INFOGRAPHIC: 4 Symptoms of a Sick Dental Practice

Posted by Jason Smith on Sun, Mar 30, 2014

You run a successful practice and you're making a good income - but you know things can be better. You've tried practice management and marketing with short-lived results. You're not willing to settle with the status quo, but you don't quite know where to look or what to do about them. You see the signs of problems under the surface, but you're out of ideas for how to deal with them.

Check out our new infographic, 4 Symptoms of a Sick Dental Practice, by clicking on the preview image below. It's designed to show you a few things that could be amiss in your practice's finances and help you determine whether the worries you have are minor - or the start to something serious.

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Topics: dental advisor, Practice Transition, dental retirement, dental tax, dental financial planning, dental accounting, Financial Planning, business of dentistry, Tax Advisory

How Your Practice Can Survive a Few Slow Months

Posted by Brogan Baxter on Fri, Mar 28, 2014

tortoisePut simply, the secret to making it through slow times as a dentist is great planning. If you have a good idea of what’s coming, and you have a plan in place to deal with it, you’ll be able to get through short periods of low production with relatively low financial impact.

Your most potent weapon is thorough information on historical financial trends for your practice. Four years of data or more will get you the best results but use what you have. This will give you a good idea of when production drops tend to happen, and will help you determine why. For example, if your practice is located in a vacation area and you tend to have less production in the summer months, you can safely bet that’s going to be a trend. You’ll be able to plan for that drop occurring on a yearly basis.

There are a few ways you can use that information.

  1. Schedule vacations: If you know a specific month or season is your slow time, close the practice for a week. You and your staff can have a vacation, and then you can condense four weeks of work into three, and avoid spending on overhead when you don’t need to.
  2. Cut hours: You don’t need to schedule at full capacity if you know that you’re going to be light on work. Lighten the load of hours during slow periods – maybe only have one assistant work each day, for example – and then when production ramps up again, you can go back closer to capacity.
  3. Reactivation campaigns: Do you have patients who haven’t been in for a while, and have fallen through the cracks? Get in touch with them, and get them in for a cleaning and a checkup, or schedule them for the operative work they’ve been putting off or haven’t scheduled yet.
  4. Run promotions: Things like giveaways and discounted procedures can bring in patients who might otherwise have avoided a trip to the dentist.

More than anything else, you must have an adequate safety net in place. If you don’t, you’ll be tempted to cut your pay or adjust your cash flow to make up for slow times, and that’s not advisable. It’ll hurt your home finances and lead to stress. Instead you should have 1 to 1.5 times your typical practice monthly expenses in your accounts at all times. You should have access to a line of credit that can cover between ¾ and 1.5 times your monthly practice expenses as well.

You need to be proactive with your taxes and expenses as well. Use your practice’s trends to shape your tax payments and your purchases. You should be adjusting tax estimates on at least a quarterly basis. Not only will this account for the fluctuations that happen when a slow month does happen, but it protects you from a nasty tax surprise. And a five-figure tax bill will hurt a lot more if you’re fresh off a dip in production.

That goes for expenses as well. Boring cash flow is a lot better than “lumpy” cash flow – in other words, paying off a large expense all at once is not ideal. When lean times hit, you’re going to be a lot happier paying off four months of $10,000 checks rather than one for $40,000.

Proactive planning – in taxes, in expenses, in savings, and in reactions – goes a long way towards helping your practice get through a lean month or two without suffering too much.

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Topics: dental advisor, dental financial planning, dental accounting, Financial Planning, business of dentistry

How Much Do You Need to Save for Your Retirement This Year?

Posted by Brogan Baxter on Fri, Mar 21, 2014

savingretirementCommon sense and logic tell us that the earlier you start saving for retirement, the better off you are. Interest compounds, so money saved at age 30 ends up worth more than what you save at 50. For example: a person who saves $20,000 a year for 25 years will, at the end, have $1.46 million saved. But to get that same amount in only 15 years, you’ll have to save $54,000 a year. In ten years, it’s $101,000 a year.

You probably don’t want to save $101,000 every year, so start now. But how much should you be saving?

That’s a loaded question, because the real answer is that it depends. Helpful, right? Beyond your age, there are several factors to consider. They include your retirement goals, how much you make, and how much (if anything) you’ve already saved.

At Four Quadrants, we plan for our clients to have the same income in retirement as they do while working, if not better (after adjusting for inflation). You’ve probably never been told this, but it is possible for a dentist to retire with between $8 million and $13 million in retirement savings. And we’ve had clients do even better.

Read the Guide: Financial Planning for Dentists

To determine what you’ll need in retirement, think about your current expenses. If you’re making around $400,000 a year, your personal expenses are likely to be around $20,000 a month right now. In five years, because of inflation, you’ll need $22,000 instead to meet that same value. In 15 years you’ll need $31,000 a month. In 25 years it’ll be $54,000 a month.

To plan for a thirty-year retirement (including inflation), that $400,000-a-year dentist must save about 27% of their gross income in order to hit their retirement goal. That amount doesn’t take into account any profit from selling the practice or any related real estate deals – but you can’t put all your eggs in that basket when it comes to the transition. Those sales won’t net you more than 60-75% of your revenue from the previous year and that’s not enough to maintain your lifestyle. Even if you take the above example and plan for a net $1 million to be invested around the retirement age, that only drops the savings percentage from 27% to 23%—hardly the game-changing difference that many dentists think it will be. One only should count on that inflow as supplementary income alongside years of savings.

For a younger dentist, somewhere from 20-30% of your gross income should be saved for retirement. If you’re older – say, within ten years or so of retirement – you should be saving closer to 30-40% of your gross. That way, your retirement won’t be filled with financial worry, and you’ll be able to continue in your current quality of life.

