As we carry on step by step through the journey of dental business and things associated with it, things important, and things that can make a difference, nothing is more emotive or more captivating than the money side.
The plan for this blog is to talk about many concepts in deeper and deeper detail as we go through them. So, for the first financial blog that this blog has to offer, it's probably best to look at some straightforward, overarching principles related to finance.
The lucky thing is that as I write this blog, I am in Edinburgh the evening before providing an all-day lecture to Lothian Independent Dental Practitioners on the aspects of dental business, including finance.
And so, all of these questions are hot in my mind as I rush to complete the project of the lecture day that lies ahead of me.
Firstly, it might be worthwhile stepping back to see my journey of learning about finance because I have never, in any aspect of my family life, been renowned as someone who cares in any way about money or whether I have any or not.
Note (This is a bad starting point for someone trying to run a business).
With that in mind, two of the significant parts of my life, where finances came into play were first in 2012, when I took time off work in the summer to go to the London Olympics with my young family and do various other activities which took me out of the young business, that I had thinking that it was bulletproof. Everything was too good to be true, only to return to no work and, no money in the bank and no idea that that was coming.
The second was in 2019, as we were trying to build the new practice and a multimillion-pound commercial property project, and we were counting on the turnover of our existing business to pay a lot of the bills, only to see our attention be distracted massively into the build project itself and watch the business tank with very limited warning that we would end up in December 2019 with not enough money to pay the bills.
These are sobering experiences, and they're why the ability to monitor finances in any business, particularly dental business, is critical.
And so, here are a few points which are worth considering:
1) Dental business finance is not accountancy. Management accounts and management reports in your practice are very different from those in accountancy. You cannot rely on your accountant for day-to-day finance.
2) The leader in the practice is accountable for the financial performance; they may not be responsible- that may be other people who are responsible for obtaining the money or doing the business, but the leader is accountable for the finance.
It's a very subtle difference but a very important one. The buck stops with you.
3) Profit is like oxygen for your business; it is essential for life but not the meaning of life. Never, ever forget that it's critically important.
4) Understand the difference (and importance) of retrospective analysis, prospective analysis and forecasting. Celebrating your financial performance from three months ago is not really of any use when you have enormous bills to pay tomorrow, getting a handle on how to forecast forward and have a really accurate assessment of how much money is likely to come further into the future allows you to plan, invest and improve at a faster rate than anyone else who does not do this.
5) Turnover is vanity; it's profit that is sanity. A high turnover with no profit is no money in the bank. Cash is king; you need cash to pay the bills.
6) Business profit is not yours to keep. Designate a salary for yourself and take the salary (If the business can afford it). Everything else left is to improve the business; it's not for you to buy a car.
7) Get to a point with your financial management where you can ask the person responsible (You are accountable), "Do we have enough money?" and then they can say yes.
To get it to that level of simplicity is absolute genius.
8) The Start-up curve is a J-shaped curve. It takes three years in a loss to make a profit from almost any investment into almost anything - never forget that.
As we move forward, we can break down into many more of these areas; we can define different categories of finance, discuss things like associate contracts or return on investment or develop financial levers where you can adjust financial metrics in real-time as you're forecasting but just now, it's best just to remember the simple things that we've listed above.
Finances are extremely emotional, and for that reason, objectivity in the numbers is absolutely crucial.
I am looking forward to speaking about this more as we move forward.
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