What should be the basis for all decisions?
Majority of 2021 have passed. We are wrapping up 2020 tax and compliance issues. Hopefully all of you got proper advice and consult about your PPPs and EIDL loans, filed for Employee Retention Tax Credit, spent and documented your HHS/PRF grants & California C19 Grants, and maximized your benefits following all of the complicated compliance rules, and are ready or already filed your 2020 taxes. Many systemic steps that need to be done in proper sequences for 2020!
One of the major takeaways from the 2020 corona crisis and the economic reset was that those business owners did better than others, who were more informed and on top of their business and financial affairs.
A few to reasons for the above questions would be:
- Being able to manage debt,
- Knowing the business components their practices
- Living within their means,
- Being of top of their businesses,
- Seeking training,CEs, investing in themselves and their businesses,
- Being informed about fundamental business details and being proactive in their businesses:
- Have access to right information and advice, and being able to network within and without the dental industry.
Have access to right information and advice, and being able to network within and without the dental industry.
This article will concentrate on information we need to evaluate our business on a daily, monthly, and annual basis and contains some suggestions and bullet points on a high level. Each practice is unique. A thorough review is needed to additionally customize more systems. With proper information systems , you will be able to recognize fundamentals in your business and make consistent and proper decisions.
We set up systems so that you’re collecting the right kind of data to track metrics.
It could be your revenue numbers, the number of customers you’re acquiring, certain operational expenses or number of calls you’re receiving with complaints, and so forth. If you can define what those are, that’ll help you grow your business.
The next step is to build a bunch of dashboards so that every morning when you turn on your computer, you look at those dashboards, and you look at them with your management team during your management meetings. Those enable you to make decisions that are informed by these metrics.
The data within your practice management software is invaluable!!! Applying it to key metrics can help you make good business decisions for your dental practice.
Data is the key to successfully growing and maintaining a healthy practice, and it’s never been easier to access the data you need to make effective business decisions. Please take the time to look at the data your software provides, understand what it’s telling you about your practice and then take action based on your conclusions.
A. Financial Review- Quantitative Analysis:
Having good books and accounting is the basis for many planning decisions.
Profit and Loss Statement must be completed and reviewed on a monthly basis. It’s important to have good source documents such as General Ledger and Profit and Loss Statement. Its also the basis for tax planning and tax filing. Tax returns are final products. It’s important that you ( or your CPA) is actively monitoring your books during the year through tax planning and tax planning strategies ( fully legal).
Good books are the basis for good decisions. Bad CPAs doing sloppy work will cost you beyond tax dollars. Your business would simply go in the wrong direction. We need to be on top of our expenses through ratios and benchmarking.
The 6 Dental Overhead Expense Benchmark Categories:
To really know how profitable your practice is, you need to know the complete and total dollar amount of all expenses associated with running your practice.
- Personnel Costs 25-30% of Income (Not to exceed 32%)
- Facility Costs 10% of Income (Not to Exceed 12%)
- Clinical Costs 12-14% of Income (Not to Exceed 15)
- Other Business Costs 10% of Income
- Discretionary Costs 2% of Income
- Business Loan Payments (Principal and Interest). (Not to exceed 12% of total collection).
- Owner’s Compensation, Other Doctors & Profit 30-45% of Income (Not to be lower than what you arr able to get as an Associate)
THERE ARE ONLY 100% TO ALLOCATE!!
All quantitative practice information must be reviewed on a monthly basis- Major Key Performance Indicators must be computed, summarized, and reviewed on a monthly basis.
B. Management Reports- Qualitative Analysis
- A production and collections report and a breakdown by each dentist and hygienist
- All production reports broken down by ADA codes.
- list of all adjustments, refunds and write offs
- Number of new patients each month.
- Active patients – last 6, 12, 18, 24 months
- Unscheduled treatments
- Accounts Receivable
- Credit Balances
C. Statistics and KPIs
- Dr. Working days
- Hygiene working days.
- # of total patients seen
- # of fmx
- # of exams
- # of emergency
- # of new patients and where they came from
- # of crowns prepped, diagnosed and booked in the future
- # of SRP, irrigation, laser, PROPHYS]
- Dr. Average
- Hygiene average
- Specialty production
- Production Per Visit (PPV)
- Broken Appointment Percentage
D. Directional Review
- Time To Make Some Decisions based on Conclusions Reviewing the Statistics.
- Where is your business heading short term and long term?
- Is it time for reassessment, changes, adjustment of priorities or the pursuit of alternative business plans?
- What new systems and protocols do we need to establish?
- What new training, marketing, technology and capacity planning are needed.
- How much we can spend on advertising, direct mail, etc. to acquire new patients.
- How many patients your practice needs to meet your financial goals.
- When you need to add staff, such as a hygienist, an associate doctor or administration.
- Can we give bonuses, raises, start a retirement plan.
NEXT STEPS:
START BY ASKING YOURSELF: “What are the key metrics and performance indicators that I should be tracking on a daily, weekly and monthly, annual basis?”
- Systematize Your Business
- Take deliberate actions to accomplish specific goals,
- Work as efficiently and productively as possible
- Businesses to be organized and run in a streamlined, systematic way,
- Improving the core systems in your business through concrete steps
- Formal plans and statements can be hugely effective in creating clarity and discipline for deliberate action. Moving in proper sequences
- having a career plan has a significant, positive effect on business owners’ incomes
We are not in business just to do more business or make more money. We’re in business to support the quality of life we want now and in the future. Your personal income is your primary vehicle for building your personal wealth right now. And down the road, should you decide to exit your business, your equity may provide a big boost to your personal wealth.
Metrics provide a clear-eyed view of how your business is performing so you don’t have to resort to making crucial decisions based on a hunch.
Metrics are a standard part of our conversations, because our role includes helping you become better business owners.