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Topics: dental advisor, dental retirement, dental financial planning, dental accounting, Financial Planning

3 Things Every Dentist Needs to Keep Work Manageable

Posted by Brogan Baxter on Fri, Mar 7, 2014

clockA dentist is most productive and most profitable when they’re in the chair. But someone has to run the business side of the practice as well, and often that falls to the dentist. They’re out of their element, they’re not with patients, and they’re adding on more time spent at work – straining home and family life as well. But there’s a pretty simple solution – a team of three advisors to manage the various parts of the dental business.

A strong office manager

Your office manager is in charge of the day-to-day operations of the practice. That includes practice systems like collections, checkout, and patient communication – the manager ensures all parts of the process are running seamlessly, and improving them constantly. The manager also is in charge of human resources, dealing with internal staff issues like lateness, complaints about a specific employee from a patient, or in-fighting between staff members.

An excellent accountant

Your practice’s accounting needs to be in order, or else growth and success are impossible. There are two parts to an accountant’s duty:

  • The accountant needs to create and sustain a consistent income structure. The balance between income from the W-2 and income from distributions needs to be right. Take-home income has to be consistent and regular, to preserve a steady cash flow.
  • The accountant must be proactive when dealing with your tax responsibilities. The books should be looked at monthly. There should be regular contact between the dentist and accountant to review practice numbers and financial reports. Quarterly taxes should, based on all of that data, be handled actively rather than passively. If you’ve had a tax surprise in recent years, your accountant is not doing their job proactively.

An external CFO

Your practice’s chief financial officer has one primary duty – to monitor and manage your business and personal cash flow. Cash reserves can never drop too low, because that leaves your practice and home vulnerable to unexpected expenses. But you should never have too much cash, either – that’s money that isn’t working for you.

Debt plays a big role in healthy cash flow, and the CFO helps manage that as well. Existing debt is structured in such a way as to make the practice as strong as possible, and new debt is built into that structure so that it doesn’t weaken your financial foundations.

In terms of overall strategic planning, the CFO is an asset as well. When deciding whether to expand to another operatory, move locations, add or drop an insurance plan, hire or fire staff, give raises – the CFO helps pick the option and the timing that’s best for you. When these decisions are made hastily or without planning, they often go wrong, and if enough do, it can dramatically impact your finances.

The more these three work together, the better off your practice and home finances will be. The dentist will be spending more time in the chair, and less time worrying about finances. The practice’s resources will be allocated properly. And with reduced stress and more time available, the dentist will spend fewer evenings anxiously poring over QuickBooks and more with their family.

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Topics: dental advisor, dental tax, dental financial planning, dental accounting, Financial Planning, Tax Advisory

When Should I Pay Off My Debt?

Posted by Brogan Baxter on Fri, Feb 21, 2014

debtFor someone without a lot of financial expertise, it may seem obvious that if you’re in debt, you should pay it off as soon as possible. And that assumption can get your dental practice in a lot of trouble.

People hate being in debt, and dentists tend to hate it even more than the general population because they have so much of it. So when they have money available, they’ll tend to put it towards paying it down as quickly as they can. There’s a battle between emotion and logic a lot of the time – the emotional decision is to accelerate debt, while the logical decision is to hold off and invest the money.

Read the Guide: Financial Planning for Dentists

It’s a hard decision to make. Debt can be frightening, and the emotional side of it is powerful. Add in the fact that retirement savings is more abstract – retirement is a lot farther away, while debt is here now – and without guidance, the decision can be pretty hard to make.

One of the first things to think about is what kind of debt you have. There’s actually good and bad debt. Good debt is something like taking out a loan to buy a new piece of equipment for your practice, or your mortgage. An example of bad debt is a high-interest credit card. If you have a lot of bad debt, that should be eliminated – but good debt can be managed more gradually. In terms of taking on new debt this comes into play again: why are you putting yourself in debt? If it’s for something that will help your practice be more productive, that’s fine. But if you’re just living outside your means, well, stop doing that.

When deciding whether to invest or pay down debt, think about the opportunity cost. If you use money on something, you obviously can’t use it on something else – so think carefully about what you’re losing when you’re gaining something else. The simple answer is that you should strike a balance between debt and savings, but the current situation leans a little bit more in one direction than the other.

Interest rates today are the lowest they’ve ever been, and probably the lowest that they will ever be. Now is actually the best time in the history of money to be in debt. So why would you be in such a hurry to get out of it? Low rates mean that your practice debt compounds less than it would with higher rates, and the interest is tax deductible anyway.

On the other hand, if you fail to invest now in your retirement, you will miss out on returns for every day your money’s not in the market. An intelligent capital preservation strategy is critical as well – to focus on saving more and taking less risk with that money in the market. If you don’t invest in your future now, you’ll have a lot of catching up to do in the future.

You can’t make up for age. The idea of compounding of interest over time makes this very clear. There’s too much to be lost by failing to invest now, too much money to lose by failing to get returns for years while you concentrate on paying off debts that aren’t hurting you that much.

So what should you be doing? Pay off bad debt first. Then concentrate more on saving money and investing it in your retirement now, putting yourself on the prudent path. Once you’re on your way towards a healthy retirement, then you can start building a strategy to pay down your good debt as long as you are also making what you want from the practice. Make your decisions based on numbers and logic, not on emotion. Debt might not be fun, but it’s a lot more fun than realizing you can’t retire until you’re 80.

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Topics: dental advisor, dental retirement, dental financial planning, dental accounting, Financial Planning

The Top 10 Tips for a Successful Dental Practice Start-Up

Posted by Four Quadrants Advisory on Thu, Dec 19, 2013

diggerThis guest blog post was written by John Fiore, dental finance expert and Senior Vice President at Bank of America Practice Solutions.

