Working smarter, not working harder
In a nutshell...
CV: Take us back three years to when you were working with your old accounting software…
VP: My Practice Manager was very proficient with the software and producing all the data. On a monthly basis, she produced a report of the income for the month, what the expenses were and broke this down into cost averages for our main expenses: employed staff, associates, labs and materials.
I am more of a manager than a clinician. I am interested in crunching numbers and see data as key to improving performance. I do little clinical work. I thought at the time that this level of data was good but the data would isolate the month’s results, so we didn’t have a picture of how it compared to the same time last year, or with previous months or quarters. We didn’t have any year to date figures. Nor could we see the profit and loss figures on a rolling basis.
CV: What happened when it came to putting your annual accounts together?
VP: There was no reconciliation with our bank account. There were gaps in this area and it meant that Ben or Matthew from Clear Vision had to fill these gaps.
So there was a lot of toing and froing between them and my team to extract the information needed for accounts reconciliation.
We therefore had our annual accounts three or four months after the year end, which meant they weren’t much use to us in terms of taking timely decisions for the business.
CV: How did this extra work impact on your team?
VP: At the end of the year, Ben would have to ask us what particular invoices were for, so it meant my Practice Manager had to spend time going back into our statements to get the information. And then collating this information to send to Ben. It very much took away from other work she could have been doing which was frustrating.
CV: What did you do to change this frustrating, time consuming situation?
VP: I had a discussion with Ben and Matthew on how we could create a more efficient process.
That’s when we came up with the idea of a custom reporting package where my team would enter all the data.
Ben then created a fantastic master spreadsheet to serve our needs.
It took between six and 12 months to hone the spreadsheet data to exactly how we wanted it. My team were now inputting our petty cash, credit cards, NHS schedules data and all the income and expenses on a monthly basis.
It proved a quicker and more efficient process. Ben could now produce information on our expenses, with a comparison to the previous month and year before, plus calculate our profits on a monthly and year to date basis, by the middle of the following month.
What was also really helpful to me was we also had an approximate EBITDA, (earnings before interest, tax, depreciation and amortisation) figure. This is an adjusted profit figure and it is very useful to any practice owner like me who can see their exit from the business on the horizon, as dental practices are valued on a percentage of EBITDA. Improve this figure and the value of your practice increases.
CV: How did this extra level of visibility start to benefit your business?
VP: I always look to manage my costs well.
At one point, as a result of having this new level of data, I could see that our material bills had risen to around 6.5% of turnover, whereas they are usually 5% or 5.5% of turnover. My Practice Manager audited the materials ordered per surgery vs. income. She could then see that one surgery was ordering more materials but generating a lower level of income. So materials were being stockpiled. We had a word with the dentist working in that surgery about controlling costs and after a couple of months our material bill had reduced to the usual amount again.
We also benchmark a number of our results against national averages. Last year we saw that our staff costs vs. our turnover was below average. So we decided to give our staff pay rises and Christmas bonuses to thank them for their above average performance.
CV: What effect did doing this have on your team and your business?
VP: The bonuses were given to the salaried staff as well as the higher performing associates.
This makes the team feel valued and because they are happier, they now work together better. They contribute more to monthly meetings. They are sick less often. They socialise more.
And this happy environment has in turn had a positive effect on our patients. The ‘friends and family’ test we are obliged to submit to the NHS every month reflects this. This patient feedback is improved. Our patients are happier.
So there is a direct connection between the business decisions we are able to make as a result of having more financial clarity and our patient happiness.
CV: How has the process of completing your custom finance package developed?
We wanted to do more of the inputting ourselves. Ben customised the spreadsheet for us so we can do all of it and eventually he was just checking what we had done.
So we create a full profit and loss account for the month and this probably takes us an hour or hour and a half to do. A complete financial picture in less than two hours per month, including EBITDA.
CV: How do the outcomes of this work compare to using your previous accountancy package?
We save time. We save costs. We have a more efficient system and the data is more accurate.
CV: What is your annual accounts process like now?
VP: We are now down to producing our annual accounts within six weeks of our year end. So it’s twice as fast as it used to be. There’s no digging out previous invoices, as these are recorded and copies taken as we go along. It’s all ready to send to Ben at the end of the year.
The data we collect as we go along has also meant that Ben can now produce a fantastic annual accounts analysis.
I genuinely feel if all dental business owners could see and understand this level of data, they would have every chance to make their businesses more efficient and more profitable.
For example, from the figures we provide to Ben on the private and NHS income each of our clinicians are generating, along with the number of clinical days they work, he is able to produce a detailed, comprehensive analysis of their performance.
He provides a colour coded report about each associate, so we can see which performers are performing well and which are performing not so well.
Previously, one of our performers was not hitting the daily private income target we have set. We had a meeting with this associate to discuss their training and equipment needs. We gave them the help they needed and reviewed their results in three months. Their private income rose as a result.
Over the three years this measurement and analysis process has helped moved our NHS to private income ratio from 90/10 to 70/30 and some months it is 60/40, 60% NHS and 40% private.
CV: How do your associates feel about having this level of visibility and accountability for their performance?
VP: Initially they didn’t appreciate why we needed it but I explained then income we require to break even and make a profit to them in mathematical terms.
So they can now see why targets for the completion of UDAs, private income and hygiene referrals are required and what happens if they don’t reach these targets.
What happens now organically, is that the higher performing dentists share their advice and findings on best practice with the other associates at our clinical meetings. So they are working as a clinical team and a level of healthy competition exists between them.
CV: What do you think your business would have missed out on without this additional financial clarity?
VP: We would have missed out on having good, accurate ‘live’ data, which is only a month old and helps us to control costs and monitor income, profit and the performance of the associates who literally do the work and generate the income.
When a practice is busy most dentists assume they are earning money but they’re not necessarily analysing performance.
CV: How do you see this increased financial clarity continuing to help you develop your business and achieve your goals?
VP: By analysing the performance of our associates, we can continue to help them upskill and provide them with support and training.
We have regular clinical meetings to discuss referrals between them according to their individual skills, which improves the patient experience as they don’t have to be referred out to join an external specialist’s waiting list. This reflects on our private income, the patient gets treatment sooner in house and ultimately, the value of the goodwill of the practice is maximised.
What is best for the patient is always number one and we feel carrying out treatment more quickly and in house, often at a lower cost than seeing an external specialist, serves them best.
So it’s clear that the level of financial clarity and analysis we now have will continue to directly enhance our patient experience.
CV: What is the biggest difference these improvements have made to your business?
VP: Firstly, there is a notable increase in profitability and income.
Secondly it gives us confidence that our business is performing well and that confidence counts for a lot. You know that you haven’t got an average business, you’ve got a dental business that’s doing better than that. Not just on the NHS side but also privately where this is in the best interest of the patient.
CV: What is the biggest difference these improvements have made to you personally?
VP: There’s less stress for me. I’m not worrying whether there is enough money coming in, whether I can pay my associates, whether I can pay my suppliers…
We have none of these problems. The business hasn’t gone overdrawn in the last four or five years because the income is coming in.
We monitor our figures and our cashflow. It’s really easy, efficient and accurate and provides me with great peace of mind as the business owner.
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