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The good news is that understanding how to manage your finances effectively is an art that can be learned and perfected. The best part is, it isn’t any difficult. 

This practical guide takes you through the landscape of financial management for physicians in 2023, covering everything from crafting an emergency fund to the significance of retirement planning.

The Foundations of Personal Finance

Understanding the foundations of personal finance is one thing all physicians should know in 2023. Often, this starts with building an emergency fund and reducing high-interest debts. 

Having an accessible emergency fund helps protect your earnings under unforeseen circumstances that life may throw at you. Additionally, it's critical to minimize debts, particularly credit card payments. 

On the other hand, high-interest rates can quickly magnify what you owe, which threatens your overall financial health. So, ensure you prioritize these two fundamentals if you’re looking to set the stage for robust financial stability in 2023 as a physician. 

Investing Strategies and Balancing Risk

In 2023, physicians should also aim to comprehend investing strategies and the concept of balancing risk. 

Diversification is a crucial consideration when investing your money. It implies spreading out investments across various asset classes (such as equities, bonds, and real estate), which can decrease the impact of poor performance from any particular investment type. 

Furthermore, strive to maximize your tax-efficient investment strategies by making wise use of registered retirement savings plans or tax-free saving accounts. These approaches enable you to accrue additional income while evading heavy taxation. Remember, the key here is finding a balance – one that aligns with your specific financial situation and risk tolerance. 

Insurance and Risk Management

Discovering the role of insurance and risk management in safeguarding your finances is another significant learning point for physicians in 2023. 

Having sufficient income protection coverage could be essential if you encounter situations like accidents or illnesses that prevent you from earning a regular income. Regularly reassess your financial needs as they progress over time, adjusting your insurance coverage to match these changes. 

The good thing about managing potential risks through insurance is that you can ensure a level of financial safety amidst life's unpredictability. However, you must note that this part of financial management is all about preparation, so equip yourself today to face the unexpected turns of tomorrow with confidence. 

Harness Technology for Streamlined Processes

With physicians often juggling their clinical responsibilities and personal finances, streamlining processes with Foothold Technology software or any other care coordination platform becomes increasingly critical in 2023. 

The best thing about integrating such tools into your daily operations is that you can effortlessly consolidate all care-related activities onto one accessible platform. Additionally, such incorporation optimizes workflow, bolsters efficiency and helps save a considerable amount of time that you can spend focusing on other financial management aspects. 

Retirement Planning

Equally important in your financial management journey as a physician in 2023 is the concept of retirement planning. While caring for others, it's easy to neglect yourself and miss out on making appropriate provisions for your golden years.

Although you may be passionate about practising medicine now, there will be a day when relaxation might sound more appealing than work. Setting aside significant savings specifically dedicated to your retirement ensures that those days can be lived stress-free without worrying about financial stability.

Start early, invest wisely, and create long-term monetary goals to ensure you're prepared when it's time to bid farewell to the world of active service while leaving no room for regrets or uncertainties. 

Professional Financial Advice

Finally, as you aim to master financial management in 2023, remember there’s no harm in seeking professional help. Circumstances may arise confusing enough to warrant advice from a certified financial planner, particularly complex matters like tax planning or estate management.

Professionals can lend expertise to help navigate the intricacies of financial decisions and offer customized strategies catered to your unique situation. They can provide perspective on risk assessment and infuse confidence about your choices, making your journey towards better financial control less daunting.

So, while it's vital to educate yourself about personal finances, don't shy away from expert opinion when necessary. It might just be the springboard you need for financial success. 

After all, it doesn’t take long at all for your company’s financial history to be filled with dozens upon dozens of mini transactions and recorded earnings. The sheer volume of figures and data that come across your screens every day is enough to make your head swim.

If you are feeling like you’re drowning when it comes to managing your company’s finances, we’re here to say that you’re not alone. Learning the ins and outs of financial management is a rite of passage for all entrepreneurs. Thankfully, this seemingly monolithic task can be broken down quite easily.

Here are just a few ways that you can organise your business finances and stay on top of your company’s financial performance with ease.

