Monday, October 31, 2016

PLUG THE MONEY LEAKS

In  my 35 years of practice management consulting work, I have observed most dentists pay close attention to the “big picture” numbers for production, collections, capital improvement costs, and perhaps, the monthly Profit and Loss Statement for the practice.  In contrast, the secondary numbers, those relatively minor expenses that get paid automatically or small Accounts Receivable balances that get ignored, receive little to no attention or oversight.  These numbers represent a major “hole” in the practice finances, leaking dribbles and dabs that add up to over-spending while under-collecting.

Over-spending happens when cost details go unchecked or there is no practice budget, no specific dollar amount allotted monthly for various expenses  When these factors are missing, there is no mental alarm that flashes for the staff member responsible for bill payment when a cost escalates. 

Some examples of practice expenses that should be monitored and comparatively shopped at least annually include merchant rates paid for credit card services (I’ve seen rates vary as much as 2.5% to 3% between different vendors.).   Telephone rates and the cost of IT support are other costs that differ greatly between providers.  The various insurances a dental practice must carry should be put out for bids each year to several reputable agents.  Many practices fail to search for opportunities to save money on dental supplies such as reduced shipping charges  on ordered supplies (Check out Practicon’s new fantastic flat-rate shipping rates.) or by joining supplier buyers’ clubs (such as Practicon’s Premier program) that can save frequent buyers thousands of dollars over the course of a year.  Some suppliers will even allow an office to place an annual order at a significantly reduced cost for frequently used supplies to be delivered monthly. 

Contracted services such as janitorial, landscaping, medical waste pick-up, document shredding services, even reception room magazine subscription rates, should be checked minimally every six months to determine if the contracted price is the amount for which your office is billed monthly.  There are recorded jaw-dropping accounts of dentists being cheated when they allowed bills from vendors to be debited from the practice bank account automatically.  A dishonest vendor can implement price increases throughout the life of a contract, and the dentist or his/her bookkeeper is totally unaware of increases since the monthly payment is made as an unchecked routine.

Another major loss of money occurs when Accounts Receivable (A/R) are not monitored and worked regularly.  The dentistry has been delivered; and a statement has been sent, been sent again, and been sent yet again with no response from the patient.  Or third party claims get put aside to handle later and never filed.  Or if they are filed, failed reimbursement is not pursued.  What to do?  One business staff member should be thoroughly trained and made responsible for managing A/R with regular billing cycles, timely filing of third party claims, and proper follow up for all outstanding monies due the practice.

The recommended guidelines for aged A/R:

            Current – 50% to 60% of total A/R
            30 days – 15% to 20% of total A/R
            60 days – 10% to 15% of total A/R
            90 days – under 10% of total A/R
            120 days and over – sent for outside collection action       

Suggestion: spend time with your business staff member responsible for the type of financial details outlined here and your bookkeeper, if not one and the same person, to assess how these potential money leaks are affecting your practice.  You may be surprised by the additional money in the bank that results from working such seemingly minor aspects of your practice finances.

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