Cash Flow Considerations When Opening a Dental Practice – What To Expect

August 18, 2022

Cash Flow Considerations When Opening a Dental Practice – What To Expect

If you’re striking out on your own and starting your own dental practice, there’s a lot that goes into the process. And one of the most important things is considering your practice’s cash flow once it opens. What does that mean? Read on and find out in this blog from Tooth & Coin.

What Is A Cash Flow Projection, And Why Does It Matter?

Basically, a cash flow projection is an estimate of the money that will be flowing into and out of your business. For obvious reasons, it’s important to have an idea of how much you’ll be spending in overhead costs, and how much money you’ll be taking in from patients. 

The Importance Of Creating A “Pro Forma” Budget

So, where do you start? A pro forma budget is a great place to begin. These are budgets that include a variety of “What If” scenarios. They help you gain a greater understanding of your finances, and how they’ll be affected in a variety of situations.

For example, you could create a pro forma budget for your best case scenario, where you get more than $1 million in patient billings in just a year. You can also create another where you get $500K in a year, and a final budget where you get $250K in a year.

Using this type of budget, you can also play with things like taking on loans, hiring more employees, and other expenses, and get a better idea of what may happen in each situation.

Common Expenses To Consider When Opening A Dental Practice

An important part of cash flow is understanding what expenses you’ll need to pay for when opening your own practice. This is far from a comprehensive list, but here’s a quick rundown of some of the expenses you should consider when creating a pro forma budget.

  • Employee payroll – Employee payroll usually represents at least 20% of your overhead. This includes wages, benefits, training, workers’ comp insurance, malpractice insurance, and a variety of other costs.

  • Facility-related expenses – This would include rent or mortgage payments on your building, as well as repairs, maintenance, HVAC, electricity, gas, water, and other such utility bills.

  • Dental equipment and supplies – You’ll need to consider the various equipment and supplies you need, from x-ray machines to PPE, CEREC machines, dental chairs, and other tools and dental technology.

  • Office supplies and equipment – Along with dentistry-specific equipment and supplies, you’ll also need things like general office supplies, copiers, fax machines, computers, and so on.

  • Lab work partnerships – You’ll likely partner with a dental lab to create dental prostheses like crowns, dentures, bridges, and other such restorations. While you’ll ultimately make money on these treatments, you typically must pay for lab work before patients are billed, so you should keep this in mind.

  • General business-related expenses – There are lots of expenses associated with running any business, including a dental office. This could include things like paint for internet service, dental software, accounting services, payment processing fees, and other such costs.

  • Marketing and advertising – The cost of marketing and advertising can vary. But if you’re starting a new practice, you may need to pay for marketing services to get people to come to your practice. This could include web development, physical mailers, digital advertising, radio ads, billboards, and lots of other potential methods of advertising.

Don’t Go It Alone – Tooth & Coin Is Here To Help With Cash Flow Projections!

At Tooth & Coin, we’re specialists in dental accounting. That means we’re here to help if you’re opening a new practice. From cash flow projections to pro forma budgets and more, our team will help you through every step of the way.

With our help, you can get accurate and realistic projections of how your business will perform, prepare for both best and worst-case scenarios, and get the expert advice you need to succeed when you open your new practice. So don’t wait. Give us a call now at (877) 265-2121 or schedule an appointment with Jonathan VanHorn to get started.

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