Are You a Clinician or a CEO? (You Need to be Both)
As an allied health professional in Australia (think physio, psychology, osteo, or speech pathology), your passion is patient care. But to ensure the long-term viability of your practice in a complex funding environment, you must also be a financial strategist. In 2025, a simple Profit & Loss report is not enough.
Your bookkeeping needs to be accurate, but your focus must be on understanding your Key Performance Indicators (KPIs). These are the three essential numbers you must track, understand, and use to drive your practice’s success.
1. The Lifeblood: Provider Utilisation Rate
Your most valuable resource is the time of your clinicians. The Utilisation Rate tells you how efficiently you are monetising that time.
Provider Utilisation Rate = Actual Billable Hours / Available Working Hours
What it means: A high utilisation rate (e.g., above 75-80%) means your clinicians are spending most of their paid time in billable sessions, which drives revenue. A low rate signals wasted capacity.
Bookkeeping Connection: Your payroll and rostering system must integrate seamlessly with your practice management software. Accurate tracking of non-billable time (e.g., admin, team meetings, professional development) is crucial to calculate Available Working Hours correctly.
Actionable Insight: If your rate is low, investigate:
- Poor Scheduling: Are there too many gaps between appointments?
- Excessive Admin: Is a clinician spending too much time on admin tasks that an assistant could handle?
- Cancellations: Is your cancellation policy being consistently enforced and recorded? (See next point).
2. The Risk Indicator: Aged Receivables
Unlike a retail business, allied health often has multiple, complex payers (Medicare, private health funds, NDIS, WorkCover, TAC, DVA, SWEP, private patients etc.). Aged Receivables is the money owed to your practice that hasn’t been paid.
What it means: This KPI tracks how long your invoices remain unpaid and is the clearest indicator of your practice’s cash flow risk.2 It’s typically broken down into categories: Current (0-30 days), 30-60 days, 60-90 days, and 90+ days.
Bookkeeping Connection: Your bookkeeping system (e.g., Xero or MYOB) must reconcile incoming payments from all sources back to the individual invoices/claims. Errors here are common when processing bulk payments from funding bodies.
Actionable Insight:
High 90+ Days Balance: This is a red flag. Implement a stricter collection process. This might require dedicated staff time to follow up with Plan Managers, WorkCover case managers, or insurance companies. Alternatively, should you be quoting before you are creating invoices and adding a patient to a debtors list?
Invoicing Errors: Often, delays are caused by simple errors (wrong provider number, incorrect date, or missing client details) or missed claim opportunities due to a lack of reliable process. A quick review of your high-risk accounts will help you tighten your invoicing protocols.
3. The Sustainability Check: Wages-to-Revenue Ratio
Staff costs are typically the largest expense for any allied health practice. This KPI helps you determine if your wages are sustainable relative to your revenue.
Wages-to-Revenue Ratio = Total Wages & On-Costs (Inc. Super) / Total Revenue (Excl. GST)
- What it means: For a healthy, sustainable practice, this ratio typically sits between 45% and 55% of total revenue. If you are above 60%, your profitability is at severe risk.
- Bookkeeping Connection: This is where accurate payroll accounting is critical. Your Total Wages & On-Costs must include superannuation, annual leave entitlements, payroll tax (if applicable), and workers’ compensation insurance.
- The Payroll Tax Warning: In 2025, state-based payroll tax rules for medical and allied health practices are a major area of scrutiny. Revenue offices are increasingly reviewing contractor arrangements to see if they should be deemed employees for payroll tax purposes. Consult with a specialist accountant to ensure your financial structure and contracts minimise this significant compliance risk.
The Takeaway: By moving beyond simply recording income and expenses, and instead focusing on these three core practice metrics, you transition from a reactive clinician to a proactive CEO, building a financially sound practice that can thrive in the Australian healthcare system.
Read More: NDIS Bookkeeping: Why ‘Good Enough’ Isn’t Good Enough for Compliance
