2. managing accounts payable - midterm

7/29/2019 2. Managing Accounts Payable - Midterm

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MANAGING

ACCOUNTSPAYABLE


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Overhead

- means the operatingexpenses associatedwith running the dental

practice


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It is usually 70% of the gross orhigher

This includes rent or mortgagepayment, payroll &independent contractorexpenses, legal & accountingconsultants, supplies, dentallab bills, utility bills, continuingeducation fees,

equipment/warranty fees


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Classification ofoverhead expenses:

A. Fixed expenses

- these expenses remainfairly constant frommonth to month.

These are generally thelarger bills.


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B. Production overhead

-supplies, laboratory,laundry, etc

Generally those costsgenerated by the level ofactivity within the office &

not generated unless caseis being performed


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C. Capital expense

-Pertains to the amount ofmoney one has invested

through which the services areto be provided from whichincome is delivered such as

equipment or other itemswhich are often depreciatedover time


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Categories of PracticeExpenses (based upon gross

collections of a solopractitioners office):

1. Personnel expenses-Salaries and taxes which

averages between 18-25%

-employee benefits 2-4%


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2. Occupancy expenses

- Lease/rent, depreciation,insurance (building &

contents), janitorial &maintenance services &

utilities (water &electricity) 5-9 %


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3. Administrative expenses

- Includes accounting and legalservices, collection costs, bankcharges, related computer expenses,continuing education, dues and

subscription, licenses and permits,office & printing supplies, postage,repairs & maintenance to equipment,

taxes, telephone, and othermiscellaneous administrativeexpenses 6-9%


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4. Equipment &

furnishings- Includes lease & interest

on equipment & or cashpurchases of equipment.

-This may cost as high as25% in new practices


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5. Clinical and dentalsupplies

- Dental supplies, infectioncontrol and barrierprotection

- 4-7%


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6. Laboratory fees

- Varies greatlydepending upon the

type of practice &volume of prosthetic or

orthodontic case- 2-4%


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7. Marketing Costs

- Includes giveaways, giftsand donations, telephonedirectory space

advertisement, practicenewsletter, holiday cards,

mailings and mediacosts.

- 5%


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FORMS OF PAYMENT(Accounts Payable)


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1. CheckA writtenorder to thedentists

bank to pay aspecificamount ofmoney to adesignatedperson


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2. Electronic Funds Transfer &Automatic Payment Systems

Somepractices

prefer thismode ofpayment tosave timein payingroutinebills.


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3. Petty Cash

A small amountof money storedin the office tomake changefor a cashpaying patientor for paymentof supplies or

vendors whorequire paymentat the time ofdelivery.


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Petty Cash Voucher

- A receipt of proof of outlayof cash; informationincludes the date, person or

party to whom cash waspaid, reason for the

payment and the name orinitials of the person whodistributed the product.


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4. Charge cards or creditcardsOccasionally,the practice

makespurchasesusing charge

cards orcredit cards


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SUPPLY AND INVENTORYCONTROL

It is important to maintain asufficient amount of dental

supply items and purchase them

at the lowest price becausedental supplies represent 7%(sometimes higher) of the total

overhead which represent asignificant expenditure by theclinic or office, hence it should

be managed accordingly


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A sufficient quantity must

be ordered so as not to runout of a necessary itemwhile taking care not to

order too many units only tohave insufficient storage

space or to determine thatthe shelf life may expirebefore the item can be used.


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TYPES OF SUPPLIES


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1. CONSUMABLE SUPPLIES

Those that are completelyused up or consumed with

use.This includes anticariogenicagents, cements,impression materials, &gypsum products


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2. DISPOSABLE SUPPLIES

Single-use items that arediscarded immediately afterthe procedure for which

they are used.This includes paper cups,examination gloves, dentaldam, cotton rolls,anesthetic needles &carpules


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3. EXPENDABLE SUPPLIES

Those items that arerelatively low in cost &

are replaced frequentlyExamples- paper clips,

burs, matrix bands,plastic impression trays


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4. EQUIPMENT

Major purchases that are usedfor 5 or more years and maybedepreciated by the office over a

number of years.

Examples- computers, chairs,

dental units, sterilizers, lasers,handpieces & intraoralcameras


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GUIDELINES FOR STORINGSUPPLIES

1. Store supplies in one centralarea. Keeping them togetherhelps make maintenance &

inventory easy.

2. Keep a minimum amount of

product on hand. Maintainingtoo many supplies costs thepractice money & many

products have a shelf life.


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SHELF-LIFE

The amount of time theproduct is guaranteed fresh.

Products should be usedbefore the expiration date

and discarded after that

date (medicaments,impression materials,cements, x-ray films)


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3. Be alert to products that

are light or heat sensitive.Read all bottles andpackage labels to check forexpiration dates andstorage instructions

- includes items such asgloves, cements,anesthetics


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4. Use storage bins toorganize supplies

- Plastic or cardboard binsthat are high in back and

low in front help facilitaterotation and avoidexpiration of shelf life.

- They also keep hard tostack items neat and

organize


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5. Plan to spend a minimum ofone hour each week to check

supplies, determine reorderpoints and throw awayoutdated supplies

Rate of use - rate ofconsumption of items and

supplies commonly usedReorder point -a predeterminedminimum quantity of a specific

supply left in the inventory


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WARRANTIES &

REPAIRSPart of maintaining

control of inventory isthat of overseeing repair

and warranties &equipment of the practice


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Occasionally, a servicerepresentative must becontacted to repair existingequipment or install

replacement parts.Warranties should be filedor stored in a designatedplace in the office for easyaccess and reference

2. managing accounts payable - midterm

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