195 Why Production is NOT the most important thing in your practice
Hi everyone, and welcome to another episode of The Delivering Wow Dental Podcast. I am super excited to be here today. So today I'm actually here to share with you something that is perhaps going to be pretty insightful for you, as you are looking at, how can you have an amazing year for this 2021? And one thing that I have had a lot of our coaching clients come to me and say is that they want to be able to grow their practice, they want to be more profitable this year. And one thing that a lot of people have the wrong idea about is that if they increase their production, then all of a sudden they will grow, right, or a production is what's most important. And so I'm actually here to share some insight that production is actually not the most important thing that you want to focus on in your practice.
And so I'm going to be giving some specific examples today of exactly what I mean and exactly what you can start to look at, some pearls that you can think about for your practice as you are mapping out your plan of how you're going to hit your big goals, how you're going to hit your profit goals for this year. And so one thing that we are looking at with our coaching clients is actually looking at historicals from the previous year, and seeing what were the different services that made up the production that we have every single month. And that way we can see were we consistent month to month to month. If we said that we wanted to implement a new service, were we actually implementing the service? What does the report show? Right?
One thing that we're also looking at is not just production, right, and what makes up production, but we're looking at another metric, which is of course our collections, but even further than that, our collections percentage. And so you might be asking, "Well, all right, what does that mean? What is collection percentage? I'm listening here." Right? And so collection percentage is the percentage of the funds that you produce that you actually collected. Okay?
And so what that means is that obviously we want that number to be as close to a hundred percent as possible. And unfortunately, most times it's not. And so as we start to look at our collections percentage, then now it starts to see where things are perhaps slipping through the cracks. And so a few examples of that is looking at your adjustments, right? Are you doing adjustments for friends, for a family, for people that you see out in your community and they come in and you feel like you have to give them a discount, right? Looking at adjustments is a great way to see how you are perhaps not collecting what you really should be, and really analyzing your adjustments.
Another thing that you can look at as well, and if that number is not as high as possible to 100%, is that, are you having statements that have not been sent out? Unfortunately, sometimes people come to me as a new client and I realize, "Oh my gosh, your AR is really, really high." Right? And we look at the reason why the real issue is that statements have not actually been sent out for eight months or 10 months. Right? And so you have patients who are happy to pay their balance, but they just never knew. Right? And so if you're looking at your collections percentage by a monthly basis, month to month to month, then now you have the ability to say, "Wait, we have dipped, why? Why did that happen?" And that would be one of the metrics that you're looking at.
Another thing that you can analyze with your collection percentage is that, do you have your checks, right? Perhaps you have checks that are coming to the practice. Are they being input in a timely fashion? Is it that your team is so busy doing calls for unscheduled patients to get them rescheduled, which is a whole nother podcast in of itself, of why that is not the best way to be able to schedule patients. Then what happens is that they're saying, "I don't have enough time. I'm going to get to those checks." And there's checks that are literally sitting there that are not being entered as they're coming in. Right? And so that's another way that maybe you have money there in the practice, but it's not been entered into the bank, right? And so that's something that's important.
Also, maybe you have electronic payments that have come in, but you've not answered them into the ledger, which means that there's going to be a discrepancy between your bank statements and what you actually have in your practice management software. And so these are a lot of things that we start to look at as we're looking at collection percentage. Another thing that we want to look at is really our fees, right? And are we collecting what we're producing? And how many PPOs that we're on? And what is the amount of profit that we're actually making per procedure if we are taking a PPO?
It was really insightful this week. One of my newer coaching clients, we started analyzing this in her practice and I actually gave her an exercise. And I asked her to calculate her practices profit margins for her different procedures. And what that means is looking at the expenses that you have in your practice, that you have every single month, whether it's your payroll, whether it's your rent, whether it is you're looking at your utilities, and calculating how much you're spending monthly divided into the number of hours that you're working, so that you have a cost per hour. And then from there, what we're doing is saying, "How long does it take you to do a filling?" So say if it takes you a half an hour to do a filling, dividing that by half, right?
And then from there, what we're looking at is, what are the supply costs for actually doing that procedure? And so we help and we show them how to quickly calculate that supply costs. But this one client, what happened was that she realized and we analyzed that she was actually getting reimbursed $80 from one of her PPOs for a filling. And what she realized is that her supply costs, her fixed expenses, her costs to actually do the procedure for a filling was $120. And so she was frustrated that she felt like she was working to pay her team because she wasn't getting paid. But the real issue is that things would never turn around because you are operating at a higher cost than what you're getting reimbursed for.
And so when you start looking at your collection percentage, all of a sudden, you start to realize that there is a difference between your production and your collections. And now you can start to dig into exactly why, what is going on, what is happening there. And now you can go ahead and make some changes so that you can move forward in your practice. So hopefully this serves you, hopefully you got lots of pearls to be able to help you to understand that production is not what's most important. Because a lot of people think that, "If I'm busy, if I have patients in the chair, then all of a sudden we are going to have profitability." Right? And the fact is that, that's not the case. What we want to do is we want to focus on how can we maximize the revenue that we're getting in our practice, and how can we make sure that we're leveraging really great systems, like looking at our collections percentage to identify the gaps.
Thanks again for listening to another episode of The Delivering Wow Dental Podcast. I would love to welcome you to join us inside of our free Facebook group, dentalbossmovement.com. And if you're on Clubhouse, find us inside of The Dentist Club. And if you haven't done so already, make sure that you head on over to our website, deliveringwow.com, to get access to your free practice gap assessment. All right, guys, take care, and we'll see you inside of the next episode.