How Does Your Practice Stack Up?
A helpful tool to check how you are doing financially is to compare your practice to your peers’ practices. The results can be eye-opening—you will often find you are doing well in areas where you thought you were struggling. On the other hand, if your practice is struggling in certain areas, financial benchmarks can provide information you need to right the ship.
Where do I Find Appropriate Benchmarks for my Practice?
If you are a member of one or more medical associations, check the member’s section of their websites. Many organizations periodically survey their members and share deidentified financial and nonfinancial results as a member benefit. Even if the data is a few years old, chances are it is still reliable, and gives you information to use as a starting point for comparisons.
If you strike out with your medical association, ask your accountant. If a firm or individual accountant has a robust medical-practice client base, they may have access to financial data from various sources. Moreover, your accountant should be able to assist you in applying that data to your practice.
As a last resort, searching the internet can be a very good resource for financial data. Caution is required, however! When using information found online, do your homework on the organizations providing the content, and, if possible, confirm your findings across multiple independent resources.
How do I Apply Benchmarks to my Practice?
The most important driver of your financial success is revenue (see our blog Why Revenue Matters Most), so direct your initial research toward provider revenue and collections benchmarks. This information will provide insight on whether your team performance is in line with industry standards and your practice is structured to maximize revenue.
Once you have compared your revenue, turn your attention to the major expenses of the practice, including payroll, headcount, rent, medical supplies, technology, and compliance. Often you will find these benchmarks expressed as percentages of revenue. Compare these benchmarks to your practice performance to identify areas of potential improvement.
Other Tips
Many practice owners use benchmarking as a tool for cutting expenses. Responsible expense management is important, but do not fall into the trap of thinking that all expenses are bad. Instead, view your expenses as investments designed to promote a healthy revenue goal. For example, if the leading practices in your specialty spend 2% of collections on marketing and business development and you are only spending 1%, you might want to consider increasing that budget.
The same mindset goes into staffing. Your staff expense maybe 35% of collections when the industry standard is 30%. That does not mean you need to reduce headcount or freeze wages. If you have a great team and culture, paying a little bit more for that may be okay. If you are actively growing your practice, some excess capacity may be necessary.
Remember—you know your practice better than anyone. Don’t be afraid to set your own benchmark targets if you know where you want to go and how to get there. The main point of benchmarking is to have and use information to effectively manage your operational and financial performance.
Trey Whitt, Partner, DentMoses, LLP, Birmingham, AL
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Financial Benchmarking: How Does Your Practice Compare To Others? | SBGM