Having control of your dental practice's cash flow is a skill that can take some time to learn. It's not uncommon for newly minted dentists to focus on forecasted revenue and overall profitability, not worrying too much when their bank balances get low. This trend speaks to the lack of business management training dental professionals must overcome as they struggle to create a thriving practice.
If you're constantly worrying about your financial projections, keep in mind that your cash flow can address many of these issues. But first, you need to track how money moves in and out of your office. Forecasting cash flow will give you peace of mind in the short term and confidence in long-term goal planning.
At its most basic of definitions, cash flow is the movement of money to and from your practice. This cash is made up of monetary inflows you receive from patients, their insurers, and other sources of income, whereas outflows involve money spent on overhead expenses. If you and other key stakeholders in your dental office aren't fully aware of how cash moves or are not clear on factors that impact these processes, now is the time to learn.
To better understand how important managing cashflow is, the example below illustrates:
Let's say in January, your practice generated $20,000 in revenue, but your overhead was $35,000. This means your office is currently $15,000 in the red (negative cash flow) before accounting for any funds you have in your reserves. You could break even for January if you have the additional funds available to cover the shortfall of $15,000. If you don't have this money on hand, it's possible your office can't make payroll or afford to operate for another month.
Of course, negative cash flows will happen sometimes. Especially when making significant investments in new tools or equipment for your office. You should still have a strategy in place to ensure this rarely if ever, occurs.
When cash flows are negative, you must figure out why this is happening and correct the issue. It's not always about customers not paying their bills or simply having a slow month. Usually, there are larger issues at hand and steps you can take to maintain a positive flow.
Below are some of the most frequent reasons a dental practice would experience negative or inconsistent cash flows.
One of the biggest challenges to understanding cash flow is simply not having the data necessary to understand what's going on in your practice. Key performance indicators (KPIs) focus on specific aspects of your management processes that impact your bottomline.
While you can measure this information manually, it can be time-consuming, easy to make a mistake, and somewhat confusing to interpret. Instead, consider investing in a modernized practice management system that offers practice analytics. Platforms like Adit not only give you real-time reporting but convey this information through an intuitive interface that is easy to understand.
Start understanding what aspects of your dental practice's operations are directly impacting your cash flow with these four metrics:
Once you have a handle on tracking and acting on the information these KPIs provide, you can add additional metrics to boost your collection efforts and stabilize your inflows further.
When you opened your practice, you may not have had enough administrative support to manage your financials. But now that your clinic is established and growing, this is a good time to limit how many team members manage your insurance processing, billing, and collections. Doing so minimizes confusion about what dental care payments are still outstanding and create a consistent approach to revenue-driven responsibilities.
Speaking of too many team members being involved with your financial processes, the same can be said about your overall employee headcount. If the primary reason you bring on new staff is due to inefficiencies in your practice, think again.
Often, it isn't about having enough hands on deck to manage any given day's workload but not having established procedures and protocols for running a dental practice. Instead of recruiting another employee, save some money and reinvest in management software that streamlines the entire care experience in your office.
Cashflow is a simple concept, but making it easy for cash to actually flow into your bank account may not be. If your patients can only pay in person or by check in the mail, this adds obstacles to your inflows. The biggest reason behind a practice's collection rate being under 95% is a lack of convenient payment options for patients to settle up their dental bills.
If your current practice management system doesn't offer tech-forward features like text-to-pay, automated billing reminders, or an online payment portal, consider how much your outdated processes are hindering your cash flow. Adit Pay is a platform that automates time-consuming processes like collections, reminders, payment processing, and so much more. This speeds up how long your office normally has to wait for payments to arrive, helping you to increase and stabilize your cash flow sooner.
Regardless of your industry, when productivity slows down, the overhead becomes more costly and takes a bite out of your bottomline. Instead of robbing Peter to pay Paul each month, consider the following tips to keep productivity boosted and your cash flow plentiful:
You should also consider how much of this effort can be directly supported by your existing PMS. Investing in additional features, such as automated text messaging or a new VoIP phone system that centralizes all communications under one program, will generate more revenue simply by freeing up time normally spent on routine tasks.
Ready to gain control of how money flows in and out of your dental practice? The following eight tips will increase how much money gets brought in each month and slow down how much is going out the door for overhead expenses!
One of the very first steps to take in managing your clinic's cash flow is reducing inefficiency. For example, if your team manually calls patients to confirm appointments, how much time is being taken away from patients visiting your office? Automating appointment confirmations and reminders can reclaim several hours of lost production time each week.
Adit Voice, for example, is a VoIP phone system that pulls up patient EHR data when patients call in, allows your team to send faxes, SMS messaging, emails, and more from their desks, and even provides call recording for customer service evaluations. This feature alone can revolutionize a large portion of your operations overnight and eliminate troublesome communication bottlenecks that lead to delayed decision-making and follow-ups.
Another important benefit your PMS can provide your cash flow is reducing labor and supply costs by going paperless. Say goodbye to clumsy clipboards full of manual forms patients need to complete and then have deciphered by your team before entering into your EHR system. With electronic patient forms, your team can set up a digital packet of paperwork that gets sent to a patient's email the moment they book an appointment. Once complete, they simply email it back via a secure upload link or patient portal where your system can automatically update their records.
