Our customized Excel-based strategic model for dental practices offers five important functionality features
During challenging economic times, business owners need every
advantage they can get. In addition to advice from consultants,
most dentists receive a four-page monthly financial statement
from their accountants, a cover letter, and a trial-balance statement
of their income and balance sheet accounts. These normally reflect
the current month and YTD results. That's it! This is the financial
information most dentists use to make routine and strategic practice
decisions - and it's not enough for sound practice management.
1 - A fast method to review monthly practice
results.
It’s a unique method for reviewing practice financials and employee productivity and assisting with routine practice decisions. It creates 16 graphical and summary reports that provide your financial and productivity results in clear, understandable graphical reports.
Six of these reports allow you to quickly review your historical results in different formats. Keep in mind, every time you close your books each month, that data becomes part of your history. All of these reports were designed for quick scanning using the scroll bar. In five of these reports, the conventional income statement is separated into four major activity-based categories. This enables you to quickly understand the financial drivers that affect the profitability of the practice and spot unusual items that may require further investigation.
Reviewing these six historical income statement reports each month is a unique and fast method to assess your monthly results and get a real handle on the financial side of your practice. You should review your monthly financials on a regular basis. It’s easy! Once you’re familiar with this practice tool, it will only take a few minutes each month to review and understand your practice financial status. It’s fun and intuitive and a great way to learn more about using Microsoft Excel.
One of these six reports, Trend Analysis, helps you put your current-year financial results in perspective by comparing them to your three prior years of financial results. One key metric: the percentage of (revenue/collections) for each activity-based expense category. That helps you understand how current financial results compare to your recent history. This software segment includes simple instructions to pull your prior year’s financial data from your 1120-S Corporation Income Tax statement.
2 - An Excel-based model designed for dentistry to assist with strategic practice decisions.
Three of the 16 graphical and summary reports
in the model were designed to simplify strategic decisions.
Planning - Perform "what-if"
analyses for current employees and fully understand the financial
impact of new employees. You can model various productivity outputs
for your existing employees and “what-if” employees
that you add in the Manpower module. The productivity scenarios
you create do not change the current run-rate projections - only
the projected future forecast.
The Forecasting segment enables you
to compare historical financial data against your current run-rate
and a projected financial forecast. These detailed statistics
help you make crucial practice decisions and get a clearer view
of the future. You can also generate “what-if” analyses
that simulate various planning strategies by simply changing any
variable (e.g. patients per day, billing rates, practice expenses,
etc.). The Forecasting module displays income-statement results
for seven practice scenarios. Each scenario is presented in an
activity-based format for easy identification of major trends.
Manpower Input collects salary information
for employees and lets you perform "what-if" analyses
for labor planning. This enables you to fully understand the financial
impact of adding new employees. You can add new employees or add
“what-if” employees for practice planning. The “what-if”
employees do not change the current run-rate projection or historical
data - only the projected future forecast. This helps you understand
the potential financial impact of new production or administrative
employees - before they are hired.
3 – Measure and understand productivity.
Productivity Graphics – Dentist and hygienist productivity appears clearly in graphical form and helps hygienists, associate dentists, and the practice owner set and measure reasonable productivity objectives. These reports can also be used for performance reviews or other communications with professionals. The graphics also give a new practice owner, who may have little prior management experience, a tool to discuss productivity with employees.
4 – Creates a Fair Market Value appraisal of your dental practice.
One of the five primary features in the model is to determine the fair market value of a dental practice. It’s not unusual for third-party appraisals – which come in big, impressive black books - to cost as much as $20,000. To pad their deliverable, consultants often feel it is necessary to write out the mathematical formulas for calculating present value and many other calculations used in the appraisal. In my opinion, most of the information is nothing but page-filling boilerplate and simply a reason to charge $20,000 for the appraisal.
The Dental Practice Financial Calculator is a solid starting point for a fair market value appraisal of a dental practice. Both the financial rates and financial criteria that I selected for the FMV calculation in my model can be replaced with different rates or criteria, as selected by the dentist or his/her financial advisor. Using the Dental Practice Financial Calculator as a starting point would save time and money and force consultants to think twice before charging $20,000 appraisal fees.
The Fair Market Value Appraisal is divided into three tabs for easy viewing and printing. This valuable document estimates a dollar value for the business and can also be used as a financial document for a potential buyer to secure financing to purchase a practice. When viewed or printed, the information in these three tabs helps simplify various business transactions or legal issues, such as assigning a value for a practice for pending partnerships or other practice buy-in agreements. This document could be used in wills, estate plans, divorce settlements, or other disputes. Our team devoted many hours reviewing the financial documentation that judges use when deciding how to value small businesses.
5 - Creates a calculator to assist in partnerships.
This tool presents users with a choice of three easy-to-understand logical formulas for compensation and profit distribution. In other words, this is where partners go to understand and agree upon compensation and profit distribution. These methods simultaneously encourage individual productivity.