Momentum Dental Business Consulting, LLC
"Pearl of the Month" (Vol. 1, Issue 8)
Pertinent comments on the practice of
fee-for-service dentistry.
by Michael Perry, D.D.S., President
Organizational Systems for the New Year
As with the clinical side of our profession, the business side is detail intensive. Systems that facilitate control of details reduce complexity and focus the efforts of the doctor and team. Two related systems ideally suited for implementation at the beginning of a year are goal setting for practice revenues and the creation of a fiscal calendar.
I have maintained for many years that a dentist in fee-for-service practice should decide how many days he or she wants to work in a year before setting monetary goals. I recommend the dentist choose a number of "patient care" days divisible by 12. This allows the dentist to create 12 "fiscal" months with the same number of work days in each. One month's practice statistics can then be credibly compared to another. A true employee profit sharing plan can also be created that is mathematically safe and effective for employees and employers alike— where employees know as a month progresses how well they are tracking toward a profit sharing bonus.
I have clients that range from 156 to 204 patient care days per year with 180 being the most common choice. A 180 day work year divides into twelve 15 day fiscal months. If the dentist plans to work 4 days per week, 180 days per year, he or she will have the equivalent of 7 weeks off for vacation, holidays, and continuing education. A fiscal calendar is created by first marking off the days NOT to be worked. The first 15 work days of the calendar year then become fiscal January, the next 15 become fiscal February and so on. Work day number 180 will be the last day of fiscal December.
After deciding upon work days and the calendar, the dentist should now set a goal for practice net profit. I have found that net profit can mean different things to different dentists. It is a mistake, in my opinion, to utilize a profit and loss statement designed to minimize tax liability to gauge profit. Some expenses that would be considered legitimate (or gray area) tax deductions, may not qualify to be part of a true overhead assessment. Net profit is most accurately defined as true income minus true expenses. Most of my clients P & L's need to be altered to accurately determine their true net profit.
The four money groups for most dentists are lifestyle, taxes, retirement, and childrens' education. After a personal financial assessment to evaluate the wants and needs in each of these categories, a dentist can factor these and the practice net profit from the previous year into the creation of a profit goal for the new year. This profit goal plus the estimated overhead creates the collection goal. The collection goal divided by 180 creates the daily revenue goal.
Dividing the revenue goal into restorative and hygiene goals allows the practice scheduler to reserve time in the daily schedules for a minimum number of high production procedures in each schedule. Doing this facilitates consistent success in achieving daily, monthly, and annual goals.
I have utilized these simple new year systems in my own practice for many years. They have helped me to consistently meet my monetary goals, provide profit sharing for my team, and significantly reduce stress. If you would like help creating these systems for your practice, please don∂t hesitate to call me.(For more information about Momentum or Dr. Perry, visit the Momentum website at www.momentumdental.com or e-mail Dr. Perry at info@momentumdental.com)
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