Financial Systems for Dental Practice Growth
Guest blog author
As a dental practice owner, have you ever reviewed your P&L and found line items that say “misc” or “ask the dentist?” We hear you. Oftentimes, dental practice expenses are miscategorized, which doesn’t give dental practice owners a clear financial picture. The reality is that dental practice expenses may not all fit in a traditional accounting template P&L. In order to see the most accurate picture of your dental practice revenue health, you need accounting and bookkeeping specifically for dental practices. A dental accounting and bookkeeping specialist can provide simple and transparent financials, that are customized to your dental practice, so that you have a clear handle on your revenue cycle management.
What does an accountant do for a dentist?
One of the biggest misconceptions that dental practice owners and accountants alike tend to make is thinking that traditional accounting processes work for dental practices. In fact, having a specialized dental accounting specialist is recommended for dental practice owners. A dental accountant doesn’t just forecast financial needs and milestones, but also advises the dental practice owner in financial best practices — especially when it comes to taxes and business expenses. Dental accounting involves developing high-level strategies for improving the dental practice’s financial future. This customized approach to your business is important for the financial future of your practice.
Dental practice accounting
The data to evaluate the health of your revenue cycle management comes from your books, right? So it makes sense to have a dental accounting and bookkeeping specialist that understands the expenses of a dental practice and how to track them. Additionally, having dental specific books makes the organization of line items on your P&L flow properly, which makes managing your practice revenue and overhead easier.
Did you know that bookkeeping and dental accounting processes are not the same? Click here to read about the differences.
Setting dental practice budgets & benchmarks
Your P&L tells a story. It tells the story of how much revenue you are bringing in, how much you are spending on expenses, and how much of your revenue is being spent on certain expenses. How much are you spending on dental practice supplies? How much are you spending on lab costs? Are you wanting to decrease the percentage of your revenue that you are spending in these areas, to increase your profit margin? Consider setting custom budgets and benchmarks to track and keep expenses where you want them.
Examples of setting benchmarks:
Dental supplies – 6%
Lab fees – 5%
Marketing – 3%
Check out the Smart Ways to Net More By Minding Your Margins webinar — with Dr. Warren Willis, Dr. Brian Borg, Dr. James Anderson, and Taylor Anderson — that explores the ideal overhead benchmarks for each dental specialty, and how to reduce expenses to increase your dental practice profit margin.
Consolidated financials for dental practice growth
If you have more than one dental practice, you probably look at individual P&Ls to assess the revenue cycle health of each practice. When you go to the bank for financing for growth, however, banks want to see consolidated financials. Consolidated financials are all line items, from all dental practice locations, on one P&L. If you are a single practice owner, you may be thinking that this doesn’t apply to you. While that might be true right now, we advise that you keep this info in your back pocket if you are considering future financing for growth.
What are your next big financial decisions for your dental practice?
Big financial decisions can be spontaneous when they should involve more strategy. As a dental practice owner, you want evaluate the impact of a big financial decision such as adding an associate, an operatory, or a location. What is your opportunity cost? What is the forecast going to look like? Finding the answer to these questions can be simple, but is often overlooked. This is when you need a Fractional CFO. Having that financial expertise and support when making big financial decisions helps you look at the decision thru a financial lens. When you make a decision based on the financial lens, you end up making a better decision for your business.
We can get you there
No matter what your next big financial decision is for your dental practice, you will want to increase your revenue and have financial strategy at your disposal. You can get both, and we can help. Click here to schedule a consultation with eAssist Dental Solutions to discuss streamlining your dental billing processes to increase your revenue, and a Business Development Specialist will set up a consultation with DSO CFO for you!
If you are currently, or planning to be, a multi-practice owner, check out our recent webinar 7 Financial Systems for Dental Practice Growth.