Adam Decker
You’d never show up to treat a patient without the proper clinical tools. And I wouldn’t show up to meet with a client without the proper financial tools. To every meeting that I have with a dentist, I bring a prepared agenda and a number of different reports. The reports vary depending on our meeting agenda to fit the situation. However, every meeting includes a look at the same three reports each and every time – the dental practice balance sheet, the dental practice profit and loss statement, and the dental practice budget for the next 1, 2, and 12 months – these reports are the tools that should be the staples for your practice.
The dental practice balance sheet tells you where you are today. How healthy is your business? Do you have the ability to take some cash for yourself? How in control are you of your debt? The balance sheet is the snapshot of where your dental practice stands today.
The dental practice profit and loss statement tells you what you’ve done. How has your practice performed over the last month, the last quarter, the year to date? Better yet, how has it done compared to the same period a year ago? Two years ago? Have your cost reduction strategies been effective? How has the economy affected your collections? Where do you stack up compared to your peers on dental supply costs? The profit and loss statement is the resource for identifying the answers to these and many other questions.
The dental practice budget tells you where you are going. I’m a big fan of an evolving budget, updated regularly. This is a great way to plan for all areas of your practice. By improving “X,” how does it impact my practice? By increasing “Y,” how does it affect my cash flow? What is the payoff period in making an investment in this equipment? A working budget takes some work up front. Especially in a newer practice where cash is tight, the budget is the dentist’s best friend. Use it to identify where you have to be each day on your production to break even. What is the impact of an average daily production increase of $100?
If you already use these tools, great! You are on the path to building, growing, and maintaining a great practice. If you aren’t using these tools, you won’t necessarily fail. But you can and will improve by using them. Not to mention that you will have far fewer tax surprises too – and no one likes a tax surprise!
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Dentists are like many small business operators… very focused on the day-to-day operations. Standing back and thinking things through seems like a luxury, but it is not a luxury if the practice is to thrive.
These reports you suggest are the first step. Once the dentist has the reports, they have a snapshot of where the business is. The next step is to learn from others and understand how your business can apply the best of what your have learned.
For me, the best time is early in the morning. That is when my strategic juices are flowing. That is when I think about the ideas I read about the evening before start to gel into a cohesive plan.
If dentists are not able to take the time to learn from successful peers, they should contact professionals that can make sense out of the reports, compare them to nationwide and local stats and suggest a plan for you to follow.
Adam probably has access to those stats… and might be a good resource for ideas for dentists to improve their practice, but I would suggest that dentists should always keep an eye on their successful peers. Then take those ideas to a professional to brainstorm the best way to implement the ideas.