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