How to Best Utilize Your PPP Loan

Congratulations if you received either your PPP 7(a) loan or notification from your lender that you will receive those funds soon. Now you need to figure out how to make the best use of this forgivable loan.

Please remember that the primary purpose of the PPP loan is to provide money to small businesses to retain their staffs. Pay out 100% of the amount of the loan over 8 weeks with at least 75% being spent on payroll costs and the rest for certain facility costs and the full amount of the loan will be forgiven. Even if you don’t pay out the full 75% for payroll costs you should still qualify for a portion of the loan to be forgiven.

The challenge for many small medical and dental practices is that most practices shut down and immediately furloughed their staff and the owners mid-March upon being told to stop treating patients. How should the PPP funds best be utilized when your staff is not currently employed at your office and you probably won?t reopen your practice until mid-May or later?

Still Employing Your Staff?

Your decision is easy if you continue to maintain your full staff even if your office is closed or working at a reduced schedule. You will use the PPP funds to pay your staff, rent and utilities over the next 8 weeks, at which time the loan should be forgiven. The government will, therefore, subsidize the staff and facility costs of your practice over the next two months. Make sure that your staff count and payroll costs don?t dip by 25% during this period of time.

No PPP For You

If you didn?t apply for the PPP or weren?t approved and don?t plan to apply again later, then please make sure to contact your payroll provider. They will help you take full advantage of the $5k per Retained Employee tax credit by having you not remit your federal payroll tax deposit each pay period. Doing so will help you recoup the full tax credit very quickly. You also have the option of holding onto the 6.2% Employer Social Security match and repaying those deferred taxes ratably over the next two years.

PPP Basics

Below are the basics of the PPP loan. (The PPP guidelines are still very fluid. The info below is based on our understanding of the rules as they currently apply. If there are any errors, please let us know ASAP.)

What if you do NOT rehire your staff?

  1. Every week your state will continue to pay your staff their regular state unemployment benefit plus an extra $600 from the federal government.
  2. The government will also pay your unemployment benefit of your state’s benefit plus $600 from the federal government per week.
  3. The full amount of PPP funds remains available for when you reopen your practice but won?t be forgiven and, instead, will be treated as a loan to be repaid over 24 months at 1% interest.

What if you rehire your staff very soon?

  1. You will use the PPP funds to pay your staff?s payroll costs.
  2. You will also use the PPP funds to pay yourself up to $1,923 per week ($100,000 max divided by 52 weeks).
  3. The PPP funds can be used to pay your rent and utilities, including phone and internet. (On the contrary, unemployment will not pay your facility costs under any circumstances.)
  4. As long as you spend the full amount of the PPP money over 8 weeks, with at least 75% for staff payroll costs and the rest on rent and utilities, the full loan will be forgiven. (Partial forgiveness looks to also be allowed based on staff counts and salaries paid during the 8 weeks following when you get the loan.)
  5. The PPP funds could be completely spent by the end of 8 weeks, no matter when you reopen.
  6. It appears the forgiven loan won?t be taxable to you as Cancellation of Debt which might give you an extra financial boost by letting you claim these expenses without picking up any income.

What should you do?

Which path you take depends on how quickly you think you?ll be able to reopen your practice. The sooner you can reopen, the more you want to rehire your staff within the next week or so and begin paying everyone once again. Practices paying high rent might also want to rehire their staff soon as a way for the government to subsidize their facility costs over the next two months through the PPP.

Let?s say you reopen on 5/18. The PPP money would pay you and your staff for two weeks while being idle, and then would continue to pay your practice salaries for the first six weeks you are open. The loan would also pay your next two months? rent and utilities. That should hopefully give you time to build up your practice A/R and cash flow again. At the end of 8 weeks, the PPP would be fully forgiven.

What if you can?t reopen until 6/15? If you hire back your staff next week, you would use the PPP to pay their salaries, your salary (up to $1,923 per week) and your rent and utilities. When you open on 6/15, there would be 25% or less of the PPP funds remaining to help you get your office up and running again. Would you have been better off keeping your staff and yourself on unemployment for those 6 weeks and then have the full amount of the PPP loan available to jumpstart your practice when you finally reopen even though that loan will no longer be forgiven? Remember, unemployment benefits paid by the government are comparable to salaries paid with a loan forgiven by the SBA. Both are ?non-loan? money.

