StudentDC Interactive

A soon-to-be grad brought me an interesting dilemma the other day.  Here is the choice he was given:

Pay Package #1.  Base plus 35 percent incentive on the monthly collections of the entire office.

Pay Package #2.  Base plus 50 percent incentive on his collections each month.

In other words, is it better to get a greater incentive based on your own work or a lower incentive, but based on the work of the entire office?

After quite a bit of thought, I figured out that it is a classic investment dilemma:  Are you willing to take more of risk for a higher reward or less risk for les of an award?  Another way to state it is:  Would you rather take the sure thing (getting paid based on the office as a whole), or take a chance (what if you can’t produce enough to get the incentive each month?)?

The risk, of course, is in what you think you can do to bring in patients on your own.  If you can bring in a lot of patients every month, you can do really well.  But if one month you are sick, or have a family issue that takes you away from the office or prevents you from marketing, you will only receive your base. 

There may be other considerations I am missing.  I would like to know what  you think - which would you take?  I will tell you what this doctor decided and why, in a later post.

It is a great time to be a chiropractor!  Not only are you in the position to lead patients to better health, but you can make a profit doing so.
Forbes Magazine has named chiropractors and other “alternative” health care providers as one of the 10 most profitable types of business.  Chiropractic (and the other related professions) came in as #5 with a 17.5 percent average pretax margin. 

Here is the article:  The Most Profitable Businesses to Start

It is not surprising to me that chiropractors are listed as more profitable than dentists.  As you look at the top businesses on the list, you’ll notice that most are professional firms (accountants and lawyers top the list) and many are in the health care field (doctor’s offices, dentists, medical services).  Having the professional background and business expertise to run a successful chiropractice practice is a path to success.

The answer is:  probably, but you will have to pay more to do this.  (In interest, I mean.)Here are some suggestions to work on to increase your credit rating: 

50 tips

Ways to increase your credit score

I was asked if putting your student loans into deferment or forbearance would have a negative effect on your credit rating.  As usual, I have to say “it depends.”  In this case, it seems to depend upon the lender, and the credit rating service. 

First, you will need to understand the difference between deferment and forbearance.

Deferment is a time when you can suspend payments on student loans.  This is the more common situation, and you can get a deferment for such reasons as being in school, graduate studies, and economic hardship.

Forbearance is another way to get your loan payments suspended, and it is usually reserved for situations when deferment cannot be granted.  Here is a good website which explains both situations in more detail:  http://studentloan.citibank.com/slcsite/repay/defer/1a6b.asp 

Be aware that, in both cases,  interest will continue to accrue on your loan, and it will need to be paid at some point.  So the amount of your loan will continue to increase, even if you are not making payments for a time.

If the credit bureau (Experian, Equifax, or TransUnion) sees that you are not making monthly payments on a loan, they may consider this a negative.  You would have to write the credit bureau and explain.  If you otherwise have good credit, it probably won’t affect it much.  If your credit score (FICO) is low, it would be another thing that would lower your score even more. 

Here is a good article from eHow with some suggestions:   http://www.ehow.com/how_2002591_avoid-loan-deferment.html

I wondered when several students talked to me about the “new” transition loans for health care proviers.  So I talked with someone at Wells Fargo.  Here is the deal:

These are nothing more than “unsecured” (no collateral) personal loans or lines of credit.  The “hidden” cost is the interest rates - depending on a lot of factors, including your credit rating, the rate is over 11 percent.  Yikes! 

Think carefully about adding another loan to your credit rating just before you go to the bank.  Instead of taking on more high-interest debt, cut back on your expectations, borrow less money, live frugally for a couple of years. 

If it seems too good to be true, it probably is!

I am not sure where this loan started, or who is funding it, but it’s a great idea.

Students have been telling me they can get a “transition” loan of up to $15,000 from NELNA or Key Bank.  The loan is a variable rate, right now at 11.5%, with a 20-year term.

I will keep you posted as I find out more information.

There is a little-known section of the IRS Code that gives small businesses a break on equipment purchases. It’s called Section 179. Here is how it works:

If you buy equipment for your practice, up to $500,000 this year, you could deduct a portion of the cost, up to $125,000 on your taxes. Here is more detail on what equipment can qualify, from Crest Capital:

“Tangible Goods financed by Equipment Loans or by most types of Equipment Leases (Non-Tax or Capital Leases) qualify for this deduction. Examples of Non-Tax (Capital) Leases include a $1 Purchase Lease, an Equipment Finance Agreement (EFA), and a 10% Purchase Upon Termination (PUT) Lease.”

The “catch,” if there is one, is that the total cost of the equipment you want to expense can’t be more than your total taxable income. To see how this deduction might affect your new practice, click on this link for a deduction calculator:

http://www.crestcapital.com/tax_deduction_calculator

For more information on this and other tax questions for your small business, check out my favorite tax link: www.taxgirl.com.

And of course check with your tax advisor. This is one of those things you can’t make a New Year’s resolution about. You just need to do it now.

The question of the day was:  I am ready to start my practice, but I really don’t want to have to pay a CPA.  Can’t I do my taxes myself with good accounting software?

I’m always curious why chiropractors think they can do it all themselves.  You were trained as a chiropractor, not an accountant.  Even if you are starting out your chiropractic practice as a sole proprietorship, you need an accountant, and you REALLY need a CPA.  So what’s the difference?

An accountant or bookkeeper can do your monthly/quarterly accounting and help you with payroll taxes and some other tax filing, but a CPA has to keep up to date with tax issues and is able to go with you to the IRS if you get audited.  If you think taxes aren’t complicated, here is a site that lists federal, state, and local taxes, called “Tanned Feet.” 

By the way, a CPA is not a financial planner, although many can give you tax advice.  A financial planner can help you figure out how to set up pension and profit sharing plans, and 401k’s and all that tax-shelter stuff.
Here is my suggestion:  Find a local CPA who has a bookkeeper on staff, someone who can help you with QuickBooks or other financial software.  At some point when you start to make lots of money, start looking for a financial planner too.