A dentist may be an exceptional practitioner. However, his or her skill set as a provider does not automatically ensure impressive business prowess. Often, dentist-owners struggle with the connection between their overhead and the success of their practice. Even with the help of a capable office manager, the dentist needs to understand the effects of overhead sufficiently to further his or her practice vision.
If you own your practice, analyzing your past year's finances is a great way to begin. You need to know exactly what your expenditures are and whether or not they are truly necessary. Inefficiency affects your profitability.
Reviewing Profit and Loss
Your profit-and-loss statement details the financial bones of your dental practice. It should list your expenses, revenue and overhead costs for the past year. Keep in mind that as you conduct your review, some of your expenses will be variable. For instance, laboratory charges and supplies needed for your dental services tend to fluctuate. Other costs, such as salaries, lease payments and clerical supplies should remain somewhat constant.
As you review your expenditures, it can be difficult to determine the health of your practice without having a point of reference. Thus, you will likely find it helpful to complete an analysis that compares your expenditures and costs with those of similar dental practices. This can help you determine how efficiently your business is performing. If you find that your practice is operating less efficiently than your counterparts, it’s time for some changes.
Predicting Future Performance
Once you have compiled the data from the past year, you can use it to help predict your practice’s expenditures for the next 12 months – and how those expenses will impact your overhead. For instance, newly purchased CAD/CAM equipment may reduce the number of impression material products that you will need to purchase. Also, consider facility-based expenses, such as increases in your lease and building improvement costs.
You can use your projections to assign new goals for productivity. As you assess every area of expenditures, you should arrive at a total. Once you deduct your variable expenses from the sum, you should have a baseline. You can use this number to decide how often you need to perform procedures and what you can expect to earn. Instead of being a dentist-owner who never receives a paycheck, you can control your overhead to increase the size of your wallet and give you time to enjoy your life.
To stay on track with your goals, schedule strategic planning meetings periodically throughout the year. The meetings will help you maintain staff accountability and make corrections as needed.
Some dentists may be a bit uncomfortable tracking overhead. Nevertheless, even though it may not have been the subject of one of your dental school courses, overhead is imperative for the success of your practice. By using it to prepare for fluctuations in expenditures and making wise scheduling choices, you can continue to grow your practice and your personal wealth.