Financially Adjusted

#51: HOW SINKING FUNDS CAN HELP YOU IN YOUR CHIROPRACTIC BUSINESS

• Leslie Roth • Episode 51

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In this episode of the Financially Adjusted Podcast, Leslie breaks down a simple yet powerful strategy every chiropractic business owner should be using: sinking funds. Learn what they are, how they help protect your cash flow, and how to set them up to prepare for irregular but predictable expenses like taxes, continuing education, team bonuses, and equipment replacements. If you’ve ever been caught off guard by a bill you knew was coming, this episode is your financial reset.

What You’ll Learn:

  • What a sinking fund is 
  • Examples of sinking funds every chiropractor should have
  • How sinking funds protect your cash flow (and your sanity)
  • The 5 steps to set up your sinking funds today

Tools and banks that make it easier (hint: check out Relay)

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Disclaimer: This content is for educational and informational purposes only. Please consult with an accounting professional for direct advice based on your specific business situation.

Hello there, my friend. I am so glad you're here with me today for the financially adjusted podcast. Be sure to hit subscribe if you haven't already done that so you don't miss out on valuable financial tips and strategies for running your practice. And also share it with a friend. Share the love.

If this is helping you you likely have a chiropractic business friend who it would help as well. So be sure to share the show, and I will get right into today's topic because it's a really important one. It's all about sinking funds in your business and why they're incredibly helpful for you. If you've never heard of a sinking fund, I'll first clarify exactly what that is, and then we'll move on and talk about some strategies. So think of this as like a labeled savings bucket that you set aside for very specific and predictable expenses.

You know they're gonna be coming, and it's just not every single month and recurring. So it's not an emergency fund. It is not just a savings account, but it's really a prevention and preparation strategy for those moments that you actually can see coming. You're preparing for what you'll likely need money for in your practice and your preventing yourself from having to scramble and then go into debt when known and predictable expenses come due.

As a business owner, you know how it goes. Your adjusting table breaks down.

Your malpractice premium is due, whether that's annually or quarterly. It's coming, and you know it's coming. Or your continuing education course snuck up on you again and you did it the past couple years, but somehow it just snuck up on you. Your front desk computer is making funky noises, and you're not sure how long it's gonna take before it breaks down, these aren't actually surprises, my friend. They are irregular expenses that you need to prepare for.

Sinking funds can give you that breathing room and that peace of mind when it comes to covering these expenses, and it protects your cash flow. And cash flow is simply the timing of when money's flowing in, money's flowing out, your bills are due, and how much you have flowing in at the time those bills are due. And the timing of all of that pretty much. So sinking funds will keep you from having to throw it all on a credit card, deal with it later, which that is not being in the driver's seat of your business. And I have plenty of other podcasts where I talk extensively about debt and how to manage your money properly so that you're not digging a hole.

But usually, it just means dealing with it more expensively if you're not prepared for it. So you know it's coming, and there's absolutely no reason why you shouldn't have that set aside. So I will break down some examples that might sound familiar to you. Continuing education. CE credits don't sneak up on you.

You know you have a certain amount that you have to fulfill every year You know you're going to need to pay for that edge education most likely on some level, whether that's a seminar that you travel to and know, you need to pay for hotels and meals along with the seminar. Not to mention while you're there, you're not working with patients and bringing in revenue, so you have to account for that lessened revenue for that time period. Or you might have a continuing education that you just do online, but you still have to pay for it. So that might not be as big of an expense, but these are some things you need to think about ahead of time. And when you travel to seminars and continuing education stuff, even if you have an associate to pick up some of that slack, it really could still mean decreased revenue for you because if you're both seeing patients regularly, you're still gonna take that hit for that particular month.

Plus then have those extra expenses for the education and the trip. So when it comes to planning for stuff like this, if you know okay. I go to the seminar every year or I'm going to plan to do two seminars where I travel to them. You need to think about that ahead of time you so that it doesn't take you off guard. And you're scrambling in a couple of different ways where you have that lessened revenue, and you have to cover the expenses.

Alright. When it comes to malpractice insurance, every single chiropractor in business has this, and you most likely are paying for this on a quarterly basis. Some people do pay annually, but I've seen it mostly quarterly. So let's say it's four hundred and fifty dollars per quarter. That should shake out to about eight hundred eighteen hundred dollars a year, This would be a hundred and fifty dollars a month that you'd be saving in a sinking fund instead of having to come up with that four hundred and fifty dollar chunk of cash each quarter.

