How Much Should Dentists Pay Themselves?

Worried that you aren’t paying yourself enough, or are paying yourself too much? Looking to give yourself a raise? Independent dentists are often confused about how they should handle their finances, particularly when it comes to personal compensation.

What’s the right amount to pay yourself? How much should you keep in the practice? In this blog from Tooth & Coin, we’ll take a look at a few basic guidelines that will get you on the right track.

1. Calculate Your Total Overhead For 45-60 Days

Assuming you’ve been running your office for at least a few months, you should have a good idea of what your total overhead (business expenses) are for each month. Let’s take the following as an example:

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In this example, we see that the total overhead for the office – the total expenses before factoring in the dentist’s salary –  is about $100,000 each month. That’s about the amount that this practice should keep in their bank account at all times. This is called a “minimum cash reserve.”

2. Keep That Much Cash In Your Reserve Balance

Once you’ve established the necessary minimum cash reserve, make sure that you keep this amount in your business bank account at all times. Think of this as an “emergency fund” for your practice. 

Even if insurance deposits are late, patients are not paying on time, or there are other issues, keeping these funds in your account means that you can absorb these costs without worrying about making payroll, or not being able to pay yourself.

3. Make Adjustments Based On Your Reserve Balance

Once you’ve taken steps to calculate how much money you need to keep in reserve, as well as your monthly net income, you can adjust accordingly. Do you want to give yourself a raise? If you’re making a large monthly profit and your reserve balance is growing, you can likely do so without worrying about putting your practice at risk.

On the other hand, if you find that you are not coming out with a profit, you may want to identify steps to take to boost profitability, cut costs, and improve cash flow so that you can build up your reserve balance. 

Temporarily reducing your salary, reducing employee headcount, or cutting other expenses are all viable options for doing this. Paying yourself is important, but secure finances for your business are just as essential. 

Not Sure What To Pay Yourself? Get On Solid Financial Footing With Tooth & Coin

At Tooth & Coin, Jonathan VanHorn and our team are experts in dental finance. We work with dentists throughout the nation to ensure they’re paying themselves properly, while still investing in the long-term success of their practice.

Whether you’re having financial issues or just want a clearer picture of your dental finances, we’re here to help. Schedule an appointment online, or give us a call at (877) 265-2121 to speak to an expert and get the help you need.