We’re halfway through 2012. Are you on track to hit your financial goals?
If your first response is “Financial goals? What financial goals? How am I supposed to have time to set financial goals when I’m busy working at the chair?” then, I’ve got a plan for you.
Or, if your response is “Financial goals? Of course, I’ve already reviewed my numbers to see how I’m doing compared to last year. It sure would be nice to hear some ideas on how we could improve our second half, though.” You’re going to appreciate the practical steps on how to run a dental practice.
No matter which group you fall into, here are the steps to hit your financial goals:
- Run your income statement
- Run your Dentrix reports
- Compare your performance to benchmarks
- Set goals to improve
- Get your staff involved
- Repeat at year end
There are only a few ways to make more money in dentistry – increase fees, reduce overhead or expand services. Very few dentists have the ability to increase fees in this economy – even if you do, you’re not touching any dental insurance PPO plans fees since those are contracted! If you want to make more money, then you have to find out what you are spending your money on – and if you can spend less and keep more, you win! You can also find out what procedures you’re doing – how many of each – and then build on your success or develop new skills.
To help you to run your dental practice more successfully, here are the steps to take:
#1: Run your income statement
An income statement showing collections and expenses is the best way to see how you’re doing at running your dental practice. It gives you in black and white your report card so you can see your financial performance. You want to run your income statement so you can see January 1 – June 30, 2012 compared to January 1 – June 30, 2011 – that way you can compare this year to last for each expense. You can see which ones went up or down and you can figure out why.
#2: Run your Dentrix reports
If you go to the Dentrix Office Manager and select the Practice Analysis icon, then you can run a detailed production report for each provider. You can see how many of each procedure you have done – and you can run it for all of 2011 and again for the first half of 2012. This shows you which procedures you’re doing and how many of each. With this information, you can see trends (are you doing fewer root canals and more extractions?) and talk with your staff about new ideas (implants are becoming more and more popular, how are we doing at promoting this treatment choice?).
#3: Compare your performance to benchmarks
Looking at your income statement, how are you doing compared to other practices? These are the benchmarks I use: Collection 98%, Supplies 5-7%, Lab 5-7%, Staff compensation 28-30%, General expenses 15-20%. To compare your supplies expense, find the category on your income statement that shows the total amount you’ve spent on dental supplies – now compare that to your total collections – and that’s how you calculate your %. Which areas are you on track? Which ones need work?
#4: Set goals to improve
If your supplies expense is 9-10%, then choose a new goal – perhaps you want to shoot for 8% to move closer to the benchmark. In the reverse, if your collections are closer to 95%, perhaps you want to set a goal of 97%?
#5: Get your staff involved
Once you see your income statement as a tool to evaluate how well you’re running your dental practice, then you can invite your staff to get involved. You can show them how much money you’re spending on dental supplies and you can share your new goal – and then ask for their suggestions.
One way to motivate staff to help you meet your financial goals is to incorporate a bonus for achieving a goal. Let’s say you normally spend $7,000/month on dental supplies and this is putting you at a 9% supplies expense. That would put your monthly income at about $78,000. If you set a goal to reduce your supplies expense, then there are two ways to accomplish this:
- Increase your income or
- Decrease your sending
Let’s say you want to be at 7% for your supplies expense. You can accomplish this by:
- Increasing your income to $100,000 or
- Decreasing your supplies expense to $5400
You could set a bonus for the person responsible for inventory / dental supply ordering at $100 for accomplishing this goal. If you increase your income $22,000 or save $1600 – either way you can comfortably afford to pay the staff bonus. The staff person is motivated to run the dental practice more successfully so she can earn this bonus.
#6: Repeat at year end
Once 2012 wraps up, run these same reports again – this time comparing the full year 2011 vs. the full year 2012. This is how to run a dental practice – at least a couple times a year you want to quietly sit down and review your numbers, compare to the benchmarks and then work with your team to improve. If you want to hit your financial goals, then you need to take the time to set them!
You can tell, I love to run these type reports to see how our practice is performing. If any Dentrix-based practices are interested in some help to run these reports, just let me know. My email is: email@example.com.