How professionals can leverage data analytics to enhance efficiency and profitability

Utilizing data analytics in your practice to optimize profitability and allow you to strategize in real-time.

Whether you’ve been in business for three years or three decades, your practice is overflowing with valuable data. From financial results to detailed operational data, the insights drawn from this information can help you understand where and why your practice is succeeding and what opportunities you have for improvement moving forward.

Learning how to interpret and examine this wealth of information is the first step to using it as a catalyst for enhancing the efficiency and profitability of your practice.

Why incorporate data analytics?

Data analytics is the process of analyzing raw data to uncover trends and insights about your practice. It supports you in answering key questions and enables you to draw conclusions about how to operate more efficiently, maximize profitability, and make more informed decisions.

Ultimately, analyzing the data in your practice will help you generate a clearer picture of where you’ve been, where you are, and where you should go.

In the professionals industry, we typically break down our analysis into two related components: financial Key Performance Indicators (KPIs) and operational metrics. While they both provide valuable insights into your business on their own, when examined in tandem they provide a greater overall picture to help you take actionable steps to build a plan for the future.

Financial analytics

Assessing your practice’s finances on a monthly or annual basis may be routine for you– be that on your own or with the support of your accountant or MNP advisor.

Wherever you fall on this spectrum, it’s vital that you know what’s going on in your business and knowing the ins and outs of what your financials look like is a big part of that.

To enhance any financial analysis, benchmarking is an extremely valuable tool that helps provide relevant comparisons for select KPIs.

Benefits of benchmarking include:

• Ability to compare your practice performance to similar sized practices in similar geographic areas.
• Highlights specific areas to focus your attention on in order to realize the full potential of your practice.
• Access to KPI trends over multiple years to better understand your own longer-term trends in the context of broader industry trends.

Key benchmarks that are important to review as part of your financial analysis include:

• Revenue/Production: Understanding your revenue growth in comparison to similar practices is a critical first step in assessing financial performance. Depending on your area of practice and your strategic goals, this can also include a breakdown of various revenue components.
• Expenses: Clearly understanding how much you are spending on large expense items such as wage costs, lab fees, supplies, or rental expense, are critical to managing your practice effectively. For example, are you staffed appropriately and are you managing your team and supplier relationships effectively? In conjunction with the benchmarking process, you’ll see how the answers to these questions highlight opportunities to enhance profitability.
• Working Capital: Gathering insight into your existing inventory levels or accounts receivable balances enables more effective management of the working capital required to operate your practice. This is especially important when the cost of borrowing is much higher than in prior years.

Assessing and benchmarking your financial KPI’s is a great first step in allowing you to determine high-level opportunities for improvement. The process provides a solid starting point to make directional decisions regarding your key strategic priorities – identifying actionable steps to achieve your financial goals today and in the future.

Operational analytics

To take a more transformational view of your practice with a focus on optimization and performance improvement, it’s important that you incorporate critical operational data and metrics alongside your financial KPIs.

Operational analytics shifts the focus from understanding key financial outcomes to identifying improvement opportunities using real-time data regarding the daily operations within your practice.

Examples of operational analytics include:

• Production metrics – This includes key insights regarding daily, weekly, and monthly production, revenue segmentation, scheduling efficiency, and other metrics. The focus of these metrics is on optimizing production and making best use of you and your team’s time.
• Patient analytics – These valuable insights highlight key metrics related to your patient satisfaction, retention, and growth. This would include measures such patient lifetime value, active and new patient details, patient reactivation, treatment plan acceptance percentages, and patient demographics.
• Communication and marketing - As practices become more digital and customer expectations evolve, it’s imperative to understand and analyze if you are marketing and communicating to your customers effectively. This can include assessing the impact of your website and marketing content, proactively improving patient retention through appointment and recall reminders, or looking more extensively at market share and market area diagnostics.

If you’re looking for opportunities to make changes, it’s best to approach the process with all the available information to help you make the right choices. Not only will it allow you to get to know your practice in more detail, but you’ll also have the opportunity to develop a significant competitive advantage.

Optimizing your practice using both financial and operational data analytics enables your practice operations to run more efficiently, enhances your patient's experience, and provides greater clarity of your revenue and cost structure. It will also serve to strengthen the practice in order to deal with the risks and to position it at times for best results in the event of a potential sale or exit, whether planned or unforeseen.

If you think it might be time to bring more efficiency and understanding to your practice, MNP advisors are here to help. Whether you’re hoping to attract more patients, or you want to completely transform your operations, meeting with an advisor can help you access the data you already have to plan for the future you want.