Ten Ways to Reduce Overhead Costs

1. Do not use highly-paid people for low-pay jobs.

Do not have your associates, hygienists, nurses or office managers do data entry work, schedule patient appointments or do clean up. Having them temporary fill in to reduce confusion can be very helpful, but do not let it become routine.

2. Add an extra treatment room or exam room.

The extra space helps with emergencies, reduces stress and adds income. To help you decide, calculate the cost to rent and equip the space, e.g. $42 per day.

3. Reduce legal costs by preparing your own contracts, legal letters or office policies.

Then use an attorney to review your work. Lawyers charge a few hundred to review a contract and a few thousand to write a contract. Modify generic forms to fit your needs and then clear the wordings with your lawyer. You get the added bonus of understanding every sentence in all your legal documents.

4. Eliminate overtime pay.

Issue a policy that no one works overtime without your permission. If you have this policy in place and an employee works overtime without your permission, you must pay the overtime pay. But then discipline such employees for violating office policy.

5. Put one person in charge of all purchases, including telephone plans, supplies and so on.

He or she can shop for the best deals and negotiate lower prices. Of course, the final decisions to make purchases or change suppliers stays with you. A good supply manager tracks supplies to prevent theft. He or she can save you time by researching the prices, features and benefits of equipment or services for you to consider before you buy.

As well as finding the best deals, your purchaser can work for discounts. Examples: “So if we pay your invoice within 7 days, can we get a discount of, say 3%?” “If we buy sixty instead of ten, can you give us a 10% discount?” “If we pay for six months rent in advance, can we have a 20% discount?” It never hurts to ask.

Consider paying a bonus when the supply manager stays under budget.

6. Reduce your accountant fees by using a retirement plan administrator, bookkeeper or payroll service.

You can do your monthly financial statements in-house with a good software program. Most CPAs are happy to help you make these types of arrangements, if you ask.

7. Evaluate your equipment service contracts.

In some cases, such as expensive treatment equipment, a service contract is a great idea and cheaper than paying for service calls. With new equipment, such as copiers or printers, you can skip the service contract if you or your office manager read the manual and replace the worn out parts yourself, e.g., copier drums. In fact, because prices are so low for many types of equipment, like computer monitors, replacing is cheaper than repairing.

8. Reduce staff turnover.

Losing a key employee costs you thousands in lost production, hiring hassle and training time. Take care of your high producers.

On the other hand, keeping poor producers or destructive employees chokes your bottom line. Replace them as soon as possible.

9. If you are over 40 years old and most of your staff members are younger, ask your accountant about an age-based retirement plan.

10. Offer a cash bonus for staff suggestions that save you money or increase your income.

For example, “Each employee who submits a suggestion to reduce our costs or increase the income will receive a $100 bonus if we use the suggestion and it works. Submit as many suggestions as you like.”

Final Tip

Of course, your greatest financial loss is the money you should be making, but are not making. You lower your overhead percentage the fastest when you increase your income.

Read “More Profit, Less Stress” to learn how.