With every chapter, every experience, and every challenge you will encounter in your dental career, there is opportunity. Take the opportunity to grow, the opportunity to learn, and the opportunity to avoid costly mistakes so frequently made by new practice owners before they even open their doors for business. Here are my top 10 tips to making your practice start-up experience a successful one.

1. Do a little homework and prepare yourself

During this recession and as the economy slowly rebuilds, it is my opinion that dental practices have resurfaced in good shape and overall failure rates for practices remain very low. However, practices occasionally do fail and when this occurs, it can be a life-defining disaster, both professionally and personally. There was a time not too long ago when you could build a practice from scratch and have the luxury of a consistently booked schedule of patients soon after your grand opening. I will tell you that this is rarely the case today. So, as soon as your mind is made up to become your own boss, start getting an idea of the unknowns that lie ahead. Speak with current practice owners to find out what particular challenges they faced, what they did to prevail, and what they would do differently today. Gather a useful amount of information and become comfortable with the upcoming challenges that you are likely to face.

2. Build a network of trusted advisors

From the day you decide to start a practice, you will be meeting many people. As you filter through all the advice and various relationships you will be establishing (or have already established), it is important that you position yourself with industry-specific advisors who will help you with the many crucial decisions you will be making for your start-up venture.

There are several trusted advisors that are vital to your project and in no particular order they are as follows:

Dental-specific Contractors: This is very important. Trying to save money by cutting corners with a general contractor who is not experienced in building out dental practices can lead to unnecessary overruns and possible frustration with your equipment specialist and architect. Dental specific contractors exist in every market in the U.S. and are easy to find. Your equipment specialist should know reputable contractors they have worked with in the past on other projects, and your state annual session usually includes dentalspecific advisors. Also, check with colleagues who have already opened their offices and may have valuable feedback about contractor performance.

Dental specific CPAs: As we know, a general dentist can do root canals, but an endodontist is highly recommended for more difficult procedures. Similar to a dental specialist in this situation is a dental-specific CPA for your practice. As with general contractors, there are thousands of general CPAs who would like to earn your business. In fact, you may already have a relationship with some of them. Though I’m not recommending you make a change from your current CPA, I would encourage a conversation with a dental-specific CPA who works with a minimum of 25 dental clients and can lend another perspective on the value of using specialized CPA services.

Dental Equipment Specialists: Quite often this group is looked upon as a source whose primary interest is selling you as much equipment as the lender will approve you for. In most cases, I have found that this is not true for the better equipment specialists. A good equipment specialist is truly looking out for your best interest and can be one of your most insightful advisors. Typically, equipment specialists are very tenured and plan on staying in the dental field for their entire careers. It is very important to these specialists that you are well-positioned as a start up to succeed because they plan to provide you with updated equipment and the latest technology for many years to come. As with your CPA, it is not uncommon to see dental practice owners maintain career-long relationships with trusted equipment specialists.

Dental-specific Lenders: Currently there is a large amount of interest in dental practice financing from a plethora of lenders including local, regional and national banks, money loan brokers and SBA lenders. You will find some lenders are very experienced with financing dental practice start-ups and others are simply general small business lenders. General small business lenders are typically looking to lend against the collateral in the transaction and not really interested in the “soft cost,” which includes your build out or tenant improvement and working capital. Dental-specific lenders who provide start-up financing are very familiar with the cost of your new project, which may run upward of $450,000 (and of which only a third is equipment costs). Working with a lender who understands the project breakdown is very important.

As your business grows, other dental-specific advisors might cross your path, which can play a major role with key business decisions. You may have a need for dentalfocused attorneys and practice management consultants who will help bring your practice to the next level. Practice management consultants can be an excellent source early in your practice plans and can assist with establishing internal control systems and personnel decisions. They are truly focused on helping you become and stay efficient while growing your practice.

3. Secure financing

Although over the past few years there has been a significant amount of press about how banks have pulled back with lending to small businesses, I have not seen this to be the case with dental-practice financing. There is no shortage of banks wanting to lend to dentists. However, you might find that your local bank and others are unfamiliar with the cost and funding allocation requirements for a start-up practice. Fortunately, there are many major lenders who are very familiar with your needs and are willing to provide you with the required funds. Also, make sure your loan decision isn’t based solely on interest rate. Although the rate is important in keeping your payments lower, it should only be one factor when deciding on a lender. Here are some other loan features to consider:

Loan Term: Similar to your home mortgage, you should consider the longest term available (i.e., 10-15 years). This will provide you with lower payments as your begin to grow your revenue stream. If your business does better than expected, you can always pay down your loan similar to your mortgage. Loans can typically be prepaid if you elect to do so after three to five years without a penalty.

Pre-payment: Loan pre-payment options will vary from lender to lender. As you build and open your dental practice, your loan pre-payment terms are less important in the earlier years and pre-paying your loan may become an option after your practice is no longer considered a start-up and is looked upon by lenders as an established practice. This occurs when you have demonstrated proven practice collections, your business revenue less your business expenses and personal expenses provides adequate cash flow, and the new loan you are considering is in your best interest or more attractive than your existing loan.

Loan Structure: The payment structure is crucial and by having a loan with graduated payments in the first two to four years provides breathing room and flexibility as your practice grows. Graduated payments can range from interest-only payments for six to 12 months to a tiered payment structure for up to three years.

Interest Rate: Rates can be fixed for the term or adjust with prime or other rate indexes. Although payments might be less with an adjustable rate, rates will eventually begin to rise, so locking in with a competitive fixed rate for the next seven to 15 years is your best solution.

