Trent Watrous, CPA, CFE, CVA and renowned speaker, specializes in the dental industry. In a recent conversation, he shared his top five tips to set dental practices on the road to a healthy financial 2018. If you don’t know the answer to any of these tips, your CPA can partner with you to analyze your situation, look for tax savings opportunities and help you plan for the year ahead.
1. Know your cash flow.
Cash is the lifeline of any business. But since dentistry has been so successful, many dentists don’t know where their cash is. Is it in the bank? Has it been disbursed? Is it in accounts receivable, or has walked out with no chance of collecting it? Know your cash flow, and know how to hold on to it.
2. Know your numbers.
What is your top line (gross sales or revenue) collections? What percentage of your top line is your bottom line? As commander in chief of your practice, you control the cash flow and income. You’ll want to know your practice metrics, budget and numbers. And, you’ll want to learn to manage by the numbers.
3. Know how to reinvest in your dental practice.
Do you know how to put money back into your practice to make it successful? Many doctors ask about reinvesting, but do not understand how to put their resources towards future success. Do you also know how and when to buy equipment? Are you aware of what equipment to buy and what technology is lacking in order to allow you to be competitive in your practice? Know how and when to reinvest to keep your equipment current. Both your CPA and a certified equipment specialist are valuable experts to help determine the optimal reinvestment strategy for your situation.
4. Know how to plan.
Dentists are perfectionists at looking into the oral cavity and creating a treatment plan for oral health… but they don’t always carve out the time to take planning and turn it to themselves to plan their practice. Say for example, “This year, I am going to increase my top line by $80,000. So, there are 12 months in a year… that’s roughly $6,670 a month.
Planning to measure your successes, strengths and weaknesses will help you manage toward success. Take the time to plan your year:
“I want to achieve___________.”
“I want to purchase__________.”
“I need to hire_______ by _________.
Whether you want to re-equip two treatment rooms so your dental practice appears more current, integrate digital radiography into your treatment planning, or hire a hygienist by second quarter (which means ramping up production to help pay for his or her presence) plan your year. “That which is not measured is not managed,” advises Trent.
5. Know what you do well.
As a dentist and business owner, you often wear several hats: CFO, COO, owner, HR director, chief marketing officer… plumber… and of course, dentist. You have years dedicated to your training as an expert in oral health. You are not, however, an expert in every area. Hire those who are, and hold them accountable for the results. That will leave you time to do what you do well—providing dental care to patients.