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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Topics: dental advisor, dental technology, dental software, Financial Planning, dental computing

How to Adapt to Changing Trends in Dental Practice Accounting

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

closedSometimes it’s hard to believe that well-known, American brands are no longer here – or on the way out. Companies and products that include Blackberry, American Airlines (stay tuned), Talbots, and Woolworths are just a few examples. Jon Baron, president of the highly respected tax and accounting giant Thompson Reuters, says “the trouble stems from a reluctance to migrate away from a business model that worked well in the past, or from a desire to protect customers from the confusion that a change might cause.”

People don’t adapt to change well. Unfortunately, in this digital age, change is constant, and keeping up with the advantages of technology can be a challenge and a blessing. For example, Jon Baron’s company developed a secure and safe way to put Quickbooks on a “clouded” server so a CPA and client can work and share in real time. Here at Four Quadrants Advisory, we take advantage of that innovation for our dental accounting.

The benefit to the dentist is seeing errors or dental practice accounting trends quickly and clearly. Dental offices, like big business, must always evolve and embrace technology as they go. Companies like Curve Dental that are putting dental software on the cloud, and Ads Next, advancing dental websites and healthcare marketing, are just two examples. As Baron says:

I know change can be a difficult thing, whether it's a new tax law, the transition to the cloud, or just a new user interface. But one thing I like about the software business for our profession is that change rarely happens for its own sake. Major changes stem from real innovation, and from new ideas about how to be more productive, more flexible, and more efficient. And in this business, those new ideas can go from concept to implementation very quickly.
All that change can be unnerving to some. But it also gives us a unique opportunity to see and shape the future, to make every day more productive, more efficient, and more profitable than the last. And if that's not a good reason to get up and come to work every morning, I don't know what is.

In this age of the Internet and the global economy, understanding how technology can help a business while still protecting individuals’ privacy is paramount. Thompson Reuters leads the industry with secure, HIPPA compliant “clouding” technology that enables advisors and dentists to share, communicate, and plan for change – in real time.  They will continue to evolve and take on new technologies with the risk that it doesn’t always work out perfectly.

Whether you are contemplating CAD/CAM, digital technologies, cloud computing, or the vast universe of complex internet marketing, push your business to the edge – not over the cliff – and don’t be afraid to evolve and change. Your legacy depends on it.

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Topics: dental financial planning, dental software, dental accounting, Financial Planning

The Future of Dental Accounting is in the Cloud

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

cloudHave you heard of cloud computing? Have you checked your credit card or bank account balance online? Do you have an iPhone? Do you use iTunes, Gmail, Facebook, or Netflix? Have you used Dropbox or some other file sharing company to move and store important information? Maybe you’ve read articles in the latest dental journals about cutting-edge dental software like our friends at Curve Dental. If so, you are a veteran cloud user and may not even know it.

Clouding QuickBooks is the future of dental accounting. Do you get frustrated by sending a backup copy of QuickBooks to your accountant, only to receive untimely feedback two or three months later? We call that “driving while looking in the rear-view mirror.” That archaic process doesn’t allow you to have real-time financial data on your dental practice and it prevents you from making positive changes quickly enough. Constant tweaks are essential to becoming more profitable without producing more. That is exactly why clouding QuickBooks is so important. It enables you and your accountant to work in your QuickBooks file at the same time, obtaining real-time data and making real-time changes in your dental business.

Analyzing deep swings in variable expense, like lab fees, is another good reason for clouding. With the dentist and their CPA/advisor accessing the bookkeeping in real time by logging into through the cloud, you can achieve fast and accurate reconciliation of profit/loss and balance sheets. Because you also scan all your lab invoices to the clouded server, your advisors can look at the invoice level and help determine the reason for increases and offer some analysis to consider, rather than having to settle for speculation. Technology allows for fast reconciliation which leads to more accurate and timely advisement on how to improve the business.

Another great reason for clouding is accounting security. Did you know that three out of five dentists experience some type of fraud in their practice? Removing check writing capabilities from your office server is one way to prevent unauthorized use of your practice funds. Years ago, I discovered that an office manager was maintaining two sets of QuickBooks files on the office server. One file was there to print fraudulent checks while the other was to record fake payments. This fraud risk is removed when the check writing authority is removed from the practice and put in the cloud.

Only authorized users are allowed access to the ultra-secure cloud partner, Right Networks, a Thompson Reuters product. Furthermore, we can limit their access to QuickBooks functions with the available security features. For example, you can customize it so an office manager can only enter bills when they are due. This allows you to match statements and invoices to bills entered and pay them directly from QuickBooks – very efficiently. Or you might want to manage the bills yourself. Either way, we can set appropriate security levels.

The future is cloudy, but we think cloudy is bright. Are you ready?

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Topics: dental software, dental accounting, Financial Planning, dental computing

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