It doesn’t matter if you are an established dental practice or a new one. At some point in time, you would have faced this financial stumbling block. There are no exceptions but certain fixes can be done in your dental practice to evade these most common financial mistakes. Let’s get started for a successful practice and to avoid delayed retirement.
1. Poor Debt, Credit and Cash Flow Management
Most dental practitioners don’t have a clear understanding of cash flow management and debt management. The consequences of poor debt flow management can lead to a great financial impact on your dental practice. Being aware of the interest rates and ways to improve the credit score is highly recommended. The best way to handle poor debt is by understanding why debt is a problem and finding if there are any inefficacious practices. Conduct as cash flow assessment by calculating your expenses, loan payments, salaries, dental supplies, taxes, etc. By understanding this you can improve your cash flow management and know exactly where your money is going.
2. Outdated Plan
You would have come up with a good financial plan while buying a dental practice but having the same plan without updating is what most dentists do. It is important to update your financial plan every few years as your dental practice grows. Since, your circumstances like living expenses, income, patient base, etc. change. Your financial goal changes too. Make a clear plan coordinating with your attorney, accountant, and banker. It is vital to gain knowledge on the financial plan rather than completely leaving it to the experts. Involve with your expert team and educate yourself in the process and create a financial plan you need.
3. Risky Investments
Do not ever put your money in risky investments that can lead your practice in jeopardy. There is a possibility of losing money in high risk investments which might cause you to delay your retirement. Before investing, it is always essential to be knowledgeable on certain factors like
- What are you investing in?
- How much value does it produce?
- Ways to improve the investment
- Plan to limit any investment losses
So, always consult an expert before making any type of investment. Most dentist’s retirement plans include these types of investments and making a bad investment can ultimately increase your working career. So, avoid unnecessary high risk investments.
4. Costly Insurance Coverage
Taking insurance coverage is essential for better risk coverage. But make sure to analyze your coverage and exclude the supporting policies which are already included in the main policy. This may lead to paying more than the necessary without overprotecting you in trivial areas. Having clear insurance should reduce your risk areas, improves business productivity, and should support your financial plan.
There exist a lot many insurance agents in the market selling expensive policies that may not be of more value to your business. Picking up the best plan by avoiding supplement policies that fit your financial plan helps in increasing your profits.
5. Not Tracking what you spend
For any business, having your finances on track is of most importance. Calculating your daily expenses into your ledger accurately helps in identifying your monthly cash flow for a healthy business. If you aren’t sure about the profits and losses who might probably end up with negative cash flows with more debts. Having priority expenses converts your negative cash flows into positive ones. Thereby you can reduce the unnecessary expenses by improving your daily income with well-defined net income and net worth of your business.
At the end of the day, improving your dental practice is what matters. Avoiding these common mistakes can increase your chances of attaining financial independence at the right age to enjoy retirement.