The importance of financial management
Financial management is a vital aspect of business management often overlooked by a practice.
I work with dental businesses and break their business into seven key areas. Despite what I am presented with, I never skip a section – it is always the financial management that is lacking in a practice.
Here are my top tips:
1. Know what is coming out so you can set a target for what needs to come in. A simple list in Excel of what is going out every month is essential. You will have fixed costs and variable costs. You need to move as many of the variable costs into fixed costs to help you when setting targets for turnover and profit.
2. Use your accountant’s bookkeeper every month. Gone are the days of sending off your receipts once a year. You need to have a firm finger on what is going on. You also need to be able to react to any changing situations fast. Look what happened with Clearstep – many are still working out how that affected them financially, as they have only their bank balance to go on. I do not advise that you, yourself as a dentist, spend hours every month inputting figures into Sage or Quick Books – your time is best spent being a dentist and leader. If your accountant does this for you, they can send you your balance sheet and profit and loss statement each month too, as well as highlight any areas that have seen a rapid change.
3. Have a forecast. Now you have your list of variable and fixed costs you can start to forecast ahead. It is very easy to do as you will be able to see what percentage your overheads are compared to gross. If you will be increasing your gross turnover your costs will go up for materials, lab bills and so on. Forecast also helps you to set a target for the business so that it is in profit, confirm how much it costs to run each treatment room per hour and much more. It is essential information and is a once a month task.
4. Audit to ensure your fees are correct. This is often the problem with financial management – the numbers do not add up due to the clinical systems. One example would be general dental practitioner orthodontics. I see this all the time. The frequency that patients are brought back for refinements and wire changes (when the courses for the systems themselves, do not recommend such frequency) causes the dentist’s hourly rate to deplete quickly. This often results in no profit for offering the treatment and sometimes the practice doesn’t even break even.
To find out more about Laura you can visit her website www.horton-consulting.com, call her on 01279 882720 or email her at [email protected]