MANAGING ACCOUNTS PAYABLE

Overhead
- means the operating expenses associated with running the dental practice

It is usually 70% of the gross or higher This includes rent or mortgage payment, payroll & independent contractor expenses, legal & accounting consultants, supplies, dental lab bills, utility bills, continuing education fees, equipment/warranty fees

Classification of overhead expenses:

A. Fixed expenses - these expenses remain fairly constant from month to month. These are generally the larger bills.

B. Production overhead -supplies, laboratory, laundry, etc Generally those costs generated by the level of activity within the office & not generated unless case is being performed

C. Capital expense -Pertains to the amount of

money one has invested through which the services are to be provided from which income is delivered such as equipment or other items which are often depreciated over time

Categories of Practice Expenses (based upon gross collections of a solo practitioners office): 1. Personnel expenses -Salaries and taxes which averages between 18-25% -employee benefits 2-4%

2. Occupancy expenses - Lease/rent, depreciation, insurance (building & contents), janitorial & maintenance services & utilities (water & electricity) 5-9 %

3. Administrative expenses
Includes accounting and legal services, collection costs, bank charges, related computer expenses, continuing education, dues and subscription, licenses and permits, office & printing supplies, postage, repairs & maintenance to equipment, taxes, telephone, and other miscellaneous administrative expenses 6-9%

4. Equipment & furnishings - Includes lease & interest on equipment & or cash purchases of equipment. -This may cost as high as 25% in new practices

5. Clinical and dental supplies - Dental supplies, infection control and barrier protection - 4-7%

6. Laboratory fees Varies greatly depending upon the type of practice & volume of prosthetic or orthodontic case - 2-4%

7. Marketing Costs - Includes giveaways, gifts and donations, telephone directory space advertisement, practice newsletter, holiday cards, mailings and media costs. - 5%

FORMS OF PAYMENT (Accounts Payable)

1. Check
A written order to the dentists bank to pay a specific amount of money to a designated person

2. Electronic Funds Transfer & Automatic Payment Systems

Some practices prefer this mode of payment to save time in paying routine bills.

3. Petty Cash
A small amount of money stored in the office to make change for a cash paying patient or for payment of supplies or vendors who require payment at the time of delivery.

Petty Cash Voucher - A receipt of proof of outlay of cash; information includes the date, person or party to whom cash was paid, reason for the payment and the name or initials of the person who distributed the product.

4. Charge cards or credit cards

Occasionally, the practice makes purchases using charge cards or credit cards

SUPPLY AND INVENTORY CONTROL

It is important to maintain a sufficient amount of dental supply items and purchase them at the lowest price because dental supplies represent 7% (sometimes higher) of the total overhead which represent a significant expenditure by the clinic or office, hence it should be managed accordingly

A sufficient quantity must be ordered so as not to run out of a necessary item while taking care not to order too many units only to have insufficient storage space or to determine that the shelf life may expire before the item can be used.

TYPES OF SUPPLIES

1. CONSUMABLE SUPPLIES Those that are completely used up or consumed with use. This includes anticariogenic agents, cements, impression materials, & gypsum products

2. DISPOSABLE SUPPLIES Single-use items that are discarded immediately after the procedure for which they are used. This includes paper cups, examination gloves, dental dam, cotton rolls, anesthetic needles & carpules

3. EXPENDABLE SUPPLIES

Those items that are relatively low in cost & are replaced frequently Examples- paper clips, burs, matrix bands, plastic impression trays

4. EQUIPMENT
Major purchases that are used for 5 or more years and maybe depreciated by the office over a number of years. Examples- computers, chairs, dental units, sterilizers, lasers, handpieces & intraoral cameras

GUIDELINES FOR STORING SUPPLIES 1. Store supplies in one central area. Keeping them together helps make maintenance & inventory easy. 2. Keep a minimum amount of product on hand. Maintaining too many supplies costs the practice money & many products have a shelf life.

SHELF-LIFE
The amount of time the product is guaranteed fresh. Products should be used before the expiration date and discarded after that date (medicaments, impression materials, cements, x-ray films)

3. Be alert to products that are light or heat sensitive. Read all bottles and package labels to check for expiration dates and storage instructions - includes items such as gloves, cements, anesthetics

4. Use storage bins to organize supplies - Plastic or cardboard bins that are high in back and low in front help facilitate rotation and avoid expiration of shelf life. - They also keep hard to stack items neat and organize

5. Plan to spend a minimum of one hour each week to check supplies, determine reorder points and throw away outdated supplies Rate of use rate of consumption of items and supplies commonly used Reorder point - a predetermined minimum quantity of a specific supply left in the inventory

WARRANTIES & REPAIRS

Part of maintaining control of inventory is that of overseeing repair and warranties & equipment of the practice

Occasionally, a service representative must be contacted to repair existing equipment or install replacement parts. Warranties should be filed or stored in a designated place in the office for easy access and reference