How seasonality affects revenue in the dental practice

June 7, 2016

Why is measuring and preparing for seasonality important for dental practices? It could create major cash flow problems.

Dentists are often faced with an uncertain-and changing-volume and flow of patients. The number of people who visit a practice in a given month is highly based on the capital that is available to the patients, as well as the time of year. This can create cash flow uncertainty problems for practices.

Dentists may find themselves unable to pay for new equipment, to bring on new staff members or to pay bills unless cash flow is managed while keeping seasonal variations in mind.

Sikka Software collects secure data from thousands of dental practices across the nation to help dentists identify seasonality trends on a national scale and prepare for changes in patient attendance. Data is collected in accordance with privacy laws, is free of practice and patient information and is HIPAA and HITECH compliant. Dentists can find out more information by clicking here.

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Seasonality trends

Seasonality was measured by comparing national monthly averages to the average for the year. The evaluated values include key performance indicators (KPIs) that reflect the business of the practice, including practice gross production, dentist gross production, patients seen by practice and total number of direct restorations. The average values for 2015 are below.

The next step was to calculate the difference between each month and the average for the year. The results were a clear pattern of modulation where some months constantly exceeded the average on all measures and other months fell short. It is not surprising that these metrics are moving concurrently since the number of patients seen relates directly to how much the doctor and practice makes and the number of treatments provided (see header image).

Results indicate that nationally, the busiest months are March, April and June; these primarily spring months are before schools let out, when individuals and families are preparing for the summer months and vacations. December is of note, it exceeds the average for doctor gross production, patients seen and direct restorations, despite practitioners taking off time for the holidays. In contrast, the slowest months were January, February, May, September and November, months either when school starts and ends or during the winter holidays that for many includes significant financial burden.

Related reading: 4 myths about money and the dental practice

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Conclusion

Practices can encounter difficulties keeping the doors open if they do not learn to manage changes in seasonality. Understanding when to expect the swings and planning cash flow accordingly can mean the difference between financial struggles and success and growth of practice revenue.

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There are two measures that dentists can take to guard against seasonality and cash flow difficulties. The first is understanding how seasonality affects individual practice revenue by examining trends year over year and comparing them to the national trends presented in this paper. Dentists can then predict how seasonality might affect revenue in the coming months and years and plan spending accordingly.

The second is managing patient flow through advertising and incentives. This is key to ensuring that your practice is healthy all year long. This could include reaching out to patients who require preventative care or treatment or communicating with patients regarding alternative payment methods such as CareCredit. This benefits both the patients and the revenue of the practice.

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Sikka Software has tools to both track and manage finances and seasonality and communicate with patients. Dentists can find out more by clicking here or by attending our annual Summit in Monterey, CA. This is a great opportunity to learn how to use practice data and analytics while meeting industry experts and gaining CEUs. More information is available here.