If youâ€™re not certain whoâ€™s handling your dental practice finances, youâ€™re not alone. But that doesnâ€™t mean itâ€™s a comfortable position to be in. Making certain that your dental practice finances are in the right hands is critical to your practiceâ€™s financial success.
Who’s minding the store? Sounds like a silly question, yes? But if your answer is, “I don’t know,” or “I just have my office manager handle all finances,” then it might not be such a silly question.
Having your practice finances in reliable hands is imperative, says Jason Champagne, D.D.S., principal of Sparks, Nevada-based Champagne Dental. And he speaks from experience.
In 16 years of practice, Champagne has run the gamut as far as how practice finances have been handled. In the beginning, he paid all the bills and balanced the checkbook. Eventually he brought in a bookkeeper whom “I tried to keep a close watch on.” Now the organization has grown to where he has a dedicated account team.
“But I do believe that (handling practice finances) is an area that a lot of smaller solo practices tend to overlook because of the busyness of the day and the focus on clinical dentistry,” he says.
A WATCHFUL EYE
Champagne recalls the time when practice revenues weren’t at their current level, and he had to employ an individual who perhaps wasn’t as skilled in handling finances and pay them a lower dollar-per-hour figure. He also had to watch them more closely. That’s a precautionary tactic that smaller or solo practitioners must follow.
They should also request regular updates.
“If you’re going to have somebody paying your bills — kind of doing the bookkeeping, accounts payable and maybe even payroll — you should be getting updates at least monthly and understand the processes they’re going through,” Champagne says. “And then their CPA should be doing various audits to make sure the person handling the money is handling it appropriately.”
There is a direct correlation, Champagne says, between having the right people handling practice finances and the financial health of the practice. That correlation comes from the ability of the dentist to focus less on the actual task of managing the finances. He or she now is able to spend more time promoting their treatment plans, and delivering the dentistry that they were trained so well to do.
“A lot of times dentists get distracted in the day-to-day,” he says. “If we’re caught up in, ‘Did this bill get paid?’ those things are distractions from the product line.”
KNOW YOUR FOCUS
Champagne recommends that dentists not dive so deeply into the waves that they get caught up in examining every check that’s written. Rather, he suggests there are a few key elements they need to keep their eyes on. The first is knowing what is being posted in the practice’s bookkeeping software, and how it reflects to the practice management software.
“You need to understand what’s being deposited compared to what you’re producing,” Champagne says. “There’s always the potential that some of the money you’re producing is not being collected.”
Next, Champagne says dentists should be tracking expense ratios on a monthly basis. In other words, examine major expense categories as a percentage of total revenue to give you a better idea of where you might be overspending.
“I look at employee costs,” he explains. “Employee costs include gross payroll, benefits and payroll taxes. I look at dental supplies. I look at my facility costs, and I look at my marketing budget.”
The most important as far as profitability, Champagne says, is employee costs. If there’s low profitability at the bottom of your financial statement, chances are you have a higher than ideal employee cost as a percentage of revenue.
WHOM TO TRUST
How do you know you’ve got the right person handling practice finances? That’s a tricky question, Champagne admits, because dentists are not trained to identify an individual’s financial skill set.
“There are a few (dentists) who might go to business school before they go to dental school, and those people might have a little better understanding,” he says. “But most of the time we don’t know what to look for.”
One recommendation Champagne makes is finding some mentors, perhaps even outside the dental industry, who can “really open your eyes” to how a business operates. Perhaps an individual who runs a car dealership and can share what they look for when overseeing their finance department.
But also, pick up a book or talk to your CPA and learn.
“I think dentists need to take more time to learn about this area of their business, and have people really explain to them how a business runs,” Champagne says. “Learn what it means to have somebody doing this, and what expectations are reasonable to expect. And be clear with that person so they know how they’re going to be measured.”