revolutionizing-dentistry-for-better-diagnosis
revolutionizing-dentistry-for-better-diagnosis

Understanding the importance of financial planning for dental practices

Undoubtedly ,launching a new dental clinic can be simultaneously exhilarating and a daunting task. Beyond delivering exceptional services, effective financial planning is also essential for guaranteeing the triumph and longevity of your dental practice. There’s no better time to start taking control of your practice financials than the beginning .

Financial Strategies for new Dental clinics :

Tailoring smart financial tips for dental clinic can be very challenging but taking a command over it from the very start can help you to establish a profitable dental clinic .

1. Craft a Detailed Business Plan:

Before diving into the complexities of finance, lay a sturdy foundation with a comprehensive business plan. Outline your mission, target market, services offered, and projected expenses and revenues. A well-structured plan not only serves as a roadmap but also aids in securing financing from lenders or investors.

2. Hire an Expert to Help You:

One of the main actions dentists recommend for managing a practice’s finances is hiring a financial expert, preferably one with specific dental practice expertise. Most dentists are not financial experts and can’t be expected to know how to manage their money efficiently. Hiring an expert such as a certified public accountant is especially important for dentists come tax time.

Treatment Adaptability:

  • Tax Preparation and Filing:- The most important benefit of hiring a dental accountant for your practice is that they can help you with tax preparation to ensure that all taxes are filed and paid correctly.

  • Financial Planning and Management:- Your dental accountant can help you plan and manage your practice’s finances. For example, they can help you create a yearly budget to ensure you have the money you need to pay for overhead expenses such as your mortgage or rent, payroll, and taxes. They can also help you with succession planning. Financial planning and management may include payroll management, hiring, and every other aspect of managing your finances as they relate to your practice.

  • Loan and Financing Advice:- There may be times in the course of owning a practice when you require obtaining a business loan for your practice. Options may include a bank or credit union loan, a line of credit, or equipment financing. If you need to seek financing, your dental accountant can help you evaluate your options.

  • Bookkeeping and Payroll Processing:- Two areas where dentists are most likely to make costly mistakes if they attempt to handle their own accounting are bookkeeping and payroll processing. In both cases, accounting errors can harm your practice. The right accountant can help you set up an easy-to-maintain dental bookkeeping system and help you choose a reputable payroll provider to ensure that you don’t make mistakes that can lead to an IRS audit.

    Bookkeeping and Payroll Processing

3. Embrace Technology:

In today's digital age, leveraging technology can streamline various aspects of your clinic's operations, from appointment scheduling and patient management to billing and invoicing. Even if you have an accountant to advise you on financial matters, you still need to give them the hard data they need to assess your practice’s finances. Using the right financial management software, you can easily track expenses, revenues, and other financial information to give your accountant an accurate view of your income and expenses.

Some of the accounting softwares preferred by dentists include solutions such as Curve Dental or Total Dental, QuickBooks or Xero, VasyERP solutions, Zoho .

4. Set the budget wisely for your clinic :

Every penny counts, especially in the nascent stages of your clinic. Create a detailed budget encompassing both fixed (rent, utilities, salaries) and variable (supplies, marketing) expenses. Strive to strike a balance between quality and cost-effectiveness when sourcing equipment and supplies.

5. Invest in Quality Equipment:

While it might be tempting to cut costs by opting for cheaper equipment, investing in high-quality dental tools and technology is crucial for delivering superior patient care and optimizing operational efficiency in the long run. Consider leasing or financing options to ease the financial burden.

Also read our blog on how to find the right and cost -effective equipment for your clinic .

6. Track Your Important Practice Metrics:

Track important business metrics that affect your profits to stay on top of your day-to-day and month-to-month financials. One of the most crucial pieces of data to pay attention to is your P&L (profit and loss) statement.

Find out some data pieces that affect your P&L (and which you should also pay attention to) :

  • Fixed expenses: Overhead costs that do not change monthly (utility bills, rent/mortgage, loan payments, etc.)

  • Variable expenses: Expenses that may change based on your monthly production (lab bills, supply bills, staff pay, etc.)

  • Over-the-counter (OTC) collections

  • Ratio of period production vs. overall hygiene production

  • Doctor and hygiene production per hour

  • Unscheduled time units

  • Accounts receivable

7. Payment Plans and Insurance Coverage

Cash flow : Cash flow management is the lifeblood of any business, and dental clinics are no exception. Keep a close eye on your cash inflows and outflows, and implement strategies to maintain a healthy cash reserve for unforeseen expenses or fluctuations in revenue

Let’s break this down into two main areas: billing and insurance.

Patient Billing: Some of your patients may not have dental insurance or limited coverage, which leaves them with a balance after their treatment. When that’s the case, dental practices can and should look at their collection practices and how they can keep the cash flowing. One thing that may be helpful is having a system in place to create individualized payment plans for patients. With a payment plan, it’s easy for patients to pay their balances in a timely manner.

Insurance Coverage: When you own a dental practice, your finances may be impacted. Unexpected events such as the COVID-19 pandemic may impact your practice revenue. It’s important to protect yourself by purchasing insurance coverage.

Here are some insurance types you may need to protect yourself, your employees, and your practice.

  • Dental malpractice insurance

  • General liability

  • Employment practices liability insurance

  • Business owner’s insurance

  • Business interruption insurance

  • Business overhead expense disability

8. Monitor Key Performance Indicators (KPIs):

Track key performance indicators such as:

Patient Statistics: Keeping track of patient statistics is a must for every dental practice. Tracking these things will help you understand how your patients impact your practice's finances.

  • Number of patients per day

  • Appointment cancellation rate

  • Number of new patients per month

  • Patient retention rate

  • Treatment presented vs. treatment accepted ratio.

  • Inquiries vs scheduled new patient appointments

Dental Office Overhead Percentages: Keeping track of your overhead is essential since this is an area where many dental practices can boost their revenue.

Here are the steps to calculate your overhead percentage:

  • Get a current Profit & Loss report.

  • Cross out any expense accounts related to practice owners and dentists.

  • Add any remaining expense categories together.

  • Divide the result against your total practice income, then multiply that number by 100 to get the percentage.

The average overhead percentage in the dental industry is between 60% and 65%. Cost-cutting can help you reduce expenses and increase your revenue if your number exceeds that.

9. Invest in Things That Increase Your Revenue

It's true that you have to spend money to make money. But when it comes to running a practice, where do you need to spend money to maximize revenues?

Ultimately, these are things that help in increasing revenue :

1) Make patients happy, and

2) Boost your practice’s visibility, both online and off

Here’s some specific advice dentists should use in this area.

  • Form relationships with repeat patients by offering them discounts on some services. You’ll get more referrals this way.

  • Give back to society by participating in charity events in the community, volunteering, etc. People will notice you and come to your practice as a result.

  • Invest in technology, perks, and facility improvements.

  • Invest in quality staff: caring, qualified dentists and staff that truly connect to patients and make them feel respected.

  • Market your practice online, paying special attention to local SEO, so people in your area looking for your services can find you.

  • Manage your online reviews by claiming your practice on review sites, encouraging patients to leave reviews, and responding to all reviews.

CONCLUSION :

By implementing these smart financial planning tips, new dental clinics can position themselves for long-term success and prosperity in a competitive healthcare landscape. Remember, strategic financial planning is not just about managing money—it's about building a solid foundation for growth, innovation, and exceptional patient care.