There’s been a lot of press following the budget about the impact to the dental profession, and the likely impact of additional costs to a practice. “You could be forgiven for thinking it’s all doom and gloom”, says Oliver Acton of Frank Taylor & Associates, “and it’s true there are some policy changes that will be painful, but careful planning can mean the impact of any additional cost pressures can be minimised. The old adage ‘fail to prepare and prepare to fail’ was never more true, and the need for preparation ahead of the budgetary changes which take effect in April 2025 can help a practice succeed in absorbing the increased costs”.
“Cost management and setting a realistic budget may not be the most glamorous of tasks, but periodic assessment of costs by reviewing contracted costs, what drives them and what the ‘levers’ are, can pay dividends” stressed Oliver.
“First understand your costs as they are now, second understand which ones you can control and how and when (in other words what is fixed and variable), and third take action at the appropriate time.”
“One of the most important fundamentals in setting a budget is to understand what your current cost base is. In short, what are you paying out each month (or year) just to keep operating as you are today. This is often referred as your “run rate”, as it refers to the level at which your costs are currently running. A common mistake is to confuse run rate with the operating costs of the last financial year. Whilst they are likely to be similar, they won’t be the same. Suppose your insurer increased the premiums on your insurance towards the end of your last financial year, perhaps in the last quarter, for example from £500 per month to £600. The impact of this will only have been quite limited in the previous financial year (£300 being £100 per month for three months) and your annual premiums would have been £6,300 (nine months at £500 and three at £600). However, by the end of the year your run rate is £7,200 (as your annualised costs are now 12 x £600), so to keep operating as you are the cost is £7,200 now”.
“This is important to understand, as if you manage to negotiate a reduction by £500, your costs in the next year would be £6,700 (£7,200 minus the £500 saving you secured) they won’t just be £500 less than last. It’s a common mistake and one which can mean your budget isn’t achievable”.
“Also key in understanding your costs is getting a grasp on where your biggest outlays are. Time will always be limited, and time spent away from the surgery and your patients carries an opportunity cost. Therefore, it’s important you focus your efforts on where you can make the biggest impact and/or achieve the biggest saving”.
“Once you have understood what’s in your current cost base, look at the contracts and see when the next opportunity for review is. Going back to the example of insurance, most policies renew annually so there will likely be an opportunity in the near future to ‘shop around’ ahead of your renewal date to help you get an idea of what other providers might be offering. Other costs, often utilities, or perhaps a bank loan have longer cycles and the next window of opportunity to review may not be for three or four years, in which case note the review date for future reference but there is little to be gained in spending much time on these at the moment”.
“Lastly, understand what is driving your variable costs, can changes in behaviour or operating procedures achieve savings? Supplier discounts, waste management and automation of processes are all areas where reviews of process invariable yield savings”.
