As a practice owner, you are directly responsible for your dental practice’s financial performance. As such, you need to understand the business’ cash flow.
Cash flow refers to the numbers needed to meet your financial obligations, earn a profit, and the ways to generate those numbers. Understanding the cash flow of your practice is a fundamental aspect of financial success.
The following steps can help you stay on track and manage your cash flow and financial performance.
Establish production goals.
Production is crucial for cash flow. In order for your practice to grow, you need production goals. For example, your goal may be to collect enough to cover operating expenses, pay off some of your debt, and deliver a profit. To maximize your cash flow, create daily and monthly production goals.
- Monthly goals should be reevaluated regularly to ensure they are realistic based on the current patient load and schedule.
- Consider sharing the daily goals with your staff each morning during a team meeting.
Strategies to maximize daily production may include:
- Stick to your schedule as much as possible to avoid losing appointments and impacting future production.
- Have a cancellation list and call patients to fill spots that open up in your schedule.
- Enhance and use your case acceptance skills to get patients to commit to procedures.
Use a practice monitoring tool.
A practice monitoring tool can help you understand the strengths and weaknesses of your practice and systems. Use a tool to establish baseline measurements for all systems from production to expenses.
This can help you start routinely tracking and examining your practice statistics. Reviewing profit and loss numbers may help you diagnose and treat problems before they affect the overall health of your practice and cash flow.
Implement effective internal systems.
Internal systems can include patient recall, staff training, payroll, and everything in between. These systems are critical in establishing operational and financial efficiencies in the practice. Using outdated systems or equipment can limit your cash flow opportunities. A high-functioning practice should offer and use quality products and services.
Implement follow-up procedures that capture all changes and ensure long-term sustainability. Develop efficient, effective, quality internal operations that support your cash flow while also upholding your brand and practice value.
Invest in a marketing campaign.
Marketing is critical in generating cash flow. This is true when you start your practice and need to attract new patients and throughout your career as a dental professional.
Investing in a marketing program may include your website, social media, and community engagement. This ensures a regular stream of patients and a potentially robust production schedule. Additionally, your marketing program lets patients know when you have new services or treatments which can be a significant source of production and revenue.
Manage your debt.
Some practice owners cannot start their own businesses without taking on debt for real estate, remodeling projects, equipment, and supplies. You must effectively manage your debt to improve your cash flow.
Consider using the following guidelines to help pay down your debt each month:
- List the critical operating expenses such as staff salaries, your income, payroll taxes, and office lease expenses.
- List each bill you have to pay, starting with the oldest due date and ending with the most recent.
- Put a percentage of the remaining funds into an interest-bearing savings account. With this, you have cash on hand if you have a bad month or an unanticipated expense.
- Consider paying some of your outstanding debt with the remaining income. Pay on one bill at a time until it is paid off.
- This plan requires personal discipline but it is worth the effort if you can free up more cash flow to then reinvest in your practice.
Create a budget and stick to it!
Create a yearly financial forecast with a budget for each month. This helps ensure your spending and debts do not spiral out of control. A monthly budget gives you a basis for your production goals and helps you stay on track. Consider the following suggestions:
- Determine your projected income for the year based on the number and types of procedures you perform each week. Make a “guesstimate” based on the previous year’s procedures.
- Outline planned purchases and spending per month. Keep track of spending by category such as salaries, equipment, supplies, education, etc.
- Highlight those expenditures that make up your operating expenses and overhead. These expenditures are necessary to keep your practice open and include salaries, your office lease, and supplies.
- Subtract operating expenses and overhead from your estimated monthly income to determine monthly cash flow.
- Having a budget allows you to make sound financial decisions each week.
These financial management and cash flow tips can be powerful tools in helping you maximize the financial performance of your business. These tools also help ensure your practice’s future growth and success.
At LenDRgroup Consulting, we care about the long-term success of your dental practice. Our team offers customized practice financing or business consulting services to meet the needs of your dental practice and your career.
We developed a lending platform of 300+ dental and healthcare-specific lenders with the sole purpose of helping dentists, veterinarians, and physicians. We want you to achieve your practice ownership goals and will work to eliminate the financing obstacles in your way.
Thus far, we have helped hundreds of dental professionals just like you launch, expand, and grow their practices. LenDRgroup Consulting understands the needs of your small business and can provide guidance to help avoid costly mistakes. So, let’s get started.
Contact us today to schedule your consultation.