For the business-impaired

Feb. 1, 2003
Accountants, consultants, and other advisors continually advise dentists to be better at business. It would be nice, but, most of the time, it ain't gonna' happen.

Rick Willeford, MBA, CPA, CFP

Accountants, consultants, and other advisors continually advise dentists to be better at business. It would be nice, but, most of the time, it ain't gonna' happen. I estimate that at least 80 percent of all dentists are, well, not businessmen. They signed up to be caregivers, not bean counters. So, if you find yourself in that camp, don't feel guilty about it. I have many financially successful clients who know embarrassingly little about their practice numbers. However, you're not off the hook! A famous coach once said, "If you aren't keeping score, you're just practicing!" You can either "practice on purpose" or "practice by default."

Some folks would rather have an all-night root canal than deal with "goals" and "budgets." But think about this: did you ever notice how much you get done on the day before you go on vacation? How did you accomplish so much? You probably had a list: Finish some treatment plans, write some letters, get the patients in and out on time, drop off the dog, etc. You had a plan and a goal in mind, so you stayed focused and got a tremendous amount done. Why not have production, collection, and general financial goals that keep you focused and energized?

We want to make this process painless. What if you could just focus on the critical points in your practice, and even then, only if something is out of whack? Manage by looking at the exceptions only. Otherwise, if it ain't broke ...

Why not have your business manager, consultant, or CPA prepare a "scorecard" for you as an "executive summary" of the points of interest to follow? If you want to know more, you can dig deeper.

The "DentaMetrix Scorecard" is an example of the kind of summary we prepare for some of our clients. (Readers can find an example of this scorecard at www.dentaleco Its color-coded flags make exceptions immediately apparent.

Note that it is best to have goal/budget figures in mind so you can focus on the variance from those goals. If nothing else, use last year's figures as a bench mark; however, the more effort you put into developing true goal/budget figures, then the more worthwhile your Scorecard will be.

Unlike a typical CPA's financial report that is prepared to complete tax returns, there are many other "metrics" you may want to monitor. How about those pesky "adjustments?" Many a sin is buried in the adjustments figure. Also, there is a big difference between insurance-dictated fee reductions and a voluntary courtesy allowance you grant to senior citizens.

In addition to the typical production figures, shouldn't you track the efficiency of your scheduling by comparing actually scheduled time vs. the total available time? Holes in your schedule for any reason are productivity killers.

You may want to know at a glance how your crown and bridge and other indirect procedures stack up as a percentage of your entire production. Or, under "Hygiene," you may want to track STM as a percentage of the total hygiene production. A quick glimpse at the "Hygiene Wage to Hygiene Production" ratio lets you know how this important overhead item is doing.

Obviously, new patients are the lifeblood of your practice. You can get fancier and track the source of new patients, like Yellow Pages, patient referrals, staff referrals, etc.

We can drown you in paperwork, but we are trying to keep it somewhat simple. Remember, there are many graphs and pages behind the Scorecard if you want to look deeper. (The Reference Numbers refer to tables and charts with more detail, and you see some handy comments in this example.) So, if your accountant is dentally savvy, perhaps together you can create a scorecard to track the metrics of special importance to you.

Raymond "Rick" Willeford MBA, CPA, CFP, is president of Willeford & Associates, CPA, PC, a fee-only firm specializing in financial, tax, and practice-transition strategies for dentists since 1975. Mr. Willeford is president of the Academy of Dental CPAs, a member of the national Practice Valuation Study Group, and numerous dental study clubs. Contact him by phone at (770) 552-8500 or by email at [email protected].

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