Fail to plan – dentistry and liquidity

The economic repercussions were felt almost immediately, the shutdown of dental surgeries and the consequent cessation of treatments being no exception. Like most businesses, many dental practices will have felt acute pressure on their working capital, managing payments to suppliers, the rising cost of PPE, all with the backdrop of closed surgeries yielding little or no income from treatments. Liquidity (or cash) management has therefore became a new skill.

He says: 'A lot of these tasks will be done to varying degrees in practices already and fall under the heading of good housekeeping, but the pressures brought about by the pandemic have brought them into sharper focus. Having more structure around them will help the practice regain, or maintain, financial good health. There are really four main phases, forecast, prioritise, communicate and repeat. We’ll discuss later why this repetition is so important.

'Forecasting is where you set out the time horizon for your practice’s cash flow projections. I’d suggest at least six months, ideally 12 or even 18. Put your focus on the near future, as these are likely to be the periods you can forecast with greatest accuracy. Look at your income (treatments, NHS payments and so on) and your costs (staff, equipment and materials). Of course, you don’t have a crystal ball, and now, more than ever, the future is uncertain but this is no excuse for not preparing an estimate of some sort. In fact, you need one more than ever. If it helps you can create different versions of your forecast, perhaps optimistic, middle of the road and pessimistic scenarios, to cater for different eventualities.