And this may not sound like a lot, but let's say you have that situation where you haven't planned for your continuing education. You haven't planned for your malpractice insurance. And let's just play devil's advocate and say that that all happens in the same month. So not only have you not prepared for all of the expenses that come with that traveling, continuing education trip, or the malpractice insurance, but you also take that hit of not seeing patients for that week or the four days that you're gone. Well, then that just piles on.

So it's not just a little bit of money that you have to come up with in your cash flow that didn't that you didn't prepare for. It's a few different things, and you have less revenue. So you can kinda see how this can get out of control and can really disrupt your cash flow and your peace of mind. And just have you playing catch up with your finances. And that's never a fun situation.

Situation to be in.. This can be avoided very easily, which is why I'm doing this podcast because this is something that a lot of people, they don't think about that. They don't plan for it, but they're likely affected by it. If you are a chiropractor running your own business, I would almost bet money on the fact that you have come upon this situation at some point in time running your business.

So make it easy on yourself. Take these expenses that I talk about today and start breaking them down with how much do you have to save every month in a sinking fund so that you can cover these expenses. We can also throw equipment replacement into that mix. I know you have adjusting tables. I know you have laptops.

Office chairs, furniture,. All of these things that are wearing down over time. You might not have to replace those next year, but you know eventually these are gonna be things that you do have to replace in your business. So if you don't have a sinking fund for these, you pretty much don't have a plan other than you are going to mess with your cash flow during that time that you have to replace it, or you're gonna go into debt. So you're gonna be putting yourself into a situation where you're not getting ahead with your money.

You are taking steps backwards, really, if you're in that situation. And then when it comes to other annual expenses like team bonuses or holiday gifts or quarterly and annual taxes. That's a big one. Like, you know this stuff's coming. And if you are someone who likes to reward your staff with bonuses and gifts annually, at Christmas time or, you know, whatever other holiday they celebrate.

Birthdays, whatever it is. That's awesome if you're being generous. I applaud that I think it's great if you're treating your staff well, and I see a lot of chiropractors doing it. You are a generous bunch, and I love that about you. But planning for this will make things so much smoother.

When it's the holidays, you aren't working as much, people are busy with their families and life, and they're not coming in to get adjusted as much. So it's likely that you're also taking a hit in revenue at this time. So planning for those bonuses, those holiday events, things like that is gonna be very helpful to you in getting through cash flow. And then you might hit the beginning of the year. It's you know, you've had New Year's Day and all of these other things going on, so you may be a little less busy at that time as well.

So you want to account for all of these times where you know bills are are coming, you know that revenue's gonna be down a little bit, It's just about thinking ahead. And making life a lot easier for yourself at that time. When it comes to quarterly and annual taxes, this is one of the biggest things that I see throwing a wrench into people's finances. You know those are coming. Most people avoid them, which I get it.

Taxes they kinda suck, and nobody really wants to think about them or deal with them. Once a year, let alone throughout the year. But let's be real. You know that they're coming, and you know you're gonna have to pay that tax bill. So this is one of the biggest things I see tripping up entrepreneurs If you take the time to lay out a plan for yourself for saving for taxes, and paying those estimated taxes and then covering the annual bill.

You will thank yourself later many times over. If you always feel taken by surprise by your tax bill every year, I am really speaking to you. And if you're feeling that pain every quarter when you send in your estimated tax payment because you haven't prepared for it, and then, you know, you're business is taking that hit in cash flow. It does not have to be that way. I'm here to tell you just a little bit of easy planning can make your life so much easier.

So every single month, you've probably heard me say this before. Every single month, you wanna take twenty five to thirty percent of your net profits and tuck that away into a separate account for your tax. So this this sounds simple, but I know a lot of people they get tripped up because they, first of all, don't know what their net profit is. They don't have those regular reports every month. So that's that's number one.

You definitely need to make sure you put yourself into a situation where you're getting accurate up to date reports, because that's gonna be the the first step to making sure that you save money for taxes and you're set up for success. So make sure that you have a good outsourced bookkeeper who's doing this for you and keeping those up to date and sending them to you so that you know what your net profit is, and you can take action to save that twenty five to thirty percent. So you're taxed on that net profit, which which is just revenue minus expenses, and you wanna make sure you set aside that money. If you're an LLC, you probably wanna save more thirty percent. If you're an s corp, you can probably get away with saving more like twenty five percent.

