Growing dental practices with a virtual CFO

Growing dental practices with a virtual CFO

 

You are a dentist. Even if you did play a certified finance officer (CFO) on TV, you’re probably not a finance whiz. Your focus is on your patients, and this has led your patient list to grow. A successful practice, however, is not solely dependent on your dentistry or even a growing patient database. A successful practice takes business acumen. That’s where a virtual CFO can make all the difference.

What is a virtual CFO?

Think of a CFO like a money strategist for your business. The role is not like that of a bookkeeper, whose job is to input data and reconcile bank statements. A CFO is also different from those whose primary job is to address taxation.

A CFO goes beyond those pieces of the accounting puzzle and works to ensure financial efficiencies that will help your practice reach its goals. CFOs offer insights, uncovering places where fiscal hygiene may be an issue and establishing best practices for a healthy outcome.

Successful dental practice owners have financial and organizational goals. For example, paying off equipment loans early, seeing greater workforce efficiency, or having better control over lab fee and supply charges. Or, perhaps your accounts receivables are too slow. You may not know just what is keeping you from greater profit, but a CFO will know.

Why a virtual CFO?

Employing a full-time, on-staff CFO will help you crush your bottom line. But what about an outsourced CFO? This is exactly the kind of solution that has worked well for a series of dental practices throughout the US. Virtual CFOs work from their offices yet support practices in any location.

A virtual CFO dedicates a portion of his or her time to your business. They have the necessary skills to review financials and understand the story that the books are telling. They’re often called fractional CFOs because they cost only a fraction of a salaried professional.

How does it work?

A virtual CFO works directly with the owner or office manager to review the books and discuss goals. What would you like to see happen this year? What would you like to see happen in five years?

After discussing goals, the next step is to assess internal controls and analyze the current level of risk for fraud. No one thinks they’re going to be cheted by their employees, yet in the 2018 Association of Certified Fraud Examiners’ (ACFE) Report of the Nations on Occupational Fraud and Abuse, it is estimated that small businesses lose 5% of annual revenue to fraud. Considering that the median loss from a single case of occupational fraud is approximately $130,000,1 I often begin with an evaluation of a practice’s internal controls. A company’s fraud investigation and forensic accounting division can work with a practice if a need is uncovered during this review.

Once any red flags are removed, the virtual CFO will develop a plan that demonstrates activities and outcomes with clearly stated key performance indicators (KPIs). It is these indicators that will drive the practice to attain its goals, therefore it’s critical to monitor and report on these indicators monthly.

This is a highly customized approach that results in a strategy unique to your practice. This strategy reflects you, your team, and your values. Because your systems have been analyzed, a virtual CFO can identify trends to help anticipate issues unique to your practice operations. The CFO will work with the office manager to closely monitor activities and quickly make changes to improve cashflow.

What’s the outcome for you? Peace of mind and improved efficiency.

Let me share an example

Our company developed a strong relationship with a dental supply business. One of their clients expressed frustration because the practice never seemed to have the number of required supplies. One month they’d have too many gloves and the next month, not enough.

This supplier knew we had the ability to help not only with better controls for dental supplies, but also to help the practice gain a better handle on overhead in general, as well as accounts receivable, employee productivity, and even incentives.

This dentist was in North Carolina, far enough away that it required us to work remotely once we established the initial KPIs. For more than two years, we were a virtual CFO, holding our monthly meetings via phone and internet.

Over the course of that agreement, we were able to create internal controls and establish supply management systems that decreased dental supply costs by 3%. As a busy office, this made a big difference to the bottom line, one the dentist could now clearly see as his chart of accounts were streamlined, making reports a snap.

Are you a good candidate for a virtual CFO?

Dental practices are ideal candidates for the services of a virtual CFO. If your business is ready to grow, if you’re looking to improve cash flow by determining how to better allocate and manage line items such as lab fees, supplies, and accounts receivable, or if you need to better manage employees, then you are a good candidate.

Most of our virtual CFO clients have at least $500,000 per year gross and the desire to grow. They want to see more profit come home with them and they want to reduce their overall debt. They understand how their success can be positively impacted by applying and analyzing metrics.

What to look for

If a virtual CFO interests you, search for a firm that’s a good fit for your practice. Not many firms offer a virtual CFO service because it requires a customer service-focused structure. Look for a team that is very communicative and highly responsive—you’ll want your calls returned within a day.

You’ll also want some bench strength. If the CFO you’re working with can’t answer your question, the person should be able to ask his or her colleagues. Look for a stable or growing base of employees in the firm you choose.

Don’t get hit with surprise bills. The contract you sign should be clear and deliberate. At Adam Shay, CPA, we offer virtual CFO services as a fixed price agreement, so you know what fees to expect each month. Look for a firm that thinks and operates like you, and one that’s entrepreneurial in nature. Search for one that operates in a manner similar to your practice, with daily huddles, employee incentives, and familiar productivity structures.

Whatever you choose, know that a virtual CFO can change the way you feel every day. You’ll be able to rest assured that the systems driving your success are solid and secure.

Source: Dentistry IQ

Comments are closed.