A successful practice requires a knowledgeable manager and a strategic business plan. In order to create strategic business plans that help dental practice thrive, managers need the proper information, and much of this information is derived from KPIs.
KPI stands for Key Performance Indicator. KPIs can indicate the performance of a number of areas of practice and are a vital tool in determining the health of your business. This is not only important as an indicator of its current status, but also when planning goals and determining the growth potential of your practice. Three major KPIs to focus on when planning new goals are as follows:
- Budgeted hours
- Generated income compared with overhead costs
In this article, we will discuss exactly how each of these KPIs can help you make the best decisions for the future of your practice.
Keep an Eye on Budgeted Hours to Ensure Monthly Goals are Met
Budgeted monthly hours and monthly revenue go hand in hand and should be one of the first KPIs to consider. In order to succeed in hitting its goal, each practice should base its monthly budget or goals on the number of days/ hours a provider is scheduled to work.
While this may seem straight forward, it is a factor that is often overlooked as things come up and schedules shift. Often times, a practice may not realize that they will not hit their monthly goal because a provider decided to work less than originally anticipated in a particular month.
Numbers may also change due to the way the calendar days and holidays fall. For example, some years may have four weekends in any given month while the next year may have five. A small change in numbers here and there may not seem like a big deal, but this can lead to a difference of thousands of dollars in overall revenue and can be the blind spot that many practices overlook when trying to figure out why their they did not reach their set goals.
Production / Visit vs. Production / Hour
Daily revenue can be analyzed by looking at the production rate per visit as well as the production rate per hour. The per visit rate is indicative of the revenue of each individual patient visit, while the per hour rate is a more commonly used way to gauge the overall income of the practice. Examining the KPI of both rates can help determine in what areas the practice could be doing better and is useful in making adjustments to meet growth goals.
While each practice may have different reasons for not meeting their revenue goals, some of the most common factors include the following:
- A reduction in the amount of hours a provider works
- Not meeting the necessary daily production
- Not meeting the needed number of daily visitors
- The types of procedures the practice performs
- Case acceptance
Although often overlooked, many of these factors are easily remedied once they are identified. For example, a provider having to take off work can be remedied by finding another to temporarily cover the shift or by rescheduling already set appointments. Chart audits and proper training are also ways to ensure that providers are keeping up with the necessary procedures and that everyone is on the same understanding concerning the operations of the practice.
Accurate Overhead Cost Tracking and Ongoing Comparison with Income Generated
A third major KPI to focus on when planning goals and growth for your practice concerns overhead costs compared to generated income. These are the numbers that stem from many of the aforementioned factors and are affected by any number of these each month. For this reason, it is important to pay close attention to these numbers and to keep accurate and current information of where your practice stands.
The following are some of the main overhead costs of a dental practice along with the average percentage of the practice’s income necessary to cover these expenses:
- Rent/Mortgage, 5-7%
- Laboratory, 8-12%
- Dental supplies, 5-7%
- Payroll/Staff salaries, 25-30%
A successful manager will understand the expected percentage of generated income that will have to go to pay these overhead costs. With this information in hand, it is possible to not only form a monthly budget, but also to set accurate and achievable revenue goals as well as successfully planning and achieving business growth.
A manager of any practice can only set goals and grow a business by understanding the current status of the business as well as why it is so. After all, a situation can only be handled once it is identified and understood. KPIs are useful tools for staying on top of your practice’s financial goals, but simply seeing numbers without any idea of how to assess them will not be much help for setting goals.
Data and statistics are only useful to us if they are properly understood. One method to doing so is through something known as the SMART criteria. This acronym stands for Specific, Measurable, Attainable, Relevant, and Time-bound, and is used to evaluate individual KPIs.
KPIs are merely indicators and are only successful if they meet all aspects of the SMART criteria. When this is not the case, the KPI is likely not beneficial to the goals of your practice and should be reworked.
At the end of the day, the objective of a KPI is to help businesses understand the status of their operation and to figure out how to improve it. Useful KPIs are key to helping your practice achieve its financial goals and find sustainable growth. No matter how your practice determines its unique KPIs, these three areas of focus are key to a successful business.