And I won't get into that now. I've talked about that in previous podcasts, but that's in a nutshell what would cover you for tax and then you will be prepared for what you need to send in with your estimated taxes and then covering whatever taxes left over annually when you get your taxes done. But taxes are no surprise if you're, you know, a person exists in this world and you earn income, you have to deal with taxes. So just do yourself a favor. Set that money aside so you are prepared.

but don't let this trip you up as a business owner. If if this has happened to you in the past, this is the time. This is your wake up call. This is the time to change your ways and make life easier for yourself. Now without getting too in the weeds, and getting overwhelmed with all of this, I'm gonna tell you how to set up a sinking fund in some very simple steps.

This likely needs to be something that is in a separate account because let's be real. If you see it in all mixed up in your checking account with everything else, it's not gonna stand out, and you're not really going to truly be preparing for that specific expense. You need to make sure that is set up into a separate account. So many banks will now allow you to have more accounts. If you have a bank that's really limiting the amount of accounts that you can have, I highly suggest Relay, and I have a link in the show notes for Relay.

I use that in my own business and they follow a profit first model. So they allow you to have tons of different accounts, which is great for setting up syncing funds and all these different savings account buckets. So definitely need to look into a bank that allows you to have these bank accounts. Okay. And then what you're gonna do as far as the steps.

Step one is make a list of all of your non monthly business expenses. Those continuing education credits that you need to pay for, the taxes. Take a look around at your office and look at what is getting worn out. All the furniture, the adjusting tables, any any equipment like computers or what you use in your practice. other services.

Think about the life span of that equipment and the shape that it's in, and really think about logically how long it'll be before you have to replace that piece of equipment. And then figure out how much you'd need likely at that time. You can back that out and figure out how much you would need to save every month to set yourself up to have the money when it's time. And the bonuses that I spoke of, the holiday gifts, the holiday events, make a list of all of this stuff that you would need money for. And that's your first step.

List all of that out. Quarterly, annual, whatever that time frame is for replacing equipment, whatever that looks like. And estimate the cost and frequency. Divide that by how many months you have until it's due, and that is what you save for your monthly fund amount. So let's say you know you're gonna give bonuses to your employees.

You have five employees. You give a hundred dollars to each person. You know you're gonna need that five hundred dollars. When it comes time to the for the holidays. So you would need to save all year long for that, and that would equate about forty two dollars a month.

So you're gonna save forty two dollars a month so that you are prepared for those bonuses. But let's say you also throw in event, you throw a party for your employees. Well, you're gonna be saving maybe a hundred and twenty five dollars a month for that if you spend fifteen hundred dollars on taking them out to dinner, you know, renting a space out, whatever that looks like for you. But just think about all of these things. Taxes, we already talked about that.

You're saving twenty five to thirty percent every month of your net profit. And think about your education. Even if you don't go to the same event every year or purchase the same type of you know, seminar or CE event. Or CE course you can roughly estimate what you want to have or need to have for the seminar itself, the course, the travel, the hotel, you know, all of that. And if you're doing any kind of training with your staff, you're probably gonna need a little bit more to account for paying for your staff's flights or hotels or whatever that is.

So estimate what you wanna save every single month so that you have that money set aside. Let's say you do one bigger trip a year. There's a certain CE event that you really like to go to. And overall, it's gonna be about twenty five hundred dollars for you to pay for the seminar, for you to get the hotel and the flight, then you know every month you need to save probably about two hundred and ten dollars towards that so that you have that money to ready to go. So you can see how I'm doing this.

. You just wanna make sure you're listing everything out thinking about it ahead of time, and I recommend you look at this, revisit this every quarter at least. I recommend that you do a budget and that you stay tuned into your budget throughout the entire month. But it's a helpful thing to sit down every quarter and really reevaluate if you have any additional costs that you're not accounting for that don't happen monthly, that you need to save monthly for, but don't happen every month. So, really, step three is budgeting.

And I talk about budgeting all the time. I like to call it a money allocation plan or map because it truly is your business map. You are using that money allocation plan to be in the driver seat of your business, to be the one that's in control of your finances. It's about not letting your money just happen to you or not just being reactive. You're being proactive and this can really be compared with with the health care that you promote.

