March 2010
NASDA stats 08/09
The upward curve in private practice profits suffered a setback in the financial year 08/09 when the average net profit dropped by 4.3 per cent below the profits achieved in 07/08. This is one of the key findings from the annual dental practice statistics benchmarking exercise carried out by the National Association of Specialist Dental Accountants (NASDA) and announced at their press conference on March 17th.
Each year NASDA produces a report summarising the results of a sample of their dental clients. This year the report was produced from a sample population of 500 practices and 500 associates. The figures produced by NASDA are averages so while they paint a picture they are not necessarily representative of any one single practice or individual. They are the only comprehensive independent benchmarking figures against which clients can compare their performance.
For the fourth year running total private fee income exceeded that generated from NHS work but the gap between the two narrowed, with the ratio being 53.7 per cent private to 46.3 per cent NHS compared to 2007/08 when it was 54.3% private and 45.7 NHS.
The gross profit of the typical dental practice (NHS, private and mixed practices) fell from £257,189 in 2007/8 to £255,085 in 2008/9. However as private and mixed practices were able to reduce their costs the gross profit as a percentage of the income of the typical practice has actually increased in the year from 66.9% in 2008 to 67.3% in 2009.
Meanwhile. NHS practices saw increases in their direct costs and as a result their gross profit percentage fell from 67.8% in 2008 to 67.4% in 2009. Private practices saw a 4.3 per cent fall in net profits while mixed practices profits fell by 1.4 per cent.
In addition to examining the income and expenses of typical practices, NASDA statistics offer a breakdown of the average fee income and profits of dentists. These figures show that in 08/09, a private dentist’s total fee income was less than in 06/07 and 07/08. This trend was reversed for principals in NHS practices whose net profit rose by 8.9 per cent. The reasons for this are probably the onset of the recession and reduction in the number of private patients as well as the development of larger NHS practices which:
- have associates, therapists and vocational trainees delivering an increasing amount of the contract value, resulting in the profit per principal increasing.
- can achieve better economies of scale, thus reducing administration expenses
- are favoured by Primary Care Trusts and have been successful in negotiating new, or extensions to, contracts at higher UDA values.
The additional work being carried out by associates is reflected by the 4.0 per cent increase in 2009 of their average gross earnings. The average gross earnings were £86,651 per associate after deducting the payment to principal; this figure was £83,302 per associate in 2008.
As a result the average net profit per associate has increased this year to £72,988 from £70,299 in 2008. This is the first increase in their earnings in the last three years. While associate costs have risen in NHS and mixed practices, they have fallen in private practices.
Ian Simpson, who is responsible for the benchmarking exercise and who is a a partner in specialist dental accountants Humphrey and Co, said at the annual press conference that the statistics reflect the onset of the recession combined with the Department of Health’s commitment to improved access to NHS dentistry.
Nick Ledingham, chairman of NASDA and senior partner in specialist dental accountants Morris and Co, predicted that there may well be a continued downward turn in 09/10. He observed that while gross profits declined, current dental practice values remain steady.
Alan Suggett, a member of NASDA’s technical committee and a partner in unw LLP, presented the latest results of his quarterly dental practice goodwill survey. This showed:
Note to editors
The National Association of Specialist Dental Accountants (NASDA) was formed in 1998 to promote high standards in dental accountancy and business advice. It now consists of around 37 firms throughout the UK as well as a lawyers’ group with 12 law firms specialising in dental issues. Members abide by the standards of the NASDA charter and meet twice a year to share information. To speak to a member in your area, go to the website at www.nasda.org.uk
The gross profit of a practice is the total income minus the direct costs, for example dental materials, lab costs and payments to associates.
For more information, contact Caroline Holland on 020 8679 9595 or caroline@carolineholland.eu
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