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Monday, April 2, 2012

"Taking Control" by Debra Quarles Salt DPM consultant

Part 1 of 1

Taking control is part one of a series of six articles

designed to get your practice working

efficiently and effectively.

The New Year, for many, means a time of evaluation and reflection. There is a sudden renewed sense of focus. Goals are set. Perhaps procedures and products are evaluated. And of course, somewhere in there is the dreaded visit to the accountant’s office to see if the practice was profitable. If not, there are two choices: 1. Increase productivity or 2. Decrease overhead.

Why not work on both this year and be ahead of the game? Getting a handle on your overhead means monthly evaluation - monitoring expenses to determine if they are staying within guidelines so action can be taken quickly if needed.

Fixed versus Variable Expenses:

Fixed expenses are those which, for the most part, remain the same month after month: employee wages, rent, insurance premiums, equipment payments, front office supplies, and utilities. Variable expenses are those which you have control over and/or that vary depending upon production. Those would be your lab expenses and supplies, marketing/promotion dollars, continuing education programs and team bonuses.

You have probably seen the figures before. Employee wages should be between 24-28% of total overhead. Supplies 5-7% and rent no more than 8%. Can a practice even hope to stay within these guidelines? The answer is a resounding yes! The real issue most times is not that your rent is too high, or you pay your team too much, although that can be an issue, the real concern is that you may be under-producing for your overhead.

As your practice grows, it is natural that you should see a decline in the percentage of overhead. Produce more and your overhead drops effortlessly. Employees are generally your largest expense, but also they have the ability to be your greatest asset. Utilize them to their fullest. You’ve probably heard the saying, if you don’t know where you’re going, any road will take you there. Make sure your team knows the goals and what they are striving for. Then track your production daily. When teams have a sense of ownership, they make things happen. It they know the practice is shy of attaining the goal for the day and a patient cancels they are much more apt to work to retain the patient or to immediately contact someone else to take that appointment time when they feel their efforts are noticed.

So where do you find those employees that will take ownership? You actually create them yourself. Do this by evaluating and reviewing your employees at least twice a year. Evaluations and reviews are a time to discuss what is working and what is not with the employee’s behavior. It is not a time to evaluate compensation. I find that most dentists feel if they sit down with their employee to discuss how they are doing, the employee will expect a raise. Employees will not have any expectation of a raise if you set the stage and inform them that raises and monetary compensation of any kind will not be discussed, only how they are doing in their job performance. So how does an employee receive a raise? Whenever I’m informed that an employee wants a raise, I encourage them to submit a request in writing, citing how they have improved the practice since their last wage increase.

What about performance bonuses? While wages are part of your fixed expenses, bonuses are considered part of your variable expenses. Team bonuses are a great way to give raises when the office can afford it and, at the same time, keep overhead in check. Think easy. Two percent of net collections – minus refunds – each month goal is produced. You may consider doubling that if goal is made three months in a row. Remember, you are the one that sets the goal. Choose a number that allows for bonuses and it will be a win-win.

If you would like more information, please contact us at info.saltdpm.com

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This article was originally published by Tri-County Dental Society Bulletin

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