8 Financial KPIs Dental Practices Should Track For Growth

Omar Visram
8 Financial KPIs Dental Practices Should Track For Growth
Table of Contents

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Key performance indicators (KPIs) are essential data points or measurements that can help you identify, track, and analyze your dental practice's success and potential for expansion. 

KPIs represent the most important factors in your practice, and therefore, they work for you to make your business more profitable and successful. They will help you make more informed strategic business decisions for your dental practice.

1.  Annual Patient Value

The annual patient value (APV) determines the average patient spend at your clinic in a year. APV can also be calculated by multiplying the average number of visits per patient per year by the average revenue per visit. For example, if a typical patient visits twice a year and spends an average of $200 per visit, the APV would be $400.

Dental clinic KPIs – annual patient value

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.

Dental clinic KPIs – production

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 expenses like administrative staff, office supplies, rent, and marketing. 

Dental clinic KPIs – overhead rate

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 a major part of a practice's expense, and therefore, it is important to track it.

Dental clinic KPIs – staff labour percentage

The staff labour percentage in general practice should be 25%. High labour percentages could indicate that business is too slow or that your clinic is overstaffed.

5.  Accounts Receivable Turnover

Tracking accounts receivable turnover is important because it will illustrate the health of your collection process. 

Dental clinic KPIs – AR turnover

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.

Dental clinic KPIs – Average prodution per new patient

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 practice, "Revenue" refers to the total income generated from patient services, and "Cost of Goods Sold (COGS)" includes direct costs related to providing these services, such as dental supplies, lab fees, and direct personnel costs (e.g., wages for dental hygienists and assistants directly involved in patient care).

For example, if a dental practice generates $500,000 in revenue and has direct costs of $250,000, gross margin would be 50%. Divide direct costs by revenues and then multiply by 100 for gross margin as a percentage.

Dental clinic KPIs – gross margin

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. 

Dental clinic KPIs – net margin

The net margin goal for your dental office should be between 25 - 40%.

Final Thoughts

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.

Looking for accurate reliable financial data?

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