Revisiting Dental Practice Financial Management Foundations

Financial management can be a struggle for many business owners. Managing rent, utilities, staffing, insurance, and very expensive dental equipment is a lot to take on. Plus, in the dental space, you’re often waiting on insurance payments to cover outstanding invoices.

If you aren’t on top of your game, you can quickly run into cash flow problems. A study by U.S. Bank found that 82% of businesses fail for this exact reason. In this article, we’ll check in on your dental practice financial management and offer some suggestions to help you stay on top of the money game.

Quick Recap of Previous Dental Practice Financial Management Tips

Last year, we talked about some basic financial management tips for dentists.

• Create a budget. Establishing a budget helps you track income and expenses, allowing for a clear financial plan. Include key items like payroll, building costs, dental supplies, off-site lab work, marketing, and a contingency fund.
• Know your unique selling proposition (USP): Identify what most sets your practice apart, whether it’s convenience, affordability, or quality. Tailoring your services to address common patient concerns, like fear or cost, can help attract and retain patients.
• Offer a membership plan: Introduce a membership plan to provide affordable care options for patients without insurance. These plans offer a set package of services for a monthly or annual fee, helping to increase patient loyalty and steady income.
• Control inventory costs: Keep a close eye on inventory expenses, aiming for dental supplies to stay around 5%-6% of collections. Efficient inventory management will help prevent overstocking, reduce waste, and maintain financial stability.
• Don’t underprice your services: Set prices that reflect the true value of your services. Conduct market research to ensure your pricing is fair and competitive, balancing overhead costs with patient expectations.

But how are you tracking toward those goals? Are you meeting your expectations? Are the finances a bit tighter than feels comfortable? Are back-office operations not as efficient as they should be?

Let’s jump into a self-assessment that you can take to determine your dental practice’s financial health.

Assessment Criteria for Financial Health

Whether you think your finances are in good shape or not, taking yourself through a periodic assessment every now and then is a smart thing to do. This can help make sure you really are managing your finances well and haven’t overlooked something that could come back to bite you down the road.

Here are some things to check on.

Are you staying within your budget?

Sticking to your budget is essential for financial stability. To assess how well your practice follows the budget, compare actual expenses to the planned budget regularly. If you notice discrepancies, take time to understand why they occurred and adjust your spending habits or budget as needed.

Are expenses under control?

Efficient expense tracking is key to avoiding unnecessary costs. Review your expense records to see if you’re consistently overspending in certain areas. Look for patterns in spending that might indicate areas where you could cut back without affecting patient care.

Are your investments paying off?

Investments in marketing, new technology, or other growth-related areas should pay off over time. To assess their value, compare the revenue generated before and after these investments. If you don’t see a return, consider whether the investment was worth it or if adjustments are needed.

Are patients paying on time?

Your patient payment policies play a big role in maintaining a steady cash flow. Regularly review these policies to check if they are being followed and if they’re helping with timely payments. If delays in payments are frequent, it might be time to revise your approach.

Regular financial reviews help you catch potential problems early. Schedule routine audits or reviews and make them thorough, covering all aspects of your practice’s finances. This proactive approach helps you stay ahead of any financial issues that may arise. We recommend an audit every six months or more.

Advanced Financial Management Strategies

If things are looking pretty good and your dental practice cash flow is in good shape, you may want to take steps to further improve your financial situation. For example, one approach is to analyze and boost profit margins by reducing costs or adjusting pricing strategies to better reflect the value of your services.

You can also improve cash flow by negotiating better terms with suppliers or optimizing inventory to free up cash. Finally, long-term financial planning is nonnegotiable for future growth—setting aside reserves for expansion or unexpected challenges will keep your practice on solid ground and prepared for new opportunities.

Add orthodontic courses to your to-do list and dental practice budget.

One of the best ways to grow your dental practice, beyond the tips and suggestions we mentioned above, is to expand your services. The natural place to expand is with orthodontics. So why not complete continuing education and licensing requirements at the same time by taking orthodontics courses to grow your skills?

Check out our list of courses today and see how your dental practice can grow with effective dental practice financial management and skill development.