Your first DPC budget, built from three months of bank data

If you're winging it, your first budget can come straight from your last three months of bank activity, and you can build it in an afternoon.

Why three months is enough to start

A budget is a plan for what comes in and what goes out each month. You don't need special software or a fancy model to start one. Your bank already recorded what you spend. Three months smooths out one odd month without going so far back that the numbers are stale.

Use your business checking account and any business credit card. If personal spending is mixed in, pull it out as you go. You want the practice's numbers only.

How I'd set it up

Open a spreadsheet with one row per category and four columns: month one, month two, month three and the average. Keep the categories few. Seven is plenty for a first pass, and you can split them later once you see where the money goes. Here's where I'd start:

• Membership deposits and other income
• Staff pay, not counting your own
• Rent and utilities
• Labs, meds and supplies
• Software, phone and internet
• Insurance
• Everything else

Go through each statement and drop every line into a category. Annual bills get spread across twelve months. For example, a $2,400 annual malpractice premium becomes $200 a month in your budget, even though it leaves the bank all at once.

One note on income. If you use Hint, deposits arrive net of fees, refunds and failed payments. The deposit is what you kept, not what you billed. For a cash budget, the deposit is the number you want.

An example with made-up numbers

Here's an example. These numbers aren't from any real practice. Say your deposits over three months total $81,000. That's an average of $27,000 a month.

Your monthly cost averages come out to $12,000 for staff pay, $3,500 for rent, $2,500 for labs and supplies, $900 for software and phone, $600 for insurance and $1,500 for everything else. That's $21,000 a month in costs. Before you pay yourself, $6,000 is left.

Now you have a baseline. That $6,000 is what you split between owner pay, savings and anything you want to grow into. If you're not sure how much of it should be yours, this post on how much you can pay yourself walks through it.

Turning the average into a budget

The average tells you what happened. The budget is what you decide should happen. Go line by line and ask whether that number is right for next month. Is a new hire starting? Is rent going up in January? Did you cancel a subscription? Adjust the line and write a one-line note on why.

Then each month, put your real numbers next to the budget. You're looking for lines that are off by more than a little. Small gaps aren't worth chasing. A line that's off two months in a row is. That's either a budget that was wrong or a cost that's creeping, and both are worth a look.

What to do this week

Download your last three months of bank and card statements. Block an afternoon. Build the seven rows. When you're done, you'll know your monthly costs to within a few hundred dollars, and you won't be winging it anymore.

If you want to see how your costs connect to panel size, plug your monthly total into the panel break-even calculator. It shows how many members it takes to cover those costs.

Common questions

How often should I update my budget?
Compare your actual numbers to the budget every month when they come in. Rebuild the budget itself once a year, or sooner if something big changes, like a new hire or a price increase.

What if my last three months weren't normal?
Swap in a more typical month, or adjust the odd line by hand and note why. You're after a realistic baseline, not a perfect one.

Do I need accounting software to budget?
No. A spreadsheet works fine to start. What matters is that the books behind it are reconciled, so the actual numbers you compare against are right.