Collecting 95% sounds great. But there's a big problem: you're leaving 5% on the table! In this episode of Metric Mondays, Kirk Behrendt brings back Dr. Barrett Straub, ACT’s CEO, to break down net collections percentage. You'll learn why 95% isn't as great as it sounds, how it’s killing your practice, and what you can do to raise this KPI. To learn what you need to know about net collections, listen to Episode 862 of The Best Practices Show!
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Main Takeaways:
Quotes:
“To get everyone caught up, we produce dentistry, we bill our full fee, and we have a maximum output of all the dentistry that we did. Next, we have some write-offs. We call it the effort gap. So, there's a percentage of production that we adjust or write off and it becomes uncollectible, and we're left with net production. We've talked about previously that net production is our maximum collectible amount. It's what is owed to us. Now what, of that amount, did we actually collect? What amount of that actually flowed into our business bank account? That is your net collections. So, what net collections is is the percentage of collectible revenue that is actually collected after all your adjustments are made.” (1:16—2:07) -Dr. Straub
“Why is [net collections] so important? It's huge. Net production is money owed to you. The costs have been incurred, the production has been produced, and the time has been used up. You'll never get that time, that effort, and that money back. So, it is incumbent on us, as business owners, to collect 100% or more of our net production.” (2:07—2:32) -Dr. Straub
“Ninety-seven percent is great on a chemistry exam. It's not great in net collection.” (3:06—3:11) -Dr. Straub
“If you're at 95% of your net production, I want you to calculate 5% of your net production. So, let's say I produce $1.2 million. I write off $200,000. My net production is $100,000, and I collect 95% of that. So, you can do the math and say, what is 5%? You're going to say, ‘Oh, that's a big dollar figure. That should be in my pocket.’ Not collecting — we’re in the collections gap. I call it the silent killer of profitability because you spent overhead to produce it, and you should collect on it because you'll never get that time back. So, this KPI reflects the efficiency of your practice's billing systems, the ability to collect money, and the insurance reimbursement processes. So, when we're not collecting 100%, it signals issues. Those issues might be denied claims, they might be delayed payments, patient non-payment, all of which reduce cash flow, all of which reduce your profitability. So, the goal is 100% or more. I would say our best practices are like 102%, 103%, sometimes 104%.” (3:33—4:49) -Dr. Straub
“Be charitable. Give away as much dentistry you want for charity and to old Mrs. Jones — do that. But what's left over, collect it. I always collected way more than 100% because on big cases I would pre-collect. I like owing dentistry. They've already paid for it. I know I owe it. So, the stress of financial considerations is out the window once you collect the money. Now, it's just fun.” (4:56—5:23) -Dr. Straub
“[If you're collecting less than 100%], it's usually a lack of expectations around collections. If Susie is collecting your money and we're at 95%, does she even know that 100% is the goal? Have we talked about like, ‘Listen, 100% is our goal. That's our benchmark. We have to collect that because that is what is owed.’ So, number one, it's usually clarity, lack of expectations around our collections. Number two, if it's like, ‘Yes, I understand that,’ and we're still low, then there are probably some gaps in our financial policies. Where are we failing? Where is this missing? How are people walking out of the practice without paying? Or is it insurance claims? Is it insurance denials? There's usually a [crack] in the armor somewhere that once we research it and find out, we can now apply some countermeasures. So, inadequate financial policies, and/or insurance claim systems, or issues with that usually is the cause of it. But there's a fourth one. And it has to do with the mindset of the person collecting your money.” (6:23—7:26) -Dr. Straub
“I personally believe that money spent on dentistry is one of the best investments a human being can make. Now, that's my belief system, and I can prove that it's a great investment. Now, the question becomes, who controls the element of finances in your practice? The person that does this has to believe that. They can't believe dentistry is a bad investment. They can't believe dentistry is expensive, because they'll become sympathetic with patients in a counterproductive way for the practice. I want somebody who is in control of the money who believes what we do is valuable, and it shows. It shows in how they communicate, and it shows in how they make eye contact. You can see that their confidence in us as a team matters. I also believe verbal skills matter. When you have a team member who is really well-developed in verbal skills, it's beautiful.” (7:40—8:41) -Kirk
“As a leader, we talk about right person, right seat. You might have an amazing team member who is super sweet. But he or she might be good at scheduling and maybe not great at money. This is where you need the help of a coach or a leadership team to say, ‘Do we have the right people in this seat?’ Because what happens is if you don't have the right person, their confidence is affected. What they will ultimately do is unsell dentistry. So, it's bigger than just collections. They'll actually talk people out of dentistry by their body language because they don't believe it's worth it, and they're not willing to ask for the money.” (8:44—9:24) -Kirk
“[Getting the right person in the right seat is] a hard issue, and it's easy to correct with communication. We've got to talk about it — and we've got to talk about it more than once, more than eight times, more than 18 times. It's a constant conversation about expectations, mindset, and aligning on why it's so important that we collect our money.” (9:30—9:49) -Dr. Straub
“What to do today or this week: number one, calculate your collection percentage. What percentage of net production did you collect last quarter, last year? Number two, if that's less than 100%, you have to ask the question, where is the money? How do I do that? You pull an AR report. How old is it? In that report, you're going to find, is it that people aren't paying you, or are insurance companies not paying you? Where does that contradict your financial policies? Are they used? Is everyone aligned on them? And you're going to develop countermeasures to collect. Most importantly, you will want to schedule time, if this is an issue for you, to sit down with your administrative team — especially the people that are accountable for collecting money — and align on beliefs and expectations and those systems. A communication of alignment will go a long way to improving this, just by saying to the people, ‘We're on a team together. Here's what we want to do. Let's achieve this together.’ You will watch that percentage climb, and climb, and climb, over time.” (10:51—12:00) -Dr. Straub
Snippets:
0:00 Introduction.
0:38 Net collections, explained.
2:07 Why net collections is so important.
2:33 The problem with 95%.
4:49 Pre-collect from patients.
6:16 What it means when you’re collecting less than 100%.
7:21 The mindset of the person collecting money.
8:42 The importance of right person, right seat.
10:45 Action items you can start today.
12:59 Last thoughts.
Dr. Barrett Straub Bio:
Dr. Barrett Straub practices general and sedation dentistry in Port Washington, Wisconsin. He has worked hard to develop his practice into a top-performing, fee-for-service practice that focuses on improving the lives of patients through dentistry.
A graduate of Marquette Dental School, Dr. Straub’s advanced training and CE includes work at the Spear Institute, LVI, DOCS, and as a member of the Milwaukee Study Club. He is a past member of the Wisconsin Dental Association Board of Trustees and was awarded the Marquette Dental School 2017 Young Alumnus of the Year. As a former ACT coaching client that experienced first-hand the transformation that coaching can provide, he is passionate about helping other dentists create the practice they’ve always wanted.
Dr. Straub loves to hunt, golf, and spend winter on the ice, curling. He is married to Katie, with two daughters, Abby and Elizabeth.