Episode 584: The Secret Key To Financial Freedom

Kiera and Brit are here to geek out on business financing. In this episode, the two break down a ton of finance-related topics to help you get your practice in ship-shape for the end of 2022. Together, they touch on …

• What a profit and loss statement is

• Ways to increase revenue and decrease expenses

• The importance of collections protocol

• How to lower overhead

• Why it’s so important to know your numbers

Episode resources:

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Transcript:

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0:00:05.6 Kiera Dent: Hey everyone, welcome to the Dental A Team podcast. I'm your host, Kiera Dent. And I have this crazy idea that maybe I could combine a doctor and a team member's perspective, because let's face it, dentistry can be a challenging profession with those two perspectives. I've been a dental assistant, treatment coordinator, scheduler, filler, office manager, regional manager, practice owner, and I have a team of traveling consultants where we have traveled to over 165 different offices coaching teams. Yep. We don't just understand you, we are you. Our mission is to positively impact the world of dental, and I believe that this podcast is the greatest way I can help elevate teams, grow VIP experiences, reduce stress and create A teams. Welcome to the Dental A Team podcast.

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0:00:51.1 KD: Hey Dental A Team listeners, this is Kiera, and you guys, I am beyond giddy about the fact that we are having a way for you guys to kick off your 2023 in the most epic way. That's right. I want you guys to go into 2023 with direction, with a plan and to actually get something done, done and done. If you've been looking at that operations manual, it is time, guys. For three months, every single week, I'm going to be doing a workshop with you and your team in January to get that operations manual done in three months. Guys, this is a value of over $10,000 that I know you're gonna freaking love because you're actually going to get it done. So if you wanna get your OPs manual done in three months and kick off your January ultra strong, head on over to thedentalateam.com/opsmanual, and I will see you January 5th for our kick-off.

0:01:44.7 KD: Hello, Dental A Team listeners, this is Kiera, and you guys guess who's back? She's been MIA for only a couple of months, probably 'cause she's been hauling across the United States forever, but Brit Stone, one of our favorite top consultants, joining me on the podcast today. Brit, how are you doing today?

0:02:00.5 Brit Stone: I'm doing great. Brit's back. So good to be here.

[chuckle]

0:02:03.6 KD: No BS Brit, she's back guys. [chuckle] I actually think that was the last podcast, Brit, was when you and I were hot and heated and it was like no BS Brit's on the pod.

0:02:14.7 BS: I think that's the one where quite a few clients were like, "So I heard the latest podcast." I'm like, "Oh really?"

0:02:21.6 KD: If you missed it, Alex will be nice to you guys and link it in the show notes. So she's a trooper that way. I appreciate Alex making your lives easy. But yeah, Brit, you've been on the road a ton. Tell us kinda how it's been like, what's road life as a traveling consultant going to offices? You've kind of had a busy world lately.

0:02:41.1 BS: Road life is fun. So world life is fun and crazy all at the same time, because you get to go to lots of different time zones. So that's always fun. Where am I? What time is it? I'm not sure. I hit a few recently.

0:02:54.9 KD: Especially coming from Arizona where they never switch time zones even when the rest of the world does.

0:02:58.9 BS: We do our own things.

0:03:00.7 KD: Yeah, you really do. [chuckle]

0:03:02.8 BS: So that's always fun. Get to see lots of great people. It's always fun to be in person with our clients and their teams and it's truly like my favorite. We have a good time playing games and just learning together and growing together. So that is fun. But other than that road life, it's fun to go see different places, man. People live in some cool areas, so I always love that.

0:03:25.5 KD: Absolutely. And like you said, I love that you said we play games. Guys, welcome to Dental A Team consulting. We don't come in and do hard things because we believe that it can be easy and that it doesn't have to be hard. So I love that you've gone... I know you just implemented traction with a practice, they've grown, you've been with them for almost two years now. Now they're incorporating traction, you just taught them how to run it. So the EOS traction model, we also go and we are not EOS certified and I purposely did that for political reasons. So we do Dental A Teams variation of EOS but it seems and looks and feels very, very similar. But with that said, today guys, I thought Brit would be an excellent guest. One I love to podcast her with her, but two, Brit, if you guys don't know, is a super savvy DSO business numbers gal.

