There are several ways a owner can improve the profitability of their dental practice. Despite what most dental practice owners want to believe, when you own your own practice you are running a business. It is near impossible to run a business with out having good solid numbers to guide your decision making. Below are some great tips practice owners should consider for the new year.
1: Clean Record Keeping:
With out clean records not only are you driving in the dark but you open your self up to many other issues. Your Quick books file should balance to your tax return. Most dentists depend on selling their practice as part of their retirement. It’s important to remember that a buyer and their advisers will want to comb through your quick books file. If your Quickbooks file is a mess, your practice will sell for considerably less. This is because the buyer has no way of knowing the true profitability of the practice they are purchasing. If your practice is worth $600,000 and the offers you are getting are $540,000, that is a significance loss in value simply because you cant prove the profitability of your practice. This is something we see very often in the industry.
2. Goal setting and Bench marking
This is a important business process. You should set quarterly if not monthly goals for production and collection and benchmark them against what most practices do. The goals you set for Production, collection, overhead expenses, lab costs, dental supplies and other categories should be shared with your team. The team should be given a goal and incentive’s to reach that goal as a part of a broader goal for the practice. Lets say your currently collecting 80% of your production, if you set the goal with the team as 85%- a practice producing $600,000 in production that increases their collections by 5% is $30,000 that falls straight to your bottom line and therefore into your pocket. This is the power of bench marking and goal setting.
3:Have a solid team of advisers
No business owner becomes a success with out a solid team to support them, as everyone has their own expertise. Your team of advisers should include a CPA that concentrates on the dental industry, a Certified Financial Planner that works with dental and medical professionals to map out a financial and retirement plan for you and your practice. Having professionals such as these allow you to have clean numbers to run your practice, tax strategies to lower the tax on you and your practice, retirement plan strategies to put more money from your practice into retirement accounts with out paying tax on them. If structured correctly many practices can save $5,000-$25,000 in taxes alone if a proactive plan is put into place.
A good team of advisers can be your greatest investment as they will save your more in taxes along with help increase your practice profitability, much more than you would pay in fees.
Virjee Consulting is a CPA firm that focuses on the Dental Industry. We work with dentists across the country at every point during their career. We have built our practice on the mission to help dentists save taxes, improve practice productivity and retire successfully.
Here’s to your best financial future ever!