Key performance indicators are essential statistics or measurements that can help you identify, track, and analyze your dental practice's success and potential expansion.
KPIs represent the most successful factors in your practice, and therefore they work for you to make your business more profitable and successful. When used correctly, they will help you make better, more informed, and more strategic business decisions for your dental practice.
1. Annual Patient Value
The annual patient value determines the average amount each patient spends at your clinic in a year.
This figure allows you to choose the production amount per visit and therefore shows how well your practice is performing. To get the most value out of this metric, you should track APV every year and determine the annual percentage increase. This will show you whether the value of your patients is increasing.
2. Net Production
Gross production is the amount of money brought in by your clinic over a certain period before write-offs and expenses are taken out. Net production is the final figure after all deductions are removed from your clinic's profits.
The amount of your practice production figure is vital because it shows how productive your clinic has been. You want your production rates to be ever-increasing, and these figures should be tracked daily and monthly and compared with the previous year's figures to determine if there has been an increase.
By monitoring this figure regularly, you will decide whether there has been an increase or decrease in overall practice performance. This may affect any decision to add or drop insurance providers, depending on the number of insurance write-offs they have incurred throughout the year.
3. Overhead Rate
Overhead costs are indirect costs that your practice incurs to stay in business. It includes things like administrative staff, office supplies, rent, and marketing.
The lower your overhead rate, the higher your profits. Having a solid understanding of the fluctuations in your overhead rate is vital for controlling your expenses and managing your cash flow. When cash flow is low, you can look into different ways to reduce your overhead, such as renegotiating contracts with vendors.
4. Staff Labor Percentage
Labor is major part of a practice's expense, and therefore it is important to track it.
The staff labor percentage in a general practice should be at 25%. When labor percentages are high, it could signify that business is too slow or your clinic is overstaffed.
5. Accounts Receivable Turnover
Tracking accounts receivable turnover is important because it will illustrate the health of your collection process.
If your clinic sees an increase in the AR, this may mean that the collection process is poor, an issue that needs to be addressed. Accounts receivable turnover can significantly impact the practice's profitability. It should always be your aim to have 95% of your patients pay all fees to the practice within sixty days.
That being said, an ideal goal would be to have 70% of your patient receivables at or below thirty days. To improve this rate, follow up on accounts receivables regularly.
6. Average Production per New Patient
This KPI is a key metric that shows how valuable each new patient is.
The average production per new patient should be two to three times higher than the average production per patient. To increase this value, try offering additional services such as teeth whitening or a periodontal screening program to enhance your new patient services.
7. Gross Margin
Gross margin is the amount of revenue left over after all of your costs of goods sold have been subtracted.
For a dental office, this amount should equate to approximately 40%. It is important to track gross margin because it shows your practice's profitability. Try offering expanded services or decreasing your overall costs to improve this figure.
8. Net Margin
Net margin is one of the most important KPIs for any business as it shows just how profitable the business is overall.
The net margin goal for your dental office should be between 25 - 40%.
To improve your net margin, you should increase the number of patients you see, increase the number of services you provide and decrease the number of expenses your clinic has.
By selecting the proper KPIs to follow for your dental practice, you will have a good idea of how all areas of your business are performing. You will also be able to determine different ways to improve and experience enhanced growth.
For more information on tracking the right metrics for your business or gaining the professional bookkeeping assistance your business needs, contact Enkel today.