You’ve owned your practice for x amount of years and are now ready to really analyze your financial health, or maybe you’re a new dental practice owner who wants to make sure they’re doing things right from the get go. No matter which camp you fall into, I commend you! Digging into finances isn’t for the faint of heart, but is incredibly necessary for creating a practice that sees long-term success and increased organization.
But where to start on the long journey of analyzation?
Grab a paper and a pen (or just bookmark this tab) and let’s dig-in.
1. Garbage In, Garbage Out
The first important step here is to develop the right system for data entry. A well developed Standard Chart of Financial Accounts (SCOA) that are common in the dental field is extremely important. Why? The real fact is this: Most dentists aren’t business experts. Spending a little time and money to develop the right accounting processes and systems will save thousands of dollars down the road and resolve a huge headache when it comes to financial well being!
The SCOA will enable you to:
- Do a comparative analysis within the dentist industry.
- Finances are a science. They tell you EXACTLY what is happening inside your practice and they’ll give you some real important actionable data.
- If you have a bad process of entering data you will have bad information. Bad information = bad decisions.
2. Look Past The Bottom Line
Most dentists I work with are accustomed to looking at their net revenue and taking it for what it is, without looking into the nitty gritty of things.
Some questions to ask yourself when analyzing your financial data:
- “Where did we spend cash?” I know a lot of accountants that do not provide their clients with real cash flow reports. A good cash flow report doesn’t only project where your cash will go, but tells you where you spent your cash last month.
- “Are my financial reports each month telling me what I need to know?” A good analysis of a financial report can tell you exactly where your practice is performing at and find some very simple opportunities to increase your bottom line.
- “What if I was able to save $30,000/year for 10 years? Would this make a difference in my retirement?” You want to make sure you’re not just building your practice, but that you’re building a future.
These to-the-point questions will help you more than you think and allow you to make course corrections on the spot, without wasting more quarters of “I wonder why?”
3. Assess Your Patient Base
It typically costs more to acquire new patients than to retain your current patient base. Are you focusing on patient retention as much as you should or are you constantly attempting to reinvent the wheelhouse to get new faces walking in your door?
I know a dental practice that is less than 5 miles from my office. This practice has been spending over $5,000/month on getting new patients into the practice. We sat down for a coaching session over coffee a while back and he tells me that his efforts generate at least 12 -15 new patients each month. Naturally, I asked him how long he’s been doing this. He told me over 7 years.
Let’s do some math here (and make it easy by using simple numbers):
Let’s assume he gets 10 new patients/month x 12 months x 7 years = 840 total new patients at a cost of $420,000($5K x 12 months x 7 years).
He hasn’t added any new location, nor an associate dentist.
I promise you that $420K would look really good at retirement time.