Overhead holding your practice back? Payroll could be to blame

By Sally McKenzie, CEO Printer Friendly Version

If your overhead costs are out of control, you’re not meeting your full potential. It’s difficult to invest in technology or practice updates when you’re barely able to pay off your bills each month. Unfortunately, high overhead costs are a problem for many practices, with a variety of factors from lackluster recall and stagnate fees contributing to financial woes. One of the biggest, however, is payroll.

Payroll costs should be between 20-22 percent of your revenues, with an additional 3-5 percent for payroll taxes and benefits. Not the case in your practice? Then it’s time to reign payroll in and get overhead costs under control.

Out-of-control overhead shouldn’t hold your practice back. Here are tips to get payroll costs in line so you can start enjoying practice success and profitability.

Stop giving out raises just because. This is a big one. Dentists want to keep their team members happy, and what better way to do that than with an annual raise? The problem is, if employees get raises every year regardless of their performance, it’s damaging your practice and sending overhead costs skyrocketing.

Many dentists think giving employees raises will motivate them to improve their performance. That’s simply not the case. If they know they’re going to get a raise every year no matter what, what incentive do they have to increase production numbers or improve their systems? They can keep doing what they’re doing and still earn more. That doesn’t do much to move your practice forward.

Instead of giving out raises because another year has gone by or because an employee has asked for more money, I suggest you establish a compensation policy and use performance measurements to determine pay increases. Before implementing this system, take the time to explain to team members why it’s better. Let them know exactly when raises will be discussed and under what circumstances they’ll be given. Make expectations and goals clear so they know what it takes to earn that bump in pay. They’ll be more productive and they’ll find their jobs more rewarding.

Make sure you really need new team members before you hire them. It can be pretty frustrating when you know important tasks aren’t getting done—and you might think it’s all because you don’t have enough employees. If your team members are complaining about being overworked and needing more help, then it’s easy to believe you need to bring more people on board.

The problem is, hiring more team members doesn’t guarantee you’ll see an increase in efficiencies or production numbers. It will, however, increase payroll and overhead costs, which is why it’s so important to make sure you actually need more team members before you put out help wanted ads.

How do you know if it’s time to hire? Let’s talk about the front office first. Every patient takes about 10 minutes to check in and check out. There are 480 minutes in an 8-hour work day, so if your practice sees 15 to 22 patients a day, the front desk spends 150-220 minutes processing patients. One employee can easily handle that workload.

If the practice works a normal 8-hour day and one front office person spends more than 240 minutes of an 8-hour workday with patients, then it’s time to hire a new team member.

Moving on to assistants. One assistant should be able to see 13 patients a day while maintaining two treatment rooms and using two operatories—assuming processes such as room set up, seating and dismissing patients, and clean up are streamlined. If your practice sees 14 or more patients a day (not counting hygiene exams) then it’s probably time to bring on a second assistant.

If you determine you don’t need to hire more people yet, and tasks still aren’t getting done, it’s likely because you have weak operational systems. Take a step back and really look at your systems to see where these weaknesses are, then start working with your team members to fix them. Empower employees to take ownership of their systems and you’ll start seeing a reduction in your overhead burden.

Make changes in your hygiene department. Your hygienist’s salary shouldn’t exceed 33 percent of her production, excluding doctor’s fees, and she should be producing three times her wage. Not happening in your practice? I suggest you look at the hygiene schedule.

At first glance, the hygiene schedule might seem full, but of course that doesn’t account for the broken appointments that lead to openings throughout the day. Those open slots translate into lost production and revenue. Without patients in the chair, hygienists can’t meet production goals.

To fix your hygiene department, I suggest considering hiring a Patient Coordinator who is trained to keep a steady flow of patients coming in and out each day, even when there are broken appointments. You’ll find your hygienist starts meeting production goals, and that will do wonders for reducing overhead.

Skyrocketing overhead costs will hold your practice back. Don’t let that happen. If payroll is to blame, following these tips will help get you back on track.

Need more guidance? Feel free to contact me at 877-777-6151 or sallymck@mckenziemgmt.com.  I’m happy to help.

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