6.22.12 Issue #537 info@mckenziemgmt.com 1-877-777-6151 Forward This Newsletter
 

Are You Halfway to Nowhere for 2012?
By Sally McKenzie, CEO

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Summer has arrived, and as families embark on their annual summer vacations the common refrain from the backseat is, “Are we there yet?” I have a similar question for you, doctor. Are you there yet? No, I’m not talking about your summer vacation destination; I’m talking about your practice goals for 2012. Yes, amidst all of summer’s opportunities to escape the daily routine, there is the reality that the year is half over.

Are you well on your way to financial success or are you halfway to nowhere? Will you cling to what you've always done through the rest of 2012 and hope that by some miracle your financial situation improves? Or will you take action and ensure that it does? There is no time like the long days of summer to tackle the challenges that have been weighing on you, your team, and your practice.

I recommend you take just one hour this weekend and conduct a simple six-month evaluation of your practice as a whole. Think carefully about what your practice has done well during the first part of the year and what needs work for the remainder. Don't sugarcoat it, you need to focus on what needs to be addressed not just what you want to address. To help you in the evaluation process, I've provided a few questions for you to answer:

1. Have you and your team established and are you meeting production goals, collections goals, and scheduling goals?
2. Does the practice use system performance measurements to evaluate the effectiveness of all business and clinical systems in the office?
3. Do all members of your team know how to measure the effectiveness of specific systems that they are responsible for?
4. Are multiple staff “responsible” for multiple systems, so instead of accountability, there is finger pointing when things go wrong?
 5. Are there established training protocols when business staff are hired?
6. Is business staff turnover common in the practice?
7. Do you have specific job descriptions for each member of your team?
8. Do you assume that staff are clear on their job responsibilities?
9. Is staff conflict and drama a distraction?
10. Are cancellations, no-shows, and holes in the schedule common?
11. Do you typically have more than .5 openings in the hygiene schedule each day?
12. Does your practice have a system to track unscheduled treatment?
13. Does someone on staff follow-up with patients that have diagnosed but unscheduled treatment needs?
14. Has the clinical team ever evaluated its clinical efficiency?
15. Does the clinical team know how to evaluate its clinical efficiency?
16. How often are fees reviewed and compared to similar practices in the area?
17. Have you expanded practice services within the past two years?
18. Do you have an established vision and goals for your practice? If so, are they discussed regularly with the team?
19. Have your practice profits declined or stagnated?
20. Are you stressed about the present condition and future growth of your practice?

The questions above relate to the condition of specific systems in your office, and each directly affects the financial state of the practice. All of the systems are intertwined, so if one is lacking it has a domino effect on the others. For example, staff turnover may be a major problem because there are no clear job descriptions. Or the employees are trying to figure things out as they go along and making costly mistakes along the way because there are no training protocols in place.  Multiple employees are supposed to take care of multiple areas creating conflict and frustration. Practice profits are suffering because there are no clear goals established for production, collections or scheduling - merely vague directives from the doctor. The hygienist is frustrated because s/he is either too busy or too slow.

Frustration and stress in the dental practice are clear indicators of management system shortfalls, but nothing screams “crisis” louder than a practice that is struggling financially. In most cases, teams working in these practices simply do not know how to implement effective systems. They want to be productive. They want to provide excellent service. They want high treatment acceptance. They want full, but manageable, schedules. They want it all - the problem is that they don’t know how to achieve it. Without clear goals, well established management systems and a means of measuring the effectiveness of the systems, the doctor, team, and practice will be left wanting for a very long time.

Next week, reach your goals this year.

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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Nancy Caudill
Senior Consultant
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How to Read your Profit and Loss Statement
By Nancy Caudill

55% has long been the industry ideal overhead for a general dental practice - the operative word being “ideal.” The key is knowing that you are doing your best to keep your costs under control. First - where do you get a P&L? It depends on whether you are using the services of an accountant, using QuickBooks or some other software program for your check-writing, or a combination of both.


Income
These entries are at the very top of the P&L. It should list the income that was generated from the practice, based on the deposits that were made to the bank for the practice. This amount should be very close to the amount that you see when you generate a collections report from your practice software, if not exactly. If you find that it's close, I would suggest you do a more thorough investigation as to why.

You may also be making other deposits on behalf of the practice that was money not actually produced by the practice - such as personal monies that you “loaned” to the office. Interest income is often included as a separate line item under “Income.”

Refunds and NSF Checks
It is not unusual to see this listed somewhere in the P&L other than under “Income” but it should be listed as a deduction from the income in order to calculate a “Net Income” before the expenses are deducted. This is important because we will be comparing the various categories to the “Net Income” and if these items are not entered under “Income” the percentage will not be correct.

Now let's start looking at the other categories of expense: Dental Supplies, Office Supplies, Lab Expenses, Facility Costs, Gross Wages for the Staff, Payroll Taxes and Benefits for the Staff, and Miscellaneous.

Dental Supplies, 5-6%
This is a category that can easily be misrepresented if you don’t have a good understanding of what a dental supply is. These items would be “disposable” items for the most part, or supplies that are used up quickly such as composites, burs, 2x2s, hygiene products, napkins, impression material, etc. What is NOT a dental supply item would be a hand scaler, an elevator, a handpiece, rubber dam clamps, etc. These items may not be depreciable but they are not disposable. Therefore, they should be listed under “Miscellaneous” as “Small Equipment.”

