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Data bites: 6 ways to get overhead under control

Nov. 2, 2015
It takes money to make money, goes the old saying. But is high overhead taking too big a bite out of your profit? These six steps can help.
Sorry—fresh-smelling toilets do nothing to lower your overhead.

Editor's note: This article first appeared in the Apex360 e-newsletter. Receive your free subscription here.

It takes money to make money, goes the old saying. But is high overhead taking too big a bite out of your profit?

Using data from the ADA and Bureau of Labor Statistics, along with proprietary sources, our analysis found the median overhead for general practices was 75%. This is extremely high. We teach our GP clients to aim for 59% overhead.

Steps you can take to control overhead
Practices should be vigilant about reducing operating costs as a way to cut overhead. Here are six areas you should assess for potential cost savings:

  1. Purchasing: Evaluate procedures for purchasing supplies. Are you bulk ordering items that you now use less frequently?
  2. Facility: Renegotiate lease terms or, if you own your facility, explore refinancing options. Currently, interest rates are at a historic low.
  3. Insurance: Work with your insurance agent to review coverages and premiums for potential savings.
  4. Utilities: Reexamine utility costs, especially for Internet and telecom. Providers usually offer different options and packages that can result in savings.
  5. Inventory: Take inventory every six months to avoid overages and shortages.
  6. Compensation: Consider implementing a staff bonus system based on increased production and collections in place of annual cost-of-living raises.

Every expense category should be reviewed regularly to ensure that the practice is receiving the proper value for what it spends.

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