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Tip 2: Assess and Improve Your Overhead Costs |
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CareCredit Practice,
With today’s economy, more patients are delaying or declining treatment. The question is: What can your team do today to keep your practice thriving in this tough economy?
To help you get through this tough economy, CareCredit is reaching out to our network of 70,000 dental practices and leading practice management consultants to find new and unique ideas and will share them in this special e-mail series.
This week’s e-mail offers great tips for assessing and improving your overhead costs by Sally McKenzie, CEO, McKenzie Management. |
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“To protect practices during this fluctuating economy, we have been helping our clients focus on the areas that make an immediate difference. One of those areas is overhead. Now is the time to enable your practice to reach the gold standard for overhead — 55% of revenue. We recommend that you look closely at key overhead triggers — inconsistent production, low collections and high expenses. Before you can begin to think of how to fix the areas of expense that are out of control, you need to be able to measure your overhead and assess your current situation.”
What You Can Do Now
- Identify areas of your overhead costs that need to be improved by comparing your actual overhead percentages to industry standards. To compare yours, click here for a complete worksheet provided by Sally McKenzie.
- Follow these steps to improve your costs:
- Fend off the “Palace Plague” - You can run a practice out of an excellent facility without breaking the bank. Your patients don’t have to feel like they are at a spa with all the amenities including umbrella cocktails. There is no guarantee that a bigger, better space will bring in more patients unless you develop a plan to attract and keep new patients as well as improve treatment acceptance among current patients.
- Motivate Your Team and Raise the Bar - With input from the team, establish individual performance goals that complement practice goals, such as increasing collection ratio, improving accounts receivables, expanding production, reducing time to prepare treatment rooms, and increasing clinical skills. Make sure to track their progress, reward when they meet their goals, and use it to determine raises. Performance reviews are one of the most effective tools in creating a total climate of success in your practice.
- Supply Side Economics - Keep good records and track all inventory. Don’t let thousands of dollars sit in your cabinets. Have a budget and have one person — not persons — responsible for managing the supplies within the budget. The information you gather through your tracking system will enable you to more readily compare cost and quality of products as well as supplier turnaround time. Work with your dental supply company and dealer representatives to help you get your supply costs to 5 - 6%.
- Collections - If your total accounts receivable exceeds your monthly production it’s a red flag indicating problems in one or more areas. One employee should be accountable for generating accounts receivable reports and following up with delinquent accounts. In lieu of extending credit to patients, partner with a patient financing company so that you get paid on time and your patients have more flexibility to make payments. Patients will appreciate the added flexibility, now more than ever, to take advantage of a No Interest Payment Plan.
Perspectives From Your Peers
Candy White, Office Manger
Offering CareCredit since 2003
“Effectively managing your overhead starts by identifying your true expenses. What are the costs associated with everything that you pay: rent, utilities, lab fees, supply fees, and payroll? Understanding these costs will give you a clear picture of what you can cut back on and what kind of production goals you must set to keep a thriving practice.”
Setting production goals to keep overhead costs under control:
- Create monthly goals. Set goals to ensure you can cover your monthly costs and how much you would like to make.
- Establish weekly goals. Monthly goals are great, but weekly goals will help you reach your monthly goals each time.
- Monitor goals daily. Checking your progress each day will help you be proactive about reaching your weekly and monthly goals. If by midweek you’re not at goal, find ways to increase production and cut costs.
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