Get Practice Debt Under Control
You knew becoming a successful practice owner wouldn’t be easy, but you probably didn’t truly appreciate all the challenges that come with the job. It’s not just about diagnosing and treating patients, which of course is what most dentists would prefer to focus on. You also must understand the business elements of running a practice, and that includes managing debt.
Debt is a pain point for many of the dentists I work with, and is often the biggest barrier keeping them from their goals. For many of these dentists, it seems all they do is write check after check each month, without ever making a dent in what they owe. This becomes exhausting and frustrating, and leaves some dentists wondering if they’ll ever get practice debt under control.
The answer is yes – with the right guidance. That’s what I’m here for. Here are a few tips to get you started.
Look at your cash flow. Many dentists simply don’t have a good grasp of their practice’s financial situation, which certainly doesn’t help them manage debt. Before you can take control of your finances, you must understand them – which is why I suggest conducting a cash flow assessment in your practice.
To do that, start by logging the numbers for net production and collections over the last 12 months, the percentage of accounts receivable over the last 90 days, and the total monthly payments made to leases, loans and business credit cards. From there, take a look at your average monthly payments to the lab, dental supplies, salaries, taxes and benefits, monthly facilities costs and all the miscellaneous expenses that don’t seem like much until you add them up.
When you’re finished, you’ll actually know where all your money goes each month – and that’s the first step in finally getting your debt under control.
Hire an expert. You’re probably thinking, Sally, this is great and all, but what exactly do I do with this cash flow assessment once I have it? Good question. I suggest you hire someone to help you figure that out. A financial expert from McKenzie Management, for example, can give you guidance based on your unique circumstances. He or she will come up with a plan to reduce your debt obligations so you can finally start enjoying success as a dentist.
Depending on your situation, the expert could recommend a variety of different ways to start reducing debt. For example, sometimes consolidating your loans and refinancing them at a lower rate is the best way forward. In other situations, it might make sense to buy the space you’re practicing in rather than paying a monthly fee to lease it. The point is, there isn’t one solution that will work for everyone, but a financial expert can tell you what adjustments will help ease some of the financial burden that’s been holding your practice back.
Start focusing on your systems. If your practice systems aren’t performing up to snuff, I can guarantee they’re contributing to your overhead and debt problems. Many dentists just don’t understand the important role these 20 systems play in their practice’s financial health, so they neglect them. This is often a costly mistake. I suggest really getting to know your systems. Take the time to look at them and determine where the problems are, then develop a plan to fix those problems. Is this a lot of work? Yes, but once you have strong, efficient systems in place, you’ll be rewarded with higher production numbers, a more robust bottom line, and of course, less debt.
Dealing with debt isn’t easy. Most dentists just don’t know how to handle it, so they never implement the necessary changes and their debt gets even more out of control. But if you commit to identifying problems and making adjustments, you’ll be able to reduce debt and finally start growing your practice.
Of course, this isn’t something you have to do all on your own. Contact McKenzie Management and we’ll provide the guidance you need to turn your struggling practice into a thriving practice.
For additional information on this topic and more, visit my blog: The Lighter Side
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