1.11.13 Issue #566 info@mckenziemgmt.com 1-877-777-6151 Forward This Newsletter
 

Budget Busters Choking Profits?
By Sally McKenzie, CEO

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A recent news story reported that the long-lost cousin of a loner living in Nevada would be the heir to millions in gold coins. Overnight the woman went from substitute teacher to multimillionaire - not a bad deal. Most of us don’t win the lottery or find ourselves on the receiving end of a long-lost relative’s riches. Rather, it’s hard work and perseverance that must pave the road to financial success.

In the dental practice, that long road also involves 22 systems and dozens of variables that directly affect the financial wellbeing of the business and your subsequent path to riches. If your wealth seems to be the stuff of distant dreams, perhaps it’s time to take a close look at a few financial realities, starting with practice overhead. Examine the areas listed below and compare your practice overhead numbers to the target percentages listed next to each item.

  • Dental supplies - 5%
  • Office supplies - 2%
  • Rent - 5%
  • Laboratory - 10%
  • Payroll - 20%
  • Payroll taxes and benefits - 3%
  • Miscellaneous - 10%    

You know what your overhead targets are, so how do you actually hit them? First, consider the areas that are most likely to be well above the benchmarks. Payroll is usually number one. If your payroll costs are pummeling profits, here’s what may be happening:

  • You have too many employees
  • Raises are based on longevity rather than productivity/performance
  • Hygiene production is low

Consider your employee rolls. When determining the need for more business staff, keep in mind that administrative tasks, specifically patient check-in and check-out, take approximately 10 minutes per patient. If your practice is seeing 15-22 patients per day, which would total 150-220 minutes of patient contact, one person is able to effectively manage the front desk duties. If that person is spending more than 240 minutes handling patients, or half the day, the practice’s systems need to be evaluated and the time and motion efficiency put towards working the systems.

As for assistants, if the procedures are streamlined, one assistant can efficiently maintain two treatment rooms for a general dentist using two operatories and seeing 13 or fewer patients a day. This would include setting up the room, seating the patient, assisting the dentist, dismissing the patient, and cleaning up.

Next, assess your procedures for giving staff raises. Tie raises to performance, and raise, or perhaps establish, performance standards. Set guidelines for raises when you hire an employee and explain to current staff when raises can be discussed and under what conditions they are given. Job descriptions are a must for everyone. Use performance measurements to determine raises. And if the practice is losing money, you don’t give raises.

The third major contributing factor to inflated overhead is low hygiene production. Typically, this is the result of a malfunctioning recall system. The hygienist’s salary should be no more than 33% of her/his production (excluding doctor’s fees). If the hygienist receives a guaranteed salary, the expectation must be that s/he be scheduled to produce three times her/his wages.

Incorporate an interceptive periodontal program into the practice. This can be initiated seamlessly with the patient check-in process. The business assistant greets patients and hands them a questionnaire and brochure with a checklist educating them on the importance of addressing the signs and symptoms of gum disease. The patients check any symptoms they have experienced, which opens the door for discussion in the treatment room.

Pay attention to other areas of overhead as well. Dental supplies should run about 5% of monthly collections. If yours are higher, make sure you are budgeting these expenses and working with your dental supply company and dealer representatives to help you control costs.
 
The standard for laboratory expense is 10% of gross production, assuming that 30-40% of your production involves crowns, bridges, partials, etc. If your laboratory expense is below that, it typically means that the amount of crown and bridgework you’re diagnosing, selling, and completing falls short of the standard. You may need to examine diagnostic approaches and treatment presentation skills. If your laboratory expenses are over the 10% benchmark, the business employees are probably not collecting from patients or your fees will not withstand the market to off-set the lab charges.

The miscellaneous category often includes several smaller items that add up to big bucks. Certainly, many items in this category are necessary. Nonetheless, pay attention to what’s labeled as miscellaneous and ask questions.

To learn more about your office’s overhead numbers and what you can do to improve them, visit www.mckenziemgmt.com for a FREE Overhead Assessment and report.

For more information on this topic, visit my blog: The Lighter Side

Interested in speaking to me about your practice concerns? Email sallymck@mckenziemgmt.com
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