Introduction
When managing dental practice finances, there are many moving parts. There are income, overhead costs, fees, taxes, insurance reimbursements, and more. Even if you’re the best dentist in town, if you don’t manage your money right, you won’t be able to build and maintain a profitable, financially sustainable practice while still providing top-quality patient care.
We’ll explore the some essential things dentists must do to optimize their practice’s financial health and meet their financial goals.
Hire an Expert to Help You
One of the main actions dentists recommend for managing a practice’s finances is hiring a financial expert, preferably one with specific dental practice expertise. Most dentists are not financial experts and can’t be expected to know how to manage their money efficiently. Hiring an expert, such as a certified public accountant, is especially important for dentists come tax time. This can be done through business process consulting to streamline financial operations.
Use Dental Accounting Software
Even if you have an accountant to advise you on financial matters, you still need to give them the hard data they need to assess your practice’s finances. Using the right software, you can easily track expenses, revenues, and other financial information to give your accountant an accurate view of your income and expenses, boosting your dental practice profitability. Consider utilizing AI business advisor tools to enhance your financial tracking capabilities.
Some dentists use accounting software like QuickBooks or Xero; there are also dedicated dental practice management software solutions such as Curve Dental or Total Dental. Depending on the dental PM software you use, the software may have its own accounting features, or it may integrate with other accounting software such as QuickBooks.
Track Your Important Practice Metrics
Track important business metrics that affect your dental practice profitability to stay on top of your day-to-day and month-to-month financials. One of the most crucial pieces of data to pay attention to is your P&L (profit and loss) statement. Business scaling strategies can help you maintain these metrics effectively.
Payment Plans and Insurance Coverage
Cash flow plays an essential role in dental practice finances and the long-term success of your practice. We’ll break this down into two main areas: billing and insurance.
Patient Billing
Some patients lack dental insurance or have limited coverage, leaving them with a balance after treatment. Dental practices should review their collection practices to maintain cash flow. Implementing individualized payment plans can help patients pay their balances on time, reducing delinquencies and defaults. Consistent frameworks for payment plans assist staff in addressing patient concerns and collecting payments. Additionally, effective management of insurance billing and payments minimizes claim denials and ensures steady revenue. For practices in areas like Miami, seeking local bookkeeping services can streamline these processes.
Insurance Coverage
When you own a dental practice, your finances may be impacted by unexpected events such as the COVID-19 pandemic. It’s important to protect yourself by purchasing insurance coverage. Here are some insurance types you may need to protect yourself, your employees, and your practice:
- Dental malpractice insurance
- General liability
- Employment practices liability insurance
- Business owner’s insurance
- Business interruption insurance
- Business overhead expense disability
Keep an Eye on Other Important Numbers
We’ve already mentioned some statistics, but we should mention a few others that can help you understand your practice’s revenue and dental practice profitability. Here are a few things to consider:
Patient Statistics
Keeping track of patient statistics is a must for every dental practice. Tracking these things will help you understand how your patients impact your practice’s finances.
- Number of patients per day
- Appointment cancellation rate
- Number of new patients per month
- Patient retention rate
Average Dentist Production Per Month
On a related note, we strongly recommend tracking statistics related to average dentist production per month. For example, how many patients does each hygienist see in a day or a month? How many patients do you and other dentists see?
These numbers indicate your practice capacity and revenue. If you and your hygienists have a lot of idle time, you must step up your marketing efforts to fill those empty blocks in the schedule.
Dental Office Overhead Percentages
Keeping track of your overhead is essential since this is an area where many dental practices can boost their revenue. Here are the steps to calculate your overhead percentage:
- Get a current Profit & Loss report.
- Cross out any expense accounts related to practice owners and dentists.
- Add any remaining expense
Takeaways and Action Items
Effective financial management in a dental practice involves a strategic approach to tracking expenses, setting appropriate fees, and optimizing overhead costs. Utilizing tools like dental accounting software and engaging in business process consulting can provide a comprehensive view of financial health. Monitoring key practice metrics, patient statistics, and overhead percentages is essential for maintaining profitability. Hiring a financial expert with dental experience can offer invaluable guidance, particularly during tax time and in setting long-term financial goals.
Implementing individualized payment plans and efficient insurance billing can enhance cash flow significantly. Ensuring appropriate insurance coverage protects the practice from unexpected revenue impacts. Embracing modern business scaling strategies, such as AI business advisors, can streamline operations and boost profitability. By focusing on these strategies, dental practices can achieve financial stability while continuing to deliver high-quality patient care.
FAQ
Get your FREE 8 Gears Assessment Score in 10 minutes!
