People use metrics in many aspects of running a business, not just marketing. Metrics give an insight into the performance of a strategy or structure. And that is why measuring and tracking key metrics across a business is important. Especially for a healthcare business, such as dental practices. Not all metrics will help you understand the impact of your business decisions. While all metrics are important to observe, there are a few metrics that will directly show the health of your practices. These metrics are called KPIs (key performance indicators). They are the metrics that are critical to your business.
One key strategy to understand your metrics is to observe and report them regularly. Having a yearly report will not help you as much as you think it will. The best way to make the most of your metrics and reporting is to check in every month. That way you know what is affecting your numbers and by how much. It gives you time to alter your strategy if something is not working out for you instead of waiting till the end of the year. You can adapt to the changes in your metrics if you know what they are in time.
Why should you track key metrics?
1. Create a structure that optimizes growth.
Any change in your business will affect your overall performance. Data is the single thing that can help you understand how a business structure is working for your clinic and practice. You won’t know if you are doing better or not if you have no data to compare. Hence, it becomes important to track data throughout the year and regularly. With data, you will identify the changes that are working for your business and which are not.
2. Improve efficiency in the existing structure.
Having before and after data will help you understand what aspects of changes are helping your business and clinic. This means that you know what changes are positively affecting your clinic and how much. Besides the previous point, you can also focus on what elements are changing your metrics. So while you have a business structure that is improving your business, you can always tweak certain elements and increase efficiency for market trends.
3. Accounts for changes in company objectives.
Company objectives change with market trends and customer behavior. And this leads to changes in short-term company objectives. Your metrics should reflect this change. With changes in company objectives, your key metrics also change. The best way to get everyone on the same page is to highlight the metrics that are crucial for your business. The metrics you observe when you are monitoring your CAC differ from retention metrics.
Here are some key metrics you should watch out for:
The production metric is a measure of the performance of a process. This is one metric that all practices should track. It also includes an analysis of quality and quantity and the current costs associated with the process. This metric provides you with the overall program of the practice. It helps you identify the areas of lulls or improvement in your practice. It is one metric that you should track weekly or daily even. Your production metric should always be positive and increase as you expand. A dip in this metric means that your practice is on the decline.
Also called collection rates, this gives you insight into cash flow. A big chunk of the budgeting strategy relies on the collection metric. It is a financial KPI. And it helps you calculate your cash in-flow and cash-outflow. The collection metric reflects the amount you have at hand. The collection metric reflects the amount you have at hand. 91-98% is the perfect range. Practices have a low collection rate due to uncollected revenue. It includes unpaid bills, delayed insurance reimbursement, etc. such fluctuations in payments can harm your collection metric. It can hold you back from achieving the results you want.
Unfortunately, revenue and production rates are not the same. Production rates are used to understand the costs of a process and what your customer is paying for it. The revenue metrics highlight how much the practice is actually getting paid. Now the reason revenue and production are different is that while a customer is billed, they might not have necessarily paid the amount in full. You should know how much you are collecting and what the costs are. Additionally, collections take insurance into account. Whereas revenue does not.
4. Gross profit margin.
Your revenue is the total money you are generating from your customers. It is cash in-flow. However, a part of the revenue will go into paying direct and indirect costs of running a business. Hence, gross profit margins are a better metric to track when monitoring the changes in profit. It is the metric used when calculating the profitability of a business. While collection and production are great metrics to track, profit will help you identify the areas you can cut back on.
Overhead costs refer to the costs a company incurs that are not directly related to the product or service, such as rent, utilities, equipment, etc. People also refer to them as indirect costs, since you can not trace the costs back to a single product. High overhead costs are one of the biggest problems when optimizing cash out-flows. If your overhead is higher than your revenue, it means that you are incurring a loss. In such a case, when you are not making a profit, you need to ascertain why by conducting an analysis.
6. Case acceptance rate.
This metric varies throughout the year and can be tough to stabilize. Having a high case acceptance rate is ideal. However, getting patients to accept cases is difficult. A rate of 90% of case acceptance should be the goal. In actuality, it can be as low as 30%. There is a lot of room for error in case of acceptance rates. Factors such as healthcare literacy, dental care anxiety, and financial limitations affect case acceptance rates. There are strategies you can use to improve your acceptance rates. Such as educational sessions/pamphlets, different fanciful plans, and payment methods.
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