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CONTROLLING THE NUMBERS THAT CONTROL YOUR LIFE
CoverStory IASSUREDLY, A PATIENT WILL ASSUME THAT YOUR HIGH-TECH PRACTICE IS ALSO USING THE LATEST CLINICAL TECHNIQUES.
electronic progress notes, charts, images and digital radiographs can be integrated with the decentralized management system. The advantages are staggering. THE HIGH-TECH ADVANTAGE
Can you imagine a patient who has already experienced in-operatory scheduling, marketing, digital Xrays, charts, voice-activated periodontal charting and intraoral images leaving your practice for an old-fashioned office? Assuredly, a patient will assume that your high-tech practice is also using the latest clinical techniques. This can help you position yourself in the ever-increasing battle being waged to lure your pa-
tients elsewhere. Picture yourself answering a patient phone call in a quiet environment, seeing the patient's face on a screen and being able to access all of his or her management and clinical information at the stroke of a key or the click of a mouse. The trend toward computers decentralizing the functions of the front desk, and therefore enhancing practice management, continues. With good software, hardware, training support and organizational skills, dental offices can automate many tasks and reach a higher level of management efficiency. The downside of decentralization? Assuming all of the components are in place, there is no downside. .
CONTROLLING THE NUMBERS
THAT
CONTROL
YOUR
LIFE
How monitoring costs can improve your personal, professional life HUGH F. DOHERTY, D.D.S. C.F.P.
N o business can run without monitors-the key numbers in running your practice that actually control your life. Failure to monitor is one of the most costly financial mistakes you can make. STEP 1: DETERMINE YOUR LIFESTYLE
Sit down with your spouse and share your deepest thoughts about your goals so that you can develop a vision of what you both would like your lifestyle to be. Make supreme efforts to keep that lifestyle in balance and your real priorities-family, not work-before you. STEP 2: DETERMINE THE COST OF YOUR LIFESTYLE
Once you have set your lifestyle, you must determine how much money it will cost to maintain it-and how much your practice must produce to do so. Estimate your cost of living expenses and add your 874 JADA, Vol. 127, July 1996
CoverStory taxes. The result is the total dollars needed to support the lifestyle you and your spouse have establishedessentially your take-home salary. When you have calculated the cost of your lifestyle, then you must ascertain what the practice must do to produce this salary. A general practitioner's salary should not be less than 25 percent of practice-collected dollars. Specialists' salaries will be higher.
expense items from the forecast and produced a budget for the year, monitor the day-to-day operations of the practice. Gather, collate and report the monitors on a weekly, monthly and quarterly basis. Thus, you can compare the actual costs, the actual sales, the actual profit margins and earnings with the budget forecasts.
STEP 3: FUND YOUR RETIREMENT EARLY
1. Production per hour. One of the most important monitors in your practice is the production per hour. Determine production per hour by dividing the annual gross projected dollars by the number of days worked, divided by the daily working hours. The doctor should produce 80 percent and hygiene staff 20 percent of this number. 2. Collection ratio. Determine this number by dividing the dollars collected by the dollars produced. It should never go below 98 percent. 3. Overhead. If your overhead is 67 percent or greater, you will be unable to save. Your overhead should be 60 percent or lower.
You alone are responsible for funding your retirement. You accomplish this by paying yourself first, in three ways: 1. Put 50 percent of your retirement monies into a qualified retirement plan. The dollars you invest in this plan must come from the practice. 2. Take the other 50 percent of your retirement monies and save and invest them personally. 3. Make sure that you and your spouse each have an individual retirement account. The key thing to remember is that no one can ever start too early to fund retirement.
STEP 7: KNOW THE KEY MONITORS
STEP 8: GET IT MEASURED AND IT WILL GET DONE
STEP 4: FORECAST
Finally, remember that every imForecast your collections for the portant goal needs to be measurcoming year, setting a target able so that you and your staff can growth rate, or a "stretch target," of gauge your progress. Letting people 5 percent to 10 percent a year. know how well they are doing is a tremendous motivational tool: it's STEP 5: PERCENTAGE called feedback. How much do you BUDGETING think people would enjoy playing After forecasting your expectations, golf or tennis if there wasn't any make up a budget for the coming way to keep score? Don't let anyone year-a series of expense items, ex- con you into believing that you pressed in percentages. These bud- can't measure what is done. If what geted percentages are based on an- a person is doing cannot be meaticipated income from collections. sured, he or she is not contributing. It's as simple as that. STEP 6: MONITOR
RESUILTS
When you've pulled together all the
I AFTER FORECASTING YOUR EXPECTATIONS, MAKE UP A BUDGET FOR THE COMING YEAR-A SERIES OF EXPENSE ITEMS EXPRESSED IN PERCENTAGES.
