Mastering your Dental Group Accountancy, Finances and Growth: Expert Strategies for Success

Are you prepared to master the complexities of dental group finance and growth strategy? In this episode, we promise you'll uncover the secrets of organizing accounting and finance functions to maximize the value of your dental practice or DSO. With over 20 years of experience, our host Aaron shares his expert advice on structuring acquisitions, managing finances, and avoiding common pitfalls. Whether you manage a single practice or are expanding into a dental group, learn how to implement best practices for long-term planning and operational efficiency.

Discover the transformative power of optimizing your accounting and technology processes. Aaron discusses the advantages of a holding company structure for managing multiple business entities, emphasizing tax efficiency and transaction simplification. Learn about the best technologies and software, such as Xero, Sage, Approval Max, and Telluride, that can revolutionize your financial management. Understand the importance of standardized charts of accounts, centralized purchasing, and hierarchical approval mechanisms to enhance your practice's efficiency and accuracy.

Finally, gain insights on the necessity of regular financial and accounting health checks to maintain a robust financial framework. Aaron provides real-world examples illustrating the consequences of poor bookkeeping and offers essential tips for accurate financial management. Learn to adopt a systems-based mindset and leverage external expertise to make informed, data-driven decisions. Discover the critical need for clarity in financial numbers when scaling up operations, managing larger borrowing, and navigating increased risks, ensuring your dental group's financial health and future success.

Transcript

Speaker 1: 0:19

Okay, good evening everyone. Aaron here tonight and welcome to this webinar. It's on the 29th of May 2024 and tonight I'm going to be talking about a topic called or titled, organising the Accounting and Finance Function of your Dental Group for Maximum Value. Okay, a bit of a mouthful and, to be honest, it's probably quite a dry subject if you don't understand dentistry and if you're not looking to build a group. But a lot of the points in here probably quite relevant to people who have one practice or looking to acquire more or have more than one practice. So I'm going to cover a few topics. I'm going to keep it relatively short because I appreciate it's a. It's actually quite a nice evening down here, down here in Surrey, where I am tonight. I've got to walk the dog yet and I'm sure you want to do other things rather than hear me bleating on about accountancy and systems. But I hope you get the gist of what I'm going to talk about tonight. So what I'm now my name is Aaron, if you haven't attended a webinar before, I've done a lot of these over the years and we're going to reignite some of these webinars today and basically my background I'm the CEO of Samara, an owner of Samara and I've been doing this for over 20 years.

Speaker 1: 1:41

I'm also the owner and CEO of Samara Global, which is an offshoring accountancy business as well. But I suppose most importantly that links me to the accountancy world is via my dental clinics is the Neem Tree Dental Group, which is a private dental group based here in London and the southeast, which was set up by my wife. So everything we do in our practice, everything we kind of tell our clients to do, we do in our practices. So some of the stuff I'm going to be talking to you tonight about is actually what we do in our dental practices. So hopefully you can understand what I'm covering and I can relate to the systems you might be using or the problems that you have in practice. I'm a chartered accountant with PwC back in a long time back now, expert vice president of Bank of America, but really for the last 20 odd years I've been working primarily with dentists and people in the healthcare sector, primarily on the accounting, financing, acquisitions, selling, buying that type of thing. So there's not much I haven't seen, and so tonight it's just a little bit of sharing my knowledge around the dental group side of things, on the accountancy side of things too. So let's crack on. So, as I said, I've been working with dental groups and DSOs for over 20 years and what I've seen in the last probably five to 10 years we've seen a lot of dental groups and dso's for over 20 years and what I've seen in the last probably five to ten years, we've seen a lot of dental groups emerge, um, all shapes and sizes, not just here in the uk but overseas as well, and what kind of things I've seen and what differentiates them, and but it's a common trend is that many of the groups have emerged, especially in the earlier years, were just cobbled together.

Speaker 1: 3:22

So a dentist might have an idea and he wants to buy a practice. Then he gets a loan from another bank to buy another practice, and then that one's trading his limited company, he buys that. Then the other one he wants to buy is a sole trader or it's a partnership. So what happens? And the dentist, or he or she can acquire, get the finance relatively easily, um, because dentists are well liked amongst the banks and lenders um, but he hasn't or she hasn't thought through the structure from the outset. And that's such an important thing. If the structure hasn't been thought out from the outset. That's when the problems come further down the line.

