- Tip 1: Have you got a Systems Based Mindset?
- Tip 2: The Framework for Success
- Tip 3: Technology and Software Requirements
- Tip 4: Choosing the right accounting tech stack for your group.
- Tip 5: What About Your Accounting Team?
- Tip 6: The Numbers Ultimately Tell The Story
- Want to know more?
- Dental Group Accounts FAQS
- Case Study
Over the last 20 years, we have seen many dental groups emerge across all parts of the world. Some very large, others smaller, but often seeking to be acquired by the larger groups at some stage, or even the vague hope of an IPO (Initial Public Offering).
The basic premise has always been to buy a dental practice or office at a certain price multiple of EBITDA , add a few more, or a few hundred more, and then sell the whole group at a much higher multiple (with a much bigger EBITDA) than what the individual practices have been acquired for.
Sounds simple – what could go wrong?
Well in a rising market, buyers and group owners who timed their exits rightly have done well financially.
But what about the many hundreds or even thousands of dental groups across the globe that still are operating, but the arbitrage exit opportunity they were hoping for has not manifested?
In the UK in this current high-interest rate environment things look very different for many dental groups.
When rates were low, borrowing was cheap, which aided the growth strategies of many of these groups, yet today, whilst some groups are buying, the appetite to purchase a practice has drastically diminished from not only the smaller groups but also PE-backed ventures too.
Along with the aforementioned higher interest rates, the cost-of-living crisis, and a difficulty in recruitment, have also contributed to the slowdown in many dental groups.
The lack of available manpower has contributed to many NHS-funded dental groups, returning funds to the Department of Health unable to meet their UDA targets.
According to the FT, NHS Dental clawback was around £150million in 2022-23. I expect it won’t be very pretty this year either, from the groups I have been talking to.
Whilst some private dental groups, have struggled to grow the top line as quickly as they had hoped, again due to manpower issues, increased competition and a lack of personnel.
In the good times, its relatively straightforward to make money building a dental group, but in my view it will be the groups that really get to grips with their financials that will emerge strongest in the down times.
With my wealth of experience over the last 20 years working with a whole host of groups, these are my 6 tips to build a finance and accounting function that will actually grow your EBITDA, but also ensure you achieve the price multiple you desire upon exit.
Tip 1: Have you got a Systems Based Mindset?
The backbone of anything successful organisation are its systems – with the financial and accounting function paramount to success. Unfortunately, I have seen this as a major afterthought by many dental group or DSO owners, seeing it as an overhead rather than something that could help them grow a successful empire.
The first step really is about changing your mindset, and thinking about what data and information do you need to have available at your fingertips to make better decisions.
As it will be interpreting the data to ensure high quality decisions that will determine the success of your group.
You will need robust systems for everything from HR to marketing to compliance to accounting.
I personally like to call it a Systems Based Mindset. So, If you have this, you are on the right track.
Now in the context of finance and accounting, you need to have a solid framework and system in place.
If you don’t, that’s your first starting point. So ask yourself what financial data do you need to know to make good decisions? Examples could include:
- Profitability by location
- Profitability by Associate Dentist
- Hourly rate of each Associate Dentist
- Key Overheads as a % of Turnover
- Cost of acquiring a new patient
- EBITDA to interest coverage ratio
The list is endless, but the above are a good starting point.
Click here to read our article on How to Build a Dental Group.
Tip 2: The Framework for Success
The framework will depend on your business structure and how you organised your group but the key factor here is you must be able to see the performance of each of your practices in your group.
There really is no excuse to not be able to see which sites are doing great and which ones aren’t.
They may all be under one company, but it really is essential to have the financial visibility of each site. If you don’t have this, you are at a significant disadvantage when it comes to making quality decisions.
Remember, quality business decisions can only occur when you have visibility of performance. If it’s all jumbled together, you will only get so far, and you won’t be able to develop your group further until you have clarity of performance.
Click here to find out more about our accounts for dental groups services.
Tip 3: Technology and Software Requirements
Once you know you need to have financial performance information for each site, then there are numerous accounting systems available to really help you gather the information and automate much of this process.
But the key has to be implementing this correctly. You will need to consider the following:
- How to get invoice and income information into the system?
- Will it be with an automated OCR system?
- Which bookkeeping system is most suitable?
- What about standardised charts of accounts?
- Will all information be centralised, or will each practice have to send the information separately?
- What about purchasing and payment authorities? Do you have controls in place?
- Have you a hierarchy in place for this for sign offs?
- What about automating much of the accounts payable side of things to speed up payments to suppliers and make your group much more efficient?
More questions than answers, but this process of evaluating the right technology and software is paramount to ensure an efficient finance and accounting function for your dental group.
Click here for more information on how to structure your dental practice’s finances.
Tip 4: Choosing the right accounting tech stack for your group.
The world of accounting software has exploded in the last decade.
Of course, the software should be cloud-based, but apart from that you will need professional help to determine the right accounting technology stack for your dental group.
In terms of bookkeeping software, there are well-known products such as Xero, Quickbooks, Sage just to name a few.
But then there is the range of additional apps that could help you streamline and speed up the whole data capture side of things, these include Dext, hubdoc, Approvalmax, Lightyear.
Then when it comes to accounts payable you will want software that will integrate into your chosen bookkeeping software. Software such as Telleroo, Crezco, Payhawk are examples here.
Then for reporting purposes, you may want to consider Spotlight, Syft or Joinn.
The right tech stack can only be implemented once a full understanding of the workflow within your accounting function has been determined.
Tip 5: What About Your Accounting Team?
Time and time again, I have seen inexperienced non-accounting team members get involved in probably one of the most important parts of the group – the money.
Why have a practice manager perform the bookkeeping, when a bookkeeper could do this efficiently and properly?
