses. And so those target percentages that you can see here, Ben, ideally internally relevant. Maybe last year you spent 10% on your admin expenses and this year we're aiming for 9%. Maybe our occupancy expenses. Now occupancy expenses typically are fairly fixed. And so as they stay fixed at 160 grand in this example, and your revenue grows to $3.2 million, all of a sudden your occupancy is now only 5%. You haven't reduced the expense, you've just increased the income, and therefore you've become more profitable.

Ben Lynch: It's a great dovetail into the spreadsheet, J-O-B. Now, for those watching, this is a lot more detailed. This is essentially an export of a profit and loss over a financial year so that we could do an analysis of the year that's been. to inform the budget for the year that's to come. And that would be part of one of those rhythms, JB, that we're talking about. And we might actually start over to the far right here to just connect the point that you made, Jack, around you know, what was the percentage and what do we want it to be moving forward? So do you want to just talk us through these columns at the end here, the last financial year and then the financial year moving forward?

Jack O'Brien: Yeah, certainly. If you want to maybe zoom in a little bit on these product percentages here, we can see that product costs were 3%. And ideally, we want to increase that cost up to, sorry, increase that income up to 5%. We want to see those products. Now, why would we want to do that? Because we know products are a profitable center of our business. You can see here, this particular example wants to grow their room hire incomes. They want to better utilise the space that they have. And so they're being really ambitious. And what that practically plays out like is going from what was two and a half grand a month of rental income into eight and a half grand a month of rental income. Again, For whatever reason, you can have your own reasons, but that's what this example is showing here. And still, we're increasing our treatment income from $62,000 to $73,000 a month as a percentage of overall income that's coming down, but we want the absolute income revenue to go up.

Ben Lynch: And what's great about anchoring to this here, Jack, is then we're asking the question, well, what are we going to do to make that a reality? What projects, initiatives, changes, systems are we going to implement in order for us to make that a reality over the next one year in this instance?

Jack O'Brien: It might be, when are we going to recruit? Or if we want to see an uptick in revenue, maybe we need to see an uptick in marketing to attract new clients. Maybe we're adding another service. So in this example, where there's three types of treatment income, maybe we're adding a fourth income stream into treatment and that will justify how we get there. But you're right, this allocation of resource then informs the action plan.

Hannah Dunn: 120 day plan or our 12 months plan.

Jack O'Brien: Spot on. Yes.

Ben Lynch: Is that paper or digital?

Hannah Dunn: That is digital in a spreadsheet.

Jack O'Brien: How do you decide what's paper? Don't answer that question.

Ben Lynch: Oh, for those that aren't aware over several episodes, we've been talking about documenting your day and your week using digital or paper-based diaries. Hannah's a fan of the paper, but it's a running joke. So long as it works for you, that's where we've all… Only for the review of the week. Ah, only for the review of the website. Everything else is due to it.

Jack O'Brien: Okay. Come on down, Benny. Stick in the spreadsheet with me. Come on down. You're guilty.

Ben Lynch: All right. So we're going down here on the spreadsheet. Just a mindful of the turbulence for the viewer. How far down do you want me to go here, Jay?

Jack O'Brien: Let's stay here for a second. So product costs is interesting, right? Because We're saying here we want to keep the cost about the same from $1,300 a month to $1,700 a month. But if you roll back to the left, Benny, month on month, you'll see, stay on that line item of product costs. I want to see month on month. If you scroll back for me, scroll back to the left.

Ben Lynch: I did not listen to your instructions. I'm now scrolling left.

Jack O'Brien: Thank you. Stop there for me. What we can see here is this expense will be lumpy. You can see there's months where it will be a thousand dollars a month. There'll be months where it'll be $2,000 a month. And that's because products are variable when we need to stock up in the clinic. Now you might. time that to make sure you've got enough stock for an upcoming sale. Maybe you're doing a Black Friday sale or Christmas sale that's coming up in the second half of the calendar year. Maybe you need to, your accountant has given you some tax advice and you need to spend some money in May or June leading into end of financial year. But we know the overall average of the year needs to be whatever the average was, but that will vary lumpy month on month.

