Archive for Dental Office Finance
Reviewing your financials is not an annual event. It’s not a project that needs done once a year when your accountant stops by to pick up your tax paperwork. It is ongoing, behind-the-scenes work that must be attended to throughout the life of your practice. This is in order for it to grow, run profitability and with minimal stress to you, the Dental CEO. It is the backbone of your business; it is that important!
- Select the right accountant: I’ll be frank—don’t pick an accountant because he’s your husband or she’s your neighbor’s daughter. Find and hire an accountant who is assertive and will assist you with actual management decisions. Look for someone who is proactive, makes suggestions and serves as a partner for you.
- Set the expectations: Discuss any related fees upfront. Also, put an agreement in writing that outlines the expectations – create a list of areas you want your accountant to advise and support you on. Are you confused on what to include? Ask: What are your most successful clients asking you to do?
- Build the relationships: Your accounting and financials are an intimate part of your business. Build a confidential, trusting relationship so that you can be up front about any concerns or issues.
12 years of school, 4 years of undergraduate work, 4 years of dental school… In spite of all of this training, dentists often have a limited knowledge when it comes to business.
Little guidance is given to dentists regarding finance, human resources, operations. Dentists are basically thrown to the wolves when it comes to operating a highly profitable business.
Sure, they get financial statements from the accountant and have access to the online banking, but they don’t know what that signifies or how it relates to their dental practice.
Over the next few weeks, my goal with my blog post series is to help you better understand the “business” side of your dental business. I will show you simple, fast tips to improve your dental practice’s profits, operations and most importantly – your success.
Each time I post, I will list a manageable 3 tips for you to implement into your practice – today. As always, I’m here to answer your questions and encourage you. I am passionate about helping you grow a stronger, smoother, more financially successful practice that brings you happiness, freedom and satisfaction.
Identify successful dental practices and other businesses that you admire. Who gives the most excellent service? How do they do it? What ideas can you take away?
New ideas can be life-changing. Sometimes all you need is just one more good idea. A lot of people have quit, when they were only a few steps from success.
My action step for you is to go out and look for some new ideas!!
Nothing is more powerful for your future than being a gatherer of good ideas and information. That’s called doing your homework.
So, how do you do this? Spend an afternoon with your entire team somewhere you admire. (Yes, this can be at the Ritz). Help yourself and your team experience first-hand what good service is really like. I promise this may be one of the best continuing-education investments you make for the entire year!
Here is a thought from Demming: “It is not necessary to change. Survival is not mandatory.” Remember — If nothing ever changed, there’d be no butterflies.
Most business owners and Dental CEOs consider employee costs as a massive expense. They are always looking to minimize that.
Having an MBA, I understand that you want to manage your largest line item in your financial statement. Yet, I don’t want you to be shortsighted in your investment in high quality, long-term, loyal employees.
Money spent on employees will be returned to you–with interest–when you make wise strategic decisions.
Your reward? Your ROI?
- increased job satisfaction among employees
- higher productivity
- lower overhead costs
- increased retention
- elevated customer satisfaction
Did I mention higher profits to the practice?
Get a life!
News flash—you’re just not that smart…and I don’t even know you! Show me the doctor who believes that phrase and I will show you someone who is leading an unsuccessful practice!
You can demonstrate brilliance if you tap into other’s minds. You don’t have to do it all. When you work collaboratively with your team, ask for their input and realize you don’t have to do it all, so many great things happen. One of them is that you are seen as a great leader, who is way above average!!
As THE DENTAL COACH©, I offer you these coaching tips:
- Leverage the strengths of each team member: With their collaboration, find what they are good at and make sure they are performing that task(s).
- Know that when people maximize their abilities, they produce extraordinary results. So take the time to do this!
What does this translate to you? More income for you!
Here’s an e-mail I just received from a client: “We have had our first ‘casualty’ of our new financial agreement. This was with a new patient in for an emergency. We did a resin & she scheduled back for a new patient cleaning. She was diagnosed with a small resin and a Cerec #14. When I reviewed the financial arrangements with her, she was put off by having to provide a credit card, mumbling that her old dentist did not require that. She was not happy, but scheduled a treatment for herself and son, anyway. She called back a week later and cancelled all appointments.”
My suggestion to this client was to revisit, in detail, the conversation that he had with this patient. I coached him to evaluate what he could have done differently. If there was nothing, I asked him to celebrate the fact that he handled it just the way he intended!
Dental patients have been trained to behave certain ways – it doesn’t happen in just your office!
It is our job as Dental CEOs to re-train patients.
You never leave the grocery store without paying for your food; you never get on an airplane without paying for your flight; you never drive away from the transmission shop until you paid for the repair… It is no different for the delivery of our dental care.
When a patient balks at paying for treatment or your financial arrangements, deliver the communication with clarity. Each time you deliver the message, you become more proficient and more comfortable. Each patient is practice. It will happen again – someone will always complain!
