practice | MANAGEMENT
Revenue, profit and cashflow: What every practice owner needs to know - Part 1 By Dr Jesse Green
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reality of life for almost every dental practice owner is that beyond education and training received at university and even as a practising associate, there’s a need to very quickly upskill on all aspects of business management. Financials, human resources, marketing and productivity and that’s all after a long day of seeing patients. The challenge for most of us is we gain our business education “on the job”, learning as we go. Consequently, many practice owners make costly avoidable mistakes, often through a lack of experience and knowledge and failing to analyse information that is readily available to them in the financial statements of the business. In this first of a six-part series on how to work less and earn more, we’ll cover exactly what a dental practice owner must understand about three vitally important aspects of their business: Revenue, profit and cashflow. Importantly, we’ll also learn practical, actionable steps to optimise these in a dental business.
90 Australasian Dental Practice
Revenue (and how to accelerate it) regularly meet many dentists who equate business success with meeting revenue targets. Of course, there is merit in higher turnover, but I remind clients
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“I regularly meet many dentists who equate business success with meeting revenue targets. Of course, there is merit in higher turnover, but I remind clients that revenue is vanity, profit is sanity and cash flow is king...” that revenue is vanity, profit is sanity and cash flow is king. If our current business strategy is focused on accelerating revenue, then as far as possible, we want to do so without increasing overheads.
Increasing revenue means working the “levers” at our disposal and in my experience, there are just three that can be manoeuvred. The first of these is the number of patients seen at the practice. The more patients we see, the more revenue is generated. We can attract more patients to the practice via marketing, retention of existing patients and reactivation. Lever number two is to see the patients more frequently, a measure that’s achieved by ensuring your recall system is in place and that patients are returning for planned treatment. The third lever is to increase the size of transactions. This could involve examining your case presentation and diagnosing comprehensively. It could also involve a review of fee structures and ensuring correct use of item numbers or your auxiliary. In any discussion around levers, I use the analogy that small hinges swing big doors, so in terms of these three levers, we need to remember they compound each other. For example, making a 10 percent increase across all three levers will result in a 33 percent increase in revenue
March/April 2022