Separate your banking from your business banking

Alongside investing in business management software, opening a business bank account is hands down one of the single greatest things that you can do to set your enterprise up for success. This is because having a dedicated business bank account set up before making any sales can allow you to maintain a clearer picture of your company’s spending and earnings from the get-go.

As you may imagine, having this crucial piece of financial infrastructure in place can help greatly simplify virtually all aspects of your company’s financial management, from completing your break-even analysis to calculating your business deductions in the lead-up to tax time. Having a business transaction account can also be a valuable tool when it comes to making office supply purchases or even just keeping track of ad-hoc business expenses like Ubers or other unforeseen travel costs.

Separating your business banking from your banking can also provide the added benefit of further establishing your business as its entity that’s separate from you as an individual. When you open a business bank account, the account name will effectively be the same as your company name, which means that any invoices that your company sends out can be payable to itself rather than payable to you. In other words, having at least one dedicated business bank account set up for your business can make your business feel that much more concrete and legitimate in the eyes of your clients, staff, and stakeholders.

Keep track of your expenses from quarter to quarter

Now that you have all your business expenses and earnings filtering through to one business bank account (or multiple, depending on the size of your enterprise), it’s now time to set up your financial management processes. This refers to all the processes involved with evaluating your company’s recorded income and expenses and organising this information across hard-copy and/or digital files that pertain to individual financial quarters.

Maintaining this practice can help you pinpoint any excessive expenditure with greater certainty from quarter to quarter. For example, if you have suspicions that a particular department in your company is spending unnecessarily, you can review their expenses alongside those recorded by another department within a given fiscal quarter.

This practice can naturally also help streamline the process of filing your business tax returns come the end of every financial year. No longer will you have to waste time chasing down receipts so that you can back up a tax deduction. From here onwards, you should have everything you need thanks to the expense and income tracking processes that you’ve been able to put in place.

Don’t overextend yourself when it comes to business loans

All seasoned business owners know that generating a consistent cash flow is one of the most challenging aspects of managing your own business – especially if you’re a smaller or medium-sized enterprise. If you do ever experience issues with your cash flow, then it’s highly likely that you may turn to financial lenders for a little bit of external support either for weathering the storm or for funding strategies for development or innovation. 

And whilst business loans can provide a lifeline for your business during its earliest stages or at times of economic downturn, there are some undeniable dangers associated with taking out these financial liabilities. For starters, taking out a business loan will impact your company’s ratio of assets to liabilities for the duration of your loan repayment period. This can, in turn, affect your ability to attract any new investors or buyers, if you’re hoping to organise a company acquisition down the line.

If your company is experiencing ongoing issues with cash flow, there’s also no guarantee that you will be able to pay off your loans, which can in the worst-case scenario, result in your company going into liquidation. And we’re not just trying to fearmonger here. Financial management is all about maintaining a balance between your incoming and outgoing funds. So if the balance is skewed towards the latter side of that equation, then it’s probably best to avoid taking on any additional debt.

Be realistic about the cost of growing your business

That brings us to our final point and one that most entrepreneurs will often find themselves grappling with when they’re on the verge of success: understanding the real costs of business growth. It can be so easy to become idealistic about funding the growth of your business, but the reality is that not all investments made for the sake of your company’s growth will be likely to yield a high return.

With that, it’s important not to put all your eggs into one basket, so to speak. In other words, don’t overinvest in one facet of your company’s growth potential. Keep your business growth strategising broad and multidimensional rather than hyperspecific. And this advice is doubly applicable to small businesses that are less likely to have the resources required to maintain an aggressive or proactive growth strategy.

And if you are wondering whether the cost of additional overheads or new staff factor in here as well, then you’ve hit the nail on the head. Whilst there is some value in the age-old adage that you ‘gotta spend money to make money’, you also want to make sure you have adequate financial resources to respond to other opportunities that may arise before your competitors do. Yes, it pays to be a baller, but the best ballers are those that are agile and ready to make moves when they need to.

