Know Your Numbers

Some years ago as the V.P. of Sales & Marketing for an optical laboratory I accompanied our sales rep into the office of an Optometrist for whom our lab did 100% of the work. He was an engaging and forward-thinking gentleman with a lot of drive. The purpose of our visit was to talk about increasing Anti-Reflective treatment sales, although we didn’t announce the purpose in advance of the visit.

After exchanging some pleasantries with the doctor, I asked him if he knew his percentage of A/R. He proudly exclaimed, “we have almost everyone in A/R. We’re over 95%”. I had to let a little air out of his balloon at that point. I said, “Doctor, I brought along your lens utilization statistics today. I think you are going to be surprised, your numbers are actually 41%, which is still a good number”. He almost went ballistic! He wanted to immediately confront his opticians and read the riot act to them. I was able to calm him down pretty quickly.

One thing that tends to be true in business: if you don’t actually know the numbers, you think the numbers are pretty good. Another thing that tends to be true: if you aren’t tracking your key performance indicators (KPI’s), then things can get out of control and get your business in trouble.

In a medical practice, the financials we recommend tracking on at least a monthly basis are Cost of Goods Sold, staff compensation, occupancy costs, marketing, equipment, general office expense (a catch-basin for expenses that don’t fit anywhere else), and net to owner. These seven categories should be built into your monthly and yearly expense reports for your P & L statements. They give you a good tool to manage the business of your practice.

There are benchmark numbers available for each of these categories. But most importantly, you want to establish your own baseline, then work to improve the numbers. If a category suddenly gets out of control, you need to know why, and how to fix it.

If you need help with organizing your own expenses into these categories, please contact us. We charge only $500.00 to do a “clean-up” of your expense reporting, then it will be easy for you to maintain this powerful business tool afterwards.