Ensuring the success and sustainability of your dental practice requires effective financial management. To make this happen, you must come up with an extensive budget that outlines the expenses, financial goals, and revenue of your dental practice. In this case, you need to leverage professional bookkeeping for dentists. A professional accountant or bookkeeper can help you maximize your profits and improve the operations of your business to ensure financial success.
For dental practices, budgeting is paramount to their financial health. To establish a budget, dental practitioners can seek advice and guidance from an accountant. This budget should foster a practice’s stability and growth and give you a financial roadmap to help you make informed decisions. Here is a guide to help you when establishing a budget for your practice:
Understanding the Expenses of Your Practice
When understanding the expenses of your practice, you must consider the following:
- Fixed expenses. These expenses stay constant, no matter the volume of patients or the revenue of your practice. They include salaries, rent, equipment leases, and insurance.
- Variable expenses. These expenses fluctuate according to the activity of your practice and can include dental supplies, laboratory fees, and credit card processing fees.
- Debt service. You should account for loan or credit payments like principal and interest.
- Periodic expenses. They include equipment maintenance, marketing campaigns, and professional licensing.
Identifying Sources of Revenue
You must evaluate the different revenue sources for your practice, considering the factors below:
- Insurance premiums. Assess the revenue generated from various insurers, taking into account fees accepted, possible adjustments, and reimbursement rates.
- Fee-for-Service Patients. Consider the income your practice earns from insured patients who pay out-of-pocket.
- Non-clinical revenue. This includes rental income or merchandise sales.
Setting Financial Goals
Once you understand the revenue sources and expenses of your practice, you can set the following goals and benchmarks:
- Short-term goals. Your budget goals can be set for the upcoming year like increasing revenue, minimizing expenses, and buying new dental equipment.
- Long-term goals. Determine financial goals like expanding your practice, planning for retirement, and paying off loans.
- KPIs. Key performance indicators must be established to measure the financial performance of your dental practice. KPIs include production per hour, collection ratio, and overhead percentage.
Monitor Performance and Adjust Accordingly
You must review the budget of your practice regularly to ensure accuracy and relevance. You should perform periodic reviews, make data-driven adjustments, and ensure ongoing communications among members of your dental team.