0:04:15.0 KD: So when I wanna geek on business, Brit and I will just hit it hard. We actually just did Business Master together with Tony Robbins. It was real fun. We won, our team won again and it was just really fun to be able to build a business with Brit. So in the business vein there have been a lot of questions and I think 'tis this season, we're all, looking at those P&Ls end of year coming up, but really how do we actually lower that overhead? So I thought Brit would be a really, really superstar to bring onto this because I know she has come from even more business in a lot of ways than I have. So Brit, kind of walk me through what are some of the things you've seen on how offices can lower overhead? Maybe even start with like what is overhead to begin with?

0:04:56.3 BS: I was gonna say, can I put a plugin that if you don't look at your P&L it says, "Please start looking at your P&L every month."

[chuckle]

0:05:05.8 KD: Amen guys. You can literally email your bookkeepers and say, "Hey, I heard on the podcast that I need to be looking at this and have them just email it to you." I personally have it emailed to me every week. I know it's not perfectly up to date, but I think having that cadence of looking at it is a good habit to get into. Even though I felt like I was reading Chinese the first probably like 500 times I looked at a P&L and I'm like, "This thing makes no freaking sense." And today it's finally starting to make a little bit of sense.

0:05:33.6 BS: It takes all of us a little bit of time, but I think that's the first thing coming into the conversation is like, truly like no judgment if you're not, but if you're not, it will be a great benefit to you if you are. 'Cause I think it can be a little intimidating for everybody. And so it's not uncommon that some of our owners that are like, "Yeah, like I know I get it, I know it's there but it's kind of super intimidating to look at." So I think buckle up for it. Learn how to read it. We'll go through, I think it's good. Go through some basics. I like math, I like algebra, which is probably why I like looking at P&L 'cause to me it's just an equation. [chuckle] So it's alright how much money do I have? What's my revenue? What's my income? Or in dentistry, like what's my collections? What's my cash money? What did I spend? So minus like all the money I spent that month and what's left over, which is my profit. So simple like three piece equation. Big picture of what we're looking at when it comes to our P&L.

0:06:32.9 KD: Absolutely. And I like also, let's start, I remember I had somebody ask me, "Kiera, I don't know what a P&L is," and I wanted to hug them, because I thought this can sound like we're speaking another language. So a P&L is a profit and loss statement. Depending upon the software you're using, typically that runs through a QuickBooks or Xero or whatever accounting software you're using, but all of them should run a profit and loss statement. There's also this thing called chart of accounts, which are all the categories on the left hand side of your P&L. So on the right hand side of this P&L are all the numbers like Brit was saying. And on the left hand side, they break it into categories. So as we spend money, and I honestly, the way it helps my brain is I think about, well in personal life I get a paycheck and I spend money on things like rent, my mortgage, cars, gas, food, electricity, all those things I just listed off rent, lease, mortgage, whatever you're paying your car, those would be your "chart of accounts".

0:07:30.6 KD: So that's where we're spending the money. So in a business, and in dental practice, that chart of accounts can be money we're actually spending on hiring, our payroll expenses, our supply expenses, our lab expenses, and we wanna make sure everything from our credit card, we go and swipe at Home Depot, we swipe at the gas station, we swipe to buy supplies at Henry Schein, that all those swipes of credit card transactions actually get allocated to the correct account so we can see how much money, every single month, we have spent for on the different categories on a P&L as well. So that's where it helped me of like, okay, in real life I budget. In real life I look to see how much of my paycheck is spent on my housing and I didn't used to do this guys.

0:08:11.6 KD: So I just have to equate it to real life for myself. But that was really how I started to understand like, got it, like you said, Brit, money coming in, how much money did we get into the practice, our collections, how much money did we spend going out of the practice and in what categories did we actually spend it in? If those chart of accounts don't make sense, your CPA can change them and I really think it's important to do. So when I actually switched that in Dental A Team, my world got a lot better. Now instead of just saying like I have money coming into our account, I have it categorized to find out okay of our platinum clients, of our gold clients, of our silver clients, so I can keep track to see do we have space for more platinum clients? Do we not have space for more platinum clients? But it helps us see on a P&L where is the money coming from and then what are we spending this money on?

