ONE WAY TO LOWER OVERHEAD: RAISE AWARENESS OF DAILY COSTS
Dental practice overhead continues to demand an ever-greater
percentage of net collections. Said
another way, the costs of operating your office keep escalating. One key to controlling overhead is staff awareness
of daily costs and how savings, even small savings, can add up to big bucks. The entire team, including auxiliaries and
dentists, should know about daily operating costs and ways to save.
I’ve calculated daily costs for many dental offices and seen
the shock register on staff members’ and dentists’ faces when the enormous
total is read. Understanding that
literally thousands of dollars are spent daily and where that money goes is a
wake-up call for the group to focus on savings. For example, turn off lights in
empty rooms, use only the amount of materials needed rather than excess; buy
supplies in bulk for best pricing; bid office insurances yearly for lowest
cost; keep up with subscriptions so they are not renewed before due dates;
decrease the amount of professional discounts on dental services; check every
invoice against packing slips or services rendered before payment is made; and on
and on.
Daily costs are easy to calculate on either a quarterly or an
annual basis. The following simplified example
uses the Profit and Loss Statement for a year, 190 work days, analyzed by seven categories: (1) Personnel,
(2) Occupancy, (3) Administrative, (4) Equipment,
furnishings, contingency (savings that can fund office operation for at least
three months in case of crisis or disaster), (5) Clinical supplies, (6) Lab, and (7) Marketing.
Divide the annual total of each expense category by 190 work
days to find the daily cost of each. Add
those totals to calculate the daily overhead BEFORE any compensation for the
dentist. In our simplified example, costs are $4,927/day. Ouch!
The entire team should be aware of not only total daily
costs for the seven general categories, but also costs of specific items such
as utilities, telephone, aggregate staff compensation (wages and benefits for
the group, never individual information),
office supplies, clinical supplies, computer operation and IT support,
janitorial costs, office rent or lease payment, lab, and so on. Sharing this information supports the
dentist’s suggestions to save where possible, even in small ways.
There are two ways to increase your income: EARN MORE and SPEND LESS. Bringing your team along on the SPEND LESS efforts will go a long way toward increasing the bottom line--PROFIT!
No comments:
Post a Comment