Financing Medical Practice Expenses

July 11, 2022
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Insights

One important topic that often gets overlooked by doctors starting a practice is how to finance medical practice expenses on an ongoing basis. The right financing can lower costs, maximize flexibility and ensure money is available when needed.

Finding the Right Business Card Allows You to Save Money and Operate With Confidence

Running a successful medical practice is no easy task. It takes time, energy, the development of new management skills—and financing.  

Though many doctors obsess over costs at the launch of their practice, one important topic that often gets overlooked is how you finance medical practice expenses on an ongoing basis. The right financing can lower costs, maximize flexibility and ensure that you have money available when you need it. How you will meet your capital and cash flow needs is one of the most important decisions you will make—and one key tool at your disposal is selecting a business card built for doctors.

A solid business credit card is a necessity for a modern medical practice. It allows you to operate with confidence, knowing that your ability to pay practice expenses can withstand mistakes in billing, dips in revenue or any other obstacle that comes your way.

“There are plenty of excellent reasons to open a business credit card,” Forbes wrote earlier this year. “Doing so will help you keep your work and personal expenses separate and enable you to build a credit history for your business. But business credit cards also present excellent rewards opportunities … and other perks that can save you time and money.”

Financing Medical Practice Expenses
A business credit card is a necessity for most modern practices. Finding the right card is important

Understanding Business Credit Cards

There are many business credit cards on the market and all tout specific advantages, from cash back to various affinity programs. Business cards target small business owners with special features designed for companies. You apply for these cards in much the same way you apply for a personal card, but the liability accrues to the business rather than you personally.  

Sifting through the options requires more than just looking at interest rates and annual fees. The additional benefits attached to each card, specifically the so-called “cash back” rewards that return a percentage when you finance medical practice expenses, are extremely important. That’s where you realize the cost savings.

Most credit cards on the market differentiate between two key categories of spending: basic and rewards-eligible. Regardless of which business card a doctor uses, they will have expenses that are not eligible, such as malpractice insurance, professional advisors like accountants and attorneys, company taxes and payroll.

But do not underestimate the potential advantage of maximizing the benefits in categories that are eligible. Financing medical practice expenses such as office supplies, software, medical supplies and specialized equipment can add up to thousands of dollars in your pocket every year. At some practices, these costs run to hundreds of thousands of dollars annually.

You want to make sure you're maximizing rewards.  

The Benefits of a Business Card

Many finance writers frown on credit cards or business cards, but the truth is that these cards are extremely useful business tools for a medical practice. Many doctors would struggle without the ability to finance medical practice expenses on a card. When used carefully, cards allow you to feel confident that you can cover monthly expenses, lower costs, obtain special offers from relevant vendors—all based on purchases you have to make anyway.

Here are some of the primary reasons to shop for a business card for doctors:

  • Lower Costs. Cash back rewards that apply toward statement credits lower costs on eligible purchases. Supplies from key vendors like McKesson, Allergan and Cardinal Health, for example, are effectively discounted several percentage points by these rewards. If your practice is already getting a negotiated discount, this is an added bonus.
  • Finance Expansion. A business card injects flexibility into your practice finances, increasing your buying power and allowing strategic purchases that may not otherwise be possible. It gives you access to money that can be used to expand your practice, without directly draining revenue streams.
  • Separate Business and Personal Finances. A business card that doesn’t require personal liability allows you to separate your personal life from your business. This type of separation is a requirement under most corporate structures, and a business card can help.
  • Mitigate Risk. Access to ready capital gives your practice the ability to withstand an interruption in revenue, whether caused by a billing mistake, an insurance ruling, changes in the regulatory environment or a general slowdown in business. As long as your card can accommodate spending, you will always be able to pay the bills in the immediate future.
  • Streamline Accounting. A business card allows you to track major expenses in one place. Some cards also allow you to segment spending by vendor and control who gets access to the account, making it simple to give a bookkeeper, accountant or business partner what they need to do their job. Other features include the ability to integrate with accounting software like QuickBooks and receipt reconciliation, which saves time and money on bookkeeping.
  • Obtain Benefits. Many business cards for doctors come with additional benefits beyond cash back. That might be enhanced savings from medical vendors or suppliers; memberships at organizations like Costco or Amazon; or other perks that can make it easier to manage your practice.

