Using Financial Statements to Manage Your Dental Practice
Feb 19, 2015
The financial health of your practice can be assessed by analyzing its financial statements. Financial statements allow you to observe where your practice’s money came from, where it is going, and where it is now. Based on this information you can determine the future of your practice. Delving into the makeup of your payor mix, patient mix, product and service offerings, and the length of time it takes to bill and to collect will allow for maximization of revenue. Assuredly, you have regularly been told to increase your fees/prices annually while still staying within regional market rates and maintaining patient value. Likewise, it is recommended that you review participation in contracts prior to a renewal for the best possible reimbursement rates. Focusing on the revenue side of the practice generally can wield larger returns than focusing on keeping expenses low.
That said, of course, prudent business practice dictates you should evaluate the need and purpose for each expenditure made. It is advisable to periodically shop among vendors for discounts, to renegotiate vendor contracts for reasonable rates, and to review debt for opportunities to refinance, to reduce your overall costs. Salaries and related payroll taxes and benefits are a large expense for a professional office. If you have not already done so, consider an incentive pay structure and bonus system, opposed to an annual cost of living increases. Appreciation through gestures and recognition, and also non-cash benefits are typically well received.
Once you have fully reviewed and evaluated maximizing revenue and minimizing expenses the recommendation is to look at your balance sheet for the assets and liabilities you are ‘investing’ in as a company. Accounts receivable may be one of the largest assets. Do you regularly and diligently focus on collecting amount due to you – sooner than later? Do you monitor purchases and supplies inventories so not to stock excess items which ties up cash and income? Debt, as was mentioned previously, may be better suited to be paid off, paid down faster than required or refinanced.
After exhausting all the financial management techniques, processes are the next area you may want to focus on. Keep your coding current to minimize errors and rework. Define steps in all functions of the practice to avoid time ineffectiveness and inefficiency at all levels. Optimize patient scheduling to maximize the benefit of everyone’s time. Limit overtime paid with closely watching staffing. We can work with you on where you could make financial changes and also help with reviewing and identifying areas in your practice where streamlining operations may help optimize your practice’s bottom line.
By: Michelle Klement, CPA
Categories: Healthcare & Dentistry