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a blog by Chris Barrow

Growing Broke

Question: how can a practice have a record month for sales and no cash in the bank? Answer: GROW broke. I’m seeing evidence of this in UK and Irish private dentistry. Too many special offers just to get new patients in the door. Discounts that are too high. Finance deals that are too expensive. Payment terms that are too generous. The lack of attention to the relationship between debtor days and creditor days. Debtor days – how quickly do patients make up their mind to proceed with treatment and how quickly do they pay? Creditor days – how quickly do you have to pay for your variable costs – lab, components, materials, self-employed clinicians’ fees? The difference between the two is either your bank overdraft or your ability to restrict drawings and/or plough your own money back into the business. When the sales go up – the gap gets larger – and the bank say “NO!” Then, you panic. Working more days as a Principal does NOT solve the problem. Sometimes, a record month can kill you. Be very careful what you are giving away – just to get people through the door. Take some time out to remind yourself about profit margins and that old cliche about vanity and sanity.

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