Do You Know Your Numbers? How KPIs Can Make or Break Your Practice

In today's competitive landscape, understanding and managing key performance indicators (KPIs) is crucial for the success of any business. This holds especially true for dental and medical practices. Knowing your numbers can either propel your business to new heights or drag it down. One of the most critical KPIs to monitor is your collection ratio. Practices should be collecting 99% or more of their adjusted production, meaning after all write-offs. Just being off by 2% in a $2 million practice can result in a loss of $1 million over a 25-year career. This shortfall can significantly impact practice reinvestment and retirement plans.

Here are five essential KPIs that every practice should be concentrating on right now:

1. Daily Production Number

Your daily production number is a foundational KPI that directly feeds into your annual production goal. Without a clear daily goal, your practice lacks direction. Setting and tracking a daily production target ensures that your practice operates with deliberate intention rather than by chance. This focus helps you make informed decisions that drive your practice towards achieving its annual production targets.

2. Collections

Collections are a critical area that demands daily attention. Several factors influence your collections, such as write-offs, patient refunds, and the separation of insurance from patient receivables. Without consistent oversight and accountability, collections can become a daunting task. However, with regular monitoring and management, it's always possible to clean up and realign your collections process. This KPI is crucial because it directly impacts your practice's cash flow and financial health.

3. Write-Offs

Monitoring write-offs monthly and quarterly is another vital practice. Many practitioners are surprised to discover they effectively work one to two months for free due to discretionary write-offs. These can stem from providing complimentary or discounted services too frequently. While it's essential to offer some gratuitous care, especially in the caregiver business, it shouldn't come at the expense of your bottom line. Striking the right balance ensures that your practice remains financially healthy while still serving the community.

4. Profit

Profit is the ultimate indicator of your practice's financial health. Reviewing your financials every month against industry standard KPIs allows you to quickly determine whether your overhead is in line. This process often involves working with your bookkeeper or accountant to set up a system that simplifies your income statement. Ideally, you should be able to assess your financial health without needing an accountant by your side. Monthly reviews of simplified financial statements help you stay on top of your practice’s profitability.

5. Work-Life Balance

This KPI might come as a surprise, but it's essential to track the number of days you work each year and the number of days you spend with family, on vacations, and pursuing hobbies. This metric is a direct measure of how well you are taking care of yourself. Remember, taking care of yourself first is critical for maintaining a sustainable and successful practice. Ensuring you have time for rest and personal activities prevents burnout and promotes a healthier work-life balance.

In conclusion, understanding and regularly reviewing these five KPIs can significantly enhance your practice’s performance. They not only help in maintaining financial health but also ensure that you, as a practitioner, are well-cared for. Knowing your numbers empowers you to make informed decisions that foster growth and sustainability for your practice. So, take control of your KPIs today and watch your practice thrive.