Ben Lynch: And one practical action we found really useful, Jack, to your point of narrate the numbers is say we're doing this in a spreadsheet before it goes back into zero as a budget. you put a note over the cell and you explain why that has all of a sudden increased or decreased from the norm, so that when you look back at it, it makes sense. There's context as to why that decision was made, or at least why we expect things to change.

Jack O'Brien: Yeah. You must tell a story in your budgeting and your finances. It has to tell a story. Hannah, you can probably speak to this. When you're looking at a new location or a new service, you then have to reverse engineer what that budget looks like. If we're going to open in November, we want to do some marketing in October. We want to do some recruiting in September. Therefore, we need to do some social media stuff in August. It all comes together, right?

Hannah Dunn: Yeah, absolutely. I was talking to a member about this recently who's opening up a new location and we spoke about whether they could start a mobile service before their build is finished to try and start to generate some of that revenue and then move into the clinic.

Jack O'Brien: And so therefore you'd budget for some more fuel costs or vehicle costs. And therefore we hit the ground running when it comes to income in the clinic. And so it allows us to take a 30,000 foot view and make sure everything lines and correlates as it works its way through the budget here, Benny.

Ben Lynch: Do you want to just speak to the clinic owner that says, yeah, but I don't really know what it's going to be with any degree of accuracy. Like I don't have the crystal ball to forecast into the future. How do you answer that?

Jack O'Brien: Well, I'll go first, Hannah, feel welcome to add your perspective, but I would say we can know with a high degree of certainty what is happening, say tomorrow, this week, and this month. And we have a very low degree of confidence over what's going to happen in three years, four years, five years. And so confidence is determined by the length of the time horizon. And as you practice this, you have greater degrees of accuracy over a longer time horizon. So we might not have confidence over what's going to happen in 11 months from today, but we have a fair degree of confidence over what's happening in six months and an even greater degree of confidence what's happening in the next one, two, and even three months.

Hannah Dunn: Hmm.

Jack O'Brien: And you can have, you can, sorry, Canada, you can inform yourself and that will give you more confidence. Like looking at this December, January is a Christmas period. Like use your, use your brain to think about the, the, the annual flows of your year, or maybe you've got a team member that's having holidays in August. Talking about integrating all of these data points in and going, well, if a full-time team members having a European summer, then that might impact our August revenue or we're going to onboard two new grads together in February. That means March is going to have a substantial bump in income, for instance.

Hannah Dunn: Yeah. And I think knowing these numbers just gives you the confidence to know that you will be okay having that dip. When you don't know those numbers, it can really set a panic when you're just looking at that count and it drops.

Ben Lynch: It's a great point. And typically we would look, Joby, at budgeting for the next three months. So someone might be thinking, oh, gee, I've got to do the whole 12 months. I'm not sure exactly what's going to play out, but at least do the next three months as a starting point, maybe even just the next month as a starting point. And what I found, and we did this just the other day, right? when you review it, you're always missing. You've exceeded it massively or you've missed it massively. You're trying to figure out okay, how did we not see that coming? How could our decision-making be better? How could we project, you know, with a higher degree of accuracy in the future? And where did we do well? And it's just iterative and a learning process. So just to calm everyone who might be a little overwhelmed by doing this, you're not gonna nail it.

Jack O'Brien: Maybe you do once and then, and then you're almost- It's very rare because this is really around trying to minimise the amplitude of errors. And there is a not a bad thing necessarily, but we don't want to be off by 15% here and 20% there. There's a margin of acceptability when it comes to variation. And so you might be with an acceptance of 2%, 3, 5% even, and that's okay because the course correction amplitude is comfortable within reasonable limits. But you can imagine the turbulence. If your projections are 10, 15, 20% off, it will be quite challenging to sleep peaceably at night.

