In most areas of practice, dentists want their offices to exceed expectations. The friendliest staff. The best treatment outcomes. The happiest patients. However, your practice should endeavor to conform to the norm in at least one area: overhead expense ratios. Managing variable expenses, like dental supplies, means that your practice can keep more of what it earns.
The standard ratio for dental supplies is between 6 and 8 percent of annual collections. Inconsistent pricing and expensive new technologies are pushing the ratio higher, but the reason many practices are operating outside of the standard is that the dentist is either unaware of the true costs or feels unable to dedicate the time to scrutinize spending.
If you’re unsure where to begin when it comes to cost control, answer five questions to kick-start your efforts:
- Do you know your ratios? Gain a clear understanding of how your dental supply budget measures up to the industry standard. If your practice’s supply spending trends in excess of 8 percent of collections, it’s time to take a hard look at inventory processes and pursue effective cost control. As a CDA member, you can get guidance on practice budgeting and inventory control by contacting a Practice Support analyst or exploring free resources at cda.org/practicesupport.
- Have you categorized correctly? When calculating variable overhead expenses, separate dental supplies from equipment valued at $500 or more. Place office supplies in a separate category — allocated at less than 2 percent of collections. And, be sure to check that lab costs haven’t errantly been entered under supplies.
- Do you scrutinize your invoices? The time invested in questioning what you you spend pays off exponentially in savings. Between fluctuating pricing, sales reps’ markups and ordering inefficiencies, you’re likely paying more than you need for many items.
- Are you paying more than MSRP? The manufacturer’s suggested retail price is simply the price at which the product’s producer recommends it be sold to consumers. Depending on wholesale cost, competition and other factors, suppliers often sell products for less than MSRP; however, dental practices too often pay in excess of this suggested price.
- Are you comparison shopping? Online shopping makes it easier than ever to compare prices on your essential items, save shopping lists and review your order history. You’re able to evaluate your options in just a few clicks — whether it’s to see savings compared to MSRP or find equivalent alternate brand products.
Start by aligning overhead ratios with increased awareness about the true cost of supplies and how your practice stacks up against standards.
Shop online for dental supplies and see clear prices for every product. Explore The Dentists Supply Company’s catalog at tdsc.com.
This article is the first in a two-part series. Watch for part II here and at tdsc.com/news in early October.