0:08:58.8 KD: So I literally have it broken down by all of the different providers in our company. So Brit, Tiff, Dana, Kiera, to see how much are we paying for that just like you guys would of what money's coming through? Are we getting this from membership plans? Are we getting this from production and collection? And then what are we actually spending it on? What are we paying our associates? What are we paying our front office? What are we paying our hygienist? All those things I feel really help you have good optics of a business to make smarter decisions.

0:09:25.4 BS: Agreed. And I love that you related it back to personal budget 'cause that's exactly how I think about it. And even when it comes to doctors and helping team members even understand our office managers kind of being involved in helping us do it, like if you can understand a personal budget, which is money coming in, money going out and how I can impact it, then you can 100% learn P&L, profit and loss and how you can manage it.

0:09:48.8 KD: Amen. So that to you guys is like crash course into P&Ls. Also, disclaimer, we are no CPAs over here, guys. We did not go to school for this and we do not have accounting backgrounds. So this is coming to you of real life because when my CPA says, "Hey Kiera, here's your P&L and your balance sheet and your cash flow," and I'm like, "All this stuff is crap. I don't know what any of it means. I can't read it and you tell me that I've got money left over to pay my taxes, but it's all been spent." Like, it made no sense to me. So I feel like agreed with you have that money coming in, money going out, that to me is a P&L. And yes, it's a little hard because typically P&Ls come a month after you did the transactions. So, they're a little retroactive, that's just how it operates. But you can still get a pretty good baseline, especially if you look year over year instead of just month over month.

0:10:38.5 BS: And I think what you said, like your accountant and most accountants will do it can help to organize things and I highly recommend it to set it up and we can give some tips on how to help you set it up. But it makes it much easier to read when the categories make sense to you. They could even add in like percentages for you, which we'll kind of go into so they can make it super simple for you to be able to go and look at every month to where you don't have to do a lot of extra work to know what's going on.

0:11:09.2 KD: For sure. And I think that that's the biggest thing as to why people get intimidated by this P&L because it doesn't make sense. And then your supplies might be sky high, your CPA is allocating that your rent is in your supplies and that doesn't make any sense. So making sure the correct transactions are going into the correct categories and the categories make sense. That's why I'm super pro a bunch of like dental specific CPAs. Like HDA is one of my top favorite ones with Morgan. He's been on the podcast before. I just love him because he's dental, a 100% dental, your reports come to you in dental lingo. He helps you get your chart of account set up in dental lingo. They know how to allocate it correctly. So your reports like, I feel information that comes to you is only as good if you can understand it. And if I can't understand it and it doesn't make sense to me, I'm not going to use it. But yet this could be a life changer for you of the amount of money you can take home of making smarter decisions on a business of do we add another team member, can I add another associate? And really being able to understand that I feel is just critical as a business owner to feel confident that you know where your money's going and you can make smarter decisions because you're informed rather than just guessing and hoping.

0:12:22.0 BS: For sure.

0:12:23.8 KD: Okay, Brit, that was like a deep dive. I hope you guys are following. Anything that I maybe said that was confusing, let's clarify, but hopefully you guys got one, what is a P&L? It's a profit and loss statement. There's a chart of accounts which are the categories, and like Brit said, a P&L is just money coming in, money coming out and what's left over at the end of that P&L, right? Is that anything else we need to wrap up?

0:12:50.3 KD: Are you guys sick of trying to figure it out on your own? I know I am. When I'm trying to run a business, sometimes I just think like there's got to be a better way to do this. And so for me, my answer has been to find someone who's done it and does it really, really, really well. Like I'm talking the best of the best of the best. I want someone who's been in my shoes, somebody who understands what I'm going through. When I was looking for the consulting business, I found a coach who literally has run a consulting business. Well that seems like the perfect fit. So you guys, right now we have a few spaces open in our platinum consulting. That is in the consulting where we actually come to your practice, we help you get systems implemented. We don't just tell you what systems to implement, we actually implement them with you and for you. You guys, it is one of the best investments I have ever made is to hire a coach who understands the business I'm in, who's lived it, who's done it. And that's what we in the Dental A Team do. We literally physically fly to you. So if you're sick of trying to figure it out on your own, if you just want somebody who understands you, join our platinum. I'd love to have you, I'd love to have our consulting team come out and see you, be in your office, be with your team and truly help you get onto the easy path of dentistry. It doesn't have to be hard. So join us in the platinum, we'd love to have you.

