Howard Farran, DDS, MBA, MAGD, Publisher, DentalTown Magazine

Knowing “The Score” is the key to managing your dental practice. The foundation of all management is if you can measure it, you can manage it. The three legs of managerial economics are: What’s The Reward, What’s The Score, and Who Makes What Decisions? You and your entire team need to see the score in an easy to understand format.

Every franchise business from McDonald’s to Southwest Airlines and Wal-Mart has an incredible Management Information System (MIS). Any manager can go to their computer at any time during the day and see their sales, labor, lab, supplies, marketing, and net income for the hour, day, month, or the year. Dentistry has always been cursed in this regard because nearly every major practice management computer software system does not include your payables, receivables, and payroll, let alone generate a Statement of Income, Statement of Cash Flow, and a Balance Sheet. This is simply incomprehensible.

Since 1990, I have tried unsuccessfully to get the major dental software companies to program their existing software with “built-in” accounting software or to make it seamlessly integrate with Quicken, Peach Tree, or Great Plains. Microsoft tried to buy Intuit, the makers of Quicken, in 1994. The US Justice Department, under the Clinton Administration, put the kibosh on the deal under the logic that only the US government should be allowed to have monopolies such as education, the post office, and airports. These are three examples of why everyone should be for a smaller and less intrusive government.

Forty-four days after George W. Bush won the White House, Microsoft bought Great Plains accounting software for $1.1 billion, making it the de facto standard for accounting software and the software you should use. “Why?” you might ask. Because all of your financial information could be available at the touch of a few buttons. If your payroll, accounts payable, and accounts receivable could all be calculated using the same program with your dental production and collection information, at the end of the day you and your staff would know if you made $412 of net income or lost $218.

When you analyze a fee schedule do you know which procedures make you a profit and which ones lose you money? I have been telling every dental insurance CEO that will listen; I lose money on radiographs, exams, cleanings and fillings, while making a small fortune on endo, crown and bridge, extractions, dentures and partials. At the end of the month do you know if you lost $8.16 on every prophy or made $7.16? Why don’t you know this obviously necessary piece of financial information? Ask your computer software company, because they are the ones who have left out 50% of all your data, including payables, receivables, payroll, Statement of Income, Statement of Cash Flow, and your Balance Sheet.

Since all of my persistence and lobbying has fallen on deaf ears, I had to go with Plan B. I called my very good friend Sally McKenzie, and asked for her expertise on a monthly MIS System. Sally showed me the reports she uses to bring together all aspects of the company’s production, collection and expense numbers. This information fits on one page and at a glance can tell you “the score” for any given month. This report is done in Microsoft Excel, and can be customized to include information you want to track on a monthly basis. I customized this report for Today’s Dental and added information I wanted to track.

The Today’s Dental Monthly Audit Report is set up for the entire year in one Excel Book with one sheet for every month. Every line is linked to the previous month’s line to automatically calculate the YTD/Monthly Average Column. Once you learn Excel, it is easy to set this up. You can start with the basics of plugging numbers into the lines and down the road add features to automatically calculate certain columns when you get comfortable with the program.

On the following page an example of the Daily Audit Report for Today’s Dental, with notations in each line to show where those numbers are taken from. The numbers from the Daily Audit Report, (DentalTown, January 2004) are transferred to the Monthly Audit Report.

If you want a copy of the 59 forms I use, send an email to me at howard@dentaltown.com and I will e-mail them back to you for free. Remember, if you ever want a world-class management information system, your practice management data of production and collection will have to be integrated with your payroll, payables and receivables. We wouldn’t even be having this conversation if we had a parent franchisee building this obvious feature into our practice management software.

Since they will not listen to me, maybe they will start listening to all of us. United we stand, divided we fall. And people wonder why we have over 33,000 dentists registered on www.DentalTown.com.