Three ideas for staying on top of overhead
Part of successfully managing a dental practice is keeping overhead costs down without cutting corners or affecting patient care. Fortunately, there are often gains to be made through efficiency if you know where to look. Here are three areas to review.
1. Periodically review employee compensation
Your staff’s compensation often makes up the largest percentage of your dental practice’s overhead. While having a great team and paying your employees fairly is paramount to your success, labor cost is an expense that needs to be optimized to protect your bottom line. A perfect balance would be to never lose key staff members over non-competitive compensation without paying more than is necessary to be an attractive place to work.
Do your best to maximize the value of each employee in a mutually beneficial way:
- Consider tying compensation to productivity by offering bonuses for actions that bring in additional revenue or cut costs
- Sit down for one-on-one meetings with each member of your team to talk about their career and provide clear guidelines for what they can do to move up and earn more
- Look for opportunities to offer benefits to employees that improve their work/life balance, such as added vacation time, flexible hours, etc.
2. Build a reserve for big purchases
Financing big purchases, such as new equipment, office renovations or other major upgrades, can affect your bottom line by incurring interest payments. Building a cash reserve for emergencies and/or practice investments involves financial planning and long-term thinking. Try mapping out which large purchases are likely to be needed in the next one, two or three years.
3. Organize your inventory
Supplies are a major recurring expense at any dental practice but tracking and managing supply inventory is all too often neglected. Instead of over ordering and presuming that “we’ll use it eventually,” implement a tracking system that keeps enough supplies on hand that you never run out, without filling your storage areas up with things you don’t need.
Monitoring what percentage of your revenue goes to overhead isn’t something you can do once a year. If you want to stay on top of expenses, you need to work time into your schedule to sit down and analyze cash flows as often as is necessary to catch and fix inefficiencies.