Alun Rees offers advice to those looking to whip their New Year finances into shape
The New Year may have barely begun, so it may seem strange to start talking about year-end finances. But now is the time to decide how good your finance year will be, what profits you will make, and above all, what you can do about it.
Accountants are great people, but for the most part, they will only tell you where you have been going wrong and what you can do to make the best out of things that have already happened. Here, I will help you decide where to go on the road to financial health.
Beginning the New Year
1. As Stephen Covey states in The Seven Habits of Highly Effective People (1989): start with the end in mind. How much do you want to earn this year? Consider all aspects of your work and business life, such as how much holiday you will take this year, whether you are going to be able to re-equip, expand, or even re-decorate – and what, and how, you are going to pay the taxman.
2. If you don’t already, then learn how to use Excel to create a budget spreadsheet. You will learn more about your business from a well-designed spreadsheet than from anything else. One word of caution: make sure you are counting and measuring the right things.
3. Following on from number two: prepare and use budgets. Be ready for what’s coming next month and the month after that. With the help of spreadsheets and budgets, you can see where you’re going and where you have been. You can work out when it’s time to increase your fees, when to give a pay rise, and what you’ll need to earn when you’re considering investment.
4. Look three years ahead. Why? Most small businesses work on the hope that they will run out of months before they run out of money. My most successful clients are those that are able to see not only the month ahead but the quarter, the year – even three years ahead. They are aware of monthly and annual trends; they anticipate them and take appropriate action.
5. Get into the habit of preparing monthly management accounts for yourself – once you’ve learned how to do it, delegate it. Compare month on month – every month. Make no exception.
6. Key performance indicators (KPIs) – another overused ‘buzz’ acronym. Of course these are important, but they must be right for you and your practice. Some will be common to all dental businesses, such as turnover, laboratory fees, materials, staff costs, heat, light, and a host of other considerations. You should also be considering profitability of each and every employee, chair occupancy, patient turnover, staff absences, and new patient analyses to measure marketing initiatives. Then add in profitability of differing treatments and calculate different hourly rates, and look at treatment uptake versus presentation.
Measuring the future
Many dentists and doctors are uncomfortable when dealing with money; they consider it unprofessional or somehow demeaning to have to count it, measure it, or talk about it. Yet if you don’t, then you are the business equivalent of a sailor setting out on a voyage without a compass, chart or view of the skies.
No information means no analysis, no predictions and no control of your business. Finally, work with an accountant that truly understands you and your business, that will prepare accounts quickly and be prepared to do battle with the taxman on your behalf should it be required. Like all professional relationships, it is based on trust, not on cost.
Alun Rees has 10 years’ experience as a business dental coach and 30 years as a clinician. He has a huge insight into how to run a successful dental practice, and how it can be achieved. Find out more at www.dentalbusinesscoach.ie.