The Wildcard

Many national and state medical and dental societies are pushing Congress to allow practice owners to delay the 8-week period to determine loan forgiveness. If this option passes, then practice owners who don?t immediately rehire their staff and instead save the funds to use upon reopening their practices could fare best. No one is sure of the likelihood of something like that being enacted, however.


“Million Dollar Metrics” for General Dentists

Managing a practice requires that you look at “the numbers” on a regular basis. If you’re like most practicing Doctors, you probably try to glance at the production and collections figures at least monthly. Did you know that there are a lot of other performance metrics that can help you gauge how your practice is performing?

Figuring out which metrics are meaningful is one challenge. The problem is that calculating those metrics and then looking at those performance indicators in a vacuum doesn’t provide you with much insight at all. For that reason, calculating various performance metrics will be much more valuable to you if you can compare your practice’s metrics to your peer group.

My CPA firm currently provides tax, accounting, payroll, and basic practice management services to more than 130 dental practices. This past winter, we collected practice management data from many of our practice clients and used that data to calculate the following ten meaningful performance metrics for general dentists for 2012:

  • Number of Active Patients (Defined as an individuals?treated at least once during the prior twelve months)
  • Collections per Active Patient
  • Collections per Doctor Hour
  • Collections per Procedure
  • Number of Procedures per Active Patient
  • Number of Non-Diagnostic and Non-Preventive Procedures per Active Patient
  • Re-Care Efficiency (Defined as the percentage of Active?Patients who came in for two exams during the year)
  • Number of New Patients brought in during the last year
  • Percent of New Patients to Active Patients
  • Percent of Adjustments and Write-Offs to Gross Production

Please note that even though the data was collected mostly from practices in the Greater Boston area, I feel that most of these metrics are relevant to practices located within all 50 states.

To make these metrics even more meaningful, we calculated each performance metric based on the data collected from all the participating practices, and then re-calculated them based on the practices that collected $1 million dollars or more during 2012. It’s very interesting to see how the performance metrics for the total sample compare with the same metrics calculated from just the million dollar practices.

An part of our analysis, we also created a graph that we call our “Internal Marketing Matrix”. This graph plots Re-Care Efficiency on the x-axis versus New Patient Percentage on the y-axis for each of the participating practices. Depending on your practice metrics and where you fall on this graph, you’ll either be apolitician, engineer, neophyte, or “dentist-preneur”.

To learn more about these ten metrics and the four quadrants of our Internal Marketing Matrix, and to find out how your general dental practice compares against the average practice and the “million dollar” practice, please watch this 13-minute recorded PowerPoint Presentation on Million Dollar Metrics for General Dentists?or watch below:

If you’re practicing in the Greater Boston area and would?like to set up a time for my firm to help you figure out these metrics for your practice, please do not hesitate to e-mail me that request.? We’d really appreciate the opportunity to help you gain some insight on the performance metrics for your practice.

Increase your revenue with a Bonus System

You can also watch our six minute YouTube presentation of this?article here.

?Are You a Doctorpreneur?”

That’s generally the first question I ask to new clients who own medical and dental practices. While doctors help their patients with some aspect of their health, entrepreneurs run businesses, trying to maximize the long-term profitability of that business.

Whether you own a practice, work at someone else?s practice, or work at a hospital, you need to remember that every healthcare office is a small business that needs to be managed as a business. Nothing that happens within your office should happen by accident. If any aspect of the practice isn?t the absolute best that it can be, you should have a plan in place to address and improve that part of the practice.

One recommendation we routinely make to our practice owner clients is to implement a Simple Incentive Bonus System. For short, we call this SIBS.

For a bonus system to work, it needs to be:

  • Easy to understand.
  • Attainable, but not automatic.
  • Something that the staff members feel they can impact

As an example, SIBS works well with dentists. Most dental practices are staffed by a relatively small team that must work well together for the practice to routinely hit its goals.

