5 reasons your overhead costs are out of control

Lately, it seems like your overhead costs have taken over your practice. You're constantly worried about paying bills and find yourself writing check after check each month -- and none of that hard-earned money is going toward investing in new equipment or the upgrades your practice needs. Instead, all of your money goes toward paying skyrocketing overhead costs, leaving you feeling stuck and wondering if you'll ever find a way out.

Sally McKenzie, CEO of McKenzie Management.

I see this in many of the practices I work with. Dentists find themselves dealing with out-of-control overhead costs that keep them from achieving their goals and enjoying practice success. They're overwhelmed, frustrated, and worried about their future. Yes, it's scary, but there are changes you can make to finally get your overhead costs under control and turn your struggling practice into a profitable practice.

5 reasons

Here are five reasons your overhead costs -- which should ideally be no more than 55% of collections -- are skyrocketing and suggestions for how to get your practice back on track.

1. Ignoring recall

Recall is one of the most important practice systems, yet it's also one of the most neglected. If you want to reduce your overhead burden, stop ignoring your recall system and start tapping into the thousands of dollars in potential revenue it represents.

How? I suggest hiring and then empowering a patient coordinator to take over recall. This important team member should call and schedule a specific number of past due patients every day. Trust me, this will boost patient retention and production -- while reducing your overhead costs.

2. Giving out raises just because

If your employees get raises every year no matter what, or if you tend to give in when team members ask for a boost in pay, there's a pretty good chance payroll is contributing to your overhead woes. Remember, payroll should be 20% to 22% of your revenues, with an additional 3% to 5% for payroll taxes and benefits.

To keep raises from getting out of hand, let employees know how and when pay increases will be discussed and under what circumstances they'll be given. Motivate team members to earn those raises, and you'll have a more productive practice and more manageable overhead.

3. Too many employees

If your team is struggling to get certain tasks done, it might seem like a good idea to hire another employee to take on some of the workload, which will also improve efficiencies and increase production numbers. Sorry, but that isn't necessarily how it will work out.

Before you hire someone new, look at how your staff members are performing. Are they properly trained? Have you given them guidance through detailed job descriptions and performance measurements? Are they motivated to excel in their roles? If you keep answering no, I suggest you focus on improving team efficiencies before you bring anyone else on.

4. Relying on preappointing alone

While this is a common practice in dental offices, preappointing often leads to last-minute cancellations and no-shows -- which hurts your production numbers while inflating your overhead.

The problem is, when patients schedule six months out, they have no idea what they'll actually be doing that far in advance. Chances are something will come up at work or in their personal lives that will keep them from making that appointment -- or they'll just plain forget. Whatever the reason, broken appointments leave you with empty slots in the schedule. If you can't fill them, it hurts production and increases your overhead.

Preappointing also keeps patients who are ready to go forward with treatment from scheduling an appointment. Why? It gives the illusion your schedule is full when it really isn't. And because patients don't want to wait weeks to see you, they'll likely look for another dentist who can get them in sooner.

Instead of relying on preappointing, consider switching to a hybrid system. When you do, production numbers will rise and overhead costs will finally start to go down.

5. You haven't raised your fees in years

Most dentists I talk to are hesitant to raise their fees. They're afraid they'll lose patients who don't want to pay the higher prices. The truth is that raising fees is the fastest, easiest way to grow practice profits -- as well as to reduce overhead.

I suggest establishing a fee schedule that's fair to both you and your patients. Base fee increases on solid data and let patients know about the changes. If this makes you nervous, just remember most patients expect your fees to go up from time to time. As long as you provide them with high-quality care and excellent customer service, you won't have to worry about them looking for a new dental home.

Don't let overhead hold you back. If your overhead costs are out of control, it's time to make the necessary changes so your practice can meet its full potential.

Sally McKenzie is the CEO of McKenzie Management, a full-service, nationwide dental practice management company. Contact her directly at 877-777-6151 or at [email protected].

The comments and observations expressed herein do not necessarily reflect the opinions of DrBicuspid.com, nor should they be construed as an endorsement or admonishment of any particular idea, vendor, or organization.