Managing Practice Risk
Instead of focusing on the Key Performance Indicators of their practice, I see many dentists spending valuable time entering data into their accounting software, trying to figure out how to run a report in QuickBooks, managing payroll, or completing any number of other tasks that that could be easily delegated to an expert, who could do it faster, more accurately, and at a fraction of their hourly rate.
It’s not that dentists can’t do it; it’s that you shouldn’t do it. Your time is too valuable! It’s not that you don’t need to understand your financials. It’s that you need someone who can take care of the minutia, so you can focus on the Key Performance Indicators that will allow you to make meaningful adjustments in your practice to increase revenue and manage a more efficient, profitable practice.
Aside from the wasted time and the ensuing frustration that comes from trying to figure something out that ‘should only take a few minutes’ in between patients, I’ve also seen the mess that needs to be cleaned up later because something was entered incorrectly or not entered at all. No, these types of mistakes won’t put someone out of business, we’ll save a discussion on those types of mistakes for later, but even small mistakes accumulate over time and lend themselves to operating a practice at less than peak efficiency.
I’ve also seen cases where money has been embezzled by employees or even by a practice partner. In one case, a partner embezzled nearly $200,000 over the course of about a year. While the original amounts were just a few thousand a month, it eventually grew to be tens of thousands each month, and eventually, his partners realized something was amiss. You can imagine the difficult process of trying to recover the embezzled funds from someone who was making ~$500,000, yet broke and desperate enough to steal another $200,000!
Unfortunately, in a large practice, significant sums of money can go missing fairly easily, and sometimes these are never caught or caught only years after an employee has left. This is why it’s important to have safeguards in place to prevent this, and to quickly alert you if something is off. This is one reason why I recommend hiring a third-party firm to help provide oversight and management of your bookkeeping, banking processes, and tax preparation.
Overhead expenses are another area that can slowly erode your profitability if you aren’t careful. Just like in a personal cash flow budget, it is helpful to group your overhead expenses into several major categories and compare them to a benchmark so you can see where you might have room to cut some fat. These categories include payroll expenses, supply costs, lab bills, marketing expenses, leases, and other smaller expenses. As you track these expenses over time, it is helpful to have a dashboard with a trend line so you can see see how each individual month compares to the long-term trend and how certain categories vary based on the month of the year.
What ties these all together? Whether it’s avoiding wasted time, avoiding accounting oversights, or making better business decisions, you need good information. Dentists need accurate financials on a monthly basis, and they’re not likely to get this done on their own. You’re a dentist, not a CPA, and just as Dentrix doesn’t make a dental degree irrelevant, Quickbooks doesn’t make an accounting degree irrelevant. You should be delegating anything that keeps you from operating the most efficient dental practice possible – including your accounting. Catalyze Dental Advisors can not only help with your taxes, bookkeeping, and payroll, but we also provide our clients with a real time dashboard of Key Performance Indicators for your practice and help you learn what how to use that information to make good decisions and manage a more efficient, profitable practice.