JADA, Vol. 127, July 1996 875
electronic progress notes, charts, images and digital radiographs can be integrated with the decentralized management system. The advantages are staggering. THE HIGH-TECH ADVANTAGE
Can you imagine a patient who has already experienced in-operatory scheduling, marketing, digital Xrays, charts, voice-activated periodontal charting and intraoral images leaving your practice for an old-fashioned office? Assuredly, a patient will assume that your high-tech practice is also using the latest clinical techniques. This can help you position yourself in the ever-increasing battle being waged to lure your pa-
tients elsewhere. Picture yourself answering a patient phone call in a quiet environment, seeing the patient's face on a screen and being able to access all of his or her management and clinical information at the stroke of a key or the click of a mouse. The trend toward computers decentralizing the functions of the front desk, and therefore enhancing practice management, continues. With good software, hardware, training support and organizational skills, dental offices can automate many tasks and reach a higher level of management efficiency. The downside of decentralization? Assuming all of the components are in place, there is no downside. .
CONTROLLING THE NUMBERS
THAT
CONTROL
YOUR
LIFE
How monitoring costs can improve your personal, professional life HUGH F. DOHERTY, D.D.S. C.F.P.
N o business can run without monitors-the key numbers in running your practice that actually control your life. Failure to monitor is one of the most costly financial mistakes you can make. STEP 1: DETERMINE YOUR LIFESTYLE
Sit down with your spouse and share your deepest thoughts about your goals so that you can develop a vision of what you both would like your lifestyle to be. Make supreme efforts to keep that lifestyle in balance and your real priorities-family, not work-before you. STEP 2: DETERMINE THE COST OF YOUR LIFESTYLE
Once you have set your lifestyle, you must determine how much money it will cost to maintain it-and how much your practice must produce to do so. Estimate your cost of living expenses and add your 874 JADA, Vol. 127, July 1996
CoverStory taxes. The result is the total dollars needed to support the lifestyle you and your spouse have establishedessentially your take-home salary. When you have calculated the cost of your lifestyle, then you must ascertain what the practice must do to produce this salary. A general practitioner's salary should not be less than 25 percent of practice-collected dollars. Specialists' salaries will be higher.
expense items from the forecast and produced a budget for the year, monitor the day-to-day operations of the practice. Gather, collate and report the monitors on a weekly, monthly and quarterly basis. Thus, you can compare the actual costs, the actual sales, the actual profit margins and earnings with the budget forecasts.
STEP 3: FUND YOUR RETIREMENT EARLY
1. Production per hour. One of the most important monitors in your practice is the production per hour. Determine production per hour by dividing the annual gross projected dollars by the number of days worked, divided by the daily working hours. The doctor should produce 80 percent and hygiene staff 20 percent of this number. 2. Collection ratio. Determine this number by dividing the dollars collected by the dollars produced. It should never go below 98 percent. 3. Overhead. If your overhead is 67 percent or greater, you will be unable to save. Your overhead should be 60 percent or lower.
You alone are responsible for funding your retirement. You accomplish this by paying yourself first, in three ways: 1. Put 50 percent of your retirement monies into a qualified retirement plan. The dollars you invest in this plan must come from the practice. 2. Take the other 50 percent of your retirement monies and save and invest them personally. 3. Make sure that you and your spouse each have an individual retirement account. The key thing to remember is that no one can ever start too early to fund retirement.
STEP 7: KNOW THE KEY MONITORS
STEP 8: GET IT MEASURED AND IT WILL GET DONE
STEP 4: FORECAST
Finally, remember that every imForecast your collections for the portant goal needs to be measurcoming year, setting a target able so that you and your staff can growth rate, or a "stretch target," of gauge your progress. Letting people 5 percent to 10 percent a year. know how well they are doing is a tremendous motivational tool: it's STEP 5: PERCENTAGE called feedback. How much do you BUDGETING think people would enjoy playing After forecasting your expectations, golf or tennis if there wasn't any make up a budget for the coming way to keep score? Don't let anyone year-a series of expense items, ex- con you into believing that you pressed in percentages. These bud- can't measure what is done. If what geted percentages are based on an- a person is doing cannot be meaticipated income from collections. sured, he or she is not contributing. It's as simple as that. STEP 6: MONITOR
RESUILTS
When you've pulled together all the
I AFTER FORECASTING YOUR EXPECTATIONS, MAKE UP A BUDGET FOR THE COMING YEAR-A SERIES OF EXPENSE ITEMS EXPRESSED IN PERCENTAGES.
JADA, Vol. 127, July 1996 875