12.22.17 Issue #824 info@mckenziemgmt.com 1-877-777-6151 Forward This Newsletter
 


Nancy Caudill
Senior Consultant
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Reports That Every Dentist Should Be Running
By Nancy Caudill, Senior Consultant

Dentist Case Study #492

The doctor’s concerns: “I struggle with the business side of practice ownership. I’m not comfortable reading reports or tracking practice financials, so I avoid it as much as possible. Production and revenues are down, and my team members just aren’t as efficient as they should be. Because of all this, my practice is really hurting, and I have no idea how to fix it.”

This is a scenario that plays out in many practices. Most people become dentists because they want to help patients. They have zero interest in the responsibilities that come with owning a small business – including hiring and developing a strong team. They put all their energy into the clinical side, which is what they enjoy most, but the business itself suffers. That is what happened to this doctor, and it’s why he came to McKenzie Management for guidance.

How did we help? We taught him how to be a better business owner. Like many dentists I’ve worked with, he didn’t receive any business training in school and wasn’t sure where to start. Here’s the advice we gave him:

Know how to manage overhead. Determine where money is being spent and what percentage of that money is going to specific areas of overhead. To properly manage your practice’s overhead costs, you must learn how to read the Profit and Loss Report.

Set goals. Establish daily, monthly and yearly performance goals for every producer in your practice. Work with team members to set individual goals that complement practice goals.

Surround yourself with a strong team. First, develop a hiring process to help ensure you bring the best people on board. Create detailed job descriptions, provide proper training and offer continual feedback. Make your expectations clear, and let employees know exactly when raises will be discussed and how they will be earned. Keep employees motivated and they’ll be more productive.

Hold strategic planning sessions once a year. During this meeting, establish new goals and identify which current goals aren’t being met. Determine what’s holding you back and develop a plan to overcome any shortfalls. 

Look at ways to increase cash flow. That means taking advantage of every income stream. How? Run monthly reports from your practice management software.

From here, we showed the doctor which reports he should be running each month and why. They include:

The Accounts Receivable Report. Accounts Receivable (A/R) should be 1x your net production. Run the report to see where you stand, but make sure the number you get is accurate. What do I mean? In this doctor’s case, his Financial Coordinator was including thousands of dollars in credit balances in the A/R report. So even though it looked like he was at 1.2, he was really at 1.7 – which is way above the benchmark. This is a perfect example of why it’s so important to hire employees who are right for the job and then provide them with proper training.

The Outstanding Insurance Claims Aging Report. It became clear the doctor needed to improve his A/R to net production ratio. To do that, we suggested he read the Outstanding Insurance Claims Aging Report every month. Why? It’s filled with cash that is just waiting to be claimed. Our doctor found about $20,000 the first time he looked.

There should only be a few claims on this report that are more than 60 or 90 days late. Your Financial Coordinator should be aware of any overdue claims and know exactly why they’re overdue. The coordinator should also call insurance companies that are 15 to 20 days past due if claims are submitted electronically and still outstanding.

The Accounts Receivable Aging Report. Finally, we told our doctor to sit down with his Financial Coordinator and look at this report to identify delinquent accounts, determine why they’re delinquent and develop a plan to collect.

If you find delinquent accounts that are more than 90 days old, like this doctor did, and your Financial Coordinator has already called these patients twice, it’s time to send them a letter. In the letter, offer to give them a small adjustment if they pay the complete balance by a certain date. That way, you avoid the fee that comes with sending the account to a collection agency. If the due date passes and you still don’t receive payment, write the account off as bad debt and hand it over to the collection agency.

The thought of dealing with practice financials and reports can be intimidating, but avoiding it will only damage your practice. Knowing how to read these reports can help improve revenues, which is exactly what happened for this doctor. He’s now much more comfortable dealing with business issues, and has a healthier bottom line to show for it.

Still need more guidance? Not to worry. McKenzie Management can help. Contact us and we’ll get started.

If you would like more information on how McKenzie's Consulting Coaching Programs can help you implement proven strategies, email info@mckenziemgmt.com

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