Lender Service Levels: As a start-up, you will have immediate banking needs such as merchant (credit card) processing, direct deposit accounts, business credit cards, etc. During construction of a new practice, better dental-specific lenders have internal processes in place to pay the building contractor, equipment companies and other vendors that may require deposits and incremental payments. They will also make sure all disbursements are made as planned so you can stay on schedule.

4. Have a business plan

You will learn, if you haven’t already, how to present a treatment plan to a new or existing patient. You’ll want to be very specific with a comprehensive exam, diagnosis and a course of action involving quality care. Similarly, developing a plan for how you are going to run your business from A to Z is instrumental in the success of your practice. You can find business plan templates for your start-up dental practice from the ADA resource center, dental specific lenders, and possibly your state dental association.

5. Develop your business acumen

The one opportunity that comes to mind when I reflect on the worst economic downturn since the great depression is the need for new dental practice owners to develop business skills and acumen. We all know the lack of business curriculum that is taught in dental school. With this in mind, from the moment you graduate and become licensed, it is wise to make a personal commitment to allocate a certain amount of time to learning the business of dentistry. Ask your school professors for suggestions of other dentists you can speak with who are already running successful practices. Begin to explore what type of business model and practice philosophy you would like to incorporate in your practice. You might be surprised how a colleague or school alum who once had the same anxiety you have about starting a practice is willing to lend a hand and share successes. Remember, these contacts are already living the dream of practice ownership and can help you save time and money as you begin your journey. Other suggestions include attending practice management seminars in your area and downloading articles on the business of dentistry.

6. Maintain a high level of credit worthiness

This is really not a secret; I hope you already know how important your credit score is, both personally and professionally. A negative or low credit score can have a significant impact on qualifying for a practice loan, the amount of money you may qualify for and the interest rate you receive. If you are not sure what is currently reflected in your credit file and would like to obtain your credit score, you can go to www.myfico.com; or to obtain a free copy of your credit report, go to www.annualcreditreport.com. To inquire about a reported creditor on your credit bureau you can contact one of the major three reporting credit bureaus: www.equifax.com (800-685-1111), www.transunion.com (800-888-4213) or www.experian.com (888-397-3742).

7. Keep your debt load at a manageable level and don’t over-extend yourself

Visit the next dental trade show or speak with your colleagues and you will hear the current buzz in the industry about the amazing technology that exists today in the dental profession. I guarantee you will hear from the companies that sell such equipment about the value the latest technology will have on generating revenue in your practice and why you can’t live without it. While this may be true, you need to be very careful that you do not acquire equipment before you can justify the cost of such an acquisition. New technology can be very expensive and can be a burden on your cash-flow if you are not ready to optimize the use and see immediate revenue or expense savings. This is also true with equipping all your operatories right from the start. Typically a 1,500-square-foot office has room for four operatories with many dentists equipping two as a start-up, as there will be always be time later to equip your third or fourth room when your practice is at a level to support it.

8. Stay on budget

We have seen new dental start-up total cost range from $250,000 to $500,000 with an average cost of just less than $400,000. The total amount includes your landlord allowance (some landlords provide an allowance toward the build out), your construction costs (for a leased space), your equipment needs (dental and office hardware/software), dental supplies, office supplies and working capital (typically $75,000 to support your expenses while you see new patients and see insurance reimbursements). Once you are approved by a lender and your project begins, it is crucial that you and your team remain on track to finish your project within budget. It may be helpful to apply for a little more than you may be forecasting to allow for any unforeseen overruns that may occur while your office is being built. Lenders may accept a slight overage than original plans but an overrun of 10 percent or higher of your original amount may create concern from the lender, so try and stay on track.

9. Establish professional/practice goals

A goal is nothing more than a target that needs to be believable, achievable and measurable. Once a goal is established, the measureable component will help you stay focused and will force you to adjust and reinvent ways to achieve your goal along the way. Professional goals can include the number of new patients per week or month, number of hygiene appointments, amount of monthly production, collections, etc. Try and be disciplined, as only you are responsible for the overall performance of your business. A simple tool of having specific goals for you and your team might make the difference between success or challenges.

10. Maintain your associate position as you are growing your business

No one is more familiar with your debt load than you are as you begin your pursuit of practice ownership. Between your student loan debt, your car loan, your mortgage payment if you purchased a home (if not, rent can be as much as a mortgage), and now your practice debt, the numbers will seem enormous and it will be very important to maintain guaranteed (predictable) income after you open your practice and while you are building your practice revenue. Once your practice is built and opened for business, we have found that maintaining an outside associate position for two to three days per week helps you better predict cash flow and pay your bills while you are adding patients to your new practice. You may consider associating for up to three days per week and reduce your associating days as you add days to your own practice. This associate position will typically be in another town or city to avoid taking patients from the dentist you currently work for.

John Fiore is Senior Vice President at Bank of America Practice Solutions and has been entrenched primarily with dental practice financing since 1992. John has seen, first-hand, the key disciplines successful practice owners live by, why certain practices struggle and how crucial it is to be surrounded by the right set of resources to ensure a successful outcome.

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Topics: dental advisor, Practice Transition, business of dentistry

Analyzing the Investment in Dental Software

Posted by Four Quadrants Advisory on Thu, Dec 19, 2013

icebergThis guest blog post was written by Andy Jensen, an expert in dental software who's been in the field two decades.

“How much does it cost?” That’s the first question most dentists ask when investigating a new or replacement software system to manage their practice. If only the price tag told the whole story! Unfortunately, most of the cost is below the water line. When the great ship Titanic made its maiden voyage, the “unsinkable” boat found out very quickly that what is beneath the water may be substantially more dangerous than what is visible above the water. The consequences were tragic.