Ben Lynch: To connect a few dots here before we round out, we were previously sharing the Google Doc, which was a simplified version, the headline categories. What we start to see here on screen is a detailed breakdown of those categories. To connect an earlier point, JRB, you said accountants like simplicity, and typically the default is alphabetical order, not functional categories. For instance, you've got your admin expenses right next to advertising, and then it goes A through to Z in your operating expenses, which is not particularly functional. So this grouping here allows us to look at making purposeful decisions. And just to layer in here, So often when we talk about growing your clinic, doing it in a meaningful way and a measurable way all comes down to the definitions that matter to you. Because you might be defining your growth as improving the revenue that you bring into the clinic. You might be defining growth as the net profit that you create in your clinic. So there's different ways to measure it. that are meaningful to you in this season of your business journey. So that's why this story is so nuanced and we love helping clinic owners at every stage find and navigate to their version of success.

Jack O'Brien: And looking at this view, if you're on YouTube, if you're not, please get over to YouTube. Hannah, I think you mentioned subscriptions earlier. If we think about subscriptions, you can probably see some subscriptions slot into maybe, maybe amenities. That would be a common place where some staff subscriptions go. You would also see subscriptions probably come in marketing in and around your website. And thirdly, you probably see some subscriptions around atmosphere costs. Maybe you've got a music license or a Spotify subscription or things of that nature. And so to just have subscriptions misses the nuance of employee expenses, marketing expenses, and occupancy expenses, and you will mislead yourself if you are not specific enough.

Ben Lynch: To add to the listener here, J.O.B., when we look at marketing expenses in this example, we have grouped underneath that marketing clinic apps, which is a client relationship management tool where you can email and SMS. We have marketing Facebook in case you're spending on ads, marketing Google for any Google ads, as an example, marketing websites, and then meeting expenses, say, for your marketing team. Then to just give one more example around occupancy expenses, we have business insurance, cleaning and rubbish removal, computer expense, electricity. You've got pest control, printing and stationary, rent and outgoings, repairs and maintenance. So they all fit underneath. occupancy. And then we're looking at, say, occupancy being 8% to 10% of your overall revenue. So you can start to see how the detail creates this narrative behind the numbers to help inform your decisions. Hannah, I think you made a brilliant point around embrace the discomfort. Once you get in there and build the repetitions, you build the confidence to be able to do this moving forward. As we put an end to this episode, what are the key pieces of advice or action you have for those listening or watching into this episode?

Hannah Dunn: blink twice to make sure you're still with us, because I know some of you will have glazed over with that information. But I think it's just about starting simply, like just make sure you book out time in your diary to look at your finances, go to your Xero account, make sure that things are reconciled. then next step, have a look at your total revenue, look at your gross profits to compare them year on year and see if they have improved. Cause sometimes you'll have the same revenue, but a really different outcome at the bottom. And so just seeing what those areas or opportunities are, I think just breaking it down step-by-step and just getting in there is my advice.

Ben Lynch: Yeah. Beautiful. J.O.B.

Jack O'Brien: to wrap us. Embrace transparency in your finances. I remember the discomfort of inviting my coach at the time, Shane Davis, into my Xero accounts. And I was relatively confident with finances, but Shane was able to help me see that I couldn't see. In our business now, Ben, you and I work together and we see different things. When clinic owners embrace transparency, inviting a new coach, you'll get things seen to that otherwise slip through and you'll be better off for it.

Ben Lynch: It's a great point. Money is a sensitive topic for a lot, but I reckon if I ask most clinic owners, you know, what do you want moving forward? It's some version of it to be more profitable, you know, to reap the rewards of this investment and risk as a business owner. And that really requires that you get familiar and comfortable with your numbers. So you make better decisions for a profitable future, a sustainable future. And go back and watch this video for some of the specific guidance. That's a key action as well. Jack, Hannah, thank you for sharing. I'm looking forward to going deep on the numbers in future episodes even more. And if you've listened and watched into this and still got questions, send them to us. Jack volunteered his email, jackatclinicmastery.com. Send him all the numbers questions. He's just looking forward to it.

Jack O'Brien: I'm ready. I'm ready.

Ben Lynch: We'll see you on another episode of the Grow Clinic podcast very soon. Bye for now. See you. Bye.