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Keys to Managing Cash Flow and Financial Performance

By: Alex Poe

As a practice owner, you are directly responsible for the financial performance of your dental practice. This responsibility requires you to understand the cash flow of your business – the numbers you must achieve in order to meet your obligations and earn a profit, and the most effective ways to generate those numbers.

Indeed, understanding your cash flow is fundamental to ultimate financial success. Here are several important steps you can take to effectively track and manage your cash flow and financial performance:

Establish production goals. Production is the first step towards cash flow. In order to sustain and grow your practice, it is essential that you collect enough of what you produce to cover your operating expenses, pay down debt, and deliver adequate profit. An important key to maximizing your cash flow is to establish daily and monthly production goals:

Make sure monthly goals are realistic based on your current patient load and work schedule.

Announce daily production goals to staff each morning in your team meeting.

Use your internal strategies for maximizing daily production – for example:

  • Stay on schedule to the extent possible so you don’t risk losing appointments and impacting production during the day
  • Call in patients to fill cancellations and open slots in the schedule
  • Use your case acceptance skills to gain commitment to needed procedures

Use a practice monitoring tool. To fully understand the strengths and weaknesses of your practice and systems, consider using a professional practice monitoring tool that can help you establish baseline measurements for everything from production to operating expenses. For example, the Milestones program from Wells Fargo Practice Finance can get you started in routinely tracking and examining your practice statistics. As you review your profit and loss numbers, you are better positioned to diagnose and treat problem areas before they impact the overall health of your practice and, ultimately, your cash flow.

Implement effective internal systems. Internal systems can encompass everything from patient recall programs to staff training and payroll, and can be critical in establishing both operational and financial efficiencies in your practice. It’s all too easy to limit your potential cash flow by using outdated and ineffective patient follow-up systems or computer programs that are not equipped to capture all charges. In contrast, a high-functioning practice will offer the best quality products and services first in order to establish a foundation of excellence, and implement follow-up procedures to capture all charges and ensure long-term sustainability. Developing an efficient, effective, and quality-driven internal operation can help support your cash flow function while upholding your brand and overall practice value.

Invest in a marketing campaign. Marketing is critical to cash flow generation – not just when you’re starting your practice and trying to attract new patients, but throughout your career as a dental professional. By routinely investing in a marketing program that includes a website, social media, and community and industry engagement, you can help ensure a regular flow of patients to your office along with a robust production schedule. In addition, an effective internal marketing program that lets your patients know about new services and solutions you are providing can be a significant source of steady production and revenue.

Manage your debt. Few practitioners are able to start their own business without incurring a significant amount of debt to pay for real estate, office remodels, equipment and supplies. But it’s important to effectively manage your debt in order to help improve your cash flow. Use the following guidelines to help pay down any excessive debt each month:

  1. List expenses that are critical to keeping the doors open for patients, such as staff salaries, your income, payroll taxes, and office lease expenses.
  2. List every outstanding bill you have to pay, starting with the oldest due date and ending with the most recent. Pay the expenses in #1 above.
  3. Take 10% of any funds left over and place them in an interest-bearing savings account. This will help ensure you have cash on hand in case of a bad month or an unanticipated expense.
  4. Use all remaining income to pay down the outstanding debt listed in #2 above, paying as much as you can on one bill at a time until it is paid off.
  5. This debt management plan requires personal discipline, but is well worth the effort as it should ultimately free up more cash flow that can be reinvested in your practice and future.

Create a budget – and stick to it! The best plan for helping to ensure your spending levels are reasonable and debt does not spiral out of control is to create an annual financial forecast with a specific budget for each month. In addition to helping you stay on track financially, a monthly budget can give you a basis for establishing production goals. Here’s how to do it:

  1. Determine your projected gross income for the next 12 months based on the number and types of procedures you expect to perform each week. This does not have to be exact – it can be a “guesstimate” based on the previous year’s procedures.
  2. Outline planned expenditures per month by category, such as salaries, new equipment, supplies, continuing education, etc.
  3. Highlight the planned expenditures that make up your operating expenses and overhead. This will include your salaries, office lease, and supplies.
  4. To determine your projected monthly cash flow, subtract your operating expenses and overhead from your gross income per month.

With a budget in hand, you have the basis for making sound financial decisions as you manage your practice week-to-week.

Taken together, these financial management and cash flow generation ideas can be a powerful toolkit for helping you maximize the financial performance of your practice, and ensuring its continued growth and success long into the future.

About the Author

Alex Poe is the Business Development Manager for Wells Fargo Practice Finance in Ohio, Michigan, Kentucky and Indiana. As an experienced healthcare finance consultant, he speaks to healthcare professionals advising in practice planning strategies for emerging and established practitioners. His industry background offers practitioners a unique perspective as they approach some of the most important decisions in their professional lives. With more than 27 years of healthcare experience, Wells Fargo Practice Finance specializes in helping healthcare professionals acquire, start and expand their practices with various financing options and a signature Practice Success Program. For more information, contact your Practice Finance Representative, Alex Poe at 614-562-0297 or alex.poe@wellsfargo.com

View all articles by Alex Poe


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The articles and materials on the Wells Fargo Practice Finance website are provided for general information only and do not constitute, nor are they intended as, a substitute for consultation with accounting, tax, legal or other professional advisors. Wells Fargo makes no representation regarding the articles available in the Strategies for Success Library or the completeness or accuracy of the information contained therein. The articles and the information contained therein may be incomplete, may contain errors or may have become out of date. Wells Fargo makes no commitment, and disclaims any duty, to update any of the articles or materials in the Strategies for Success Library.

The views expressed in the articles are those of the authors alone. They may or may not reflect the views or opinions of Wells Fargo.

Wells Fargo Practice Finance is the only practice and commercial real estate lender recommended for members of the American Dental Association.

ADA® is a registered trademark of the American Dental Association. ADA Member Advantage is a service mark of the American Dental Association. ADA Member Advantage is a program brought to you by ADA Business Enterprises, Inc., a wholly owned subsidiary of the American Dental Association.

All financing is subject to credit approval.

Wells Fargo Practice Finance is the only practice and commercial real estate lender recommended for members of the American Dental Association.

All financing is subject to credit approval.

Wells Fargo Practice Finance is the only practice and commercial real estate lender recommended for members of the American Dental Association.

All financing is subject to credit approval.

Wells Fargo Practice Finance is the only practice and commercial real estate lender recommended for members of the American Dental Association.

All financing is subject to credit approval.

Wells Fargo Practice Finance is the only practice and commercial real estate lender recommended for members of the American Dental Association.

All financing is subject to credit approval.

Wells Fargo Practice Finance is the only practice and commercial real estate lender recommended for members of the American Dental Association.

All financing is subject to credit approval.

Wells Fargo Practice Finance is the only practice and commercial real estate lender recommended for members of the American Dental Association.

All financing is subject to credit approval.

Wells Fargo Practice Finance is the only practice and commercial real estate lender recommended for members of the American Dental Association.

All financing is subject to credit approval.

Wells Fargo Practice Finance is the only practice and commercial real estate lender recommended for members of the American Dental Association.

All financing is subject to credit approval.

Wells Fargo Practice Finance is the only practice and commercial real estate lender recommended for members of the American Dental Association.

ADA® is a registered trademark of the American Dental Association. ADA Member Advantage is a service mark of the American Dental Association. ADA Member Advantage is a program brought to you by ADA Business Enterprises, Inc., a wholly owned subsidiary of the American Dental Association.

All financing is subject to credit approval.

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