What We Can Learn from Icebergs

Icebergs are large frozen masses of water. When they freeze, the volume increases and they are slightly less dense than the surrounding water. From Wikipedia, “Any object, wholly or partly immersed in a fluid, is buoyed up by a force equal to the weight of the fluid displaced by the object.” That’s why they float. It also means that, given the density of water vs. ice, most of the mass of the iceberg is found below the water, out of site, but just as real. Dental offices that don’t consider the costs found “below the water line” can also face unforeseen and undesirable outcomes. A holistic perspective and analysis is required to ensure positive ROI on any technology implementation.

What Lies Beyond the Sticker Price?

Gartner Group, a widely respected national re-search group conducted a study and found that across all industries, for most client/server installations, the software price represented just under 10% of the total cost of a system. Of course, these are not dental industry specific numbers, but anything remotely close to these numbers warrants significant consideration when you have so much on the line.

The sticker price never tells the whole story. There are always additional considerations with any purchase. This is especially true of technical purchases like dental software. Software license fees usually don’t include most of the cost items associated with implementation, use and maintenance of the system. For example, there are typically additional charges for things like:

  • Implementation fees.
  • Data conversions.
  • Initial system training and upgrade training.
  • New staff training and re-training costs.
  • New hardware.
  • Hardware upgrades required to run the software.
  • Hardware upgrades required to support an upgrade (like new video cards, additional memory or faster processors).
  • IT staff expenses for installation, configuration, and upgrading.
  • IT services costs for system maintenance, database repair, and overall database health.
  • Data backup equipment/software/tapes, and staff time to manage it as well as IT support time to setup and maintain appropriate scripts and processes, then update those processes with each software upgrade.

With a little time and thought, the list can become quite long. These undocumented fees can easily in-crease the cost of a typical dental software system by double or more. One IT Professional that specializes in client/server dental installations indicated that his clients will spend between $500 and $700 per month on his services (that is in addition to the cost of equipment and vendor fees). You can find out what you spend quite easily. Just ask your accountant what the average IT spend is over the last year. My guess is that you will be quite surprised. It all adds up really quickly.

How to Spot Lost Production

Even given the long list presented above, there is one cost item that is intentionally passed over by many vendors—because they don’t like to talk about it. It’s a very easy item for software reps to just ignore and forget about. For some offices it can become the most expensive cost item on the list. It’s the cost of office downtime and lost production required by most vendors for things like computer installation, configuration, upgrade installation, staff training, etc.

Any time the office has to be shut down when it would ordinarily be open, there is massive cost to the practice (and the practice owner).

Most firms suggest “on-site” training. Sure, it’s more convenient for a trainer to come to your office and spend 3 to 5 days in a row, but how much does that cost? They will quote something like $1000 or $1500 for the training but that’s just the check you write. What about the check that isn’t being written by your patients during that week of training? That’s where the real cost is. And think about how productive your staff is being when you have an IT guy running from workstation to workstation installing the latest bug fix. It isn’t hard to see that much of the cost for a traditional dental software system is really hidden beneath the water line and is not taken into account in the typical client/server software sticker price.

Analyzing Web-based Solutions

Web-based solutions inherently include more of the costs in their published price. Most of the items that require office downtime are not required. For example, in a Web-based solution, the installation is done on the web-hosted server located in a hardened network operating center. Nothing is installed in the dental office. There are no CD’s to plug in, no server to configure, nothing to load on workstations, etc. With a web-based solution, once the system is provisioned, the dental office receives a URL, a username and a password. All that is needed is a web browser. The result is no hidden costs for installation, configuration etc. Same thing goes for updates. Nobody has to come to your office and take precious and expensive office time to do an upgrade. You just log in the next morning and the upgrade is installed.

Training is much the same way. When using a web-based system the training is most effectively done on-line. It will be presented in short, one-hour sessions that can be handled during normal office breaks and down time. They don’t require you to close the office for several days. The result is no lost production time for training and implementation.

Finally, there is the general maintenance cost for a client/server system that requires hundreds of dollars a month for an IT guy’s time. We’re not saying that you won’t need the IT guy anymore, but you will only need him about half as much. So, whatever you paid last year for IT services, you can pretty much cut it in half for a web-based solution. When you buy a car, you know that some models require more maintenance and use more gas. Some are really reliable and just sip fuel. Obviously, the sticker price is just part of the equation.

Avoiding the Apples-Oranges Comparison

One common mistake that many offices make is to assume that the product and services received from a client/server system are equivalent to the product and services received from a web-based system. This assumption will result in a gross error that can cost the dental office thousands of dollars. The monthly subscription fees paid to a web-based vendor typically include many services that are not included in most traditional software vendor quotes. Many offices find that the additional services required with a client/server based system end up costing as much or more than the total monthly subscription fee of a web-based product.

Thus, it is vital that a total and honest comparison is performed before simply accepting the sticker price as the whole price. Any return on investment (ROI) analysis must include not only the simple software fees, but also the system related fees that are not included in, but are required to run the software. Additionally, the analysis must include the costs associated with office downtime and disruption. Failure to include these hidden costs is simply ignoring the truth.

Conclusion

When a dentist is considering a new practice management system, all costs should be included in the analysis. It’s very easy to ignore some of the most expensive parts of a system. Expenses not paid to the vendor, such as server configuration, software installation, backup systems and process scripting need to be considered. Additionally, the very significant costs of lost production associated with on-site training and computer software installation must be factored in. It is widely recognized that a typical client/server software price includes just a fraction of the total cost. Web-based systems improve the ROI from several perspectives. First, they totally eliminate some of the most routine expenses; secondly, they incorporate in the price many products and services that must be added to a client/server based system; and finally, they represent a hassle free implementation eliminating the hidden costs of lost production.

