07/31/2017

Maximize operational efficiency by managing overhead expenses


Managing overhead expenses might not be a skill dentists learn about in dental school, but it is a necessity for running a successful practice. Practice owners don’t always realize just how much their overhead costs add up and how high the real cost of doing business can be.

As a practice advisor at The Dentists Service Company, Julie Axt sees how a thorough evaluation of overhead efficiency can significantly reduce costs, increase revenue and streamline operations — in practices of every model and size. There are opportunities to control overhead in commercial space costs, staffing, supplies, equipment and collections, says Axt, who recommends taking the following actions:

Lease agreements

One of the greatest causes of overhead inefficiency within a dental practice is the cost of commercial space. Practice owners who lease should budget between 5 and 7 percent of total expenditures to their lease agreements. If this percentage is higher or lower, it may be time to consider increasing production or expanding operations.

Staffing and payroll

Unbalanced staffing is another top expenditure for dental practices. Too often, practice owners overhire, overschedule or overcompensate. Staffing should be closely aligned with business need. For example, there is no reason to have three employees working the front office when two will suffice. Conversely, understaffing can result in employees working overtime, another significant cost for dental practices.

Lab, supplies and equipment

Ordering supplies can be a bit of a juggling act that requires balancing cost with quality, availability and shipping speed. But much of the overspend can be reduced by simply taking inventory and planning ahead. Keeping an accurate inventory can prevent last-minute rushes and exorbitant expedited shipping fees. Assigning a staff member to take inventory, order supplies and rotate stock to reduce waste is a good way to offset these unnecessary costs.

Rush shipping fees are also a common expense when it comes to labs. Checking the schedule and confirming the delivery of a case can eliminate last-minute panic as well as expense. Shopping around for local labs that offer delivery can also reduce these expenditures.

Paying close attention to the quality of a lab’s work can also reduce ongoing costs. When work is inconsistent or has to be returned due to error, there is a drain on the practice’s time and patients’ patience. A reputable lab will warranty their work and dentists have a right to hold them accountable. This should be clearly outlined in any agreements with vendors.

Prior to making a large equipment purchase, dentists should thoroughly assess their business needs to confirm they will receive return on their investment. For example, dentists sometimes spend thousands on CAD/CAM systems but don’t do enough crowns or restorations each month to justify the expense. Before doling out the big bucks for high-tech equipment, ask yourself whether it will help grow your practice based on your treatment modalities.

Collections

Failing to collect can also impact the bottom line in a dental practice. A bustling practice may have the appearance of high productivity, but a closer look at the numbers shows otherwise. Sometimes, dentists aren’t even aware there is a problem, which is an important reason for dentists to regularly examine the practice’s books.

For most practices, an ideal collection ratio is 97 percent of adjusted production, with 85 to 90 percent of payments received within 60 days. The standard benchmark for accounts receivable should be no more than a month’s production.  

The number of past-due bills can be greatly reduced by implementing a formal financial policy. The policy should clearly outline the patient’s financial obligations and indicate whether and how often billing statements will be sent, whether the practice makes collection calls, and whether past-due bills will be turned over to a collection agency.

All staff members should be educated on the details of the policy. Patients should sign a financial consent form, acknowledging that they read the policy and understand their own financial responsibilities.

Managing overhead expenses is a necessary skill for creating and maintaining a productive dental practice. Monitoring expenditures and making adjustments based on individual needs and goals can contribute to stronger financial security.

The Dentists Service Company specializes in group purchasing and practice management services, helping dentists practice on their own terms through supply savings and dedicated marketing, human resources and practice advising expertise. Learn more at tdsc.com.



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