Once you have a budget, compare it to what happened every month. Look at the biggest differences in dollars, find the reason for each one, and decide whether to change your spending or your budget. That 15-minute habit is what turns a budget into a tool.
Start with a budget built from real numbers
If you don't have one yet, this post shows how to build your first DPC budget from three months of bank data. A budget built from real spending is easier to keep than one built from hopes.
The monthly comparison
Put three columns next to each line of your P&L: budget, actual and the difference. Most bookkeeping software can produce this report once the budget is loaded. Then read it from the biggest dollar difference down.
A made-up example
Say you budgeted $1,500 for medical supplies and spent $2,400. That's $900 over, or 60%. The reason matters. If you bought a three-month supply at a discount, it isn't a problem and next month should run under. If supply use is rising because visits are up, the budget was too low and should change. If nobody knows why, that's the line to look into first.
Which differences matter
- Large in dollars, even if small in percent, like payroll running $1,000 over.
- Repeating, the same line over budget three months in a row.
- Revenue under budget, because it affects everything below it.
Small one-time differences usually don't need action. Note them and move on.
Look at timing, not only totals
Some differences are timing. An annual bill budgeted in March but paid in April makes March look under and April look over. Year to date, they cancel out. That's why I'd read the year-to-date column next to the monthly one. If year to date is close to budget, a single odd month usually isn't worth chasing.
When to change the budget
I'd revisit the budget each quarter, and any time something big changes, like a hire, a price increase or a new lease. Don't change it every month to match what happened. Then it stops telling you anything.
Use it for decisions
The budget is where a decision gets tested before you make it. Want to add a medical assistant? Put their full cost into the budget and see what's left. This post shows how to test that hire.
What I'd do this week
- Load your budget into your bookkeeping software, or ask your bookkeeper to.
- Run budget vs actual for last month.
- Write a one-line reason next to the three biggest differences.
- Put a quarterly budget review on your calendar.
Common questions
What if I'm always over budget?
Either the budget is too low or spending needs to come down. Look at which lines repeat. Those tell you which it is.
Should owner pay be in the budget?
Yes. Leaving it out makes the practice look healthier than it is. Plan your own pay like any other cost.
How detailed should the budget be?
Match the main lines of your P&L. Ten to twenty lines is plenty for most practices.
Want budget vs actual every month?
We reconcile every account every month and send your P&L and Balance Sheet by the 15th, so decisions like this start from real numbers. If that's what you need, apply to work with us.