Andy Jensen has been in the dental software business for nearly 20 years, directing the marketing activities for DENTRIX, Easy Dental, DentalVision, and now Curve Dental. You can reach Andy at andy.jensen@curvedental.com or by phone at 801-851-5175 x1002.

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Can Dental Lab Fees Lower Overhead and Increase Profits?

Posted by Four Quadrants Advisory on Thu, Dec 19, 2013

toothThis guest blog post was written by Larry M. Guzzardo, author and expert in practice management solutions.

Are you frustrated by the balancing act between achieving your best restorative result and making a fair profit on procedures? Do you feel you have to compromise on esthetics because you can’t afford the lab that knows how to provide the very best quality? Tired of “eating” the cost when you go ahead and do it anyway or when the lab fee turns out to be higher than you expected? Every dentist I know is exhausted by the strain this creates between them and their lab technician.

Create options and flexibility

If you are doing prosthetic dentistry and participate with insurance plans that force you to discount your fee, the options are few beyond looking for a lower priced lab. But then you’re caught in the “you get what you pay for” syndrome. However there is still a way to decrease overhead expenses and increase profits all while utilizing your choice of the best technicians. Consider billing patients a separate fee for their laboratory expense. Now get up off the floor! This is not as unusual as it may seem. There is no other area of medicine that pays the lab service for their patients or includes this amount in their fee. Explore the possibility that your hands will no longer be tied. Options are now available to you and your patient that could not be presented in the past.

” . . . You now have the flexibility to do what you want without risking a clinical compromise or financial loss.”

Immediately increase operating profits and lower overhead expenses 10%-14%

This concept may be new to all of us in dentistry; however we have to recognize this is a standard practice in almost every other industry, particularly medicine, for years. To mention a few, lawyers have always done it. Mechanics, banks, contractors, and hotels do it. Now even the airlines do it too. Not to mention delivery services who add on a surcharge when fuel prices go up. All of them have discovered the increased flexibility and profitability achieved from charging one fee for their initial service and a separate fee for anything extra. They never have to lower their quality of service or put their reputation at risk. I say it’s time we catch up. How much longer can you continue absorbing additional costs without it affecting your bottom line?

Every dentist I know understands how important it is to maintain a healthy working relationship with their laboratory technician. They realize the vital role the technician plays in the final result so they also expect to pay a premium for the very best.

An excellent technician makes you look like an artist and an average one makes you look just like everybody else. Let me show you how this can be done and still show a profit.

Because this is so widely done in other industries we need to learn how to feel good about it too so we can eliminate this significant overhead expense. And give ourselves the flexibility to choose a laboratory technician that can provide the best result for your patient at the same time.

Why not just select a fee that includes every expense and allows for a fair profit margin? First of all, your fees would be constantly changing depending on the lab you selected or procedure you needed and second, psychologically, it is easier (as all retailers have found) for the patient to comprehend when the total is divided in two. Charging separately for the lab will make your fee for the procedure sound competitive with other dentists in town.

Presenting this fee to the patient is easy:

“Ms. Patient, to complete your treatment as I have described, the fee will be (x) and the approximate laboratory fee to achieve the result we are looking for is (x).”

Get familiar with the fees charged by your laboratory so you can estimate the fee slightly higher than you expect, so when the case is completed, the final fee will likely be lower for the patient.

Bookkeeping and accounting is even easier. Lab charges are posted to your accounts payable system as you do right now and, instead of billing the patient for their lab fee through your practice management software, their lab invoice is generated through your accounting software as well. When patient lab payments are collected, this amount is credited against the amount posted. When this occurs (+$250.00 posted and -$250.00 collected) the result equals zero. Eliminating this expense completely from your practice and immediately increasing your operating profit!

I realize this may be a difficult concept for some because not only does the doctor have to embrace the idea, so does the rest of the staff. Take your time by starting with a small case so the excitement for the idea can build and before you know it, you’ve created a routine. Clients I’ve worked with who have implemented this concept have not only become better at managing the business side of their practice, they’ll tell you that having the freedom to work with the lab of their choice, they enjoy dentistry more than ever.

Larry M. Guzzardo who has co-authored two books, “Powerful Practice” and “Getting Things Done” conducts in-office practice management consultations exclusively for dentists to enhance trust, create organization, increase profits, and to develop patient relationships that last. Larry has presented numerous workshops including, “Winning Patient Acceptance,” “Business Communication Systems,” and “The Leadership Challenge.” Larry can be reached at 800-782-5770, www.larrymguzzardo.com and by email at Larry@larrymguzzardo.com

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Embezzlement Strikes 3 out of 5 Dentists - & It Can Happen To Any Dentist

Posted by Four Quadrants Advisory on Thu, Dec 19, 2013

cashThis guest blog post was written by David Harris of Prosperident, an expert in fighting embezzlement and fraud in dentistry.

Published statistics suggest that three out of five dentists will be victims of embezzlement in their careers. Embezzlement knows no boundaries – it strikes general dentists and specialists, solo practitioners, group practices, dentists in small towns and those practicing in urban areas. It is carried out by long-time, trusted employees and carries high financial and emotional costs. I’d like to share some of the things I have learned in the course of investigating many dental embezzlement files.

How is embezzlement normally uncovered?

The answer to this question might surprise you. The American Dental Association recently published the results of an extensive study on embezzlement. Among other things, the study considered how victims uncovered the embezzlement taking place in their offices.

Here’s where it gets interesting — only 19% of discovery was prompted by the planned operation of the dentist’s system of controls (day-end balancing, review of software audit logs, fraud found by the dentist’s accountant etc.). The remaining 81% was discovered by some accidental occurrence (examples include another employee reporting the theft, patients identifying billing discrepancies or an employee working unexplained extra hours).