To get this right, it requires some time for the assistant who orders your supplies to review the invoices and indicate how many dollars were for the following: repairs (parts and labor), small equipment, dental supplies, office supplies, and lab. It is not unusual for dental supply companies to list all of these expenses on one invoice, but they must be broken down into the 5 sub-categories mentioned earlier. It is important to break this down correctly in order to set a budget for yourself and your assistant. It's also not fair to be fussing with your dental supply rep about your dental supply costs when you aren't allocating the supplies correctly.

Office Supplies, 1-2%
Stamps, paper products, pens, copier and printer cartridges, etc. all fall in this category.

Lab, 10%
This would also include ortho, implants and abutments, nightguards, removable and fixed prosthetics, etc. If we see an office with a very high lab overhead, it could be that the fees/collections are not in line with what the lab is charging (this is not uncommon with offices participating in PPO plans), the lab is charging too much in comparison to the fees, or the doctor is doing too many “redos” where there is a lab expense but no income to offset the expenses. It is also possible to have a practice that simply does relatively few fixed and removable procedures because the patient base is comprised of younger families without these dental needs.

Facility Costs, 5%
This can be confusing for offices that own their own building. Therefore, they don’t include any expense for this. It would be advisable to “rent” from yourself for an amount that would be determined by your accountant. This also includes utilities (not telephone, as this goes under Miscellaneous), janitorial, security, etc. 

Staff Wages, 19-22%
Gross wages before taxes are taken out. State and Federal withholdings are only a pass-through. You do not actually pay for these out of your pocket. You deduct it from their wages and pay it to the state and federal government on their behalf. 

Benefits for the Staff, 3-5%
This would be the matching Social Security that you are mandated to pay, unemployment and other mandatory payments, as well as paid holidays, vacations, bonuses, health insurance, etc. 

Miscellaneous, 10%
This category includes most everything else that is considered direct expenses to the opening and closing of your practice. Computer support, interest on a loan for the practice, marketing, telephones, CE, travel for CE, etc. This is an area where many dentists find themselves in trouble. If you are spending a lot of money on CE and it is not increasing your production and collections, there is no return on your investment.

Do your math homework and review your P&L. Know your numbers!

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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Belle DuCharme, CDPMA
Instructor/Consultant
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Can You Afford to be Understaffed?
Belle DuCharme, CDPMA

Many offices are not hiring support staff in favor of the monetary savings, and are asking existing staff to work more efficiently without overtime. Worry over rising costs and declining revenue forces doctors to look at the obvious for financial relief.  “I am not hiring anyone to replace my second assistant or the financial coordinator. If I can just remain stable in my numbers I will survive.” 

The meaning of “stable” according to Webster is “steady, unchanging, constant, even and sure.” If it was so easy to remain “stable” few practices would be feeling the pinch of financial stress. In dentistry, being stable is a temporary state because practices are either moving upward with growth or stagnating and in decline. Decline can take some time to notice - it’s as simple as not replacing patients that have left the practice or not following up on inactive patients for months or years. Your numbers may be good if you are selling dentistry to your existing patient base, but you still need to build that core base of compliant patients by continued marketing both internally and externally.

Where are the new patients and where have the existing patients gone? Since everyone at some time will need a dentist, and that includes the edentulous, it stands to reason that they are still in your files waiting for your call or they are new to the area and looking for a dentist but cannot find you or you are not available when they call. If you have reduced staffing down to the bare essentials, what person will be available to answer the phone at lunch and make the daily required calls to the unscheduled?  Who has time to update the website and work on social media and external/internal marketing? Who has time to spend educating and presenting treatment plans to the patient without interruptions? One of the hardest things to measure is what is lost to the practice by being understaffed.

Reducing overhead by eliminating staff that are not performing to standard and are non-compliant to office policies is good. But reducing staff that are performing because the overhead is too high could result in serious production decline for the following reasons:

  1. The phone is unanswered because everyone is with patients; the caller does not leave a message and moves on to the next dentist on the list.
  2. The phone goes to voicemail which results in poor patient perception of availability.
  3. Follow-up doesn't happen, and patients fall through the cracks. Patients leaving without appointments to check their schedule are not called back.
  4. Patients are not given the time they need because staff members are needed elsewhere. For instance, the Business Coordinator is presenting the next appointment and discussing the need for an implant when the hygienist beeps for help with periodontal charting. She proceeds to hurry the patient out the door.
  5. The Business Coordinator is called away from the desk to tear down and set up the treatment room and sometimes to sterilize the instruments. Calls are going to voicemail and patients are entering the reception area to be greeted by no one.
  6. The dental assistant does not have time to chart so gives the Business Coordinator a list of procedures to make a treatment plan. The patient is asked to wait in the reception room as the Business Coordinator hurriedly throws it together and then takes the short explanation to speed the patient out the door.
  7. With the staff being utilized to the maximum, the incentive to get patients back for treatment declines.
  8. Essential tasks are postponed, such as scanning documents into patient's charts, thank-you letters to referral sources, arranging staff meetings, patient call backs, CE courses and Lunch & Learns, checking the practice email, tracking lab cases, taking diagnostic casts for treatment plans, asking patients for referrals and offering a beverage to a patient or visitor in the reception room.

Before downsizing staff, look to see if there are other ways to lower the overhead. If you must downsize, rewrite the job descriptions and define the areas of accountability to include added tasks. Make sure that business staff are properly trained in sterilization and OSHA standards before entering the clinical area.  Cross train dental assistants and hygienists to schedule appointments from the clinical area to ease traffic at the desk and to scan documents and track lab cases. Before downsizing, call McKenzie Management at 877-777-6151 for a conversation with one of our consulting professionals to see if other practice systems are contributing to falling numbers.

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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