Making Responsible Decisions about Expenses

In the past, many dentists only thought about their overall expenses once a year when they had an annual review with their accountant. With so many changes in the industry during the last two years most dentists need to have a better idea of their monthly expenses and if necessary, have some tools to make effective changes. Dentists are busy thinking about patient treatment, but they need to put the same effort (or delegate) into keeping track of expenses and making the changes needed with a very measured approach.

Some dentists only look at their Profit and Loss Statements without looking at their actual overhead and understanding which areas are fixed and which areas can be changed. Every owner should know what their break-even production is for a month. This is a calculation of all expenses including the owner’s take-home salary each month. Knowing what your practice needs to produce to hit this base amount will allow you to make decisions accordingly. 

Some fixed expenses can’t be changed, these include utilities, rent, insurance, bank fees and maintenance. Your only option to change any of these expenses is to ensure that you have negotiated the best plans available for each of these expenses without sacrificing the quality of services. One example of this would be having internet that isn’t reliable because of the plan you choose to save money. When deciding on a service switch do your research and make sure that your office will be benefitting from more than just savings.

It’s great if you know the benchmarks of variable expenses and knowing where you sit with them and how to change them is part of the key.  

One of these expenses is the subject that is on everyone’s mind right now, staffing and staffing costs. Staffing costs should be between 26% and 28% of your overall production. If your percentages are higher than this it doesn’t mean that you need to cut staff hours or jobs, what it does mean is that office production needs to improve to meet this benchmark expense. It means looking at your systems and tightening up areas that may have started showing some “cracks.” You may want to look at hygiene retention, hygiene open time, hygiene billing per hour, treatment acceptance and dentist open time. It could be all of these factors or just some of them but having effective systems in place in all of these areas will increase office production.

Supplies for a dental office should be between 6.5% and 7% of total collections for the month. A sundries budget is based on fees that are collected; you want to have that money in the bank before you spend it. This industry norm is easily measurable and can be assigned to a specific team member. Your team member will want to find the balance between time spent on a good deal of quality products and the time spent on making the find. 

Lab fees are another expense that you want to be aware of, meaning that your lab fees should be at least 8% of your overall production. If your lab fees are falling below the industry norm then you will want to look at your treatment coordination systems. Almost every dental office should have a patient demographic that will support this metric. 

You also may want to check to make sure you are getting the most out of everything you are already paying for. Know the metrics of your internal and external marketing efforts. You should be seeing the desired results with metrics, in the case of marketing are your new patient numbers hitting your goals and are the referral sources reflective or where you are spending your funds?

Lastly, before taking an expensive course or buying new equipment you will want to do the mathematics so that you are aware if the course or equipment is for your own knowledge or will it increase services offered and ultimately produced in the office. Having this knowledge may help you make the decision that works for both you and the office.

In today’s dental practice landscape, you need to be aware of your expenses on a monthly or quarterly level not just annually during your financial meeting with your accountant. Hiring a coach to help bring your practice to the industry norm with effective and efficient systems is money well spent.

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