Speaker 1: 3:59

And it's so, so important that if you, if you're going to go down this route, you're going to acquire if you've got one practice, you're going to acquire another practice or further practices you have a system, you have a structure of how to do it, because if you don't, when it comes to exiting, it's going to be a real mess for you to exit and and it's going to be a real it's going to cost you a lot more. You won't get the valuation that you want to achieve. So you've got to make it. When you, when you go out, when you get with you go, when you go with the intention of purchasing a practice or building a group, you've got to have a thinking of well, how is it all going to be structured and how am I going to exit it in 5, 10, 15, 20 years or whatever it may be, and that's so, so important.

Speaker 1: 4:40

So today I'm just going to briefly run through some of the financial bits how to build and manage the accounting side of the group, okay, and then hopefully, you'll get a few tips and ideas and it'll stir some thoughts in you, and that's really what I want to do today is just stir some thoughts and then you can ask some questions questions, uh, with me, um, later on if you need any help. So the question, first question is what am I asking? What is a dental group? Well, a group, in my mind, is just if you have more than one practice. Um, even though what I'm going to talk to here today is if you have just one practice, great. The same principles apply. But remember, if you're going to have a group, you've got got that exponential rise in things you've got to do and activities have got to be done. So if you get it right in one practice, you can then replicate it in other practices as well. So how do you group?

Speaker 1: 5:31

How have groups emerged over the last few years? Well, historically, a lot of it is through acquisitions. You borrow money and then I'm going to buy another practice, I'll buy another practice. But perhaps in a little bit more recent times we've seen more startups emerge, where someone does one startup, then does another startup, does another startup and builds a group that way. Or they might do a mix. They might do some startups and they might do some acquisitions. So there's some organic and inorganic kind of growth happening at the same time, acquisition. So there's some organic and inorganic kind of growth happening at the same time.

Speaker 1: 6:00

Now, for most people, from a financial point of view not clinical or any other, but from a financial point of view the objective has to be to grow the EBITDA through acquisition or through organic growth, like startups. But as you add further practices, you hopefully will be adding firstly, hopefully adding EBITDA, but also be able to grow the EBITDA further of the group. Now, the reason why people are doing this is the financial arbitrage that this offers. So you might be able to buy a practice at a certain multiple of EBITDA, which is earnings before interest, tax depreciation and amortization. But if you amalgamate, say, 10, 15, 20 practices together, of all their EBITDA together, when it comes, when it comes to selling the group, you'll achieve a greater multiple.

Speaker 1: 6:49

And why? Well, ultimately I suppose that the phrase is that the whole is worth than the sum of the parts, and that's that's the point. If you've got a group, it's more valuable to an investor to buy the whole group, and they haven. That's that's the point. If you've got a group, um, it's more valuable to an investor to buy the whole group and they haven't had to do the hard work of acquiring one by one, which you would have done. Um, they are just buying a group and hopefully maximizing uh, you're maximizing your sale prices.

Speaker 1: 7:14

Well, so, and that's what? That's what the reason we've seen so many dental groups emerge over the last what 10-15 years now. This has happened pretty strongly, um, over the last few years and, and it's been great in a rising market and values have been rising, and when money was freely available and it was easy money to be made, it was easy. You could raise money, raise money on to buy another practice, buy another practice, keep going and, before you know, you've got five to ten practices. Um, but a couple of years ago, with the influence of liz, trust and cost of living, a crisis and brexit and a whole range of other things, um, borrowing has got harder or got more expensive, and so the real challenge now is the real successful groups will be the ones that can actually manage their practices and their groups in this more challenging market, which is evident here today, and it's about thinking how do I manage my finances, how do I manage the financials in this group?

Speaker 1: 8:16

So what are the issues facing groups currently? So we've seen, as I mentioned, higher borrowing costs If you're on a variable rate loan. That has gone up over the last few years significantly to the higher base rate. We've seen a cost of living crisis where people may not be spending as much, say, on private care. We've seen a massive recruitment issue within dentistry, where it's hard to find nursing staff and dentists in certain parts of the country. We've seen more clawback amongst NHS practices. I think around 150-odd million Clawback was that right, I can't remember now. A significant amount last year was clawed back.

