Overwhelmed by Overhead? Look at Payroll
You hate to admit it, but overhead is controlling your practice. It dictates every decision you make, from whether you can buy that new piece of technology you’ve been eyeing to how much salary you can pay yourself each month. To make matters worse, you have no idea how you got here, or how to turn it around. You’re overwhelmed, so you just continue along, hoping you’ll magically find yourself on the right track someday. All this does is make the problem worse, until you’re burnt out and wondering if you’ll ever make enough money to retire.
Unfortunately, this is a common scenario many dental practices face. The good news is, if you’re ready to commit to making real change in your practice, you can take back control. First you have to determine why overhead costs are soaring, and one of the first places to look is payroll. That’s right, if your practice overhead is out of control, payroll is likely one of the main culprits.
Payroll costs should be between 20-22% of your revenues, with an additional 3-5% for payroll taxes and benefits. Did your eyes just bulge out of your head? Are you wondering how that’s even possible? It is, and I can help you get there. If your payroll costs are way above this benchmark, it’s likely because you’re too eager to give staff raises, you have too many employees or your hygiene department is under producing.
Any of those sound familiar? Whether your practice is dealing with one of these issues or all three, it’s time to reign in your payroll costs and reduce overhead. Here’s how: Don’t give raises just because. You have to take the emotion out of giving raises. Team members need to earn raises based on performance, not receive them just because they asked or because it’s been a year since their last pay hike.
I know it’s easy to fall into this trap; you want to keep your team members happy, especially the ones who have been with you for years, so you throw more money at them and hope the extra incentive will lead to improved performance. But if these team members aren’t doing anything to increase production and improve systems now, giving them a raise isn’t going to change that.
Instead of giving in every time an employee asks for more money, establish a compensation policy and use performance measurements to determine pay raises. Explain when raises can be discussed and under what conditions they will be given. Set clear expectations and goals for every team member, so they know exactly what it takes to earn a higher salary.
Don’t be too quick to hire new employees. It’s clear to you that certain tasks aren’t getting done. Instruments aren’t getting sterilized as quickly as they should be, and if collection calls are being made, they certainly haven’t been very effective. Your team is complaining they’re overworked and need more help, so you do what you think is necessary. You hire more staff. Problem is, nothing has changed except your increased payroll costs.
Hiring more staff doesn’t guarantee improved efficiency or production. The only guarantee it gives you is an increase in overhead. While more people might seem like the answer, training and coaching existing staff is a much more cost effective way to make your practice more efficient. Invest in your employees and they’ll not only become better at their jobs, they’ll be reenergized and poised to help you meet practice goals.
Before you hire someone new, look at how much time patients spend at the front desk. Every patient takes about 10 minutes to check in and check out. There are 480 minutes in an eight hour work day, so if your practice sees 15 to 22 patients a day, the front desk is spending 150-220 minutes seeing patients, which is something one front desk person can easily handle. If the practice works a normal 8-hour day and one front office person spends more than 240 minutes with patients, then it’s time to consider hiring a new team member.
Now let’s talk about assistants. If procedures are streamlined, including room set up, seating and dismissing patients and clean up, one assistant can efficiently see 13 patients a day while maintaining two treatment rooms and using two operatories. If you see 14 or more patients a day, not counting hygiene exams, then you can justify hiring a second assistant.
Get your hygiene department on track. If you’re overwhelmed by overhead, chances are your hygiene department is under-producing and a weak or even nonexistent recall system is probably to blame.
Let me explain. Your hygienist’s salary shouldn’t exceed 33% of his or her production, excluding doctor’s fees, and he or she should be well aware of practice expectations: to produce three times his or her wage. If that’s not happening at your practice, it’s time to look at the hygiene schedule.
Your schedule may appear overbooked, but what about all those openings that pop up over the course of the day? That’s lost production, and more importantly lost revenue. If patients aren’t in the chair, hygienists can’t possibly meet production goals, no matter how good they are at their job. If you want to up production rates and reduce overhead, hire a Patient Coordinator who’s tasked with keeping a steady flow of patients coming in and out each day, thus keeping your hygienist on track to meet daily production goals.
Skyrocketing payroll costs shouldn’t be keeping you from practice success and profitability. Focus on getting these costs under control, and you’ll reduce overhead, increase production and improve efficiencies in your practice.
Next week, 3 ways to boost employee performance and reduce overhead.
For more information on this topic and more, visit my blog: The Lighter Side
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