And a final note, please don’t let a handful of patients destroy a positive and appropriate approach to minimizing treatment plan discussions, reducing short-notice cancel and failed appointments, and patient upsets.
This works successfully in other offices. It will in yours, too!
I invite you to share what you might suggest differently than the above.
I’ve seen a lot of dentists have financial issues and get stuck in a real bind. But the real issue is not how much money you are making, but what you are doing with it when you get it. What are your living expenses? Where are you spending your money? What are the most important priorities for you and your family? Is it private-school education for your children or fancy cars for you and your spouse?
My observation, through years of experience as THE DENTAL COACH©, is simple: many dentists spend more than they make. According to the ADA, less than 10% of we dentists can retire at the age of 65 and maintain our current standard of living. This is shocking to me! What do we have to show for all of that hard work in dental school and beyond?
Do you know where your practice stands right now, today? What is your largest expense?
The number one largest business expense for a dentist is staff. The average staff cost is between 24-30% (including wages, taxes, benefits, etc.) It’s not uncommon to find dentists with staff costs in the 35%+ range. Unbeknownst to them, their staff expenses are totally out of control! (Check out my book, Killing the Practice Before It Kills You: How Throwing Out My Business Model Saved My Life) to see how I managed staff costs.
The key to finding out where your money really is:
- Pay attention to your largest expense – staff. What can you do to manage this cost?
- Take time to sit down with your CPA and analyze your overhead expenses on a monthly basis. What can you do to make sure that your money is being spent in the right areas?
- Review your Income Statement. How can you ensure that you are living the life you want now, while also saving for the life you want in the future?
If you have an expense management tip that you would like to pass on, please share it in the comments below.
Okay, maybe it is what you think. I bet you immediately thought of “Overhead.”
NOT!!!!!!!! If you are like most dentists.
But do you know what that really means? Yes, you want to keep overhead low, but do you have a clue what kind of number “low” is? Or even the norm? Ok, I bet you listened to one of your “buddies” tell you what you should be doing? Oh, you read an article in one of the dental magazines that quote studies and information that is 15 months past today? Ok, I bet you are getting pissed because I have just hit a “RAW” spot. In reality, you are not looking at your numbers and you hate this stuff…just let me treat my patients.
Keeping your overhead to 60-65% or less is critical. Who is holding you accountable? Mr. Practice Overhead? No…don’t get pissed at me…get pissed at how challenging it is to operate our practices profitably!
Specifically, the biggest piece of that overhead happens to be the allocation of staff costs. Staff costs should IDEALLY be no more than 24-30% (Dr. Charles Blair would tip the end of the scale if you have 2 Full-Time Hygienists) of gross receipts. That is your magic number. Staff costs include: all wages, all benefits, matching social security and FICA taxes; workman’s compensation and any of the Dental CEOs contributions to their benefit package.
Your income statement. (You do have an income statement, don’t you?) If you are the dentist who receives an income statement, and stuffs it in a drawer because you have no idea what to do with it, you are essentially driving a car without a rear view mirror. Not very safe, is it?
Taking a moment to pull out your income statement will help you manage your practice like you would any other successful business – you are, after all, the Dental CEO. When I was studying for my MBA, I learned that managing by the numbers allows you to make better business decisions.
Without the income statement serving as your dashboard — you won’t know which direction you’re going. You won’t know if you’re going right, left or straight… and more importantly, what you will back into.
It’s okay if this overwhelms you, but I won’t let you use that as an excuse to continue to ignore it. Enlist the help of another professional – a CPA or Financial Advisor – to review the statement with you. Don’t be apprehensive about it; this is your key to a successful practice!
In Kindergarten, we were taught to count. At the time, that was tough stuff! And I’m here to give you more tough stuff – but I promise this is something you need.
Owning your own dental practice means owning a business – which means that you are the CEO. The CEO is responsible for the overall profitability of the practice. You may be a remarkable dentist and truly enjoy taking care of your patient’s oral health, but if you aren’t good with the money-side of things, you won’t be able to pay your bills and you will no longer have a dental practice. That is the harsh reality of it.
1. Charge appropriate fees: You can still be fair while making a living, too. Be sure to have clear, written financial arrangements and collections procedures, too.
2. Ask for help: Consider including your team as a part of Open Book Management, which I’ve discussed in previous blogs. Some offices may even form committees around budgeting and finance. Ambitious and driven staff members will welcome the opportunity to take a bigger role and responsibility in the practice – and essentially contribute to their future! If the practice is successful, they are successful.
3. Think about each expense: Ask the question- How does this expense relate to the practice? Does it contribute to our goals? Are there less costly ways to do this? What would happen if we don’t incur this expense? In my book, you can learn about how I dissected my staff costs and learned how to reduce them, without losing quality staff.