9.27.13 Issue #603 info@mckenziemgmt.com 1-877-777-6151 Forward This Newsletter
 


Belle DuCharme, CDPMA
Instructor/Consultant
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Over Your Head with Overhead?
By Belle DuCharme, CDPMA

Dear Belle, I have been with my present employer for a year now but find myself crying at the end of the day. Every two weeks she says she needs $8,000 to make payroll. I collect from everyone but the accounts receivable is past due, mostly with her friends and family who don’t pay their bills at all. Where is the money going? Shouldn’t there be enough for payroll? Perplexed Patsy

Dear Perplexed,
If you have more than 10% in 90 days aging accounts receivable, this is a sign that collections need attention. A high accounts receivable will definitely affect the cash flow and the practice’s ability to pay expenses. If you have isolated problematic accounts and asked the doctor what to do about friends and family, you have done your job. If the amounts for family and friends are not collectable, they should be adjusted off to give you a realistic accounting. There are several things to consider when looking at shortage of cash. Ask yourself the following questions before looking for other places the money could be going:

- Are all insurance claims going out electronically on the day of service? Paper claims can take as long as 30 days to pay, whereas electronic claims are paid in one to two weeks.
- Are you following up on unpaid claims that have aged to 30 days?
- Are you sending statements daily after receipt of insurance payments?
- Are you sending e-statements?
- Do you include a self-addressed payment envelope?
- Are you consistently following up on past due accounts with phone calls instead of more statements?
- Are broken appointments killing your production/collection stats? Is your system for communicating with non-compliant patients working?
- Are your fees fair and have they been updated regularly?
- Is the practice retaining or losing patients? Check patients with and without recall appointments for the last year.
- Are you getting new patients regularly? Are you able to appoint them within a week of the call?
- Are you connected with social media and have a marketing plan both external and internal to generate patient referrals? How are your online reviews?

All of these points, plus much more, affect cash flow. The practice should be collecting enough to cover its overhead. Overhead consists of the following expenses:
1. Facility - lease, rent or purchase of the practice location: 5%
2. Staff Payroll (not doctor) and benefits: 22-27%
3. Dental Supplies: 5%
4. Dental Lab Fees: 10%
5. Miscellaneous: 10%

Controlling these costs will achieve an industry ideal of 55% overhead, leaving enough for the doctor’s salary and money to invest into the practice and/or reward those that have contributed to the practice success.

The doctor(s) and hygienist(s) are producers. They are the only staff involved in diagnosing and recommending treatment. If the numbers are down in diagnosing treatment, consequently the schedule will reflect that with open time. If diagnosing is not the problem, perhaps support of the doctor’s diagnosis is not happening by the Financial Coordinator. Financing options must include services such as CareCredit offered to patients who cannot pay in cash and who have maxed out other credit lines. It is enticing to be able to pay monthly payments without interest for 12 months. You will increase treatment acceptance by offering CareCredit in the beginning of the presentation. This option must be offered to every patient who has a treatment plan applicable to this financing option. CareCredit will even coach you on how to present their product to your patients.

The amount of financial responsibility you have in the practice will determine whether you will be able to examine the profit and loss report. Someone should be looking at the practice overhead numbers to determine whether expenses meet or exceed industry norms for a healthy dental practice.

An overall collection rate of 98% of net production is necessary for a healthy cash flow. If you are achieving this, then you are doing your job. If you said yes to all the above bullet points, you are also doing your job. When your employer tells you that $8,000 is needed to make payroll again, it is time to sit down for a discussion of what you are responsible for and what is out of your control.

For professional training in dental practice management, call McKenzie Management today and schedule training customized to your practice issues, or visit the website HERE.

If you would like more information on McKenzie Management’sTraining Programs  to improve the performance of your team, email training@mckenziemgmt.com

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