Can you hear that sound? That’s cash leaking out of your office. More specifically it’s cash in the form of discounts given to patients. Let’s pinpoint it even further – random patient discounts that have no rhyme or reason.
I’m not even touching insurance discounts — that’s a completely different barrel of monkeys. Your team knows what I’m talking about. Many times they’re being told to give a discount by a hurried doctor. When the uncomfortable question “How much?” is asked — the doctor deducts 25% or 50%.
I wouldn’t believe it if I hadn’t heard it myself. And I admit — I’ve done this, too. Unless you understand the overhead of the practice or how much you may already be writing off with insurance, it’s easy to smile and say “go ahead and give her 50% off. We went to college together!” And for associate doctors who are paid according to production, it’s an even easier comment to make.
The pain comes when you learn the numbers behind the operations. The conventional wisdom is that overhead can be as high as 50% to 60%. Many accountants will tell you that the true number is closer to 65%. So you give away another 25% and you can see that there’s not much to reinvest in your practice, much less compensate yourself and your team. What should come with being a business owner is the ability to turn a profit. Dentistry is no different than any other business in this regard.
Run your adjustment report for the past six months and count the number of different adjustment types you handed out. For example, did you give a separate discount for your aunt that was different from your neighbor and was also different from your kid’s teacher? You have too many types of discounts! Let’s consolidate them so you can track how much you’re letting trickle out of your practice.
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