Often, when I ask this question in dental practices, the answer is generally ‘no’. However, even if number-crunching is your least favourite activity, it is really worthwhile working this figure out.
It can help you to plan ahead, stay in control of your costs and make decisions quickly. And, the good news is that you don’t have to do all of this yourself, there are plenty of organisations and tools, such as software, that can help you make these calculations.
For example, when I was working as a business manager in a dental practice, and with a background in finance and management, I found it very helpful to work with a dental specialist accountant (especially if part of the National Association of Specialist Dental Accountants and Lawyers).
A specialist accountant can help to keep your accounts up-to-date, so you are always aware and on top of your direct and indirect costs and expenditure.
However, you don’t want to rely solely on a third party accountant. You also need monthly management accounts that give you regular insight into how your business is performing so that you can take action and make any necessary changes quickly.
Imagine someone approaches you with a view to buying your practice and wants to know the current operating costs and expenditure. Are you confident that you would be able to produce accurate information in a timely fashion? Even if you weren’t already planning to sell, it could be worth exploring the opportunity but without the facts and figures to hand you may not be able to.
Having this kind of information to hand can help you to work out your operating hourly rate. This is important as it drives your dental pricing menu and fee guide, which in turn will determine your annual and monthly payment plan prices, should you have one.
When it comes to this, dentists are no different to other professionals providing a service – when you hire someone such as a plumber, mechanic or solicitor, they will more likely than not give you an hourly labour rate. Only with this information can they make sure their fees are set at the appropriate level to cover all outgoings and make a profit. And the same goes for dentists.
With the fluctuations in revenue and costs that a practice goes through, i.e. tax year end, self-assessment payments due, staff salary reviews, etc, there’s no reason that a practice shouldn’t review its fee scale every 90 days.
Using an accounting software package that produces timely analysis, reports and accurate business trading information can help to determine a profitable hourly rate. It’s a simple equation – you need to be spending less than you are earning from your patients. And for this, you need to know your hourly rate.
With a monthly payment plan you gain regular revenue, which can make it easier to predict income and work out these figures. As a Business Development Consultant with DPAS, one of my roles is to help and advise practices by reviewing their plan income and patient monthly fees.
An hourly rate can be one of the KPIs that you monitor as a practice on a regular basis, be it weekly, monthly or annually. Knowing what yours is, and reviewing it, gives you invaluable information that can keep your practice profitable.