This not only reduces wait times in your lobby but helps identify any potential issues with their insurance information beforehand. The final result? Happy customers increase cash flow.
Other ways modern dental practice management software can streamline your operational and administrative processes include:
Cash flow is also affected by the in-network PPO plans you have contracts with. Each year, you probably receive a notice that your office will receive a smaller reimbursement rate because of administrative costs. Check around to find out what higher rates are being paid elsewhere and use this comparison to negotiate better reimbursement rates.
Your team is at the frontlines of your thriving clinic every day but may not connect how their decisions impact the way money flows. Communicate with your staff, for example, about how their supply usage and waste can increase overhead, requiring you to make cuts to compensate. But it's not all about spending. You should work with your scheduling team and educate them about the importance of maximizing productivity. Explain how much no-shows translate into dollars lost and that creating appointment times based on the length of a procedure and not a generic time slot can ensure time is spent on billable services.
A morning huddle is a great way to communicate this information and provide ongoing progress reports on their efforts.
While having a close business relationship with vendors that provide important services like your supplies, window cleaning, and even employee vending machines, you shouldn't be afraid to consider alternative suppliers when things are getting too expensive. Of course, you should first try to renegotiate your contracted rates, but if it's apparent that you can receive the same quality goods and services elsewhere, it might be worthwhile to switch.
It's essential to pad your bottomline to cover months when business is slimmer. It's not uncommon for dental practices to experience slowdowns after the beginning of the year. These periods are also a great time to look back at the previous year's KPIs and identify areas where your dental service could expand and/or improve.
Advertising is one expense that many dental practice owners wish they could spend less on. As you evaluate your overhead spending, it's necessary to contrast costs that fuel growth from those that do not. Marketing is essential to increasing your customer base since new patients generate revenue.
Slashing your ad budget or opting to not advertise at all for a month can be devastating to this goal. Instead, work with a knowledgeable digital marketing company that can create campaigns based on low-cost strategies that offer high returns, such as driving traffic to your website and converting visitors into booked appointments.
You may wonder if it's really necessary to work with an agency to manage your advertising, and the answer is yes! Successfully marketing your practice requires time and dedicated resources, which you probably don't have a lot of while running a busy dental clinic.
The saying "an ounce of prevention is worth a pound of cure" rings true when trying to create a steady cash flow. This effort includes being aware of your options should your practice experience a negative cash flow situation. You don't want to be caught in a desperate situation and be stuck with a loan that has an outrageously high-interest rate. Instead, do your research now before you are in a panic situation.
During the COVID-19 pandemic, many dental offices developed a habit of ordering more than needed simply because of scarcity fears. Now that production levels of oral care supplies have gotten back to normal, it's crucial your team gets back in the habit of only ordering what is necessary. This approach will ensure your team uses these tools and products appropriately to reduce waste and reduce your cash outflows.
As a leading cloud-based dental practice management platform, Adit has created an end-to-end software suite that provides all the tools your office needs to understand and manage your financials. Our practice analytics tool gives you a full view of your operational and administrative performance, including essential data metrics that measure productivity by service, team member, and patient engagement. This information will ensure your staff can make the best decisions and support the best practices necessary to maintain a healthy bottomline supported by a positive cash flow.
Because we never stop innovating, our practice management suite includes all the technological tools your practice needs. Drive your customer service and collections performance to the next level with our over 15+ features that can integrate seamlessly with your existing platform, including:
Learn more about turning your practice data into actionable insights that can improve every aspect of your operations, from production metrics to marketing campaign performance. Request your demo today!
Angela is a former English teacher turned marketing content specialist. Over the past 10 years, she’s developed marketing strategies to forge enduring bonds between B2B, B2C and SaaS companies and their clients through holistic education, effective communication, and captivating storytelling that moves audiences to act.
Offer ends April 4, 2023, and is limited to prospective customers who participate in a Adit services demonstration and are actively employed by a dental practice. by May 31, 2022. No purchase of Adit services is required. The $50 Amazon gift card will be emailed to the company participating in the demo within 4 weeks of completion of the demo. Offer may not be combined with any other offers and is limited to one (1) gift card per office. Offer is not available to current customers or to prospective customers or individuals that have participated in a Adit demo during the prior six (6) months. Recipient is responsible for all taxes and fees associated with receipt and/or use of the gift card as well as reporting the receipt of the gift card as required under applicable federal and state laws. Adit is not responsible for and will not replace the gift card if it is lost or damaged, is not used within any applicable timeframe, or is misused by the recipient. Adit is not responsible for any injury or damage to persons or property which may be caused, directly or indirectly, in whole or in part, from the recipient’s participation in the promotion or receipt or use of the gift card. Recipient agrees to indemnify, defend and hold harmless Adit from and against any and all claims, expenses, and liabilities (including reasonable attorney’s fees) arising out of or relating to a recipient’s participation in the promotion and/or recipient’s acceptance, use or misuse of the gift card. This offer is sponsored by Adit Communications, Inc. and is in no way sponsored, endorsed or administered by, or associated with Amazon.
Schedule A Demo Before 00/00
A team member will be reaching out soon to schedule your free demo