As we’ve mentioned throughout this guide, financial management is all about balance. Learning how to look past the numbers and engage with the reality behind your company’s figures can help you maintain a healthy balance between your earnings and your outgoings. And it is this ability to maintain balance that will help your company grow organically, that will help you helm a larger enterprise as your billings grow in suit. That is without a doubt, the most sustainable way to transition from a startup entrepreneur to a bonafide CEO.

Getting your finances in order

The first stage involves understanding exactly what your incomings and outgoings are each and every month. Equipping yourself with this knowledge will make it easier to plan, budget and take control of your money. 

Make sure you take into account bills, rent or mortgage payments, food shopping and travel costs. You’ll also need to consider any loans you might have, including online loans and credit cards, so you can develop an effective budget plan. 

This will help you see where you spend most of your money and can even flag any frivolous spending that can be easily cut back on. If you find that your outgoings outweigh your incomings, you’ll need to work out a plan to reduce your spending. Simple suggestions include walking instead of taking the car, where possible, taking your lunch to work instead of buying from the café, or reducing your nights out. 

Set up a budget

Once you know your total income after essential outgoings and expenditures, you’ll be able to create a budget. Allow yourself a set amount to spend on non-essentials or luxuries such as eating out once a month, a night at the cinema or an occasional treat. Not factoring this spending into your budget is unrealistic but setting yourself a reasonable and affordable limit will help you stay on track. 

It’s important to consider any big events in your budget such as Christmas, weddings, birthdays or holidays. Planning ahead will help you save and limit any unexpected costs. If you use credit or debit cards for most of your spending, you might find it useful to make note of your transactions throughout the month, so you know how well you’re sticking to your budget. 

Start saving

It’s not easy to save money, especially with high food costs and the increase in bills. However, putting even a small amount away each month will contribute to positive financial health in the long term. 

Start small and set a realistic goal so you don’t become disheartened. Once you’ve paid off any outstanding debts or loans, you can increase your savings amount each month. 

Managing your finances can be stressful, particularly if you’re struggling to keep up with payments or afford everyday essentials. If you’re feeling like you’re not in control of your money, it’s important to seek advice from your bank or from a specialist charity such as Citizens Advice

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Phil McGovern is the Managing Director of MPA Financial Management Ltd., a financial services company based in Warwickshire, United Kingdom. The firm started in 1998 but since 2010 the company has grown rapidly - from managing £40M to currently managing £380M on behalf of clients. Here Phil tells Finance Monthly’s readers more about the services that his company provides and offers his tips on
retirement planning.

Can you tell us more about MPA Financial Management and the services that it offers?

We believe in employing people who have high emotional intelligence and can relate to normal people. We spend a lot of time and money training our staff to high levels of educational achievement through the CII and we have a strapline of Inform, educate, inspire. We want to inform, educate and inspire our clients and staff to meet their long-term goals of financial and personal satisfaction.

We mainly manage money on behalf of clients in various tax wrappers and 70% of our business is pension-related. We also offer the full range of mortgages, life and health protection but over the years pensions and investments have grown substantially.

We offer 3 main services on the wealth management side:

-MPA Private Client for clients with investable assets in excess of £500,000 pa. They are offered quarterly reviews, access to discretionary fund managers or model portfolios or bespoke offerings. We also arrange special lunches with fund managers and industry speakers and access to other professional services.

-MPA Wealth offers pension and investment services from £75,000 to £500,000. We usually recommend a Model Portfolio service from our panel of MPS (5 companies) which are risk rated against Distribution Technology. Clients will get annual or biannual reviews (depending on size).

-MPA Lite is a cost effective solution for small portfolios which uses 7IMs passive risk rated portfolios, under £75,000 in size.

We also run a post retirement investment solution that combines Prudentials PruFund Growth (40%) with Brewin Dolphin Balanced, reducing volatility down by 2/3 and performance by 1/3 (as against using Brewins only).

We offer whole of market mortgage service and a will writing and probate service. We are increasingly involved in long-term care planning.

We are pension transfer specialists and have advised many clients on the merits of transferring out (or not) of defined benefit schemes.

 

Can you outline the process you go through to assess your clients’ current financial situation and assist them with identifying financial goals and concerns?

