Money Management Solutions: Dental Practice Case Study
Financial and money management expert Sandra Simmons describes how she was able to assist a dentist to handle debt and put him on the road to wealth and financial freedom.

Financial Difficulty: How do I fix my declining profitability and rising debt?

A dental practice I worked with was actually doing well, but expenses were out pacing income on a business level as well as the personal level for the practice owner. With almost $3 million per year in revenues and $1.5 million in debt the practice was just keeping its nose above water.

The challenge was to raise revenue, cut expenses and pay down debt at a rapid pace, while reducing the practice owner’s personal tax liability from 40% to a lower level.

Money Management Strategy #1: Cutting Expenses

The first action was to create a budget in the Money Management Solutions program to find out what it was costing to run the practice on a weekly basis, and where expenses could be cut.

Once an evaluation was done, the big culprit in rising costs turned out to be the dental supplies. There was no formal ordering procedure, and staff were shopping the catalogs and ordering whatever they wanted. To get this under control, a two-pronged plan was developed.

The first action was to institute new ordering policy. A self-carbon internal requisition form was designed for staff to request supplies be ordered. All requisitions are routed to the owner’s wife for review against on-hand inventory and other requests. The carbon copy is sent back to the staff member requesting the supplies with a notation of whether the request has been approved, approved with modifications, or disapproved. Ordering is now handled by one person rather than everyone ordering.

Second, a complete inventory of supplies was ordered, and excess inventory found tucked away in drawers and cabinets was scheduled to be returned for credit. This alone saved a substantial amount of cash.

Money Management Strategy #2: Raising Revenue

An income planning drill was done to identify areas of the practice that were non-viable, discover what services were profitable and easy to deliver, and discuss what new products or services could be added to raise income profitably.

The dental supplies were examined again to find out if the suppliers had raised their prices. Several vendors had increased prices and the retails needed to be adjusted in the dental practice.

Next, to address the 8 – 12% annual increase in the cost of doing business, the services were reviewed to see where prices could be raised without causing undue upset with patients. It was found that prices had not been raised on some items for over a year. Several services were raised immediately and yet were still competitive in the market. Lost income from keeping retail prices stable is a common mistake business owners make. Every consumer knows that the cost of living and doing business goes up each year. They are rarely surprised by price increases.

The Doctor/Owner was scheduled to get trained on a modern procedure that he had been wanting to learn for quite some time. The new procedure was determined to be “where dentistry is headed in the future” so the modest training cost could quickly be recovered within a very short time after introducing the new service in the practice.

The staff bonus system was based on revenues that were too low for the practice to be viable. The bonus system was revamped with a new, higher “break even” target set to qualify for bonuses. In addition, a bonus game was added whereby all staff and their spouses could play to win a group trip of their choice.

The promotional activities were evaluated to determine whether they were producing a good return on investment and where costs could be cut while improving response. Changes that were made included adding a monthly email newsletter to all patients. Here is what the practice reported after the first newsletter went out. “I had to send you our first e-mail newsletter. We already have gotten responses!”

Money Management Strategy #3: Reducing Debt & Implementing Long-Term Savings

Using the Money Management Solutions software, the weekly allocation of income included percentages to reduce debt, pay regular expenses on time, promote the practice and set-aside funds for a long-term retirement savings plan.

The increase in income from cost cutting measures, promotional activities and weekly income planning was immediate and profitability was on the rise. A mere 3 weeks after implementing the Money Management Solutions program, here is what the practice owner had to say, “Thanks for ALL the tips. We are putting things in place and already seeing results!”

Money Management Strategy #4: Setting the Course for the Future

In a few short weeks the practice was turning around and headed in the right direction. The regular weekly planning using the Money Management Solutions software maintained tight controls and the practice owner could clearly see that this was painlessly helping the practice stay on course toward a bright financial future.

The key to the success of the plan was the practice owner’s decision to fully embrace the Money Management Solutions program and keep the discipline in. Once that decision was made, the rest was simple.

Statistical graphs are being charted weekly and the decrease in debt and increase in cash reserves are a validation that the plan is working. Continuation of the actions taken to keep a tight control on costs, raise income and pay off debt is handled in less than an hour each week using the Money Management Solutions software, and the practice owner spends the rest of the week with his attention on treating his patients. He is sleeping well at night, no longer worries about money and is having fun in his practice again.

My estimate of how long it will take until the practice is free of the $1.5 million debt…14 months, provided the Money Management Solutions program discipline is kept in and used as intended.

You can speed things up considerably by using the tips in Dr. Brian’s new book Breaking The Profit Barrier – The Healthcare Practitioner’s Guide so check out the book!

If you would like a money management consultation regarding your dental practice or business contact Sandra Simmons at 727-448-1011 or email her at info@moneymgmtsolutions.com .

Are you a dental professional or healthcare provider in need of working capital? The simple solution could be invoice factoring.

Until recently, individual doctors, dentists and physician groups could easily go to their local bank and get all the working capital they needed.  But, while banks still loan money for that purpose, getting a loan or line of credit can be an uphill battle.

The ‘credit crunch’ has caused a major tightening in underwriting parameters at banks nationwide.  banks typically require a minimum credit score of 685, the practice must have a track record of profitability, and start-ups are excluded. Businesses who would have easily qualified for a line of credit six months ago are getting turned down.

The main problems with a bank loan are: it creates debt on which you pay long term interest at high rates, a low credit score locks you out of qualifying, and it often requires a personal guarantee and additional collateral.

Factoring is an excellent means of acquiring needed cash flow.  Medical accounts receivable factoring is the business of buying third-party accounts receivable at a discount so as to make a profit from collecting them. There are very positive differences between bank loans and invoice factoring.

• Invoice factoring is not a loan. It is an off-balance sheet transaction so the factoring fees are a deductible expense.
• Personal guarantees are not normally required, as they are for a bank loan.
• Funds can be received within a week of applying, provided all documents are received in good order.
• With invoice factoring, additional collateral is not required to be pledged.
• Funding is only limited by the company’s pool of accounts receivable, as opposed to bank financing, which usually loans a maximum amount.
• The credit of the business or its owners is not of major importance to the factoring company.

With invoice factoring, funding is limited only by the amount of third party receivables the professional has on its books.

Third party receivables are those amounts due from insurance companies like Blue Cross and government programs such as Medicare and Medicaid.  With medical invoice factoring, the healthcare provider submits a batch of invoices to the factoring company and receives an advance at a rate that is determined by the contract.

The advance rate is typically 75% – 85% of the estimated net collectible value of the invoices.  The remaining amount (the reserve) is remitted back to the provider upon collection, less the factoring fee.

Are you a healthcare provider or dental professional in need of an infusion of working capital? Referring the best resources for medical invoice factoring is just one of the many money management strategies I provide to my clients to insure they achieve their financial goals and build wealth for their long-term financial freedom.

Another great tool I recommend reading is Dr. Brian Dawson’s new book Breaking The Profit Barrier – The Healthcare Practitioner’s Guide, so check out this book!