So what can be learned from this?

There has been a lot written by advisors who suggest that the way to prevent embezzlement is to implement more (and more) controls. I’m sure you have seen articles that give frustratingly long lists of things a dentist should check weekly and monthly. In addition to the large time commitment that accompanies this internal audit process, I have always questioned its effectiveness.

Embezzlers are driven by some powerful forces, and to expect them to be discouraged by some visible and easily circumvented controls seems like a delusional exercise.

Read our guide: Dental Accounting 101

With the ADA’s survey results reinforcing my view, I hope that dentists and their advisors begin to see the futility of attempting to manage fraud through internal controls and self-directed audit.

Please don’t misunderstand me — there are lots of controls that serve purposes other than fraud detection. For example, even though day-end reviews uncover less than 8% of all embezzlements, these reviews serve other useful purposes like catching clerical errors.

There is good news. Since I’ve just turned your understanding of embezzlement upside down, at this point you are probably looking for a solution. Fortunately I have one, and it is a lot less painful than you might think.

This silver lining is that, regardless of the methodology used to steal, embezzlers behave in very predictable ways. We have developed and constantly refined a “Fraud Risk Assessment Questionnaire” that is designed to help you capture and assess these behaviors. Completion will take less than five minutes and could save you a bundle. You can request the questionnaire by sending an email to fraudnews@prosperident.com. And what if you suspect fraud? This is where it gets a bit tricky. Many of the things that instinct tells you to do in this situation (call the police, confront the subject etc.) have the potential to make your situation far worse.

If you suspect fraud, the best advice I can give you is that stealth is paramount. If someone is stealing from you and senses that you are about to uncover their stealing, they will have a very strong desire to destroy the evidence. This might be as simple as wiping your computer’s hard drive and destroying all backup media, or it might take a more sinister form (there have even been cases of thieves burning down dental offices in an attempt to hide the evidence!)

Any steps taken by the thief in this direction will compound the damage they have already inflicted on you.

If you are in this situation, it is essential that you receive knowledgeable advice – and by this I mean someone with experience in dealing with dental embezzlement investigation.

While the list that follows is not a substitute for this kind of advice, it may prevent you from making some of the mistakes that others have made:

Stealth is paramount for several reasons – normally at this point, fraud is SUSPECTED but not CONFIRMED. It is not unheard of for a dentist to wrongly believe that he or she is a victim.

On the one hand, if there is no fraud, it is far better that staff members are unaware that the dentist had a “crisis in confidence” in them. However, if fraud is happening and the thief thinks that you are on to them; their normal inclination is to take steps to destroy evidence. For example, erasing data from your computer’s hard and destroying all backups. We were not involved but did observe a situation where an employee, sensing that the dentist was about to uncover her fraud, burned down the entire office to make reconstruction of her crimes almost impossible.

If a theft is taking place, the best outcome for the dentist will be achieved by preserving evidence, conducting a quiet (stealthy) investigation and confronting the thief only when fully prepared.

There are several things that must be done in order to preserve stealth:

  • The dentist must continue to act normally and avoid behaving unusually
  • Investigation must be done in a way that does not disclose the dentist’s suspicions. The easiest way to tip your hand is to have a couple of people who look like police officers or accountants) come into the practice and start poring over records or to start having a unusually large number of non-patient phone calls for the dentis
  • The dentist must be extremely guarded about discussing suspicions with colleagues, staff members etc. We were involved in a situation where a relative of the suspect worked at the vendor of the dental software used by the dentist, so great care had to be taken in communication with the software company.
  1. Obtain professional advice. Some dentists approach fraud investigation as a do-it-yourself project. Given that the dentist typically does not know what to look for (and often needs the assistance of staff to access computer information in any case), self-guided fraud investigation is likely to accomplish little other than tipping off the fraudster.
  2. Preserve evidence. Your computer’s hard drive contains a cornucopia of information that will be needed to confirm the fraud, quantify losses, prepare an insurance claim, proceed with prosecution etc. However this information is volatile and can be deliberately erased or overwritten
  3. Dental software vendors make continual improvements to their software. A common recommendation of vendors, if contacted with concerns about theft, is to upgrade your software to the latest version. This is probably not a good idea in most cases as doing this will undoubtedly be resisted by, and raise the suspicions of the thief.
  4. Do not place “bait” (e.g. put an extra $20 in the cash to see if it goes missing). This action is likely to provide a false sense of security. Employees who target their dentists often perpetrate sophisticated frauds involving tens or hundreds of thousands of dollars. If you were doing this and the dentist offered a (fairly transparent) chance to demonstrate your honesty by returning the $20, wouldn’t you give it back? This seems like a fantastic bargain.
  5. Do not change financial protocols. Looking to make changes without being able to explain the rationale will certainly be seen through by a thief.
  6. Do not report the incident to police (until you have sufficient evidence to confirm fraud). Making a police report before you have gathered all the evidence serves no purpose and may limit your options in dealing with a thief.
  7. Do not confront the suspect. There will be a time when this is appropriate – our success rate in obtaining confessions from thieves is 100%, but it requires careful preparations before the confrontation.
  8. Do not contact insurance companies. If a theft involves obtaining extra funds from insurance companies (e.g. upcoding of treatment), the insurance company may have recourse against the dentist for amounts misappropriated. Some insurance companies will provide agreement not to hold the dentist vicariously liable in situations where the dentist had no involvement in the theft, but this amnesty needs to be set up correctly, with an intermediary approaching the insurance company on behalf of an unnamed client.
  9. Whatever you do, don’t fire anyone until evidence has been gathered – the amount the employee may steal from you in the few weeks that it will take to complete an investigation pales in comparison to the cost of a wrongful termination lawsuit.