Speaker 1: 8:57

But with all these issues here, here it's in these tough times you need to know your numbers in your group. That's paramount in my view as an accountant, as someone who's seen it, done it, and it's so important that to know your figures, know how the business is doing um, and then to be able to make make better decisions. So what I've done today is just put a few tips together down to um to just highlight and get you thinking. More than anything I'm not going to show anything in particular, just get you thinking about um tips to build your finance and accounting function that actually will help you grow your ebitda in your group as you grow, as you add more practices and you build more practices. You want to grow that ebitda, but if you have the systems in, you'll have that transparency and visibility to know what's working and, more importantly, what's not working.

Speaker 1: 9:46

So tip one so I've called it get a systems-based mindset. And this is kind of what I mean is you have to be able to implement a system, a solid system, for your accounting and finance function, and what you want to have is the visibility of how you're doing. How is each component of the group doing, how is each practice doing? And if you don't, if you have different systems for different practices, it's going to be a complete headache. So what you want to do from an accounting and finance point of view is implement a system that's universal across the group. So there'll be things you'll want to know. You'll want to know the performance of the profit of each location, or how profitable each associate dentist is, or the rates of hourly rates that the dentists are generating at, or such as the EBITDA per site.

Speaker 1: 10:28

The really important number is EBITDA earnings before interest, tax, depreciation, amortization, and that number is so important because that's the number that valuations will be determined on, and when you're buying or when you're selling your practice um, you need to know what type of data now before you. So if you've got these things, you need to know, you need to have a system in place to be able to report this information and if you've got one practice has got one type of system and other practices doing another type of system and other practices doing something else, it's a mishmash. And so, and I have to say that I've seen quite a few groups where they don't put the time and effort at the outset to this. As I said, they've amalgamated all these practices over the last few years, but they've added no kind of um input, no investment into the core finance function, which is so, so important if they're going to get a really good return on the on the valuation. So that's tip one.

Speaker 1: 11:28

Number two is the framework. Now I mentioned it earlier. Um, we see I've seen groups over the years where there's limited companies. Someone the practice owner also owns a sole trader. He also has some partnership with someone else. He has a limited company with his wife. Some practices a limited company. It's honestly, it's just a mess. Okay, um, and it's not enough. It's not a uh, a great way to manage it. Um, in addition, if you've got things in different entities, like a sole trader, some in a limited company, and then that means they're not part of a group. Okay, and for group purposes, if you've got a group you'll be able to save significant more tax if you're in a corporate group structure because the office you can offset the profitable entities against the loss making entities in a corporate group structure. Because you can offset the profitable entities against the loss-making entities in a group. But if you have a sole trader that's loss-making or profitable in a company that's loss-making, you can't offset them. So all these things come into play Kind of.

Speaker 1: 12:25

My personal favorite structure is to have a holding company at the top and under that hold company there'll be individual companies for each practice. Now you could have one company below which might have a few practices in there, fair enough. But ideally I would always say you have individual practices, individual companies, individual practices. Why? Because ultimately you might in the future say I've got 10 practices but I don't like this practice here because it's so far for me to travel. I want to sell it. So it's easy to sell it because it's just selling the shares of that company from your hold code to another party and therefore nothing is jumbled up, it's not mixed together and it's not a messy transaction, it's an easy exit. So, so, so important to set that framework up. And, as I said, a jumble of companies, partnerships, sole traders is messy and any serious buyer would always discount the price they'll offer you because of the complications, because of the mess, and we've seen deals fall apart because of this, because they might have something like 20 practices but they're in a real disarray and real mix. No reporting lines, there's no clarity. A buyer will say you know what? I don't want the headache, I don't want to pay, I don't want to take the risk of buying something that I can't actually see the visibility of. So key, important thing here make sure you have a framework and it's kind of set in stone, and then you add to it incrementally as you go along, right?

Speaker 1: 13:52

The third aspect is technology and software. Now there's so much to consider in the accounting space with technology and you have to think how are you going to be managing this? Now? The next slide is actually some choice of tech stat. But these are just some of the questions you need to think about before you even go down the route of choosing the right tech for yourself. Um, you have to think about. Okay, you might be receiving invoices at your local um clinic levels.