  • Front desk person ? Fills the doctors? and hygienists? schedules and collects money from patients and insurance companies
  • Hygienists ? Validate treatment planning presented to patients. and can also provide additional services which add top line revenue and profits
  • Assistants ? Help improve patient flow efficiency

Implementing SIBS

Implementing SIBS is pretty easy. Simply figure out your annual goal, divide that figure by twelve, and that?s the monthly goal. (Obviously this will only work if your practice doesn?t have seasonal fluctuations.)

Any month that you hit the goal, give each team member a $100 bonus. Hit 110% of the goal, and increase the bonus to $200 or $250.

Don?t worry about sharing the practice?s financial information with the staff. If the goal is based on monthly collections, make sure to remind your staff that even though the monthly collection goal seems high, the practice overhead is high as well. Remember, there are staff expenses, occupancy costs, lab fees, dental supplies, debt payments, equipment to buy and maintain, insurance, computer hardware and software, and all sorts of other costs, and then the practice still needs to pay your salary.

You should also periodically adjust the threshold used to calculate the monthly bonus. A good time to adjust the goal is around the time you hand out raises

SIBS Examples

Here is an example of SIBS. Let?s say that you set your annual collections goal at $900k, so the monthly goal is $75k. You have a meeting, and explain to your staff that any month the practice collects $75k, each team member gets a $100 bonus. And if the practice collects 110% of that goal, or $82.5k, everyone gets $250

You then remind the staff that while the monthly collections seems high, you have a ton of expenses to pay each month, and after paying your salary, there is not a lot of money left over. Trust me, after a few times of telling them this spiel; they will start saying it to you whenever you bring up the monthly collection goal. That’s what happens at my office anyway.

Improve SIBS

Here are a few suggestions to make SIBS even more effective:

  • Don?t lump the bonus check in with the regular payroll that gets directly deposited into each staff member’s bank account.
  • Instead, issue a printed check from this bonus, and personally hand this check to each employee. (This will also allow your employee to cash this check and use the money for something special such as going out to dinner and to a movie or shopping for something they’ve been waiting to buy.)
  • At that time, thank each team member for their hard work in helping the practice achieve the monthly goal.

Just think how powerful a statement you are making to your staff if you hand them a check for their bonus payment, and personally thank them for helping the practice reach its goal.

As a reminder, you then do need to call this manual check into your payroll service since the income belongs on each employees? W-2.

Caveat Owner

Like everything else these days, there are a few pitfall of SIBS. For starters, this bonus plan can lose it?s luster over time. So, keep it fresh by changing the focus of the bonus over time. Maybe switch from monthly collections to new patients brought in to re-care efficiency, and then go back to collections. However, no matter what practice variable you use, always make sure to align the goals set within SIBS to the long-term goals of your practice.

You also need to be careful that your staff doesn?t game the system. I saw this at one client where the front desk person stopped depositing checks once the maximum goal was met, and held those checks to deposit the following month. Make sure to tell your staff the bonus will end immediately if anyone tries to beat the system by pulling a stunt like this.

Win-Win With SIBS

We?ve had a lot of practice owner clients implement SIBS, and they often see an immediate increase in collections Plus, the staff at these practices end up making a little extra money too, which keeps them focused on reaching the stated goal each month. Hopefully you?ll realize similar results.

Don’t miss it – Jan. 19 event

Are you in the Boston area on Thursday Jan. 19?

If so, you won’t want to miss our 14th annual Tax and Financial Planning Seminar at the Brookline Holiday Inn.

Highlights this year include:

Game Plan for College: Admissions, Financial Aid and Funding Strategies, with Todd Fothergill, Strategies for College, Inc.

Getting the Most Tax Savings from your Moonlighting and Professional Expenses, with Andrew Schwartz, CPA, Partner, Schwartz & Schwartz

– Basic Financial and Retirement Planning for Young Healthcare Professionals, with Jason Skolnick, First National Corporation

Benefit the Most from Recent Tax Updates and your Employee Benefits Package, Richard Schwartz, CPA, Partner, Schwartz & Schwartz

– Special Two Session Dental Track: Breakthrough Dental Marketing and Getting Patients to Invest in Treatment Predictably, with Don Khouri, Fortune Management of Boston

To learn more and RSVP, please go to: