Top 3 Critical Items Your Bookkeeper Should Be Reviewing
Analysing the health of your dental practice business is essential to growing in the long-term success. This can be done with the help of the right accounting system that offers proper functionality. Choosing a cloud-based system for analysing the performance of your dental practice is a wise decision as it can provide real-time information. With these systems, you can analyse your performance at any given time, which means you need not wait until the end of the month or quarter to see your progress. However, if you have not switched to a cloud-based system or have a bookkeeper who highlights the key metrics requiring your attention, you may find it difficult to review your progress. If this is the case, you can monitor three essential monthly metrics to see where you stand.
1. Productivity
To monitor your operational performance, it is best to track production per provider. Benchmark each provider’s monthly production against their annual budget and numbers. An appropriate system permits monthly management reports, including benchmarking, to ensure they are on track.
Thanks to this analysis, you can stay aligned to your budget and get insight into the correct underlying production issues. For example, during a monthly review, you identify that the production of Hygienist #2 has been decreasing over the past four months. This is a matter of concern as, at this speed, she will not be able to meet her annual target. To work on this, you will have to unite with your office manager and get on to the root cause of the issue. The faster you identify operational issues like these, the more money and time you can save in the future, thus getting you better results.
2. Cash
Cash flow is essential for the success of any business. If there are any concerns with your cash flow, it is best to look into the matter immediately, without any delay. A common mistake that most dental practice owners and new bookkeepers tend to make is not understanding that cash and profit are two different things. You cannot consider your monthly profit equivalent to the amount of cash you have in hand.
Profit can be calculated by finding the revenue and expense difference. At the same time, cash flow includes things like personal loan payments. If you do not understand the difference between the two concepts, you will likely spend more money than you earn.
You will have a monthly cash flow review with your bookkeeper. In this review session, ensure to discuss the following topics:
- How much cash do I have to meet my commitments?
- How collection time impacts cash flow?
- What are your options for excess cash than obligations?
3. Profitability
- Ensure your financial reports are compiled accurately to make the analysis of these metrics useful. Always choose an experienced accountant or bookkeeper who has sufficient knowledge about working with dental practices.
- Request your accountant/bookkeeper to review all three metrics – production, cash flow, and profitability every month. Reviewing these metrics correctly will help you reach your financial goals.
Few things to remember:
- Ensure your financial reports are compiled accurately to make the analysis of these metrics useful. Always choose an experienced accountant or bookkeeper who has sufficient knowledge about working with dental practices.
- Request your accountant/bookkeeper to review all three metrics – production, cash flow, and profitability every month. Reviewing these metrics correctly will help you reach your financial goals.
