Understanding Financial Success Within Your Dental Practice

When it comes to the financial side of your dental business, do the math and numbers side scare you? Do you hesitate to share with your dental team your financials, fearing your transparency will reveal to your team some not so good news? Does your team think you are a millionaire because of the top line dollars produced monthly? How can you share what it takes in the understanding of monies coming in verses monies going out.... And what is left..... if anything!!
Income Statements, Profit and Loss Statements, what do these things really mean? Does the team ever look at these important pieces of paper? And when they do, is the mindset that doc is making a killing? Do we ever share the costs within those statements? Costs, like student loans, building and practice loans are just a few of the big items that affect the bottom line dollar. Does your team know this? Do you or your team realize these examples rarely even exist on an Income Statement?

Before these reports are explained, there are some benchmark things we should look for first.

1. AMP first and foremost goes into a practice and evaluates the cash flow of the business. Is the collection ratio 97-98%? What and why is there money in the over 90 day column? Are the Accounts Receivable ratio 1% or less? If these reports have money just sitting there, this may hinder the practices financial performance because the cash that could be used for better technology or marketing or raises, is sitting in a report and not available for practice growth and improvement.

2. Second is hygiene. If you don't have good hygiene flow you will be relying upon all kinds of new patients and marketing efforts - which isn't always healthy.  Are 75-80% of your patients scheduling their next appointment before they leave your office? If a patient comes in through hygiene and doesn't pay their bill, what good is that for cash flow?

3. Next is case acceptance. If the patient comes in and doesn't say yes to treatment and doesn't schedule and doesn't pay their bill, again what good is this financially to the practice? What should your percentage be? This depends entirely on the type of practice. We look at overall numbers and successes. We ALWAYS look to grow this area and it greatly varies from office to office.

4.  Lastly, the final benchmark item AMP analyzes is marketing. What good is money spent on marketing if the cash flow, hygiene department and case acceptance are not healthy? Sadly, most consulting companies start here, at the weakest link.

Looking at some other areas -
Outstanding Insurance. This is money due to you from the treatments you have completed. There should be NOTHING in the 90 day column.

New Patients – Vital to the health of the practice.

Overhead – There are two ways to impact overhead. 1) drive revenue up or, 2) decrease expenses. Both impact profit. The greatest area to impact the net profit is increasing revenue. There are two areas from here that impact overhead; one is fixed expenses (rent, staff salaries, loans, utilities, marketing...etc) and the other is variable (lab, supplies, taxes, merchant fees, etc). Massive massive profits can be driven by increasing revenues. Remember, fixed expenses don't change. Here is your golden nugget for growth. Be sure to fully understand this concept!!

Profit and Loss Statements and Balance Sheets...... watch this clip from AMP TV to learn even more of these financial areas of your business....