Speaker 1: 14:22

Um, how does that information get into a system? Is it? Does someone key it in? Is it through some automatic scanning OCR system software? Um, and then from the OCR system does it go into a bookkeeping system, and which bookkeeping system is right for you? Um, do you also have standardized charts of accounts? So that means, are the P&Ls and the balance sheets looking exactly the same in terms of the titles and the headings, the same in each entity? Um, do you have those set up standardized across the board? Um, will you have for you? We have, we have overheads in the central head office, overheads, um, or and and or or.

Speaker 1: 15:04

Does all the information that comes in not go to any of the clinics? They come to you as a central headquarters? Do they all come from there in one place? And? And if that's the case, how do you know what's being purchased? What kind of payment authorities do you have in control in place? So, and also, and as a result of that, do you have a hierarchy in place for signups for something to be ordered, say over a thousand pounds or five thousand pounds, whatever it may be, and then, ultimately, who's making those payments? Um, how do you know that what you've ordered, is it arrived, and then at the same time, it should be paid and it hasn't been returned, that it needs to be returned or it hasn't been damaged or whatever?

Speaker 1: 15:39

So you need to think about all these systems and processes. These are so important. These are fundamental, relatively simple, because when you scale up, you've got to think about all these processes and procedures not for one practices but for multiple practices. Therefore, you have to think about having that a system minds, a system mindset, as I said in tip one. So those are kind of some of the questions you need to be thinking, or using these questions to ask an advisor such as ourselves or someone else to to help you implement. Um.

Speaker 1: 16:10

Then tip four is about the tech. Now again, there's a sea of technology out there in the accounting space. Since I've been in accounting, it's just grown kind of exponentially. Um, I'm showing my age here, but when I started it was pretty much things like excel and sage, but now we have in the bookkeeping frame zero, sage and multiple others. But that's the basic, that's the standard. But then you have things like apps attached to QuickBooks or attached to Xero, things like Approval Max or Dext or HubDoc or Lightyear. Some of these scan the invoices, some of them put approvals in, some of them download the information from invoices into software. All very powerful and sophisticated, but it's important you choose the right one for the right job.

Speaker 1: 16:58

Thirdly, there's payments. There's a payment system you can play with, things like Telluride or Cresco or PayHawk, where, rather than you have to go to the bank and pay individual invoices one by one through your bank account, you can do a few ticks in these systems and pay all the invoices one by one through your bank account. You can do a few ticks in these systems and pay all the invoices in bulk and it'll save you a significant amount of time, okay, which is a valuable commodity. And then there's the reporting side of things. Um, all well and good having everything bookkept and making these payments and using all these apps, but then you want to see, at the end of the day, what is this telling me? So there's software such as spotlight, siftom, all of these things out there. They're all kind of out there. Now it's very easy to sign up to all of these. They all have like a monthly subscription type of fee service.

Speaker 1: 17:40

But where I see it all go wrong is implementation, and it's so important to get the implementation right because otherwise you'll just be using a fraction of the power of the software, um. But the foundation for all of this is from the bookkeeping and from our as a firm. We we're a very strong zero firm. We do use quickbooks for certain clients because it's a legacy, um, but what our team always do is they're always doing the bookkeeping daily for clients, and so the book, the books, are always up to date. Okay, that's important because the books are up to date, then the position of the client knows how much they need to pay, what the situation is, what the performance is. So from an invoice point of view, the books are always up to date. Obviously, the income side is coming from monthly reports that we get, say in our clinics, from software of excellence, but that's updated at the end of the month anyway.

Speaker 1: 18:31

So the tech is paramount. But before you implement different tech and try these all different things, it's important to put a workflow together, which was kind of tip three what is the workflow that you're going to put together to actually implement and then choose the technology you need? But again, where it all falls down quite often is we see the wrong people doing the wrong job. So I strongly suggest you don't get PMs or nurses to do the bookkeeping. They're good at being PMs or nurses, not the bookkeeper, and it will always be cheaper and you'll get a better result if you get a bookkeeper to do it. This will free up valuable time for your PM to grow the group. So again and I know it's hard to find bookkeepers but we have an army of bookkeepers who know dental stuff and who can do the bookkeeping for you in a cost-effective manner to get these things done.