We complete a comprehensive factfind in the early stages trying to ascertain, in the clients’ own words what they are trying to achieve with their finances.

We spend a lot of time trying to work out the clients’ attitude to investment risk and their capacity for financial loss using our own in-house questionnaire.

We then recommend investment solutions that will match their risk and long-term plan and recommend the tax wrappers that are the most tax efficient way of investing the money.

We then ensure that we monitor the performance of the investments, and the tax consequences on an ongoing basis so that they meet their goals. We spend a lot of time communicating with them to keep them happy about their investments and helping them understand how they react as they do

 

How should individuals plan for early retirement? What options are available above and beyond a pension?

Ideally, they should start early. Many clients come to us just before or at retirement and want us to manage the money for them when the wealth has been built up.

There are many ways to structure a retirement plan. We tend to use ISAs, OEICs, investment bonds, EIS and VCTs to get a balance between risk, reward, income, growth and tax efficiency. We will also use investment property as another asset that can generate income and capital growth.

Advising on DB transfers has become a large part of the advice process in the last 2 years while transfer values are so high and that has to be factored in to the advice process.

 

In your experience, are individuals fully aware of their assets and worth so that they can take advantage of tax planning? Which types of assets are usually missed?

No, in my experience they do not understand the difference between all the tax wrappers we use. They generally have an idea of worth but we take a lot of time explaining the strategies that we use to maximise returns and minimise tax.

Maximising pension contributions using carry forward is complicated and they don’t understand that. Also, the planning for high-earners’ pensions and the Lifetime Allowance is something they don’t understand.

We maximise ISAs and invest other monies in a general investment account and use this to fund ISAs each tax year. This works up to £250,000 but over this CGT becomes an issue. Therefore, we then use investment bonds as a very tax efficient income generator.

We use AIM portfolios for IHT planning alongside trust work.

 

What solutions do you offer in respect of maintaining and growing wealth for future generations of the same family?

We can aggregate asset value for family members so that they can benefits from large fund discounts. Discounts start over £500,000 and children with an ISA for £20,000 could get the investment with no initial charge and a reduced ongoing charge with Family Discount.

We have joint meetings with children so that if anything happens we have met them.

Also, trust-based work and long-term care leads to dealing with the children and beneficiaries.

 

As a Managing Director of MPA Financial Management, what are your key responsibilities? What does a typical day look like for you?

My key responsibilities include managing the day-to-day business, the finances, recruitment, marketing, strategic planning, discipline, investment management and also looking after a large client book.

I sign off all the DB transfers for the company and get involved with compliance and process for DBs.

A typical day would be as follows:

-Wake up at 4am, check the company bank accounts to see what money has come in today;

-Leave for office at 7.30;

-Catch up on emails and paperwork. Probably review sign offs for DB transfers sitting on my desk (usually at least 6);

-Write financial planning report for a client;

-Go on various platforms to check on performance of various portfolios;

-Maybe have a review meeting with a client. Administrator will prepare paperwork, so will check for accuracy. Check Intelliflo back office system for notes of previous meeting. Look at Analytics for research on portfolio;

-Meeting with client lasts usually 1 hour. Pass on notes to admin and any work to do;

-Have meeting with Admin manager for updates on how things are going. Deal with any issues;

-Talk with Office Manager for any logistical issues need to know about;

-Constantly replying to emails from clients or reps;

-May meet with rep from investment company;

-If any spare time, I tend do some investment research or talk to clients;

-Get home at around 6pm and carry on responding to emails I have missed.

 

What is your vision for the future of the services that MPA Financial Management offers?

I want us to be a firm that is respected countrywide for the levels of service it gives to clients and the level of ethics it employs in dealing with everyone. I want us to help more and more people reach their financial goals without having sleepless nights.

Our long-term target is to reach £1BN in funds under management and to keep striving to drive down investment costs for clients.

 

Website: http://www.mpafm.co.uk/

Britain’s 5.3[2] million strong army of sole traders and micro businesses estimate they’re spending the equivalent of 2.5 million working days collectively each month on managing their finances, a figure which could be a serious underestimation according to KashFlow.