That proactive health care. If somebody's coming in for regular adjustments, they're gonna maintain a level of health physically and mentally. And the same thing happens with your finances, really. If you're proactive and you're regularly doing these financial adjustments, to your money allocation plan. And you're thinking about what comes ahead, and you're thinking about just maintaining a level of financial health in that you're prepared and you're in the driver's seat, and you're not messing with your cash flow in a way that constantly leaves you scrambling.

That's financial health and peace of mind. So by these regular financial check ins and having a budget, you're doing that. Yourself. You're doing yourself a huge favor in the future. Now when you are doing a budget and you're setting up all of these syncing funds into separate accounts, hopefully, you can label these buckets, so to speak, of what they're supposed to be.

For me and my business, I do an annual bills sinking fund. So this I could label it annual bills, but I do have quarterly bills that I save monthly for, and I just throw them all in here. Now something I also do is I have a separate bank account for continuing education and travel. So I kinda keep that separately. And then I have a separate account for tax.

So you can do this however it makes sense to you. You don't have to have a separate bank account for every single thing you're saving for, like, for an adjustment in adjusting table or a computer. Like, you don't have to open a separate account within your bank just for each individual thing. But, you know, you can have a separate account for the annual and quarterly bills, tax, continuing education. You can have one also for equipment or reinvestment into your business.

So whatever works for you, but these are just ideas to get the the wheels turning, so to speak, for what you can do in your business. Step four is treat it like a bill. So you've at this point, you set up your accounts, you set up your money allocation plan, you want to treat this like a bill. Like, any other bill that's due that month, you treat this the same way.

Like, that is due. No questions asked. That's coming out of your monthly money allocation plan. So, it's in there and you're accounting for it, and you're setting that aside. So being really consistent and disciplined about this is what's gonna make you win and follow through with this plan.

And then step five is don't touch it. You might have something come up where you're like, oh, I'm just gonna pull from this account for this other thing. Try to avoid that as much as you can. Now I understand if there is, like, a true emergency and you have no choice, but this is something that's meant to keep you protected and prepared for each one of these expenses. So if you are really loose and flexible with how you're using that money, then it pretty much negates the entire benefit of it.

So don't touch it. Leave each one of these accounts alone for and use them only for the purpose of what they're meant for. This might sound like a lot. If you're totally new, to doing this, there's definitely gonna be some steps involved, some time involved, that you have to spend setting this up, but I think that you are going to thank yourself for years and years to come if you do this. Sinking funds do more than just keep your finances running smoothly from month to month.

They give you peace of mind. They calm your nervous system as a business owner. And let's be real, being a business owner is really freakin hard, and it's nonstop up and down emotions. It's a roller coaster.

So any place that you can make it easier on yourself, especially if you're not a numbers person. This isn't something like tricky or complex. It's pretty straightforward, actually. So whether you have some, you know, an intricate financial situation or not, you can do this and help yourself win. So even if you have kind of messy finances right now, they're all over the place.

You're not sure like, what you're gonna do, how we're gonna move forward, start with this. It's a great place to start. Just really setting money aside. It may not be perfect right away, but you'll dial this in just like you will with your budget or your money allocation plan in general.

Over time, you're gonna get a lot more comfortable with setting up allocations and where your money is going. But even if you get it wrong the first time, having some money saved towards a goal or you know, a bonus for an employee or a trip is better than nothing. Especially when it comes to taxes. That's something that is a little bit of a bigger issue than just know, having something saved up for a trip. Taxes, that can really mean having a big bill that you're not prepared for every year.

So that is really one that's nonnegotiable. But start saving something for all of these things in your business that you're going to owe down the road. And that is gonna always gonna be better than nothing. Nothing. And that just goes right along with what I say all the time.

Imperfect action is always better than none at all, and this is just one of those things that proves that to be true. So you don't have to be perfect at this, but you do need to try to prepare in your business. And your future self will thank you for that. If my tips and strategies help you and you have that friend you can share it with, please do so. And leave me a review.

If these are helping you, I would really appreciate that. I don't do paid advertisements a whole lot, if any at all, and so word-of-mouth is huge. So, if this helping you, I would really appreciate a share and a review. And reach out to me if there's some question that you have, if there's some way that I can help you work through something financially, reach out to me.

You can find me on Facebook and LinkedIn mostly as Financially Adjusted and Leslie Roth. You can reach out to me via email at support at financially adjusted dot com. But I love hearing from you. So please reach out with any questions, and I thank you so much for showing up and just for showing up for yourself.

You've got this, my friend. And I'll talk to you soon. Have a great day.

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