As a practice owner, you are directly responsible for the financial performance of your dental practice. This responsibility may require you to understand the cash flow of your business – the numbers you plan to achieve in order to meet your obligations and earn a profit, and the most effective ways to generate those numbers.
Indeed, understanding your cash flow is one fundamental aspect to ultimate financial success. Here are several important steps you can take to effectively track and manage your cash flow and financial performance:
- Establish production goals. Production is the first step towards cash flow. In order to sustain and grow your practice, your goal may be to collect enough of what you produce to cover your operating expenses, pay down debt, and deliver adequate profit. One important key to maximizing your cash flow is to establish daily and monthly production goals:
- Evaluate monthly goals to keep them realistic based on your current patient load and work schedule.
- Consider announcing daily production goals to staff each morning in your team meeting.
Use your internal strategies for maximizing daily production – for example:
- Try to stay on schedule to the extent possible so you don’t risk losing appointments and impacting production during the day
- Call patients to fill cancellations and open slots in the schedule
- Use your case acceptance skills to gain commitment to needed procedures
Try using a practice monitoring tool.
To fully understand the strengths and weaknesses of your practice and systems, consider using a professional practice monitoring tool that can help you establish baseline measurements for everything from production to operating expenses. For example, the Milestones program from Wells Fargo Practice Finance can get you started in routinely tracking and examining your practice statistics. If you review your profit and loss numbers, you may be able to diagnose and treat problem areas before they impact the overall health of your practice and, ultimately, your cash flow.
Implement effective internal systems.
Internal systems can encompass everything from patient recall programs to staff training and payroll, and can be critical in establishing both operational and financial efficiencies in your practice. Using outdated or ineffective patient follow-up systems or computer programs that are not equipped to capture all charges may limit your cash flow opportunities. In contrast, a high-functioning practice may offer quality products and services. In order to establish a foundation of excellence implement follow-up procedures to capture all charges and ensure long-term sustainability. Developing an efficient, effective, and quality-driven internal operation may help support your cash flow function while upholding your brand and overall practice value.
Invest in a marketing campaign.
Marketing can be a critical factor to cash flow generation — not just when you’re starting your practice and trying to attract new patients, but throughout your career as a dental professional. By routinely investing in a marketing program that may include a website, social media, and community and industry engagement, you can help ensure a regular flow of patients to your office along with a potentially robust production schedule. In addition, an effective internal marketing program that lets your patients know about new services and treatment options you are providing may be a significant source of steady production and revenue.
Manage your debt.
Some practitioners may not be able to start their own business without incurring debt to pay for real estate, office remodels, equipment and supplies. But it’s important to effectively manage your debt in order to help improve your cash flow. Consider using the following suggested guidelines to help pay down any debt each month:
- List expenses that are critical to keeping the doors open for patients, such as staff salaries, your income, payroll taxes, and office lease expenses.
- List every outstanding bill you have to pay, starting with the oldest due date and ending with the most recent.
- Take a percent of any funds left over and place them in an interest-bearing savings account. This may help ensure you have cash on hand in case of a bad month or an unanticipated expense.
- Consider using remaining income to pay down the outstanding debt, paying as much as you can on one bill at a time until it is paid off.
- This debt management plan requires personal discipline, but it may be worth the effort if you can free up more cash flow that can be reinvested in your practice and future.
Create a budget and stick to it!
One plan for helping to ensure your spending levels are reasonable and debt does not spiral out of control is to create an annual financial forecast with a specific budget for each month. In addition to helping you stay on track financially, a monthly budget may give you a basis for establishing production goals. Here’s a suggestion on how to do it:
- Determine your projected gross income for the next 12 months based on the number and types of procedures you expect to perform each week. This does not have to be exact — it can be a ‘guesstimate’ based on the previous year’s procedures.
- Outline planned expenditures per month by category, such as salaries, new equipment, supplies, continuing education, etc.
- Highlight the planned expenditures that make up your operating expenses and overhead. This will include your salaries, office lease, and supplies.
- To determine your projected monthly cash flow, subtract your operating expenses and overhead from your gross income per month.
- With a budget in hand, you have the basis that can help you make sound financial decisions as you manage your practice week-to-week.
Taken together, these financial management and cash flow generation ideas can be a powerful toolkit for helping you maximize the financial performance of your practice, and helping to ensure its continued growth and success long into the future.
The team at LenDRgroup Consulting cares about the long-term success of your practice. No matter if you are in need of practice financing or business consulting, we are able to craft a customized plan to fit the unique needs of not only your practice, but also your career. We bring a lending platform comprised of 300+ dental and healthcare specific lenders, and we built this network with the purpose of helping dentitsts, veterinarians, and physicians. We want you to acheive your dreams of practice ownership while eliminating the obstacles associated with practice financing.
To date, we have helped hundreds of medical professionals expand and grow their practice. LenDRgroup Consulting recognizes and understands the needs of your business and can provide guidance to help avoid costly mistakes. So, let’s get started. Contact us today to schedule a one-on-one consultation.