North Texas Dentistry Volume 8 Issue 1 NTD 2018 ISSUE 1 DE | Page 22

money matters
T H E
FINANCES
AND THE DENTAL PRACTICE
FLIGHT PLAN
by Justin M. Kendall and Haylee N Davis
t’s a common refrain: private practice dentists report that
they work hard and invest tirelessly into their practices
only to realize, all too commonly, that the cash flow and
practice value generated does not accurately reflect the
time and effort expended. In fact, at times, the practi-
tioner’s overall feeling of success diminishes in direct correla-
tion to hard work, above-average patient flow and higher than
average practice revenue. If the practice is full of patients and
everyone is working hard, shouldn’t there be a surplus of cash
for office expenses and above average income for the owner and
dental team? Shouldn’t there be adequate capital to fund new
growth for the practice? Shouldn’t the practice demand a pre-
mium when it is time to sell? Not necessarily.
I
There are a variety of factors at work against the hardworking
dental practice owner that must be, but often are not, ad-
dressed. Among other things, the dental practice owner must
ensure that its business systems, marketing plans, staffing, reg-
ulatory compliance, transition strategies and clinical competen-
cies are in place. Similarly to dentistry where periodontal health
is foundational to providing quality restorative dental work for
a patient, there is a foundational standard that must be ad-
dressed before exploring any of the other avenues of successful
practice ownership: that standard is the practice budget and
financial plan.
Flying Blind
Experienced pilots chart their course long before they climb into
the cockpit to prepare for takeoff. They evaluate everything
from the desired destination to climate conditions during flight
and everything in between. They know why they will takeoff in
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the manner in which they do, which altitude is most efficient,
how to provide passengers with the best experience, how much
fuel is necessary for their journey (along with any reserves nec-
essary for any unanticipated contingencies faced) and which di-
rection to fly in order to reach their destination. Navigating the
financial health of a dental practice without a budget or finan-
cial plan is akin to a pilot climbing into the cockpit without a
flight plan. Regardless of his or her skillset or intentions, if the
pilot leaves New York intending to later land in San Francisco,
yet flies east instead of west, no amount of technical expertise
will overcome this ill-fated plan. Likewise, the most skilled and
well-intentioned practitioner who aims for a fiscally healthy
dental practice that has adequate cash flow to provide quality
patient care and practice growth, competitive team salaries and
bonuses, and above-average income for its owner, will not reach
his or her goal by merely showing up to provide patient care, no
matter how well care is delivered. For the practice owner, the
budget and financial plan are critical pieces to the “flight plan”
for the office. Without a sense of direction, especially financial
direction, even the most talented dentists may ultimately fail to
reach their goals and potential.
Financial Plans and Budgets – Aren’t They
the Same Thing?
Contrary to common belief, the terms “budget” and “financial
plan” are not interchangeable. Simply defined, a budget, similar
to a fuel gauge, is a sterile calculation of income and expendi-
tures during certain periods of time (month, quarter, year, etc.)
while a financial plan encompasses a dynamic, intentional strat-
egy designed to address modalities for reaching long-term goals.