Practices 'need overdrafts to counter falling profits'

Practices struggling with falling profits should consider taking out overdrafts and slashing staff costs, medical accountants have warned.

Bob Senior, a director at Tenon Financial Services, told the Primary Care Live conference in London this month that growing inflation and the pay freeze would hit profits at least into next year.

'At the moment it's hard to see how most GPs' profits can be sustained and why they should not fall by 3-4 per cent a year,' Mr Senior said.

Practice managers 'need to make sure they either warn their partners that their drawings might dry up, or put an overdraft facility in place. Possibly both,' he said.

Mr Senior said that practices trying to cut costs often focus on bills and equipment, but staff salaries account for more than half of their spending. Accountants warned last month that dispensing practices were being forced to cut staff (GP, 19 September).

Mr Senior urged practices to make better use of their assets, for example by 'hot desking', rather than reserving consultation rooms for specific doctors.

He also warned them not to rely on practice-based commissioning to generate extra income.

'Don't expect it to be there in perpetuity,' he said. 'I personally would not be putting £100,000 into these new structures.'

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