There’s a saying in business, “You can go broke making a profit.” And another, “Cash is king. Profit is theory.
As you know only too well, you don’t pay rent, meet payroll or pay your bills with profit.
You pay them with cash.
A dental practice can bring in healthy revenues, have high case acceptance rates, have a great reputation, be growing, and yet still go broke.
Why? Cash flow.
The practice might be profitable on paper, but have no money left in the bank. They become insolvent.
A growing dental practice is often hungry for cash … hungry for inputs so it can make the business’ outputs (i.e., patient services).
The tragedy in this is that cash flow crises can often be averted. They can be predicted, planned for, and then contingency measures put in place.
For example, if a practice knows it has some jumps in expenses or fixed costs approaching, such as moving to a larger office, adding equipment, or hiring more staff to cope with growth, then these expenses can be planned for and compared with the planned revenue in those months.
Which would you prefer to do?
(A) Call your bank manager and ask for a short-term loan or increase in overdraft when you are urgently in need of the cash (and therefore stressed, and desperate, and not in a great frame of mind to negotiate good terms), or
(B) Call your bank manager 6 months in advance and meet with him or her to explain the coming cash crunch, the reasons behind it, and plan for the funding in a calm, relaxed, totally-in-control manner?
Not only would you get the loan, but you’d also impress the bank manager and strengthen the relationship for further funding, should it be needed to support your practice’s growth.
The bank manager would see you are a seasoned practice owner with a planned approach to your business, not a fly-by-the-seat-of-your-pants owner. (They see a lot of those. They don’t like doing business with them.)
Apart from the relationship with your bank, there’s the immediate effect of sleeping better at night.
We all seek a level of certainty to comfort us. Knowing what lies ahead in business and planning your cash flow gives you a peace of mind and confidence in your day-to-day work that will rub off on those around you…
…in your workplace and at home. It’s a good feeling.
This is one of the reasons we are so passionate about helping our dental clients create cash flow forecasts, to help them keep their practice on track and to avoid any stressful, unpleasant surprises in the coming months.
It doesn’t matter whether you’re a single location with a small staff, or a practice with multiple locations and 20 or 200+ employees.
Every dental practice needs a cash flow forecast.
Running your practice without a cash flow forecast is like driving a car at night along a dark country road with only your normal headlights on. It’s hard to see what lies ahead. Some wildlife might come right out in front of you, leaving no time for you to react. CRASH!
On the other hand, a cash flow forecast is like driving along that country road with your high beams on. You can see so much more. You can drive with much more confidence. Less stress. And avoid the CRASH!
Another thing we often find in helping our clients build realistic cash flow forecasts is that we can spot problems and make suggestions that help improve the practice’s cash cycle. This puts money in your bank account.
In fact, here are 5 things you could consider right now to increase your practice’s cash flow:
- Implement Efficient Billing and Collections: Streamline your billing process and ensure prompt follow-up on outstanding payments. Consider offering multiple payment options to make it convenient for patients to settle their bills.
- Dial In Your Appointment Scheduling: Maximize the use of available chair time by efficiently scheduling appointments. Minimize gaps and cancellations to ensure a steady flow of patients throughout the day.
- Offer Incentives for Upfront Payments: Encourage patients to pay in advance or in full by providing discounts or special offers for those who settle their bills before treatment.
- Negotiate Supplier Contracts: Negotiate with dental suppliers to secure better deals and discounts on essential dental materials and supplies, reducing overhead costs.
- Invest in Dental Technology and Equipment: While there may be upfront costs, modern dental technology and equipment can lead to more efficient and higher-quality treatments, potentially attracting more patients and increasing revenue in the long term.
So, if a cash flow forecast is so crucial, why do many practices not have one?
Simple. Practice owners get busy. Busy serving patients. Busy dealing with staff. Busy dealing with the day-to-day.
Also, it’s easy to get ‘too close’ to your own practice. “You can’t see the forest for the trees,” as the saying goes.
Having an independent and fresh pair of eyes look at your business—especially cash flow (which is its life blood!) allows opportunities for improvements to be identified. Things that are there, but often difficult for the practice owner to see amidst the ‘busy-ness’ of it all.
So, what should do about it? Call us. Take action. A cash flow forecast costs less than you think.
It’s time to turn those high beams on!
As a Greater Houston-based team focused exclusively on the needs of dental practices, we’re uniquely positioned to help you grow your practice while increasing profitability! We’d love to have an initial conversion to see how we may be able to support your practice. To learn more, visit us at https://stacbiz.com or call us at 844-424-9637.
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7 Key Financial Practices That Separate Thriving, Growing Practices From The Rest.
There’s no denying it. Creating a thriving practice is about much more than practicing medicine!
Topping the list of “other” priorities is your practice’s financial management. In this short guide, the experts at STAC Bizness Solutions outline 7 financial best practices that differentiate struggling practices from those which are highly profitable and experiencing healthy levels of growth.