KashFlow commissioned a study among sole traders and owners of businesses with less than ten employees, to get a better understanding of the pressures they feel when it comes to things like balancing their books, managing cashflow and doing their annual tax return. The study uncovered some surprising findings. Despite almost a third (32%) admitting that managing their finances leaves them feeling stressed, only 6% rated their finance management abilities as ‘not good’ – with 87% rating themselves either ‘really good’ or ‘not bad’ at doing things like keeping on top of cashflow, managing payments and staying compliant.

As part of the study, KashFlow considered the list of jobs that are part of financial management for sole traders and micro businesses, all of which they say they’re currently fitting into less than half a day a month. These include:

As a business management tool, KashFlow makes all these tasks quicker and easier, with the exception of competitor price analysis and reviewing supplier costs.

Oliver Shaw, CEO of KashFlow said of the findings: “It’s really encouraging to see that many of those we surveyed feel confident and in control when it comes to their business finances, especially as we know it’s not their favourite thing to do. However, the figures suggest that many could be underestimating how long they actually spend each month, or perhaps overlooking important finance management tasks which will help them stay in better control of their business in the long term. We know that they would far rather be earning money doing what they love than staring at a spreadsheet. It’s one of the reasons why software like ours exists; to make the time intensive and tricky things easier for people.”

KashFlow say the impact of non- compliance on small firms and sole traders should not be underestimated, with penalties being enforced for late payment and filing, or mistakes with a broad range of things including tax returns, statutory accounts to Companies House, PAYE, P11D and National Insurance. These can have serious consequences for micro businesses, a sentiment echoed by Roy Maugham, Tax Partner at UHY Hacker Young who recently said, “There is increasing pressure on small and mid-sized businesses to spend their time and money on systems to ensure that tax affairs are accurate and up to date. Without adequate care, small businesses are at risk of being pulled up over minor mistakes or small disparities, which could incur disproportionately heavy fines and penalties.”

Oliver Shaw concluded: “Sole traders and micro businesses make a huge contribution to our economy, and our research shows they’re a really passionate and motivated group, who love being their own boss. Staying on top of their finances is vital for them to be compliant and ultimately, stay afloat, so they should consider tools that allow them to do it in a smarter and more efficient way.”

(Source: KashFlow)

[2] https://www.gov.uk/government/statistics/business-population-estimates-2016

Right from the beginning decision makers in business played a vital part in progressing revenue, whether in ancient Greece or today, but they weren’t always the same guy that took care of the books. Here Tim Vine, Head of European Trade Credit at Dun & Bradstreet delves with Finance Monthly into the history of the CFO, and the prospects of financial management for the future.

Corporate structures have changed dramatically over the last 150 years – and so too have executive roles. Even in the last few decades, we’ve seen CIOs go from being a rarity to a mainstay in the board room, and now we’re even seeing the growth of new positions like the Chief Digital Officer and Chief Information Security Officer. The CFO role has changed dramatically, as well. From financial guardian to strategic partner and key adviser on the future direction of the business: the role of the CFO has come a long way in a short space of time. So, how is the current business environment shaping the role of the CFO and what will financial directors need to focus on in the future to secure business success?

The history of the CFO

How has the CFO role shifted over the years? For most of the twentieth century, the CFO position didn’t actually exist. Instead, financial managers oversaw bookkeeping and were responsible for annual budgets. They were, for the most part, removed from the decision-making process, and only became more influential when financial regulations became more complex. The position of CFO first emerged in the 1960s and became much more common in the decades that followed. Financial leaders now occupy a key role at the heart of most organisations, and are expected to keep tabs on the big picture as well as the minutiae of every department. No other senior position offers quite the same degree and breadth of strategic insight.

Over the past decade, much has been said about the changing role of CFOs. Long gone are the days in which CFOs were tasked solely with financial management and reporting; instead, the responsibilities of today’s financial officers can stretch from investor relations to strategic growth.

The evolution of the CFO

The drivers for the increase in scope of the CFO role are as plentiful as they are diverse. From increasingly stringent regulations and the impact of globalisation to the transformation of business and industry, the evolution of the CFO role has been a necessary response to the growing demands of a rapidly changing world.

