Profit is essential for the long-term health of any business. As we start the new year it is important to look at ways to increase profits in your practice, which will help your practice thrive in 2025.
To determine your current level of profitability, start by updating your Break-Even Point (BEP). Your monthly BEP is the average amount of money you need to pay all of the expenses of the office for the month. Once you determine your BEP, you can compare it to your collections to determine your level of profitability.
Net Income – Expenses = Net Profit
Net profit is the residual money from your collections, after you account for any money refunded (collections – refunds = net income) and all expenses.
Not only do profits allow you to more comfortably pay all the expenses but they also provide economic security for the practice and the team. Higher profits often result in lower financial stress for the entire team. When expenses are comfortably covered and profits remain, stress levels can be reduced for everyone involved with the practice. The ways to increase profits are as follows:
• increase production
• decrease expenses
• increase collections and fees
Any combination of these will help increase profitability.
Increase Production
There are multiple ways to increase production, many only require minimal change or additional effort. The first step is to update all diagnostic tools for each patient followed by a comprehensive treatment plan.
There are multiple ways to increase production, many only require minimal change or additional effort. The first step is to update all diagnostic tools for each patient followed by a comprehensive treatment plan.
Always evaluate the effectiveness of doing the maximum amount of treatment in the minimum number of appointments, thus reducing overhead on individual treatment plans.
Investigate potential ways to increase your treatment portfolio. Adding new treatments to your mix can allow you to expand your business and reduce open time in the schedule.
Improve time management to help increase production. Your goals are designed to allow for profitability. Your consultant helped you plan your schedule to achieve your goals. If the schedule is worked as it was designed, your production will provide the profits which are built into the production plan.
A strong cancellation policy will help to reduce the amount of lost production due to unexpected last-minute openings. Today, most businesses have adopted strong policies with an incentive to keep appointments by utilizing a penalty for last minute changes. The goal of this policy, in a dental practice, is to deter bad behavior. Hopefully, making patients aware of the penalty and tracking all appointment abuse will deter patients from abusing your time.
Same-day treatment is another effective method to increase production. A goal of doing one same-day treatment in the morning and one in the afternoon allows for two per day. In a four-day work week that is eight additional treatments per week without all the associated overhead of rescheduling the appointment into the future. Same-day treatment allows you to both increase production and decrease expenses on the associated treatment.
Decrease Expenses
When looking at your Profit & Loss (P&L) statement, view it with the percentage of income column to determine if your overhead percentages are in line with generally accepted accounting principles (GAAP). Budgets will help keep expenses in line. There should be budgets for every individual category of overhead. The largest area of overhead in a general dental office is staff compensation. It is important to be lean or right-sized in your staffing. Being under staffed can result in decreased production and being over staffed can drive up expenses without enough corresponding increase in production to offset them.
When looking at your Profit & Loss (P&L) statement, view it with the percentage of income column to determine if your overhead percentages are in line with generally accepted accounting principles (GAAP). Budgets will help keep expenses in line. There should be budgets for every individual category of overhead. The largest area of overhead in a general dental office is staff compensation. It is important to be lean or right-sized in your staffing. Being under staffed can result in decreased production and being over staffed can drive up expenses without enough corresponding increase in production to offset them.
Consider utilizing a Group Purchasing Organization (GPO) to help keep costs in line for a variety of services and supplies. Discussing major purchases with at least five trusted advisors will help you to avoid impulse buys. Those advisors include, but are not limited to your:
• CPA
• Consultant
• Office Manager
• Lead Assistant or Hygienist
• Friend of the practice, who you discuss business ideas with
• Friend of the practice, who you discuss business ideas with
Increase Collections / Fees
Annually, reevaluate every PPO with which you are in-network, to determine if each individual plan is profitable. If a PPO contract is not profitable, make a plan to eliminate it from your practice.
Work on building your base of credit cards which are on file, properly encrypted and securely stored electronically. This allows you to bill the card on file, up to a pre-agreed amount, on any outstanding balance after insurance has paid their portion.
Outsource insurance, billing and accounts receivables follow up to third party specialists. Doing so delegates services to an agency who not only specializes in these services but is also more efficient in dealing with them. Additionally, it allows your team to focus on treatment, the schedule and service to patients rather than insurance and collections.
When reviewing the percentage of overhead column on your P&L statement compare it to GAAP amounts for each category. This allows you to determine how many areas of overhead are out of line. If there is only one area of overhead which is out of line, it is likely just a problem with that individual category. You should look for possible solutions to that problem. If there are multiple areas of overhead that are out of line, it generally indicates the quality of treatment you are providing far exceeds the fees you are charging. An increase in fees often solves this problem and aligns multiple areas of overhead.
It is essential to review and increase your fees, annually, to keep pace with the increased cost of providing dentistry to your patients. Do not put off fee increases. It is better to do small annual increases than to wait several years and need to make a major, more noticeable increase due to decreasing or non-existent profits.
Conclusion
This is the time of year when goals are set and plans are made to achieve them. It is essential for the health of your practice to factor profitability into the plan. I challenge you to make this year, 2025, twenty-twenty-thrive.
This is the time of year when goals are set and plans are made to achieve them. It is essential for the health of your practice to factor profitability into the plan. I challenge you to make this year, 2025, twenty-twenty-thrive.
HOPE REKTORIK, SENIOR CONSULTANT
hoperektorik@theparagonprogram.com