Running a successful dental practice requires more than clinical excellence — it demands financial awareness. You need clear visibility into your practice’s performance to make informed decisions, spot problems early, and identify growth opportunities.
Tracking the right financial metrics every month provides this clarity. Instead of waiting until year-end to review your finances, monthly monitoring allows you to course-correct quickly and maintain healthy cash flow.
Production vs. Collections
Your production represents the total value of services you’ve provided, while collections show what you’ve actually received in payment. This distinction matters because you can’t pay your bills solely with production.
Track your collection ratio by dividing collections by production. A healthy dental practice typically maintains a collection ratio of 98% or higher. Some practices achieve 99–103% due to the timing of insurance payments — previous month’s claims paid in the current month can push collections above 100%. However, consistently collecting less than 98% means you’re losing revenue from services already rendered, signaling issues with insurance follow-up, patient payment plans, or billing processes.
Monitor both metrics separately as well. Steady production with declining collections signals administrative problems. Declining production indicates scheduling issues or reduced patient flow that requires immediate action.
Overhead Percentage
Your overhead percentage reveals how much of your collections goes toward operating expenses. Calculate it by dividing total costs by total collections, then multiplying by 100.
Successful dental practices typically maintain overhead between 60% and 65% of collections. This benchmark represents healthy financial management and optimal profitability. If your overhead exceeds 65%, you should review your expense categories to identify inefficiencies. An overhead rate above 70% signals serious financial strain that requires immediate attention, as it significantly reduces your take-home income and limits your practice’s growth potential.
Break down your overhead into categories like staff compensation, supplies, laboratory fees, and occupancy costs. This granular view helps you identify which areas need adjustment without making blind cuts that could hurt patient care or team morale.
Accounts Receivable Aging
Your accounts receivable (A/R) represent money owed to your practice. Aging reports indicate the duration of these balances has been outstanding, typically broken into 30-day increments: 0–30 days, 31–60 days, 61–90 days, and over 90 days.
Aim to keep 90% of your accounts receivable (A/R) in the 0–60 day categories. Balances older than 90 days become increasingly difficult to collect and may require write-offs or the involvement of a collection agency.
Review your A/R aging report monthly and implement systematic follow-up procedures to ensure timely payment. The longer you wait to pursue outstanding balances, the less likely you’ll collect them.
New Patient Acquisition
Track both the number of new patients and your cost per acquisition. Knowing how many new patients you attract each month helps you gauge whether your marketing efforts are working and whether you’re maintaining practice growth.
Calculate your acquisition cost by dividing total marketing expenses by the number of new patients. This metric shows whether your marketing investments are delivering acceptable returns. If you’re spending $500 in marketing to acquire a patient with a lifetime value of $300, you need to adjust your strategy.
Also, monitor your new patient sources. Understanding whether patients find you through referrals, online searches, or social media helps you allocate marketing dollars more effectively.
Active Patient Retention Rate
Your retention rate measures the percentage of patients who return for continuing care. Calculate it by comparing the number of active patients this month versus the same month last year.
Aim for a retention rate of at least 85%, which represents the industry benchmark for patient loyalty. The average dental practice retains only about 40–60% of patients, so achieving 85% demonstrates exceptional patient satisfaction and practice health. Lower retention rates suggest problems with patient experience, communication, or treatment quality that you must address quickly.
Track the recall appointment completion separately. Patients who skip hygiene appointments are more likely to drop out of your practice entirely. A strong recall system protects both patient health and practice revenue.
Turn Your Numbers Into a Strategic Advantage
Understanding your financial data isn’t just about bookkeeping — it’s about shaping a stronger, more resilient dental practice. By tracking essential metrics, such as production versus collections, overhead percentage, accounts receivable (A/R) aging, new patient acquisition, and patient retention, you gain the insight needed to make confident, timely business decisions.
At Dental Tax, we specialize exclusively in the financial, tax, and corporate planning needs of dentists. Our team helps you interpret these metrics, build efficient systems, and turn raw numbers into clear, actionable strategies that support long-term practice growth.
Ready to feel more in control of your practice finances? Connect with our team to get started.
Adam has an MBA from the Richard Ivey School of Business in London and also holds a Chartered Investment Manager designation.
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