0:14:10.8 BS: No, I think that's the basics. So then we can start to dig into the biggest sections, again, I love algebra, biggest sections we can impact to ultimately increase our profit or that outcome at the end is by increasing our revenue, decreasing our expenses. Those are kind of our two levers we have to pull when it comes to a P&L information we take from it and what we can do with it. So I think that's an important piece to kind of just recognize making more money or spending less money ultimately will result in more profits.

0:14:48.1 KD: Absolutely. Just like in a personal life, right? I can either increase my paycheck and have more money left over at the end of the month or decrease my spending, AKA Kiera, when I lived in Arizona, when Jason was in pharmacy school, at the end of the month I would go and find all the things I could possibly return to the grocery store and to the places so I could actually have money left over. So I decreased my expenses, I didn't increase my pay. Ways I would increase my pay were getting side hustle jobs, AKA natural made dog food. I will share that story another day. Washing windows. I did have a window washing business for a hot minute. But those are ways that I was able to increase pay. So in a dental practice, we either increase production or, Brit, I think you've seen this too. Another way that you can actually increase your revenue is collect your AR like...

0:15:34.7 BS: A hundred percent. It's cash money. It's cash money. So how can we get more cash money?

0:15:39.9 KD: If you couldn't see Brit, she was just pounding her hand. I know she was, I can't even see her. And I'm like, that is her saying cash money, because our AR, accounts receivable, so a lot of times when people are trying to decrease their overhead, which overhead truly at the end of the day is how much does it cost for us to run this business, to reduce that, like Brit said, the levers either increase our profit, our revenue or decrease our spending, a great way to increase that revenue, if you're not wanting out a bunch of production to the schedule or you can't or you whatever it is, look at your AR because there's usually hundreds of thousands of dollars sitting in AR of uncollected money that if you collect it, can actually reduce your... It can increase that money that you're bringing in, which will by default, even if you did nothing else, decrease those expenses because we have more money that we've collected.

0:16:30.4 BS: Yeah. And if you're one of those doctors and I see it and I hear it, that's like why? Like our production's really good, our production's really good. Why isn't my profit where it should be? Or why aren't we making as much money? A hundred percent, like that's the first place I would go to look. And if our production's really good, production is a leading measure, right? It leads towards collections, we've gotta produce to even have the opportunity to collect. But until we actually collect it, it's not real yet. [chuckle] So...

0:16:58.0 KD: Exactly. So I would say on that, I think we've walked you guys through really well of what a P&L is. What, how, I love Brit where you just said there's two levers; increase our revenue or decrease our expenses. And like you just said, a lot of times where are we actually collecting the money? It's okay if you produce it, but at the end of the day what I truly care about are how are your collections? Because those two go hand in hand. But collections pays the bills, production just feeds our ego. And so we've gotta make sure that we're actually collecting what we're producing. Otherwise we can't pay the bills with just production on a page. So really it's important to make sure you've got a strong collections protocol placed to make sure someone's actively working it that knows how to do it. If they don't, guys that's what we do all day long is teach people how to do this effectively in a very simple way. Definitely something we can help with with on that as well.

0:17:51.4 BS: For sure. And then the next piece of it is expenses, which often another term for expenses when we kinda wrap them all together is our overhead, right? So we add it all up together and we get to what is our overhead, how much is it costing us to actually keep this business running? And then that's the next piece we can start to kind of look into to see what opportunities we have to decrease it and increase our product.

0:18:21.0 KD: Yes, absolutely. And so Brit walk us through like, okay, I am a dentist, we are collecting, our collections are at 98%, which by the way guys, even if you are at a 98% collection ratio, you still might have money sitting in your AR so please don't gloss over that. There is still money there. Even if your collections are great, check to see how much money is sitting there, especially in the 60, 90 and over 90 day buckets. Those are ones that we'd wanna collect looking at membership revenue as well. So when we have that, where do we start? Like okay great, I'm collecting, we're producing 100,000, we're collecting 100,000. Then we look at all of our expenses, which for me guys, my cadence is every quarter when we run traction, I go through my entire P&L of all the expenses for the last quarter and look to see is there anything I should cut, anything I shouldn't be paying for anymore. And really assess to make sure there's no extra expenses in there. Other things of expenses, Brit, what are some areas within expenses in a dental practice where they can reduce that when they're looking at that P&L?