A natural consequence of this evolution has been the need for CFOs to expand their scope. They have had to step up and bear the burden of increased responsibility. Although their role may have become more integral to the success of the business, expectations and pressures to deliver have also multiplied.

More recently– over the past three years, to be precise – CFOs say they have experienced a “significant” (53%) or “some degree” (44%) of change to their roles according to our latest research. Many (59%) respondents reported an increased array of duties, noting that their role now necessitates greater prediction and management of risk and compliance issues, or that they are increasingly being asked to drive the bottom line as well as the top.

As a result of this increased pressure to take on a larger breadth of responsibility, the plethora of the CFOs’ responsibilities now includes everything from taking a more strategic role in their business and working in a multidisciplinary function to analysing customer data and leading strategic mergers and investments.

The current state of play

As CFOs’ roles continue to expand, they cannot to neglect the day-to-day responsibilities that have previously defined their function. When asked to make a like-for-like comparison between their primary obligations now and three years ago, CFOs provided little evidence that they are under any less pressure to perform their ‘core’ tasks, despite growing expectations about what else they can deliver. Our research found that when listing what CFOs see as their main responsibilities both three years ago and today, they identified only slight changes between the two. The usual daily accounting and treasury tasks are just as relevant today as they were a few years ago, but compliance rising in rank to occupy third place and controllership falling to eighth.

While organisations seem to be increasingly reliant on the expanding skillset of the CFO to help them deal with external pressures, many respondents suggest that they aren’t being provided with the requisite level of support to conquer those challenges. Our research highlighted that resource issues are one of the biggest struggles facing CFOs. They do not have a large enough team to carry out all of the work, and time pressures inhibit them from completing the tasks effectively. Moreover, more than a third feel that they are struggling under the pressure to find new growth and revenue opportunities, with 31% noting that they are asked to be experts in too many fields. CFOs suggest that an increasingly broad remit is making it difficult to focus and ensure the direction of the finance function. In fact for many (56%) feel that their employees don’t have access to the tools and technologies that could help them, in spite the fact that a significant majority (84%) say technology solutions are vital to their data analysis and smart decision-making.

What is also evident from the research is that CFOs are concerned with having to meet the seemingly unrealistic expectations which the board has on the finance team. This is further compounded by a trend in team size reduction, with almost two-thirds of respondents sharing that their team size has decreased in recent years. Essentially CFOs are being asked to do more than ever before, all while seeing their resource levels shrink.

Looking into the crystal ball

Looking ahead, data is going to play an integral part of the CFOs’ role in years to come. It is true that the importance of data has already been established; more than a quarter of respondents say that data analysis has become an increasingly vital part of their responsibilities. Many suggest that analysing data it is now one of their day-to-day tasks – and this is only going to increase.

As it stands, over 90% of CFOs state that data is either “extremely” or “somewhat” important in helping them make smart decisions and forecasts.

But data isn’t just about forecasting. It can help finance leaders to better understand customers, gain a better understanding of the market in a globalised world, and improve the organisation’s operational efficiency. Data is also essential in helping identify new revenue opportunities.

Setting the scene for success

The role of the CFO is undoubtedly in a state of change. As it continues to evolve, conflicting priorities, growing expectations and shortfalls in essential resources are creating a high-pressure, high-risk environment: one in which the consequences of poor decision making are becoming ever more significant, such as was the case with General Motors and Enron for instance. In fact, over half of CFOs surveyed feel that it is just a matter of time before a serious mistake is made due to a lack of staff and resources. Providing finance leaders with the data, tools, time and technology to do the job to the best of their ability should be a boardroom-wide concern, given the critical role they play in an organisation’s success.

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Finance Monthly is a comprehensive website tailored for individuals seeking insights into the world of consumer finance and money management. It offers news, commentary, and in-depth analysis on topics crucial to personal financial management and decision-making. Whether you're interested in budgeting, investing, or understanding market trends, Finance Monthly provides valuable information to help you navigate the financial aspects of everyday life.
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