Garbage in means, garbage out, it is essential to have accurate data entry in a standardised manner, or else any reports you rely on will be inaccurate and lead to poor decision-making.
Therefore, having the right people doing the right job is a pre-requisite here.
The larger the dental group the larger the team will be, which will include bookkeepers and accountants.
You can hire internally for these roles, or alternatively outsource this to firms like ours that have the experienced manpower to support your group.
Click here to find out more about offshoring your accounts.
Tip 6: The Numbers Ultimately Tell The Story
The bookkeeping should be done daily, with the management accounts available at the end of each month, and a review of each practice’s performance should be evaluated – that’s when you know if things are going to plan.
Without a regular review of performance, assuming you have followed steps 1 to 5 above, it would have been a pointless exercise.
Therefore, make sure you review the performance of each site and then take any necessary action swiftly.
The numbers always tell the story, but your whole finance and accounting function must been structured and enabled to tell you the full story, not a half-baked cobbled-together story of your dental group’s performance.
Click here to find out more about our financial health check up services.
Want to know more?
If you are a Dental Group or DSO anywhere across the world, with our shared service centre with talented team members, we can help you implement and run a much more efficient accounting and finance function but also help you grow a better dental group or DSO.
As that’s the ultimate aim, to build a quality dental group that creates value for all stakeholders.
Good luck, and get in touch if you need assistance.
Dental Group Accounts FAQS
I have a small dental group of just 2 sites, does the methodology outlined apply here too?
Yes.
In our experience, having a well-thought-through workflow which is expandable is key to success. Get this structure right, and you then have a solid platform for your 2 sites, and any additional sites you acquire or start up.
This sounds complex, can Samera help my dental group?
Simply yes. We can help you with the whole set up and running of the accounting and finance operation of your dental group, or just one aspect, including providing experienced team members to carry out all aspects of the work required.
What’s the first step in setting this all up?
In our experience, the key is to understand your existing processes and workflows, and then define a detailed workflow for your organisation. Our advice would be to implement this stage by stage, rather than all at once.
How much experience does team Samera have in this area?
We have been working with Dental groups and DSO’s for over twenty years, so we have seen most things, and also through our sister business, The Neem Tree Dental Group, we test all our processes, to ensure they are robust before sharing with our dental group clients.
Does team Samera work with international Dental Group clients?
Yes.
Our expertise in this area is second to none, so we can work with DSO’s or Dental Groups across the UK, Europe, North America, the Middle East and Asia,
Case Study
How should I set up accounting systems for a dental group?
To set up accounting systems for a dental group, start by choosing robust accounting software that can handle multiple locations and centralize financial data. Implement standardized processes across all practices for tracking income, expenses, and payroll. Set up a unified chart of accounts to maintain consistency in financial reporting. Ensure regular financial reviews and reconciliations to monitor performance and cash flow. Finally, train staff on the accounting procedures to ensure accuracy and compliance.
What are the best practices for managing cash flow across multiple practices?
To manage cash flow across multiple dental practices, maintain a centralized cash flow management system to monitor income and expenses. Implement standardized invoicing and payment processes to ensure timely billing and collection. Regularly review cash flow statements to identify trends and address issues quickly. Use budgeting and forecasting tools to plan for future cash needs and allocate resources efficiently. Keep reserves for unexpected expenses and consider inter-practice loans to balance cash flow between locations.
How do I ensure compliance with tax regulations for a dental group?
To ensure compliance with tax regulations for a dental group, centralize your accounting to track all income, expenses, and payroll accurately. Regularly review tax obligations for each practice, including VAT, corporation tax, and PAYE, and ensure timely submissions to HMRC. Implement standardized processes across all locations and work with a tax advisor familiar with dental practices to stay updated on regulatory changes. Conduct regular audits to identify and correct any discrepancies.
What accounting software is recommended for dental groups?
For dental groups, recommended accounting software includes options like Xero, QuickBooks, and Sage. These platforms offer features tailored for multi-practice management, such as centralized financial tracking, payroll integration, and real-time reporting. They also provide scalability to accommodate the growth of your dental group and ensure compliance with tax regulations. It’s important to choose software that integrates well with other tools you use and provides robust support for managing multiple locations.
How can I streamline payroll for multiple dental practices?
To streamline payroll for multiple dental practices, use centralized payroll software that handles multi-location payroll processing efficiently. Automate calculations for salaries, taxes, and benefits across all practices, ensuring consistency. Set up a unified system for employee records and time tracking to simplify payroll management. Regularly review and update payroll data to ensure accuracy and compliance with tax regulations. Outsourcing payroll management to a specialized provider can also reduce administrative burden and ensure efficiency.
What financial reports are essential for managing a dental group?
Essential financial reports for managing a dental group include:
- Profit and Loss Statement: Tracks income and expenses, showing overall profitability.
- Cash Flow Statement: Monitors cash inflows and outflows, ensuring liquidity.
- Balance Sheet: Displays the group’s assets, liabilities, and equity.
- Budget vs. Actual Report: Compares projected budgets with actual financial performance.
- Payroll Report: Details employee compensation, including taxes and benefits.
These reports are critical for making informed financial decisions and maintaining the financial health of the dental group.
Dental Accounts & Tax Specialists
As dental practice owners ourselves, we know what makes a clinic tick. We have been working with dentists for over 20 years to help manage their accounts and tax.
Whether you’re a dental associate, run your own practice or own a dental group and are looking to save time, money and effort on your accounts and tax then we want to hear from you. Our digital platform takes the hassle and the paperwork out of accounts.
To find out more about how you can save time, money and effort on your accounts and tax when you automate your finances with Samera, book a free consultation with one of our accounting team today.
Dental Accounts & Tax: Further Information
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