0:19:24.1 BS: Sure. So I would say like when I'm first tackling a P&L or starting to look at it and get familiar with it, and this is where it helps when you do have a dental specific accountant. 'Cause usually accountants will start to put things into categories, right? So like payroll's gonna be a category and marketing's gonna be a category and dental supplies are gonna be a category where I might have bought dental supplies from Henry Schein and Patterson and all these, Benco, all these different places, but it comes together to know that that's dental supplies. So I can start to see with those categories kind of based on industry standards, like should I be and am I in the ballpark? Am I completely out of the ballpark? Or kind of where am I sitting? And then from that, once I've got the categories, I can just pick, alright, if there's a category that's high, then I'm gonna start to dig into it and see why is it high. So that's kind of for me the first step I would take before I get like too into the weeds and the details, just start targeting like where is our biggest opportunity? Great, let's go look and dig into that, see what's actually going on, see what's in that category, what are we spending, what opportunities do we have to decrease our spend in that area.

0:20:34.2 KD: Yea. And I think it's really important to look at what the categories should be. So typically speaking, payrolls between 25% to 30% is what we like to see payroll, there's supplies 5%, labs 9%, you can go down the list of everything. In my chart of accounts guys, I've literally gone through and put a percentage next to each portion of my each category of how much I wanna be spending in those categories, that way I can make sure I'm profitable at the end of every month. But that like, again, that was me four years into a business before I even thought to do that. So I agreed with Brit, that's for a more advanced, if you're already doing it, rock on. Put a percentage for every one of those chart of accounts to make it up to 50% or 100% or whatever percentage you want your overhead to be.

0:21:20.6 KD: Put that percentage in next to each of those categories, and then you can see if you're over or under in each of those categories. So that's gonna be our 2, 3.0 P&L overhead users. Our basic users, the ones who are just coming in, totally agree with Brit, get your P&L, one, looking at that every month at a minimum. That's step one. Number two, getting those chart of accounts to make sense, so they're categories you're doing. Number three, realizing increased production or decreased spending. And then really dive into all those different categories and see how much we're spending? Why are we spending? And then could we find easier ways to do it? Could you guys get into a like a dental supply savings group? Could you bundle it with your Benco rep and get a discounted rate on that? Could you talk to your lab people?

0:22:06.1 KD: Could you use a different lab group? That would be the things that I would feel could really help you decrease those expenses, just like again, in a household budget. Jason, my husband, he drives me nuts, but I love him for it. He will go through and like call our insurance or our internet company and say, "Hey, we're gonna cancel our internet service." And I'm like, "Hey, remember I work from home. Don't cancel it." But he wants to get the lowest prices. So we're decreasing our expenses personally all the time. Drives me nuts. I don't do it. But that's something where Jason feels if he can keep those expenses lower, we have more personal profit at the end of every month from the paycheck. So I feel like if someone were to want to go implement this Brit, like I kind of walked them through it, beyond getting your P&L and looking at it, let's kind of go like a beginning, a middle and an advanced, where can they go to really start to move those levers on overhead?

0:23:01.0 BS: Yeah, I think some of the biggest ones that are a little bit more variable that we have control over, I'm always gonna take a look at payroll. Am I paying any overtime? What's going on? Is that pretty much as good as it's gonna get? Usually it's overtime that I'm looking at that I wanna control with that. Dental supplies are another one that we have a lot of control over and can be very variable 'cause we get out of something or we think we're out of something and our ordering can get a little out of control. So working from a budget when it comes to our dental supplies can be super helpful. And then those are some of the big ones that I think to look at initially. And then from there, just kind of just take a look at least know maybe what industry standards are, which your accountant should be able to kind of help you with, or especially if you've got a dental specific accountant, and see what sections you have of your P&L that might be a little bit high. And then just start figuring out where am I making that spend? Do I actually know where that money is going? Do I know what I'm spending it on? Is it worthwhile for me to spend money on or do I need to make any adjustments or is there any opportunity there to do it for less?

