Although a dental practice can be incredibly successful, there is no denying that it costs a lot of money to run. If you are not careful about managing your finances, you could actually find your practice losing money, no matter how good your clinical skills and how long your patient list might be. Here are 6 money management tips for dental practices.
Hire an Expert
There are endless moving parts in the finances of any dental practice. Overhead, accounts payable and receivable, business insurance, staff salaries…you are a dentist, not a finance expert, and you have enough on your plate already. Hire a dental consultant with financial expertise or a finance consultant who has experience with dental practices. It is especially important to work with a CPA or an attorney at tax time.
Even the best accountant can’t give you the best financial advice without hard data. Use either dental practice management software with built in accounting features or a separate accounting solution such as QuickBooks. Either way, you or someone on your team should get in the habit of entering every single dollar that goes into or out of your practice.
Track Your Financial Metrics
Learn to read your monthly profit and loss statements, as they are filled with crucial information about the health of your practice. Ideally, staff costs (wages plus taxes and benefits) should make up around 30% of your budget. Lab costs and supplies should be no more than 8% each. Marketing is extremely variable, but it is a good idea to try to keep it at or below 4%. Using these numbers will put your variable expenses at around half of your total budget.
Fixed expenses such rent, loan payments, utilities, insurance, and the like are extremely difficult to reduce, and you are responsible for them regardless of your practice’s income. Fortunately, they tend to remain close to the same as your practice grows, meaning that they will make up a small percentage of your budget over time. Keeping fixed costs below 15% to 20% is indicative of a healthy, thriving practice—depending on location, as some cities are simply more expensive than others.
Keep an Eye on Other Important Stats
Although they are not financial metrics, a number of other stats can give you clues about the current and future financial health of your practice. These include, but are not limited to:
Patient stats: Number per day, cancellation rate, number of new patients per month, etc.
Percentage of suggested treatments accepted
Inquiries vs. scheduled new patient appointments
Production per hour: Dentist and hygienist
Unscheduled blocks of time
Check Your Fees and Salaries
Your fees should be competitive in your local market. Don’t try to be either the highest-priced or the lowest-priced practice in town. Know your target patient population, and customize your fees accordingly, while remaining within range for your area.
Set starting salaries in the midrange for your local area. Reward staff who perform well with raises, bonuses, and other incentives. If you set starting salaries too low, you will not attract top talent. If you set them too high, you will not be able to afford to adequately reward the best on your team.
Invest in Moneymakers
You need to spend money to make money, but it is vital to spend it on the right things. Invest in two key areas:
Making patients happy: Discounts, a more comfortable office environment, and new technology are just a few ways to make dental patients happy. The best way to know what your existing patients want is to ask them. Conduct surveys on a semi-regular basis.
Boosting your visibility: Online marketing is critical, paying special attention to local SEO. But it is not enough on its own. Participate in local charity events. Add a blog to your website. Write an article for the newspaper. Sponsor a kids’ sports team. Make people in your community feel like you support them, and they are more likely to support you.
Though it can be challenging, reducing overhead by just 10% can make a huge difference in your practice’s profitability. Review your vendors, talk to your insurance agent, and take a hard look at your petty cash expenditures. Few dental practices are running at 100% efficiency, so there are almost always ways to trim the fat.
Ready to Get Started?
If you are interested in learning how to take your dental practice to the next level, please contact Ascent Dental Solutions today at 413-224-2659 to learn how Dr. Coughlin can help.