Overhead Expense Benchmarks for Your Dental Practice to Know
As a dentist, you know that overhead expenses can take a rather big chunk out of your bottom line. That’s why it’s important to benchmark your overhead expenses against other dental practices to ensure that you keep your costs in line.
Luckily, by understanding these benchmarks, dental practices can make fully informed decisions regarding where to allocate their resources and how to improve their bottom line. Try to look at specific expense categories.
Checking these categories of your overhead expense can give you a more detailed picture of where your money is being spent and where you can save. For example, if you are spending a large percentage of your budget on rent, you may want to consider moving to a smaller or less expensive office. Getting in touch with a dental practice consultant can be helpful as well.
Continue reading to understand the ideal overhead expense benchmarks:
1) 24-28% for Personnel Costs
Quite a lot of your overhead will be for personnel costs, which include salaries, benefits, and taxes. To keep your personnel costs in check, you will want to make sure that you are not overstaffed and that you are paying competitive salaries. At the same time, it’s best to consider offering incentives to employees to keep them happy and motivated.
2) 12-14% for Clinical Costs
Clinical costs include supplies and equipment necessary for your practice to operate. To keep your clinical costs down, you will want to be sure to purchase high-quality supplies and equipment that will last. Dental practices should also keep an eye on your inventory and only order what you need.
3) 10% for Facility and Equipment Costs
A dental practice’s facility and equipment costs include the costs of your office or clinic space and the costs of the equipment that you use. To keep your facility and equipment costs down, you will want to lease or purchase high-quality space and equipment. Try to be sure to keep your space and equipment well-maintained as well.
4) 11% for Extra Expense Costs
Extra expense costs include any unexpected costs that may come up. These costs can include things like emergency repairs or the costs of additional staff. To keep your extra expense costs down, you should be sure to have an emergency fund set aside. It’s key to plan for possible extra expenses when you are budgeting for your practice.
5) 0-2% for Discretionary Costs
Discretionary costs consist of different expenses that are not essential to your practice. These can also include things like professional development and business travel. Discretionary costs can be tricky to budget for. It’s an absolute must to carefully consider your discretionary costs and only spend money on those that you feel are necessary.
6) 35-40% for Owners, Doctors, and Associates’ Profits
The final percentage of your budget is allocated to profits. This includes your income as well as your associates’ income. The profits will be determined by your business model, your overhead costs, and your gross collections.
No matter how you measure it, it is important to keep as close of an eye as possible on your overhead expenses. By doing so, you can ensure that your dental practice is operating as efficiently as possible.
Looking for a dental practice consultant? Ash CPA offers accounting for dental and healthcare professionals, as well as assistance with buying, selling, and valuing dental practices. Get in touch with us today!