Free Money!

November 18, 2009

Small steps like taking a coding class, establishing a tax-deferred savings account, and reviewing the performance of your financial advisors can net you a multitude of thousands with no real work involved.

I knew that headline would get your attention. I have written from time to time of some of the things that docs can do with their practices and their personal finances that amount to "free" money. But I am going to aggregate them, and add a few new ones, to drive the point home; you can often make more money by doing a few smart things than you can by seeing more patients and putting in more precious time.

Number one is the coding issue. This came up again for me recently when a friend of mine asked how he could do better financially without working longer hours. About the same time, I saw a blurb in a magazine indicating that a one day coding class for a doc, not his staff, can "easily" yield $10,000-50,000 every year thereafter, without seeing one more patient. Free money.

Number two is a corollary - upgrade your billing staff/software/practice. For example, I mentioned OfficeAlly.com in a previous piece; they offer a free online service to electronically enter your claims. It's slick and it catches your errors immediately, which can speed payment up hugely as you don't have to wait a billing cycle to re-bill the errors. I was able to eliminate my outsourced billing person saving me five figures, so I suggest that you review your current office practice. For instance, my friend spent $10,000 for billing software 10 years ago. You know, we're not using leaches much anymore either The system's amortized, it's out of date…time to move on. Every study I have seen shows that docs bleed money in their billing practices and I, for one, am not happy subsidizing the American insurance industry.

Third, and it may be hard to believe, but there are still a surprising number of docs who do not have a tax-deferred savings account. Whether it is a 401(k), IRA, or SEP, Uncle Sugar wants you to save and make even more for retirement, your kid's college fund, whatever. If you are in this disadvantaged group, ask your CPA or financial advisor which one is "right for you," as those annoying drug ads on TV say. He or she will show you the math, how saving money in one of these accounts, delaying the taxes for years, even at a conservative rate of return, will yield tens to hundreds of thousands of dollars that you wouldn't have had otherwise. Money that you didn't have to work for…free money.

The real heavy lifting in this process is what Einstein is reputed to have said was the greatest development of the 20th century. Not nuclear fission, not space travel, but compound interest. And time spent putting your arms around this idea is like learning the Midas touch. Free money.

Shall I go on? How about a few small, easy ones like a putting all the money you spend personally and in your practice on a business reward credit card that you religiously pay off at the end of the month. You get an annual record of all the surprising things you spend on, helping you at tax time and showing where to cut back when you need to, and you can get 2-3% of cash back from things and services that you would have bought with cash. Free money. The trick of course is never to take a loan on the card and to make sure you don't spend foolishly in the first place. Keep in mind that one study I have seen says the average person spends 20% more using a card than using cash. But you're not average, are you...

Another suggestion I've made over the years is to annually review your advisor team. After a while they either take you for granted or you’ve reached the limit of their idea spectrum. Either way you're still paying the same fees, which are not likely to have been adjusted downward with less effort expended on their part. Last year I changed my CPA and she immediately came up with thousands in overlooked refunds, even though my previous CPA and I thought we had it covered. Free money.

One interesting digression is that when I started asking around for a reference for a new CPA, no one would give me a name. I asked all the wealthy, smart people I knew and came up with not one name. Not even any excuses or waffling, just tight-lipped silence. Who were they hiding? Jimmy Hoffa? I finally got the one I changed to by chance. Fortunately, after a careful interview, the new CPA has worked out very well. This experience further confirms—I've said it before and I'll say it again—people are just goofy about money. They'll tell you about their health, their sex lives, and other things you don't want to hear about, but never anything to do with their financial affairs.

Last point for today. Americans have an aversion to negotiation, thinking that it is some form of conflict, a zero sum fight. I win, you lose. But it's just business and in this economy, many businesses are hurting, so sometimes all it takes is asking. Haven't people asked you for fee forgiveness? So why shouldn’t you ask as well? For example, I was buying some shirts over the phone recently and said to the shirtmaker, "I’m buying three. You'll throw in a free one, right?" Pause. "OK." No conflict, just ask. Free money.

Remember, if you ask 10 girls for a kiss, you might get slapped a few times, but you will also end up getting a kiss as well.