Managing the financial aspects of a dental practice is essential for long-term success and profitability. Dentists need to monitor and assess various financial reports regularly to gain insights into their practice's financial health, identify areas of improvement, and make informed business decisions. By analyzing key financial metrics, you can ensure profitability and take proactive measures to optimize your practice's financial performance.
In this article, we will discuss the essential practice management reports as well as the important financial reports that dentists should review to assure profitability. Create a binder, and make a decision on the reports you will start reviewing. Do not let this list overwhelm you. If you aren't reviewing any reports, start with the End-of-Day report and your Profit and Loss. Each month, add another report and review it with your office manager/administrator.
Embezzlement happens when you are not paying attention and don't know your numbers. Just as devastating is poorly trained employees who don't know what to monitor.
End-of-Day Report: This report should be processed at the end of each day after deposit reports are run. The dentist, practice owner, or office manager should review this report for accuracy. The report must match the deposit report.
Daily Deposit Report: This report should be run at the end of each day and compared to the end-of-day report for accuracy.
End-of-month Report: This report should be run after you close out the last workday of the month. It is important to close the month and run the report before the start of the first day of the new month.
End-of-Year Report: This report should be run after the last workday of the year and the month is closed. It should include a full A/R report, production by provider and procedure report, delinquent accounts report, an adjustment by category report, and the production/collections report.
Recall Report: This report should contain information on patients who are not on the schedule and have not been seen for re-care in seven months or more. The recall report should be run monthly and worked daily unless your hygiene department is booked solid.
Outstanding Insurance or Insurance Tracking Report: provides a record of unpaid insurance claims, dates of services, and the dates the claims were filed. Use this report to determine claims in need of follow-up. The report should be run bi-weekly and worked daily.
Adjustment Report: This report should be run with the end of month report. It will produce a record of write-offs, adjustments, debits and credits by type. It should disclose courtesies, and discounts as well.
New Patient Report: The new patient report should be run monthly. Track new patients to see how they found you, and whether your marketing is working.
Patient Analysis Report: The patient analysis report will show the number of patients you have on record, the number of active patients, how many patients are scheduled for-recare, how many patients are past due for re-care, the gender and age breakdown of your patient base, what percentage of your patients have insurance, and the top 10 zip codes for your patient base. This report should be run and reviewed quarterly.
Production by Provider and Procedure Report: This report breaks down production by procedures and by individual provider. In reviewing it, you will see what procedures are provided most often and what procedures are lacking. It is a huge resource for your practice.
Treatment Plan Report: This report will show you treatment plans that have fallen through the cracks. It is a great resource for filling gaps in your schedule.
Delinquent Accounts Report: Reveals accounts with an outstanding balance when payments were last made and by whom. This report should run bi-weekly and be worked daily.
Accounts Receivable Report: Your A/R report should be reviewed monthly. You need to closely monitor any account that is over 60 days past due. Make sure your financial coordinator is actively working with the patient to clear the outstanding balance.
Income Statement: The income statement, also known as the profit and loss statement, provides a comprehensive overview of a dental practice's revenues, expenses, and net profit during a specific period. Dentists should analyze this report to assess their practice's overall financial performance. Key elements to review include total revenues, expenses (such as staff salaries, rent, supplies, and utilities), gross profit margin, operating profit margin, and net profit margin. Identifying any significant variations or trends will help dentists evaluate the effectiveness of their revenue generation and expense management strategies.
Accounts Receivable Aging Report: Monitoring accounts receivable (AR) is crucial for maintaining healthy cash flow. The AR aging report categorizes outstanding patient balances by the length of time they have been unpaid. Dentists should review this report to identify any overdue accounts and determine the average collection period. By analyzing this data, dentists can spot potential issues with billing, payment processes, or patient communication, and take appropriate measures to reduce outstanding balances and improve cash flow.
Cash Flow Statement: A cash flow statement provides a detailed record of cash inflows and outflows within a given period. It highlights the sources and uses of cash, allowing dentists to evaluate the liquidity and solvency of their practice. Dentists should pay attention to net cash flow from operating activities, as it indicates the practice's ability to generate sufficient cash to cover daily operations. Analyzing the cash flow statement helps dentists identify areas where cash inflows can be maximized and expenses controlled to maintain a positive cash flow position.
Production and Collection Report: This report provides a breakdown of the dental procedures performed and the corresponding collections. Dentists should review this report to assess the productivity and profitability of different services offered. By comparing the production figures with the collections, dentists can identify any discrepancies and take necessary actions such as improving billing and collection processes or revising fee schedules to optimize revenue generation.
Expense Analysis Report: Tracking and analyzing expenses are crucial for identifying cost-saving opportunities and optimizing profitability. Dentists should review an expense analysis report that categorizes expenses by type (e.g., supplies, rent, payroll, marketing) and compares them to previous periods or industry benchmarks. This analysis helps dentists identify areas where expenses may be excessive or not in line with revenue generation. By optimizing expenses without compromising the quality of care, dentists can increase profitability.
Key Performance Indicators (KPIs): Dentists should establish specific KPIs to measure the financial performance of their practice. KPIs can include metrics such as average revenue per patient, patient retention rate, case acceptance rate, overhead ratio, and return on investment for marketing efforts. By regularly monitoring these KPIs, dentists can identify trends, compare performance to industry standards, and make data-driven decisions to improve profitability.
Regularly reviewing essential financial statements is crucial for entrepreneurs to gain a comprehensive understanding of their company's financial health. By analyzing income statements, balance sheets, cash flow statements, conducting budget variance analysis, and tracking industry-specific KPIs, entrepreneurs can make informed decisions, identify potential issues, and take proactive steps to ensure long-term success. Consistent monitoring of these financial indicators enables entrepreneurs to adapt their strategies, allocate resources effectively, and maintain a financially stable and thriving business.
Ready to take your dental practice to the next level? Sign up for a free demo today and see how our solutions can help you achieve excellence!