Your dental practice may be booming, but without adequate cash flow your businessâ€™s financial stability (and potential) can be exposed to unnecessary risk.
Try these best practices to help manage your dentistry cash flow.
Though you may have limited control over when insurance companies issue payments for approved claims, or the speed at which your patients pay out-of-pocket amounts due once insurance claims are processed, there are several ways to minimize cash flow shortages — before they put your practice in financial jeopardy.
Establish (and enforce) patient payment policies upfront
Before patients come in for their first visit, ensure that schedulers establish expectations, including:
· When co-payments are collected (which should be at the time of service)
· The types of payment you accept (which should include credit cards and online payments)
· The patient’s responsibility to confirm how much their insurance provider will cover for basic preventative exams, and additional services that may be required at the visit (such as X-rays)
· How treatments that the patient will pay out of pocket are billed, and due if insurance won’t pay the claim in full
When you hold patients accountable for treatment costs before they come into the office, you can reduce the amount of accounts that (a) become past due, (b) you ultimately turn over to collections, or (c) have to charge off entirely.
Invest in technology that takes the inefficiency out of claims processing
Your ability to reduce inefficiency in the claims and billing process is an important aspect of managing cash flow: Invest in an affordable software solution that integrates with your EHR software to expedite claim filing. If you mail hard copy invoices to patients, transition to low-cost electronic invoicing programs to reduce time delays (and costs) associated with paper invoices.
Stay aware of what other dentists in your area charge
The majority of small, independent dental practice groups expect revenue increases over the next five years. Their positive outlook is driven primarily by their plans to improve cash flow management, increase profitability, and become more aggressive in patient acquisition. Don’t know how your fees compare to other providers? Haven’t increased them in several years? Frequently cash-strapped despite having a busy practice? All of these may signal that it’s time to do competitive research and confirm you’re charging enough for services based on the norms in your area. Raising fees for your most popular services, even by less than $10, can improve your cash flow stability.
Leverage industry expertise
If you don’t currently work with a certified public accountant who specializes in the dental industry practice, you’re missing out an opportunity to learn from the tactics other dentists use to optimize their processes. Try to find a CPA who has at least 25 other dental clients.
In addition, develop a consistent cadence for how often you run sales and cash flow reports, and set thresholds that make it easy for you to identify when cash flow is in the danger zone. Further, identify the top five factors that are the most significant contributors to cash flow challenges so you’re prepared to course-correct and get cash flow back on track, when needed. For example, you may want to consider:
· Reducing payroll expenses by cross-training full-time staff to manage tasks outside of their primary responsibilities
· Optimizing scheduling processes to reduce patient no-shows, and improve the amount of time it takes to schedule patients, handle check-in, and complete treatment
· Reducing expenses associated with your physical office, by renting unused space in your building, parking lot or storage room to another local business
· Identifying insurance providers that are habitually slow to pay; consider whether it’s in your best business interest to continue the relationship
Establish a fallback plan
Cash flow issues are manageable, but only if you’re proactively prepared to handle them when cash on hand dips below the “comfort zone” for your particular practice model.
Don’t wait to find out that you’re faced with cash flow shortages to establish relationships with businesses that offer small business funding solutions at competitive rates and terms. Whichever funding solution you choose, the amount of time you spend researching your options and ensuring you have a financial partner you can turn to in times of cash flow shortages is invaluable.
Cash flow issues can put your dental practice’s financial security at risk, but those that arise unexpectedly tend to be most costly. Try these best practices to reduce the uncertainty about your practice’s cash flow health — and develop a plan of action if you are faced with cash flow constraints.
For more information about cash flow, check out 5 Best Practices to Help Manage Your Small Business Cash Flow.
About Tim RoachTim Roach is a co-founder of Lendr, a leading provider of merchant cash advances for small to midsize businesses. Roach holds a B.S. in Finance from Linfield College, and previously served in the United States Navy. Prior to joining Lendr, he founded Oak Street Trading, a proprietary trading firm.