Speaker 1: 19:22

So think about the team, okay, and if you get to a size, a certain point you might need. You might need a whole infrastructure where you have the bookkeepers. You might have a an accountant in the team. You might have a whole infrastructure where you have the bookkeepers. You might have an accountant in the team. You might have a financial controller and then you might have a finance director. Now, quite often or not, what we find is that you might have a finance manager in the team, but all those other things that we just mentioned the bookkeeping, the reporting, managing the accounts, all that type of stuff and payroll, all that type of stuff can be outsourced to ourselves, because we do that increasingly now for a number of groups. So things to consider.

Speaker 1: 19:55

So that's tip five, and then tip six is really kind of letting the numbers tell the story. Now, as I said, bookkeeping is done daily and the bank accounts are reconciled and the output has to be the managing accounts that come um at the end of the month and it's so important to be able to to um, see, see them, um, and then ultimately interpret the numbers and then take action. And then so, and this is the thing, it's not one of x's, this is a repeat and rinse and repeat. And once you've got that system working quite well, um, you'll be able to see the patterns, you'll be able to see what's working, what's not working and, as I say, it's not rocket science but it's a tried and tested process. So, after all that effort, after all that work, you might be thinking well, what's, what's the outcome?

Speaker 1: 20:47

Well, for you as a business owner, it's the clarity of the performance of the business. It'll tell you if you're doing great or it'll tell you if you're doing terribly, depending on the clinic by clinic basis, or dentist by dentist basis, or however you decided to set things up, but also it gives clarity to any potential investors or buyers and therefore it's always going to be a much more valuable asset to a buyer if they can see clarity from day from from the moment they say, oh, I'm interested in buying your business, if they can see the numbers quickly and understand what they give. That gives them confidence and therefore they'll pay a premium for a business. If it's a jumbled mess, okay, they'll either walk away or they'll say you know what, not interested, I'm not ready to to to buy this type of practice. It's just too much of a mess and I've seen this time and time again. A messy set of books, a messy set of numbers it makes people just walk away.

Speaker 1: 21:41

Now, in addition, armed with this information, you can make much better decisions and ultimately get much more accurate, up-to-date information. As I said earlier, poor information or poor interpretation of information that's been provided will ultimately lead to poor business decisions. So so, so important. So what I'm really trying to highlight today is just get you thinking that. Think about this in really important function. You might be thinking about the clinical side, you might be thinking about the marketing side, you might be thinking about the HR side. All are very important, but if you don't have a hold of the numbers, a grip of the figures, um, and you don't have a structure in place to help you do that, you're not going to have the visibility and therefore you won't be able to be able to grow okay, um, and and to develop your, your business as well as you should be.

Speaker 1: 22:29

So, as I said, I was going to keep it short today. I'm going to kind of just wrap up, but there's a few things we can do to help you. If you need some help, um, we can help you with the bookkeeping side of things, um, in my mind it's it's a simple thing, but it's the sometimes the thing that's done the worst, okay, and I've seen so much so accurate bookkeeping is so, so important because that ultimately underpins the management information. So when you're saying someone's going to do the bookkeeping, it's got to be posted to the right part in the package and therefore then you're going to be reliant on that information to say what's this account telling me, what are these accounts telling me? So, if you're not sure about your bookkeeping or it's not going that well, we actually carry out a free bookkeeping assessment of your sites. All we need is access to your Xero or QuickBooks file and we can then provide a free review. I'll show you an example, hopefully I can show you one. I'll share it towards the end.

Speaker 1: 23:32

At the end, I think, then, in addition, um, we also set up this we can help you set up the structure of your whole group. Um, it's kind of that. This is so important as a whole code that different companies you might have something as a sole trader that you need to convert into a limited company, so there's a whole process of incorporation that has to happen. So all of these things we can do for you. So, again, think about the structure and then, if you need us to, we can also basically run the whole operation to some extent for you. We can manage the setup of the workflows. We can manage the setup of all the bookkeeping and do it. We can do all the bookkeeping management accounts payroll, year-end accounts, associate pay you name it, we and do it. We can do all the bookkeeping management accounts payroll, year-end accounts, associate pay you name it, we can do it. It's a complete one-stop solution. So, and I think for a group it gets to a point where and it's and we can do it cost effectively because we have team members here in the uk. We have a dedicated 100 subsidiary of our team based overseas in India as well that can do some of the bookkeeping work. So we can put a cost-effective solution in place for our clients to make it work for them and at the same time, get the clarity of information that they need.

