Prof. Dr Anka Letic, DDS., PhD
Historically, there were times when the dentist just handled the “procedures” for the patient. In our increasingly complex society, the business aspects of dentistry have become more important for even the “survival” of certain dental practice styles.
In other words, the dental practice must be managed as a business in order to even have the ability to provide dental services to your community. By taking the time to outline what you wish to accomplish with a savings and investment strategy, you give yourself a road map to financial success (Tab.1,2). Ration between Production, meaning giving dental therapy, and Collection, meaning getting paid, should be 98%. Write everything down and calculate very day (every month) how much you “produce” and how much you “collect”. Don’t rely solely on your memory for this exercise. It is far better to take the time to establish a written record of your earnings and decision-making. Like everything else in life, your objectives will change over time. Simply be prepared to make revisions as your income increases, your family expands, you change jobs, and so on. In other word, be flexible. One of the most fascinating studies of rational and irrational behavior takes place in the financial industry named Behavioral Economics. It is easy to assume that financial and investment decisions are based upon carefully calculated formulas, trends, and other evidence. But, according to the many research findings presented through behavioral economic studies, we tend to make highly emotional decisions regarding our money and as a result often make very unwise decisions. Emotionally, we can’t let go of a stock that once performed well for us. And most of us have a high degree of risk aversion as our fear of loss overrules our anticipation for reward. Researchers studying behavioral economics categorize investors into four key personality types: secure, dismissive, preoccupied and fearful. Each of these personality types has a different set of emotions and levels of self-worth that influence their decisions and thus various levels of advisability. Investors understand these personality issues and how they influence decisions. Psychologists tell us that the best investors are psychopaths - people with a real clinical disorder that diminishes emotional responses and enables them to behave in ways that people with normal levels of emotions consider ruthless, cruel and insensitive.
Goals Direct the Process
Financial planning can be done on your own or you can work with a qualified advisor. Either way, you should follow a process that puts the emphasis on your goals, needs, and unique situation, not on cookie-cutter solutions or specific products (Tab. 1).Your goals can be long term, such as buying a dental practice and paying off the loan, or short term, such as saving for a vacation. Either way, write them down. “I’m a big believer in putting goals on paper”. Always consider the three variables that follows: fixed costs up to 36%, variable costs up to 24% and the most important profit, not less than 40%. Furtheron, level of training, scope of services, degree of supervision, and dental therapist wages determine changes in dental care costs. These interdependent dimensions are related to the productivity and efficiency of dental clinics employing dental therapists. In general, there is a positive relationship between the level of training (formal education or on-the-job), years of experience, and earnings. General dentists are trained for more years than dental therapists; dental hygienists are trained for more years than dental assistants; and it is assumed that dental therapists are trained for more years than dental hygienists. As a result, the wage rate of a dentist is expected to exceed that of a dental therapist and so on. Step two you should evaluate the situation. This involves some data gathering and analysis. One way to organize your financial information is with a balance sheet. List everything you owe (your liabilities) and everything you own (your assets). Subtract the total dollar amount of your liabilities from the total money amount of your assets, your monthly income and your monthly expenses; include both fixed expenses like rent or a mortgage and discretionary expenses like entertainment. Inventory other financial information, too, including your insurance policies and estate planning documents.
With a realistic picture of your financial life, you’re ready for Step three: Develop a plan. Let’s assume that one of your goals is to better manage your income. Your plan might include different income resources such as Public programs, Private pay Patients and Commercial Insurances. Patient care revenue, while generally paid on a fee-for-service basis, also may be paid on a fee-per-visit or fee-per-covered member (e.g., capitation) basis. Regardless of how the payment is made, the major sources of patient care revenue for safety net dental clinics tend to come from the public or insurance sources.
Step four. Put the plan into action.There’s not much point in having a plan if it’s not implemented. Here’s where deadlines and specifics can be extremely helpful. Step 5: Monitor the plan and make necessary adjustments. If you do not periodically reevaluate where you are, you are less likely to get where you want to be. Take time to sit down, review your progress (or lack thereof) toward your goals. Keep a written record of those efforts, and work on refining your goal-setting technique. If you take two individuals who have specific financial objectives, the person who monitors their progress is more likely to be successful and reach their goals. In some ways, this is the most important step in the entire process, because things always change.