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Howard Speaks: Shock Your System Howard Farran, DDS, MAGD, MBA, DICOI; Publisher, Dentaltown Magazine

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– by Howard Farran, DDS, MAGD, MBA, Publisher, Dentaltown Magazine

According to statistics from the International Franchise Association, franchises employ a little more than 15 percent of the private-sector U.S. workforce. Anyone can open up a dry cleaner or a restaurant – but do they know the business of running a dry cleaner or a restaurant as well as a franchise? Nope. The reason people buy into franchises and pay franchise fees is because being part of a franchise gives your business a greater chance of being successful.

When I was 10 years old, my dad quit his job as a Rainbow Bread deliveryman and sank all of his money into purchasing a Sonic drive-in franchise. It was risky, but he had a friend who had done the same thing and – with the systems Sonic had in place – his friend ran a successful business. There weren't computers 40 years ago, but there was a company called National Cash Registers (NCR) that helped you run your franchise efficiently and effectively. I worked for my father from 1972 until 1982 and I saw, firsthand, the power of the cash register. Back then the cash register was a complete management system. It is the reason McDonald's has sold more than 50,000 franchises and they have only had a few of them go under. Do you know why those few McDonald's restaurants went under? Because the government would close down a highway after they built a new freeway. You literally have to take the street away from McDonald's to make it fail.

Today, technology can do some pretty amazing things in terms of practice management. Which practice management software does your practice use? Do you use one of the more popular systems that have evolved over the last two decades? Have you looked into or jumped onto the cloud? No matter which system you've purchased you're getting a pretty good tool to run your practice as efficiently as a franchise like McDonald's or Sonic. But, are you using your practice management software to its fullest potential? And is your practice management system performing the way you wish it could?

I have lectured to dentists for 20 years, and if I asked 100 docs in one of my lectures what their overhead is, maybe 10 of them could give me a straight answer. That's sad, baby! That should just be automatic. Why don't you know this? Maybe you don't care. Maybe your office manager knows the answer. Maybe your accounting software doesn't link with your practice management software.

Wait a second. Your accounting software doesn't link with your practice management software? Why not? It should, right? Is it because the practice management software you use doesn't have that capacity? If the software you're using doesn't there are some that do. What else would you like your practice management software to do?

I've met with the good people behind some of these practice management software systems. They develop software around the wants and needs of dentists. If enough dentists want something, they can make it happen! They like to hear from you. You asked for perio charting? POOF! They gave you perio charting. You asked for voice-activated charting? BAM! You've got voice-activated charting. You asked for a bridge to your X-ray machine? BLADDOW! You can now bridge your X-ray machine to your practice management software. That's all fine and dandy, guys, but stop thinking like a dentist for one minute and start thinking like a business owner! I know, very few of us were attracted to dentistry because of the businesses aspect of it, and we all tend to stay away from stuff we don't understand. It's time we all understand our business better. It's time to understand your numbers as well as you understand caries. It's time to take a look at your current practice management software and think of ways it can help you run your business more efficiently and effectively!

Your number-one cost is labor. Just imagine integrating a time clock with a payroll function like QuickBooks or Peachtree in your practice management software system. If your staff clocked in and clocked out on your practice management software, at the end of the day your system would know their wages. By having your schedule on your dental software, if you need to do $2,000 a day to make your labor 25 percent and your overhead 60 percent, all you'd need to do is set it. Say you wanted to have 50 percent overhead; the practice management information system could tell you what your overhead is at the end of the first hour, and then you could adjust accordingly. It could tell you what your overhead is at lunch and then at the end of the day so you can see if you hit your 50 percent overhead goal.

You accept multiple and varying insurance companies and fee schedules from multiple PPOs. Do you know which ones are making you money? Do you know which procedures you're making money on, breaking even on or losing money doing? Let's say your software had your overhead figured into your schedule. Then let's say you sign up with a new PPO that only pays $800 for a crown seating you usually charge $1,000 for. And when your front desk staff schedules an hour and a half on the schedule, something flashes in red stating that you'll lose $40.17. So she goes back into the schedule and blocks off only an hour – and now a green number pops up and says you'll make $40.17 instead. Your front desk used pertinent information to make a quality scheduling decision. You and your staff could use something like this, right?! You've probably hired a CPA who uses QuickBooks and comes to your practice every quarter to discuss your report. It's helpful having a CPA around who will watch your numbers and try to keep you on track, but if you're getting your financials every quarter, it's too little too late. If you've got an issue in your practice, you need to look at your books on a weekly or daily basis.

What about knowing what your revenue per operatory hour was for the day and what your net or profit per operatory hour based on your overhead was for that day? What about the ability to adjust numbers in your budget to see how your overhead is impacted? For example, if you were to cut lab expenses by $500, or if you closed your practice for three days, what would happen to your overhead? This is all stuff you should want to know! If you could plug in daily amounts for all expenses and compare that to the production per hour, that would be huge!

Think about payroll; every week you're in the back trying to figure everything out on QuickBooks or Peachtree. Wouldn't it be awesome if you could bridge those programs to your practice management software? It would be so much easier because all the information you need would be in one place!

When I check into a Hyatt or a Hilton I am blown away by the data at their fingertips augmenting all of their decisions. They know my past. They know if I prefer king beds, smoking or non-smoking. They know everything about me. You don't know anything about your finances. You can't tell me what your return on assets was last year versus your return on equity. You can't tell me what your overhead is. You can't tell me if you are making money or losing money on any of the PPOs you take. You can't tell me what procedure fees you need to increase. You might be making money on crowns, root canals and extractions but losing your shirt on cleanings, exams, X-rays and fillings because of the time you have scheduled for each procedure and what the insurance company will pay. You should know whether you made $20.13 versus $20.14 or if you lost $7.08 or $7.09. Sure you can figure this all out on your own, but wouldn't it be so much easier if your practice management software did it for you?

This is already happening with businesses like Heartland Dental Care. All of their more than 300 dental practices operate with systems that help to ensure a practice's success. They know what makes money for a dental practice and where production needs to be tightened up. And other software companies are developing ways to bridge accounting information to your existing practice management software.

We can't say we're in a major recession anymore – we're in a major contraction! We don't have the luxury of working 32 hours a week anymore; most of us are working (or need to work) 40 or more. We can't raise our prices right now, and insurance companies are coming out with PPOs and discount plans left and right. Guys, you need to know your overhead, and it's inexcusable that you don't demand revisions to your practice management software to run your business more efficiently. Dental practices and practice management software companies are successful when they work together to provide the options you want and need. You've just read my practice management software wish list. Go on the message boards of Dentaltown.com and let's discuss what you'd like your practice management software to do. Now is the time that we should all be able to operate our practices with the same reassurances of success provided to franchised companies!
Seminars
Howard Farran, DDS, MBA, MAGD, is an international speaker who has written dozens of published articles. To schedule Howard to speak to your next national, state or local dental meeting, e-mail colleen@farranmedia.com.

February 17, 2012 • Tarzana, California
Southern California Oral/Facial Study Club
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www.facebook.com/pages/SoCal-OralFacial-Study-Club
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March 2nd and 3rd, 2012 • Birmingham, UK
The Dentistry Show
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April 21, 2012 • Destin, Florida
Excellence in Dentistry
Jennifer Jones – 800-337-8467
eid@theprofitabledentist.com
www.theprofitabledentist.com
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