How to Shop for a Business Card

Physicians have advantages that many other small business owners do not. A credit-worthy doctor with a salary well above the national average can take advantage of some fantastic business card benefits. But how do you choose which card to use?

Start with an idea of how you will use the card to finance medical practice expenses. Will you use it for large equipment purchases or monthly medical supply orders? Will you pay the card off each month or will you carry a balance? Are there specific benefits or features that matter to you? When you have an idea of what your needs are, you can go shopping online and compare cards. Here are some suggestions to consider:

  • Use a Card for Doctors. A card designed for physicians to finance medical practice expenses is more likely to give you benefits that apply to your situation. For example, a card designed for doctors is more likely to be partnered with medical vendors and give you additional savings. Physician business cards are designed for use in a medical practice and are most likely to be the best fit.
  • Get Maximum, Unlimited Cash Back. Cost savings are a major benefit of using a business card, so it makes sense to maximize your returns. Cash back systems are often tiered, offering different percentages for different types of expenses. In addition, some have caps on the rewards you can earn. It can make shopping difficult. Simplify the process by looking first for the highest percentage you can find on medical practice expenses. Generally speaking, anything above 2% is excellent. Then, make sure the rewards are unlimited. Once you have narrowed the list, look at how the cards apply the reward feature. Some expenses, like office supplies, are almost universally eligible for rewards. Others, like payroll, are almost always excluded. But there is much in between, and you should seek out what is important to you. If getting cash back on expenses like dining is important, for example, choose a card that offers that feature.
  • Find a Higher Limit. Access to more credit makes it easier to finance medical practice expenses. Specialists who tend to make large purchases of medical equipment and supplies, such as plastic surgeons, dermatologists, ENTs and ophthalmologists, can especially benefit. Find a card that offers a solid limit up front, rather than one that requires you to increase your credit over time.
  • Avoid Annual Fees. Rarely is there any good reason to pay an annual fee. Unlike personal cards, where the fees are sometimes low enough to be overlooked, fees on physician cards can run to hundreds of dollars. Some card providers also charge hundreds of dollars for an additional card to give to a partner or office manager. Expenses like these erode your cost savings pretty quickly. There are plenty of cards available without annual fees and other charges, so choose one that suits your needs.
  • Look for Business-Friendly Features. Like rewards and fees, this is another area where cards can differ substantially. Some cards come with business-friendly features that make it easier—and sometimes cheaper—to manage your practice. For example some card providers will require you to call in to get additional cards, and charge you for it. Others give you the ability to issue virtual or physical cards through your account dashboard, and do so for free. Other items to look for are the ability to lock and unlock cards; cards that offer dynamic spending limits; integration with bank accounts and accounting software; and receipt matching with automatic reconciliation, allowing you to text or email receipts to your card company to validate the expenses on your statement and keep everything in one place.  
  • Seek Out Additional Benefits. Business cards for doctors offer many other benefits, depending on the relationships maintained by the card company. For example, some cards might offer a free membership to Costco Executive, which can save money on office supplies, or a free membership to Amazon Business Prime, which saves money on shipping. While these may seem like bonuses, the membership fees and the savings throughout the year can add up to hundreds of dollars.  
  • Compare the Terms. Of course, you need to compare interest rates and know the terms offered by each card so that you can choose an option that matches your intended use. Don’t farm this part out. Financing medical practices expenses means taking on debt. Even if it is short term, it means your company is effectively borrowing money. Most doctors have some experience with credit cards, but read the fine print and understand what you are signing.  

How to Apply for a Business Card

Once you finish shopping for a card, completing an application is the final step. This is usually done online. You can fill out the application whenever it is convenient and generally receive a decision very quickly.

Get some documentation ready so that you can answer basic questions about your business and its owners. This may include your Employer Identification Number (EIN), National Provider Identifier (NPI) or Social Security Number. Details on your business finances, like annual revenue and average monthly spending, are also usually required.

Don’t apply for more than one card at a time. Instead, choose a card, apply and wait for an answer. Doctors with solid credit and income are likely to get the answer they want. When you get an approval, follow through and set up online access to your account and other benefits that make practice management easier. Put it on file with key vendors and start using it to maximize benefits.

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