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5 Tips for Managing Your Dental Practice Finances

As a dentist, you understand the importance of managing your finances - especially when it comes to billing, payment collections, and other financial matters. But managing your practice finances is not an easy task, especially when faced with new regulations and technology changes that can be downright confusing. In today’s environment, it has become increasingly difficult for dental practices to ensure they receive accurate payments for their services and protect themselves against rising insurance costs and bad debt expenses. Here are five suggestions that will help you manage your practice finances.

Track Every Dollar

If you don’t know how much money is coming in and going out of your dental practice, it’s difficult to know what’s working financially—and what isn’t. In other words, you can’t manage what you don’t measure.

A money tracking system (or budget) helps you better understand your practice finances, so you can make adjustments as needed.

Here are some tips for getting started:

Know exactly what your expenses are and when they will occur.
Make a list of all income sources that contribute to the practice and when they should be received.
Assign amounts to each expense and income source to track actual vs. projected spending and revenue.

You may want to hire a bookkeeper or accountant to help with this task if it isn’t your area of expertise. You can also use an online personal finance tool, like mint.com, to track your expenses and log your bills online to stay organized and on top of your finances.

Get Out of Debt as Soon as Possible

Small business loans for dentists are usually great as they can help you grow your business. However, that does not mean you should take one after the other, as that can turn into a vicious cycle. If you’re in debt, it can feel like the weight of the world is on your shoulders, and that pressure can make it hard to think clearly. You can’t focus on what really matters to you because you’re just trying to keep your head above water.

If you get out of debt, you’ll free up a lot of mental space for other things. You’ll have fewer bills to pay and less anxiety about meeting them. And with each bill you cross off the list, your stress level will drop, making it easier to see solutions to other problems in your life.

You can take control of your finances by getting out of debt as soon as possible and staying out of debt. It is possible to get out of debt and stay out of debt. You just need to follow these steps:

Make a budget and stick to it.
Pay more than the minimum payment on your credit card bills each month (if you have them).
Use cash or debit for purchases instead of credit cards.
Save for retirement and emergencies.
Find ways to earn extra money (a second job, side business, etc.

Have a Rainy Day Fund

Dentistry is a notoriously cyclical business. When you have a dental practice, your income can fluctuate wildly. New dentists often struggle with managing their finances during these times. One of the most important steps they can take to better manage their cash flow is to set aside money in a rainy day fund.

Here are some good reasons why you should have a rainy day fund for your dental practice:

You need money to pay the bills if you don’t have enough patients in your dental chair.
If you do not have enough cash on hand, it can be difficult to keep the practice afloat.
Having a rainy day fund will make it easier for you to cover unexpected expenses like a new piece of equipment that needs repair or replacement.
You would rest easy knowing that your family will still be taken care of even if something happened with the practice or yourself.

It’s also important for dentists who are starting on their own without any outside funding sources such as investors or banks to have these funds available to pay back those loans without having any problems.

Pay Yourself First

There are many success strategies, but one of the most important and most often neglected is the simple act of paying yourself first. In other words, when income enters your practice, the very first thing you should do is pay yourself a pre-determined amount.

This won’t be easy at first because there may not be enough money in the business to cover this expense. However, it is essential if you want to create wealth and build a sustainable practice. If your practice is not profitable enough to cover this expense, this simple exercise will motivate you to make changes and get things on track.

If you do not pay yourself first, you will always feel like there is never enough money in the bank account, and sooner or later, your practice will fail because it just can’t support itself and meet its obligations. This strategy has been around for years, and it works.

Conclusion

A good financial and business plan is critical for any dental operation, but there are some basics you should know to keep your practice running smoothly. The above tips are great for managing finances in your practice.