If you want to speak with me about a fraud matter, you can see my availability online and self-book an appointment using my online booking calendar at www.tungle.me/fraudguru. Or if you prefer, you can call and ask to speak with me or one of our experienced investigators at 888-398-2327.

We also have an email hotline that is checked daily (including evenings and weekends) by our on-call fraud investigator. This email address is fraud@prosperident.com

David Harris is the Chief Executive Officer of Prosperident, the world’s largest dental embezzlement investigation firm. His personal email is david@prosperident.com and he can be reached by phone at 888-398-2327.

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The Insurance-Free Dental Practice - Is it Fantasy or Reality?

Posted by Four Quadrants Advisory on Thu, Dec 19, 2013

qdpThis guest blog post was written by Dr. Dan Marut of Quality Dental Plan and Naomi Cooper of Minoa Marketing.

As a health care provider, it’s frustrating not to be able to help people because of perceived affordability issues. Most dental patients are effectively trained to understand their dental insurance based on the comprehensive/catastrophic medical insurance model, where there may be a small copay or deductible, but beyond that, everything within reason is “covered.” Many patients don’t realize that in contrast, dental insurance is neither comprehensive nor catastrophic, but rather a defined benefit program with high administrative costs and bureaucracy. And because dental insurance maximums are so low, having hardly changed in the past 20-30 years, insurance ends up effectively limiting treatment rather than facilitating it.

What you may not know is that your patients are confused by this not so subtle difference between medical and dental insurance. The medical insurance model has taught them to believe that if insurance doesn’t cover it, it must be unnecessary, discretionary, experimental or exploitative. And they’re secretly resentful that they’ve paid high dental insurance premiums and still have to fork out additional out of pocket costs; it just doesn’t seem fair compared to how their medical insurance works.

I created Quality Dental Plan to help patients get past that hurdle – and to allow them to feel as if they truly “belong” in your practice. QDP is a dental savings plan within your practice that incentivizes preventive care. It allows you to help patients say yes by giving them “benefits” that are available exclusively within your practice, regardless of whether they have insurance. Beyond that, patients have the freedom to choose a provider of your caliber rather than be forced to select from the insurance provider list, and QDP helps your patients know up front what their out of pocket costs for preventive dental care will be.

The most important thing to remember is that Quality Dental Plan isn’t dental insurance. Rather, patients pay a simple, set annual membership fee directly to their local dentist, bypassing the third party entirely. In return, they receive a preventive dental care package for the whole year at that dental practice. There’s also a further savings for additional family members, and patients also save on any treatments (restorative, cosmetic, implants), with no limit, and no deductible.

Meanwhile, QDP member dentists remain in control of their own practices, choosing their own QDP membership fees, setting their own fee schedules, and keeping 100 percent of what they collect, including their membership fee

Another exciting part of the program is the host of positive changes that tend to happen after a dental practice begins offering QDP to their patients. First, word of mouth referrals increase because of the excitement QDP creates among patients. Next, new patient value increases because case acceptance goes up. Recall intervals begin to tighten up and revenue increases. Collections increase because more services are paid for in advance to take advantage of member discounts. Predictable, recurring annual revenue is created so cash flow improves. Patient loyalty is fostered, and both referrals and long-term patient value increase dramatically as a sense of belonging and value are created in the practice.

At the end of the day, an in-office dental membership plan has huge benefits to a practice, but implementing one on your own takes a lot of time and focus – resources that are likely better spent on patient care and running the practice. It took me three years of experimenting, learning and refining to figure out how to make QDP run seamlessly. By working with us, dentists get to eliminate all that trial and error and leapfrog ahead to a tried-and-true system that is customized for their individual practices.

As a result, QDP member offices can skip the time, money and energy that I invested creating web sites, consulting legal counsel, crafting advertising and marketing materials, conducting market research, hiring copywriters, designers and public relations professionals, and soliciting feedback from patients. QDP is a turnkey solution that doctors can put into place right away, while they use their own time, energy and expertise to treat patients.

Another benefit of working with QDP is the extensive resources we provide. We make available a comprehensive implementation guide, including checklists with all the steps dentists need to get started, as well as live training and video tutorials. We help promote the membership plan to a dentist’s patient base with professionally designed marketing materials and advertising templates – all of which can be tailored to the practice. We even employ a full-time PR team to that can help practices get exposure in local media and attract more new patients, and offer geographic exclusivity so you know that you’re the only dentist in your area who can offer QDP in the practice. In short, QDP lets dentists easily implement a plan proven to increase revenue, loyalty and collections without taking time away from patient care.

Dr. Dan Marut, DMD founded Quality Dental Plan to connect dentists looking to make a difference in their communities with new patients while giving people without dental insurance a compelling reason to go to the dentist. He is also the founder of NewDocs.com, a sought-after lecturer and a published author. Dr. Marut is committed to giving back to his community and the world through his profession, and founded his practice and both of his companies with that vision in mind. For more information about QDP, visit www.QDPdentist.com. Dan can be reached via email at DanMarut@QualityDentalPlan.com or by phone at 888-960-1221.

Naomi Cooper is President of Minoa Marketing, a dental marketing and social media consultancy based in Los Angeles, CA and also serves as Chief Marketing Consultant for Pride Institute. Naomi has over fifteen years of marketing experience – and a decade-long track record of enabling dental practices and dental companies to achieve their marketing goals. Naomi is a published author, a sought-after speaker and an industry opinion leader. She can be reached via e-mail at naomi@minoamarketing.com. For more information, visit www.minoamarketing.com.

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