0:24:11.2 KD: I love it. And if you were a person who just heard Brit say that for me, I'm like, "Awesome. Checklist done. I'm doing this." If you're a person who hates math and you're like, "What the, you want me to go look through all this? Figure it out." I just wanna paint a picture of what it feels like to know your overhead. And this will be me personally, but also clients. I feel like people who know their overhead are much more confident, collected and less chaotic and stressed because they're not constantly worried, "Will I have enough money to cover my expenses?" They know how much money they need to produce, they know how much money needs to be collected, they're watching their collections to ensure that there's a healthy collection ratio on it. And then they also know what their expenses are. So when we talk to people who know their numbers, like you can tell any practice who actually looks at their overhead, looks at their numbers because they just have a confidence to them.

0:25:01.5 KD: And when you ask how much are you paying on supplies, they usually can tell you we're at about 4% to 5% per month. That's the type of elite knowledge that you should be aiming to have. It won't happen overnight, but really being able to know your numbers, because I feel like having that confidence knowing, like I talked to a doctor yesterday and we are trying to figure out, can she afford to hire this associate? And just feeling so scared, can I hire? And we literally went through like, alright, let's look at our P&L, let's look at our overhead. Let's look to see how much this person would cost us as a worst case scenario, are we comfortable with this much profit left over? But if her books would've been, she has no clue, she has no clue how much she's spending every month, that makes it much harder to make a decision effectively and efficiently and also very confidently if you don't have that behind the scenes. So that's what I would say, Brit, I don't know if you've seen anything else beyond what I said of what it just feels like when you really do know your numbers and can reduce that overhead at all times.

0:26:00.8 BS: I think there's also a power that comes when you actually like know what can be done to help the thing, right? So, and I think that's with the P&L instead of just always, like you said, feeling like I'm not aware. A lot of doctors it's like, well, I just feel like I'm making nothing or I don't really know without uncertainty. Whereas when I know like, alright, here's the areas where I've got opportunity or like, great, we need to focus on producing and collecting more, it's a lot less stressful when I know how to solve an issue.

0:26:33.4 KD: Yes, you can actually go to sleep at night because you know there's a solution. Like this morning I woke up and I'm like, "Oh my gosh, I'm freaking out about this." But to be able to like know I can solve it [chuckle] I think that was my little self love today was like, I love my brain. It can solve any solution or any problem. I feel like you're right. Like if you can solve it with these numbers, you don't always have to chase, I also feel like you don't have to chase the hamster wheel of like, produce more, produce more, produce more. You've actually figured out how to fix both sides of the equation so you feel more confident as well.

0:27:05.3 BS: And you get to it quicker instead of like, "Well, let's try this. Well, let's try that. Well, let's try this." So like, you can target it a lot more and make an educated decision about things you wanna implement.

0:27:15.0 KD: Absolutely. So guys, I feel like Brit and I just did a nice crash course on P&L's overhead, how to adjust those levers, if that made sense to you, rock on, if you feel maybe a little like, "I have no idea and I think I should know that," guys, we've, we try to provide so much value on this podcast for you to go and implement and to just continue to elevate your practices to the most elite level that you can be. If you're someone like myself who sometimes likes someone to hold my hand or someone to walk me through it, as you can see Brit and I love to do this and we do it for hundreds of offices across the nation. So guys, if it's something, I feel like knowing your numbers is absolutely essential as a business owner and knowing how to adjust those, again, also essential. So if that's something that resonates with you, if you want a little bit of hand-holding, if you want somebody to just kind of guide you and your team through it, reach out. I'd love to hear from you, [email protected], and Brit, as always, it was so fun to podcast. Thanks for being on today.

0:28:12.9 BS: Thanks for having me.

0:28:13.9 KD: Absolutely. Alright guys, as always, thank you for listening and we'll catch you next time on the Dental A Team podcast.

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0:28:23.5 KD: And that wraps it up for another episode of the Dental A Team podcast. Thank you so much for listening and we'll talk to you next time.

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