6 habits of financially secure practices
Like any admirable goal, getting your business’s finances in order and becoming financially secure requires the development of good financial habits. Here are six habits of financially secure practices, according to the ADA Center for Professional Success.
- Consistently and appropriately increasing fees: Each year the cost of providing quality dentistry increases, including supplies and salaries. As the dentist business owner, you can choose not to increase fees and accept less profitability. The first step is to realize that many businesses increase their prices, typically to meet a specific profit margin.
- Collect 100 percent net-to-net: Expectations are the key to success or failure. Many teams settle for 97 or 98 percent of net assuming they can’t collect everything. One hundred percent net to net should be you and your team’s expectation. Many financially successful practices collect 100% of their net production. This means that if you produce $100,000 a month gross, which results in $92,000 net when you take into account insurance write-offs, professional courtesies, and other adjustments, you should collect no less than the $92,000 net.
- Plan for consistent growth: All aspects of your practice will impact growth—from fees to collections to overhead. Growth planning should be a topic discussed in your staff meeting, followed by reporting key growth indicators and adjusting your systems and processes to keep your practice on track. Numbers also play a significant part—specifically your gross production, net production, collections, net collections, and new patients. This all means you must give thought and structure around your staff meetings, with attention to keeping your staff invested in the practice growth while primarily focusing on providing the best patient care possible. Include celebration, continuing education (training), and correction.
- Believe everything is possible and do everything possible to enable care: Successful practices know that it’s their responsibility to provide the patient with a plan that is comprehensive, complete, and provides the patient with information on all available options, and then work together to make it happen.
- View overhead in terms of revenue: Expenses need to be managed so you achieve the profitability that enables financial independence. Practice growth is the number one way to reduce your overhead. When most practices look at “managing” overhead, they seek to cut costs. But, even as you look to ensure you’re not wasting money, you should be focusing even more of your energy on growth.
- Know the difference between good and bad debt: By far the worse “bad” debt a practice can have is any debt you cannot afford to pay. Overextending yourself or your practice financially is the easiest way to insure you will never have the financial freedom and independence you desire. Good debt is having a mortgage because it’s cheaper than rent. It’s purchasing technology that provides incremental production and enables better patient care. This is good debt to have because they can accelerate growth and profitability.