Not many people enjoy going to the dentist, yet dentists are a vital part of comprehensive healthcare and deserve to thrive financially. Why then, do some dental practices struggle with financial management? There are plenty of reasons, so let’s dive into the details.
Understanding the Financial Landscape of Dental Practices
Why are dentists so expensive? Well, they use highly specialized equipment, which must be continually upgraded to keep up with technical advances. The type of practice dictates the equipment’s complexity and expense. For instance, cosmetic dentistry might have more high-tech equipment than general dentists.
Then there are highly qualified support staff, admin staff, rent or mortgage, and utilities, etc.
Revenue varies, for example, cancellations impact income, even if with cancellation fees. Some patients pay at the last minute, and insurance reimbursements add to the fun.
Dentists can improve cash flow with accounting software that includes accurate financial tracking. It identifies areas of profitability to be optimized and potential cost savings to be leveraged.
The Importance of Compliance in Dental Accounting
Dental practices, like all healthcare providers, must comply with healthcare regulations, including HIPAA, and financial regulations, particularly tax. This is because there are dental-specific tax rules and deductions to which dental practices must adhere.
There are other financial regulations that require strict adherence through detailed and accurate record-keeping. Practices must embrace the principles of transparency in financial management, so that their finances are an open book to the right people – like auditors.
Compliance with patient care regulations is, of course, non-negotiable, not only to ensure patient loyalty but also to avoid legal penalties and potential jail time.
Effective Billing and Coding Practices to Reduce Reimbursement Delays
The CDT Code is used to standardize the types of services provided. It’s useful to note that dental insurance doesn’t necessarily cover all codified services. Patients have to pay for services not covered and this can impact dentists’ bottom line.
It’s essential to log the right codes for accounting and claims purposes. The wrong codes can unnecessarily delay payments. It’s a good idea to provide regular training for staff to ensure they know the codes in their sleep.
Accounting software automation tracks and follows up on unpaid claims and invoices, which improves reimbursement rates as well as accuracy in financial reporting.
Controlling High Overhead Costs in Dental Practices
Dentists need highly qualified staff, including dental assistants and technicians. Depending on the practice, they might also need nursing staff. Then there are receptionists, cleaning staff, the list goes on. It’s no wonder that staffing costs are among the highest expenses for dental practices. This can be helped with software that optimizes scheduling and reduces overtime.
Supply costs can be reduced with bulk buying and even rent/mortgage payments can be reduced by subletting unused space. Implementing energy-efficient solutions, like LED lighting can cut costs even further.
One of the best ways to cut costs is to outsource non-core functions, including cleaning and especially financial management.
Streamlining Accounts Receivable for Consistent Cash Flow
Overdue payments are a thorny issue. No one really likes to make phone calls that demand money. Well, not demand so much as very strongly suggest that invoices are settled immediately. OK, some light demanding is required.
Unfortunately, tracking accounts receivable is essential to maintain healthy cash flow. You know, the thing that keeps doors open.
It’s important to have clear payment policies, with flexible payment plans so that patients have more options when it comes to payment. This, and accounting software, like SAGE Intacct ERP that automates payment reminders, improves accounts receivable management and boosts cash flow for better operational planning.
Tracking Profitability by Procedure Type
Dentistry is diverse with a broad range of services, procedures, and areas of specialization. Each has unique expenses and revenue. A single-service practice has simpler financial management requirements than a multi-service practice that includes periodontics, orthodontics, and oral surgery.
They have different profit margins, so tracking revenue and expenses per service is important. This shows which services are the most profitable and should receive the lion’s share of resources.
On the other hand, it also shows which services are least profitable. Partners in the practice might agree to increase resources to improve that line of service. Either way, knowing the cost per procedure helps prioritize services and enables informed pricing decisions.
Benefits of Outsourcing Accounting Services for Dental Practices
One of the best decisions dentists can make is to outsource accounting services. Outsourcing provides access to all the important financial management services without the expense of full-time staff.
But it does more than that. Outsourcing ensures compliance to regulations (like those pesky tax regulations mentioned above) and provides guidance and support for challenges that arise. For instance, real-time financial reporting from an external accounting team offers deep insights into performance for informed decision-making.
Outsourced accounting services are also flexible and scalable, so you only pay for the services you need, and you can increase your services as your practice grows.
Closing
One thing all dentists want is accurate financial management. It’s not a bucket list thing, it’s a keep-the-practice-open-to-put-food-on-the-table thing. Outsourcing dental accounting services is the best way to achieve accuracy while saving costs. You and your staff get to focus on patient care and operational tasks and we’ll handle the rest.
