Howard Speaks: Are You Keeping the Right Score? by Dr. Howard Farran

Dentaltown Magazine

by Howard Farran, DDS, MBA, publisher, Dentaltown magazine

I’ve been beating this very same drum for years, even before I got my MBA in 1999—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? How many of you have heard me making all that noise?!

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 Walmart has an incredible management information system (MIS). Managers 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 year. Wouldn’t it be great to be able to do that for your dental practice? “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. But for some reason, this doesn’t seem to be the highest priority for most owner–dentists. Now it’s my turn to ask “Why?” Personally, I don’t get it, so I’m going to continue to beat the drum on the importance of having an MIS for your practice.

The first step is identifying an accounting software that can be customized for your needs, and the second step is creating a comprehensive chart of accounts (COA). We use Sage 50 accounting software (formerly Peachtree) because we not only wanted the ability to customize our financial statements, but also needed a robust invoicing system for Farran Media, not to mention an advanced payroll component. While 95% of solo dentists use QuickBooks, I’d argue if you have more than one location, you need something with more bells and whistles.

Whatever software you’re using, the foundation should be built upon the COA to give you the best possible financial statements, ensuring you can easily see how your practice is doing with a quick review each month. I’ve seen so many dentists over the years set up their COA so they’re only looking at a portion of the picture—sometimes benefits aren’t included in the staff or associate dentist wages. More times than not, the owner docs aren’t paying themselves, which makes the practice look good on paper, but if you’re the sole practitioner, shouldn’t your wages be counted in the overhead?

I could go on and on with many examples of justifying a higher bottom line by leaving things off the P&L. You’re only hurting yourself, doc, because that’s not a true picture of your practice’s health or profitability. You also can’t compare your practice to industry benchmarks if you aren’t comparing apples to apples.

While there are many variations on a COA, I wanted to give you an example of how we have things set up in our accounting system. I look forward to your feedback on the message boards! Please post your thoughts, and share your COAs, in the comments of this column online at

Check it out!

Download our chart of accounts for use in your practice—it’s free!
Dentaltown’s website contains dozens of sample forms and reports for use by the front office, back office, hygiene, and accounting and HR teams. Townies can download them all for free! To download your own copy of the chart of accounts below as a Microsoft Excel document, go to


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