It Truly Is As Simple As Effective Management!
Success in dentistry depends on the ability to properly manage both the clinical and practice management aspects of your practice. And, when it comes to dental practice financials, there are a number of moving parts one has to pay attention to - income, fees, overhead, taxes, insurance reimbursements, payroll, etc. Because, even if you’re the best dentist in town - spending incredible amounts of time and money on improving your clinical skills - if you don’t manage your money, you’re not going to be able to build and maintain a profitable, financially sustainable practice.
Fact is, patients don’t respond only to clinical skills! In fact, most patients cannot differentiate between a dentist who has taken 1,000 hours of continuing education in the past year and a dentist who has taken only 20. Majority of dental patients will never know if they've received inferior treatment unless they are informed by another dentist.
Advancing your practice management skills along with your clinical training is essential to growing a successful dental practice! Every decision that you make on a clinical product, technique, or piece of equipment has direct practice management ramifications on things like patient satisfaction, efficiency, and overhead control. Similarly, every practice management decision will have direct clinical applications as well.
It is this constant balance of clinical and practice management skills that you need to hone and improve that will dramatically enhance your ability to diagnose and treat patients while at the same time motivating and leading patients to optimal dental health while "managing" the most important aspect of the practice management...profitability!
Enter The Consultant!
When vetting prospective dental clients and assessing current financial practices of the dentist, EHM most frequently finds three factors omnipresent:
- Failing to operate within net
- Failing to pay themselves a salary - more often taking "draws", "disbursements" or "distributions"
- Using the practice as their personal ATM
Few dentists are financial experts — so how can they be expected to know how to manage their money in the most efficient way possible? Hiring an expert such as a seasoned management consultancy is especially important to help create financial benchmarks and pathways with which to achieve financial success. Of the dentist's EHM engages, the main action they seek for managing their practice’s finances is hiring a firm with financial experience, preferably one with specific dental practice expertise.
One caveat here is that the "expert" you hire should not be your buddy, or the "local marketing girl" who meets weekly with you and your peers for cocktails and appetizers. What you end up with here is not a financial adviser, but "friends" selling you fun.
Outside of a management consultant, EHM recommends a few essentials to assist with optimizing your dental practice:
1. Dental Practice Management Software
Even if you have an accountant to advise you on financial matters, you still need to give them the hard data they need to assess your practice’s finances. Using the right software, you can easily track expenses, revenues, and other financial information to provide your accountant with an accurate view of your income and outcome.
Depending on the PM software you use, it may have its own accounting features, or it may integrate with other accounting software such as QuickBooks.
2. Track Important Practice Metrics
Stay on top of your day-to-day and month-to-month financials by tracking important business metrics that affect your profits. One of the most crucial pieces of data to pay attention to is your P&L (profit and loss statements)!
Some of the other smaller data pieces that go affect your P&L (and which you should also pay attention to) are as follows:
Fixed expenses — Expenses that do not change month to month (utility bills, rent/mortgage, loan payments, etc.)
Variable expenses —Expenses that may change based on your monthly production (lab bills, supply bills, staff pay, etc.)
Over-the-counter (OTC) collections - OTC collections should be 45% to 55% for fee-for-service practices.
Patient stats — This include new patients per month, number of patients seen each day, and cancelation rate
Treatment presented vs. treatment accepted ratio - atio of treatment presented vs. treatment accepted should be 70-90%.
Number of new inquiries vs. number of new appointments scheduled - Average practice may lose as much as 10% of its patient base through normal attrition — aim for 15% new patient growth to offset this.
Ratio of perio production vs. overall hygiene production - Perio/hygiene production should be at least 30% perio services.
Doctor production per hour - EHM average dental client production per hour is $425 with about 18% achieving over $550 per hour.
Hygiene production per hour - verage hygiene production per hour is about $121
Unscheduled time units - Monitoring production vs. payroll hours provides a wealth of information as labor represents one of your largest financial liabilities
Accounts receivable - Collection should be at 97-99% with less than $2,500 at 90 days
3. Set Realistic Fees and Salaries
Fee schedule and salaries are some critical factors affecting your dental practice’s revenues. Fees are usually calculated by fee averages for the area and based on insurance reimbursement rates for fees. Salaries are based largely on the going rate in your area as well.
With regard to setting fees, many fee-for-service dental practices establish fees based on what is the "going-rate" in their service area. Problem here is, what Dr. Jones charges doesn't really factor into your bottom line - your overhead may be twice that of Dr. Jones and his lower fees won't pay your bills! Being the lowest in your area is akin entering a race to the bottom. EHM can help you establish the appropriate fees and salaries for your practice.
4. Invest in things that increase your revenue
"You have to spend money to make money". Yep, the old adage is indeed accurate! But, when it comes to running a practice, what things do you need to spend money on in order to optimize revenues?
- Make patients happy, and
- Boost practice visibility, both online and off
Specific advice in this area:
- Form relationships with repeat patients by offering them discounts on some services may generate referrals.
- Participate in charity events in the community, volunteering, etc. People will notice you and come to your practice as a result.
- Invest in technology and facility improvements.
- Invest in quality staff — caring, qualified dentists and staff that truly connect to patients make them feel valued and respected.
- Effective marketing campaigns
5. Controlling Overhead
It may seem like a no-brainer, but many dental practices often neglect to save money. Interested in the latest digital scanner for your practice...need a new autoclave or server? What about your retirement?
Is your dental practice on track for financial success in 2018 #weshouldtalk