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Why dentists don’t make the profit they should make
Most dentists are experts at their craft. They know how to keep teeth healthy. However, most dentists are unaware of the proper steps to create and maintain an accurate bookkeeping system that allows them to understand the true financial health of their business.
Could your dental practice make more profit?
In the competitive world of modern dentistry, financial rewards aren’t the only key indicator of success. Nonetheless, if your dental practice cannot generate the desired levels of profit, the entire future of the company could be under threat.
As such, understanding the main issues that could be holding you back forms an essential step enroot to success. Here are six of the most common problems that you may encounter. Make sure that you avoid them at all costs, and that road to success will become far smoother.
Failure to calculate Associate’s pay could reduce profit
Every member of your dental team has an important role, including the receptionists to cleaners. However, dental associates are arguably the most significant team members. Given that they are usually self-employed contractors in general practice, calculating their pay with accuracy is vital.
Without those figures, it’s very difficult to analyze the current state of the business or to know whether you are paying too much. Some private dentists can earn up to $ 200,000, so knowing exactly what you need to pay your associates is key. In some circumstances, this may include thinking about holiday payments and other additional costs.
Calculating an associate’s pay is probably a task best left to the company accountant or admin department, but you should still take an active approach by communicating with them to understand and analyze the scenario. Otherwise, you stand to keep losing out due to persisting with ideas that aren’t unlocking the most efficient way to run your dental practice.
Of course, it’s important to take the salaries of other employees into account. Given that the staffing costs will be among the biggest in your business venture, getting this element under control can open the door to far greater profits. You’ll also have a far better understanding of the situation.
Better management of the lab and materials can increase profit
The laboratory is a central feature of any successful dental business, and yours should not be any different. Consequently, then, poor management of the lab and the materials housed inside it will come back to cause major disruptions for your practice.
In the case of using outside lab companies to fulfil the demand of the practice sometime could be a major component of profit decrease. To decide running an inhouse lab or outsourcing could be a crucial decision, a good analysis is always important.
Semi-frequent audits can have a positive impact on the situations too as this will help identify areas of improvement before they escalate into serious issues.
Better management of Dental Supplies
Managing dental supplies sometime can be a difficult task, if it is not managed efficiently could be a nightmare to run the practice smoothly. As a dental accountant we know that there are an incredible number of products needed for the smooth running of any dental practice. From your everyday sundries such as nitrile gloves and face masks to specialist materials such as veneers and implants, managing the materials used by the practice requires patience and a specific process.
As a dental professionals you’re more than capable of managing such a task, supply cost plays integral part in practice ROI, if the management of supplies is not smooth, disorganized, inadequate or over supplies for non essential and irregular products, in that case you will be loosing lot of cash and it will impact your operation and credibility.
Poor purchasing decisions of equipment will impact on profits
Profit is a two-way street. So, while you will naturally place a lot of focus on the ambition to gain the biggest client base and Customer Lifetime Value figures, the importance of spending cannot be ignored. In this sense, equipment choices should be top of the agenda.
As mentioned above, choosing the right equipment, and keeping it in good health is a crucial step towards preventing damage to patient health. However, you must think about the purchasing decisions from a financial perspective too. Perhaps the biggest source of problems comes from the idea of buying fancy equipment that won’t be used. Always scrutinize your prospective purchases.
Another issue stems from buying equipment at the wrong time of the year. The timing of the purchase could be crucial for scalability and cash flow, as well as the potential tax benefits. This is especially true when making significant machinery purchases, which is why understanding the impacts on your company accounts is essential.
On a separate note, you should give all other overheads the same level of attention to ensure that your budget works harder than ever. Trimming the fat on utility bills, staffing, and even web hosting can increase the profit margins. This can only put your dentistry practice on stronger ground.
Not calculating your ADY will reduce profit
ADY stands for Average Daily Yield and this is the total gross income you (and your associates) are generating, on average, per day. So, say your total gross income for January was $ 20,000 and you have worked 10 clinical days to produce this income, then your average daily yield is $2,000. But, if you have worked 20 clinical days to produce this income, then your ADY is only $1000.
Make sure you’re calculating your ADY, to help you monitor your practice’s profit.
Better marketing strategies can boost profits
Marketing is an essential feature of any business, and dental practices shouldn’t be any different. Poor marketing strategies will generate smaller ROIs, which will simultaneously result in spending more money in order to get the results you need and will seriously harm your financial status.
Despite the fact that every company in this arena deals with teeth and oral health, the field of dentistry is particularly diverse. A dental practice that specializes in orthodontic braces will have a different audience to those that focus on general family dentistry. Likewise, some dentists are aimed at purely cosmetic tasks while others aim to fix health problems.
Each dental practice will have its unique place in the market, and this means having a unique audience too. Finding your place in the market, particularly in terms of the audience, will direct every aspect of your marketing strategies. This can range from deciphering whether local radio or social media marketing is the best solution to finding the right tone of voice.
Similarly, your location can influence the style and methods of marketing that work best. Ignoring the need to research and analyze your options will significantly limit your hopes of resonating with the audience and converting interest into sales.
Improper accounting system
First, good accounting keeps you in compliance with the CRA and other governing authorities. It ensures you are following the laws that the government has established. Good accounting helps you sleep at night knowing that you’ll never pay a fine, never go to jail for breaking the rules or underpaying taxes, and (should it occur) could have an auditor in and out of your business in record time.
You have to understand the difference between bad accounting and good accounting to be a successful dentist. Good accounting doesn’t just protect you from thieves. The real power of accounting lies in the ability to make good business decisions. Hiring a dental bookkeeper is always a crucial business decision for any successful dentistry.
The biggest, most successful, and best run companies in the world – Apple, Google, Microsoft, and thousands of others – know the importance of good accounting. They spend millions of dollars on sophisticated accounting systems and people every year.
In nutshell
Ultimately, then, the failure to generate the desired levels of profit can be linked back to poor planning. Learn to prepare your business for success by covering every element of running a dental practice, and the positive results will soon follow.[/vc_column_text][/vc_column][/vc_row]
