Can You Afford to Give the Team a Raise Yet?
In my job, I hear from dentists all around the country. A few have skated through the recession with nary a financial bump or bruise, others have sustained serious financial beatings, and most have fallen somewhere in between. Virtually every dental practice has had to implement some cost cutting measures, and for many it meant curbing salary increases. Now as the economic tide is turning, practitioners are feeling pressure to thaw frozen wages.
Certainly, we have enjoyed some positive economic news recently, but the question you have to ask yourself is: Are you truly experiencing an economic recovery in your own office? If so, the next step is to consider the true impact of that “modest increase.”
Here’s why - every increase in salary, no matter how seemingly small and insignificant, has a direct impact on your overhead. The Employee Salary Review is a clear and simple mathematical tool that you can access immediately to determine exactly how much more money you’ll need to collect each month to cover that “itty bitty” increase. To ensure that salaries do not exceed 22% of average monthly collections, which would tip your overhead costs into the danger zone, you must have a plan to increase revenues and balance the impact of the raise. If the team wants to make more money, then the practice must make more money, and every employee plays a vital role in accomplishing that.
Have you developed new strategies to boost hygiene production and treatment acceptance? What steps will you take to increase collections? Is rent going down anytime soon? Can you refinance your practice mortgage? Have you considered loan consolidation to increase cash flow? Don’t fool yourself into thinking that any raise is so small its impact won’t be felt. Without a clear plan to increase revenue, a little raise here and a minor wage adjustment there will come ripping through your profits, and I guarantee you’ll be stunned at the thundering impact.
First, take a look at collections. Make one employee accountable for collecting money, generating accounts receivable reports, and following up on delinquent accounts. Your financial coordinator should achieve daily collections of 45% or higher if you are accepting insurance assignment. If you don’t already have one, establish a collections policy and follow it. Expect full payment at the time of service for all procedures under $200. Additionally, in lieu of extending credit to patients, partner with a patient financing company, such as CareCredit, and require insured patients to pay a portion of their payment responsibility when services are rendered.
Monitor your money monthly. Review the aged accounts receivable report every 30 days. It should list each account with an outstanding balance and date of last payment. Total all monies over 90 days delinquent. The percentage should not exceed 15% of your total accounts receivable. If it does, delinquent account calls need to be accelerated. Reexamine benefits. Offer a set amount for benefits that can be budgeted and controlled by the doctor. Reinforce recall. Delegate responsibility for the recall system to the patient coordinator, and expect him or her to:
Consider your fees. While many practices may have forgone fee increases over the past couple of years, consider if the time may be right for an increase. Under normal economic circumstances, fees should be increased 3-5% each year. If your area is seeing its share of economic improvement, a 2-3% increase may be in order. Overlap patients during just the first 10 minutes and last 10 minutes of each appointment. This will increase income even before fees are adjusted.
If you feel strongly that you want to raise employee compensation, by all means do so, but conduct a Salary Review so you know exactly how much it will cost your practice.
Want more of me? Click here to visit my blog, The Lighter Side, for more Dental Practice Management info.
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