Dental practices, historically, have always been something of a unicorn when it comes to cash flow management. This is due to the nature of the business model that has been built up over many years. A patient turns up at the practice needing treatment, you provide your exceptional services and they pay a fair amount for your time before leaving.
This fantastic model meant that for many years, cash management and forecasting for dental practices was something of an unnecessary extra. Business, on the whole, was always good and cash was never really much of an issue.
Roll forward to 2023 however, and the landscape in which dental practices operate has fundamentally shifted from where it was even just 10 years ago. The continued rise in private dentistry has increased competition in the market. With more players entering the scene, your practice now needs to do more than ever to stand out and attract those high value patients.
On top of this, recent inflationary changes are now being felt in all aspects of the dental business model. Rising supplier costs, increasing wages, increased taxes and higher interest rates. The once comfortable and reliable dental model is now under pressure, and you need to take action to avoid your margins being eliminated.
One of the best ways to do this is with a financial forecast. Forecasts are a crucial element of many business models and now, industry leaders in dentistry are now implementing forecasts into their practices. But what exactly are the benefits of a forecast and how can Hive help?
Benefits of Forecasting
Aside from the obvious benefit of seeing how much profit you are projecting to make in the next 6-12 months, there are several extra benefits that a forecast can deliver you that we have seen in our experience:
Cash Flow Projecting
Worried about how your corporation tax bill may impact your cash position? Or how pay rises for your staff may impact monthly cash surpluses? A forecast can help to model these and many other scenarios so you can truly understand how small changes to your practice can impact your end of month cash position. Crucially, you can predict and project these changes before they take place, so you aren’t caught out.
Cost Controls
Forecasting can add crucial cost controls into your business and give you and your team something to be held accountable for. For example, did you know most dental practices in the UK spend somewhere between 6%-8% of their turnover on their dental materials and consumables? Your practice can begin to forecast forward at a spend within this region and if your actual spend exceeds this level, you can review and assess areas for improvement.
In addition, having a forecast in place gives your practice team a target and budget to work to. This will encourage them to drive bigger discounts with suppliers which will benefit your practice.
Performance Appraisals
A conversation we often have with practice owners is around how to handle performance reviews with their associates. The practice has overhead costs to cover and staff to pay, alongside making a profit for the practice owner which you should be entitled to, as a return for your risk and investment! A crucial part of the overall performance of the business is therefore ensuring that your associates are profitable when they work in practice.
Having a forecast in place and projecting individual clinician turnover can enable far more constructive reviews with clinicians and gives them a target to work towards as well.
Growth Planning
Are you thinking about expanding your practice? Or perhaps acquiring your second site, maybe even your third. If the answer is yes to any of these, putting a forecast in place is simply essential. Not only will any finance provider require a forecast to satisfy their credit team’s needs, but any period of growth in a business comes with huge risk and inevitably disruption.
Having a forecast in place will dispel some of the uncertainty as you grow and will again provide a point of reference for you and your team to come back to when appraising if plans are on track.
How Can Hive Help?
Here at Hive, we have developed a tried and tested annual forecasting service that many of our clients are now enjoying the benefits of. Our forecasting service includes:
- Initial creation of the budget following discussions with yourself to understand your goals and ambitions for the next 12 months. This initial creation will also include a detailed review with yourself to fine tune and tweak the forecast before it is finalised.
- Uploading of your finalised forecast into Xero and creation of a tailored report to enable tracking of forecast vs actual at the press of a button.
- Formal annual reviews of forecast vs actual with a member of our projects team and a member of the consultancy team to discuss the results.
If you’re interested in discussing forecasting with us today, get in touch.
