You went to dental school and pursued continuing education so that you can provide the highest level of dental care to your patients. But going to dental school doesn’t necessarily make a dentist a financial guru. These are two different skill sets. You want to spend your time seeing patients, not poring over financial statements, although your practice’s financials should be a priority. The dental industry experts at Bryant Consultants are here to help. Today, on our newest blog, we share four secrets to lowering overhead expenses in your dental practice.
What is an overhead expense?
Overhead expenses are ongoing costs of operating a business.
In the world of dentistry, there are six primary overhead categories:
- Personnel – This includes payroll for your entire team, the taxes you pay on that payroll, any health insurance costs you pay, and pension matching contributions. It also includes expenses for temps and contractors, including an answering service or a collection service.
- Facility – This is the cost of the physical building where your practice is located. It includes your monthly payment, if you are leasing the space, any costs related to equipment, and any interest on loans for the building or equipment. Other facility overhead expenses include utility bills, property taxes, any repairs and maintenance, landscaping, janitorial costs, and security (whether that be an alarm system, cameras, or a security guard).
- Clinical – This category encompasses dental supplies and lab fees. You may have an expense account used to pay clinical overhead.
- Other business costs – This is your miscellaneous category, covering general expenses that businesses have in just about any industry. Examples of these costs include, but are not limited to, office supplies, licenses, permits, business insurance, and bank fees.
- Discretionary costs – Think of these as optional costs: travel expenses, continuing education, business gifts, and charitable contributions are all examples.
- Owner’s compensation and profit – This is the practice’s net income, as well as all of your earnings as the practice owner. It also covers the earnings of other dentists working out of your practice, including associates.
Four secrets to lowering overhead expenses
Secret 1) Set benchmarks
This means setting target amounts that represent a certain percentage of your total revenue—each one a different slice of the proverbial pie. Your practice is unique, and
each overhead expense category should have a designated percentage. A dental practice consultant can help you split these percentages to stretch your dollars.
Secret 2) Avoid common pitfalls
We find that many of the same mistakes are made, across the industry, by hard-working dentists just like you.
These errors include:
- Including the compensation for other dentists and associates under personnel costs.
- If you have a mortgage for your facility, include only the interest under facility costs.
- If you own the space under a separate entity, pay yourself rent.
- Keep any large equipment purchases as assets, not expenses, unless your accountant advises otherwise.
- If you need to reduce costs, first look at your discretionary category.
Secret 3) Focus on team improvement above all else
It can be easy to become obsessed with the bottom line and how your financial accounts read. Remember, the numbers you see for expenses and profits are the results of how you run your practice. Those numbers don’t get pulled out of the air; they are the real-world results stemming from the systems and processes you have developed as the owner, operator, and leader. If you’re unhappy with the balance sheet, the best way to change those results is to improve your systems and processes. Your team plays an instrumental role in the effectiveness of those systems and processes, and responsibility for improving your team’s performance falls on you. Team training can be a great way to change things and motivate your employees.
Secret 4) Work with a dental industry consultant
You want your patients to trust you to provide the highest level of care. If you’re not an expert in finances or running a business, then why not hire a consultant who does have that knowledge and experience? The team at Bryant Consultants has decades of collective experience on the business side of the dental industry and will put that expertise to work for you. We recognize these are challenging times. That’s why we offer a free one-hour consultation to hard-working practice owners just like you. Find out more and schedule your complimentary one-hour consultation by calling (877) 768-4799.
