Are You Halfway to Nowhere for 2012?
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?
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 firstname.lastname@example.org
How to Read your Profit and Loss Statement
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.
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
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%
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%
Facility Costs, 5%
Staff Wages, 19-22%
Benefits for the Staff, 3-5%
Do your math homework and review your P&L. Know your numbers!
Can You Afford to be Understaffed?
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:
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.
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