Speaker 1: 24:56

So if I've tickled your thoughts here, I've got you thinking about anything today. Um, you can certainly book a call with me. Um, you can go to our website, samaracouk, book a call on samaracouk aaron's calendar, or you can email me on aaron at samaracouk. Um, I'd be happy to have a conversation with you to discuss your kind of groups, accounting, accounting and financial needs or any other needs. Okay, I'm more than happy to. Okay, now I'm just going to share something else. Hold on with you. Okay, bear with me a second.

Speaker 1: 25:45

So I'm not sure if you can see this, but this is a. This is a bookkeeping um analysis of a client we did recently. It's a rather large client, okay, but you can see if you can read it properly, it says 39 health score. Now, actually, I'll make it bigger. If you can read it properly, it says 39 health score now. Actually, I'll make it bigger if I can take my face off it. So this, this, this we've inherited this work and it's a complete mess. To be brutally honest with you, um, and you can see it's. It scores it at 39 percent, um, and it's, and the software that we have it can tell you the amount of errors, and this is saying it's over 17 or million pounds worth of errors. It's a massive problem, but you can see down here where the errors are. Things are old unpaid invoices or old purchase credits or there are duplicate bills. So all of these things have to be rectified now. This is an extreme example. Hopefully you're not in that situation, but if you want a bookkeeping health check done, we'll be happy to share that with you for free.

Speaker 1: 26:46

As I said, all I need is your access to your files, to your zero or your QuickBooks file. We just need to sign up and then we can do that. So, as I said, you can email me on rnsmrcouk. I'll get in touch, um. As you can see, there's a few more things here. There's scoring you on different things. So just going back to this. So, in a nutshell, to summarize, that's been speaking for half an hour there. Time flies, isn't it? I did promise you you could be able to get out, and I do have the dog kind of watching me vaguely wanting me to take him out or take her out. So, in a nutshell, if you need any help, think about the tips I mentioned today, though it's get a systems kind of um I'm gonna go around through this again systems-based mindset.

Speaker 1: 27:33

So think about what information you need and implement a system across the whole group. Think about the framework. Okay, is it all going to be a hold code? Are there going to be limited companies underneath it? And what are the tax consequences with that? Think about the technology. How's the information coming into the business? How are you using that information? How are you recording this information? And then, how are you making payments out? So all these questions are relevant. Think about it, and then what is the tech that you need to use? There's a whole range of tech on here.

Speaker 1: 28:04

Get that right, choose it right and make sure it kind of is suitable for your needs. You don't want to over egg it, but you don't want to under egg it as well and get the right people to do it the team. Don't use your internal team. Get external, as I mentioned earlier, we can support that if needed. We have plenty, plenty of team and plenty, plenty of experience to do this and ultimately, let the numbers tell you the story. You can't hide from numbers. If it's done accurately, you'll know whether you're doing well or whether you're not doing well, and then you can make better decisions. And the danger is for one practice you can get away with it, maybe even for two practices you can get away with. Maybe even for two practices you can get away with this.

Speaker 1: 28:44

When you start scaling up, when you've got bigger borrowing, got more um, more issues, more people, more risks involved, you need to make sure you have clarity of numbers and therefore the numbers will tell you the honest truth, um, even though sometimes you may not want to see it. So hopefully you found that of use today, um, if you need anything, please, please, don't hesitate to reach out to me. And if you've got any comments or questions, please do reach out to me. Or if you've got any questions, you can ask them now, even if you have any, okay, happy to do that as well. I'm not sure if there are, but I will kindly wrap it up then. I don't think there are any other questions tonight? Okay well, thank you very much. I hope you found it useful and if you need any help, you know where I am. Thanks, have a good evening, Thank you.