The pause in our daily routines initiated by the coronavirus pandemic has created severe challenges. It has also provided an opportunity to assess the effectiveness of your contingency plan and how well your business will recover once the epidemic passes. What changes will be needed to the plan once you return to the new normal that will better meet the next business interruption? If history is any teacher, we know there will be another disruption.
Business interruption can occur due to illness or disability of a practice owner, environmental disasters such as epidemics or weather events, and economic factors such as recessions or business downturns.
Your contingency plan should provide a road map on how to navigate these three key events. In the case of illness or disability of the dentist, it is important to have insurance policies that provide income to the dentist as well as practice overhead insurance to cover operating expenses. In cases where the dentist will be absent for an extended period of time, having a mutual aid agreement with local dentists can help maintain a practice during convalescence or, in the case of sudden death, maintain the practice until it is sold.
Environmental disasters such as our current pandemic or the more likely weather-related event will require communication. The ability to communicate with your team using videoconferencing such as Skype or Zoom to discuss how you will manage a response to a disaster is critically important in mitigating the unknown and fear that may result.
Communication with your patients using a robust communication software for texting, email, and newsletters will allow you to maintain connection to your patients by providing positive and reassuring messages. Let patients know that although your office is closed, you are available via teledentistry to help them in case of a dental emergency. It is vitally important to have an encrypted connection to your office network and that all communication avenues meet HIPAA requirements. Remember, cybercriminals are still working during times of distress.
If a situation arises where there are multiple days of lost production, consider what days and times can be added when you resume operations to accommodate patients who need to be rescheduled. You will want to get patients in as soon as possible and not push appointments out too far on the schedule. This contingency, as well as any other changes, should be discussed with your team prior to opening, providing them an opportunity to rearrange their schedules and be ready to implement the reopening plan.
Finally, the economic component of your contingency plan, regardless of all other events, is the lynchpin of your plan. Consider the overall performance of your accounts receivable. It is the primary area that can help you financially in the short term. However, if accounts receivable is out of control, past due accounts will likely become harder to collect, especially if patients are in financial difficulty as a result of environmental or economic disruptions.
Ideally, having accounts receivable that is 1.5 times your monthly production is the goal. Conceivably, it could cover your financial obligations for four to six weeks.
As you refine your contingency plan, consider changes to be more effective at collections. Meet with your office manager to discuss how collections can be improved. Whenever policies are developed, they should be written and routine follow-up should be part of the practice owner's due diligence. Evaluate adjustments and refunds to ensure accuracy. A big problem today is embezzlement in the dental office. It is estimated that 60% of offices have been victimized by a dishonest team member. Offices can easily be exploited during business disruption and having safeguards in place will limit your exposure.
It is essential to actively rely on your profit and loss statement that you generate each month to determine your average monthly expenses. This will assist in determining a contingency fund of at least three months of expenses in a company savings account and help determine policy limits for office overhead insurance. A contingency fund should be in a separate high-yield savings account where excess cash from your checking account is automatically deposited. This contingency fund will serve as another reservoir for cash, allowing you to fund other business priorities such as a retirement funding, or practice interruption events.
If you have a healthy accounts receivable and a relationship with your bank, establishing a line of credit can also serve as a backup to any cash flow shortfalls or be used to finance small equipment purchases.
On the personal side, create a budget for personal expenses and taxes. It is important never to commingle business and personal expenses: Keep them separate. This will help prevent you from overextending yourself financially, resulting in stress that can affect your health and relationships.
We are living through extraordinary times. As you prepare to reengage in business activity and society, it is helpful to examine where you are, make decisions, and grow from the experience. It will make you stronger, allow you to reconnect with family and friends to achieve better relationships, and enable you to make changes in your thought process to be better equipped for business interruptions.
Updating your contingency plan will help you solidify your strategic plan for success.
Paul Caselle, DDS -- a speaker, trainer, and business coach -- is a graduate of New York University College of Dentistry and the residency program in family dentistry at Forsythe Dental Institute. He brings more than 40 years of experience as a practicing dentist and has fellowship certification from the World Clinical Laser Institute, Invisalign, and Six Months Smiles.
The comments and observations expressed herein do not necessarily reflect the opinions of DrBicuspid.com, nor should they be construed as an endorsement or admonishment of any particular idea, vendor, or organization.