Episode #360: How financial clarity and smarter systems can help dentists strengthen their business and reduce dependence on Insurance

Naren Arulrajah: This is the Less Insurance Dependence podcast show with my good friend Gary Takacs and myself, Naren Arulrajah.

Narrator: We appreciate your listenership, your time, and most of all, we appreciate your intention to reduce insurance dependence in your practice. Our goal is to provide information that will help you successfully reduce insurance dependence and convert your practice into a thriving and profitable dental practice that provides you with personal, professional, and financial satisfaction.

Lester De Alwis: Hello everyone. Welcome to another episode of the Less Insurance Dependence podcast, your trusted source for insights, strategies, and expert advice to help you take back control of your dental practice and career. I’m Lester De Alwis, your co-host, and I’m thrilled to bring you another value-packed episode with a very special guest, Ken Kaufman. On this episode, on this podcast, our mission is to help dental professionals reduce their reliance on insurance and create thriving, profitable, patient-centered practices.

Before we dive in, a quick word from our sponsors. Ekwa Marketing is offering a complimentary strategy — marketing strategy meeting — where the experts will show you how to attract high-value new patients, rank number one on Google locally, and consistently grow your new patient calls.

So if you ever want to discover where you are standing in terms of your digital presence, you can visit lessinsurancedependence.com/marketing-strategy-meeting to book a complimentary strategy session just to understand how things are going on your online visibility.

And if you’re looking for coaching to create a thriving fee-for-service practice, schedule a complimentary coaching strategy meeting with Gary at thrivingdentist.com/csm.

Now onto today’s episode. I’m excited to welcome Ken Kaufman, a respected leader in dental finance and CFO services. Ken and his team are industry leaders in accrual accounting, financial reporting, cash forecasting, road mapping, and fundraising — all with the goal of helping dental organizations grow their business and lead with confidence. Today, Ken will share how financial clarity and smarter systems can help dentists not only strengthen their business, but also reduce their dependence on insurance.

Ken, we’re excited to have you here. Thank you so much for being part of this podcast.

Ken Kaufman: Lester, thank you. Thrilled to be here. Excited for this discussion.

Lester De Alwis: So let’s start with this idea in mind. How does financial clarity empower practices to reduce their dependence on insurance?

Ken Kaufman: Sure. The most interesting part of that question is that a dentist wants to go through this process, and it should feel initially kind of scary, and it should feel like we’re afraid about what’s gonna happen financially to my practice. And so the thing that you always want to do — and this is if you are trying to reduce your dependence on insurance, this is also if you want to try to go and build a new de novo or acquire a practice — the same principles all apply here.

And that is that you want to put a model together, or like a financial forecast together, that says, okay, if I’m going to stop receiving revenue from this insurance company, how much is that, and how long will it take me to replace that with other types of patients and other types of things?

And you put this nice little thing together that is ultimately probably gonna be in a spreadsheet-type of format, and it’s gonna tell you, okay, we can only reduce our insurance dependence this much over the next however many months, and we can plan all that out really nicely and make sure that you don’t run outta cash in the process.

Ken Kaufman: Cash is king here, and that drives — and liquidity is what helps our businesses be sustainable over time. And so it gives you this opportunity to just plan really, really carefully, and you don’t have to be worried about, am I gonna run outta money? The model will tell you the timing and how you need to go through the process while still maintaining enough liquidity to be able to cover payroll and your expenses and those sorts of things. Does that make sense?

Lester De Alwis: Exactly. It makes a lot of sense. I think financial clarity is really the foundation, but one of the biggest fears dentists have is cash flow. Now let’s talk about that. How can better forecasting and financial road mapping help practices kind of transition away from PPOs?

Ken Kaufman: Yeah. So this is, again, this is interesting. And at the end of the day, you’re going to make more money if you go down this path, but that may mean there are some short-term sacrifices or some short-term pain for long-term gain. That might be a better, or a cooler, way to say it.

But moving away from that dependence creates a really interesting — it just creates so many opportunities, because you’re no longer beholden to one payer who, by the way, has been really, really bad over the last five years at increasing at all. Some might even be trying to decrease in some circumstances, right?

And so again, forecasting, thinking about the future — all of that planning can be done right inside these modeling concepts or this forecasting concept that’s just gonna empower you to ultimately tell those insurance payers that you’re done and you’re ready to move on.

Lester De Alwis: Exactly. Great insights. So now, you also work with DSOs and larger groups. Let’s talk about what independent dentists can learn from their approach. What lessons can solo and small group practices learn from DSOs when it comes to managing finances and growing outside of insurance constraints?

Ken Kaufman: So to start with — because I get this question a lot about, you know, "Well, this DSO over here, they’re just so perfect and amazing and everything’s going great" — I would like to just break this down very clearly. Every DSO, when you lift up the hood, is a disaster. Dentistry is extremely hard. Trying to grow dentistry is even harder, and it is messy.

And the reason why it’s so hard is because everything is so people-dependent. And people are messy. People have problems, people have challenges, people don’t like their job, people love their job. You have all of these different emotions and all these things happening all the time. I just want you to know that if you feel like your small group, or your small DSO, or your large DSO — if you feel like, “Man, we’re just struggling,” everybody is in the same boat.

Ken Kaufman: So I just want to level the playing field. First of all, if you’re feeling that level of stress, I don’t know what to tell you other than: welcome to dentistry, and welcome to the hard work of trying to grow dentistry — by locations, or by number of chairs, or whatever your movement is there.

Now, how does that relate back to insurance dependence? Well again, at the end of the day, you went to dental school because you wanted to help patients. And there is a monetary reward. And the challenge is that the insurance companies are taking too much of that reward away.

And so, the sooner you can get yourself on a path toward that — if that’s what you want to do — the sooner you can get on the path, it’s just the more money you’re going to be able to make, and the more freedom you’re going to have to treat patients the way that you want to treat patients. The more freedom you have to actually be even more selective about what types of patients, or what types of modalities, you want to even deal with inside of your practice.

General practice — when we say to the world, "We do everything" — that’s hard. And so, the ability to get really good at some things inside of one practice can be very, very beneficial. And again, all of that, as you break away from the shackles of the insurance dependence, it’s just going to give you more and more optionality to build the practice that you want — not that your friend wants, not that your professor at dental school wants — none of it. It’s what you want, and what you’re excited about, and how you want to actually make your impact on the world.

Lester De Alwis: Exactly. Exactly. Now, earlier, Ken, when we discussed, you mentioned a book that you were working on. Would you like to share about that as well?

Ken Kaufman: Oh boy. I may be putting myself out there a little too far, Lester, with this, but I’ll mention it, because — okay, we’re nowhere close to it being done. I mean, this is a next year thing. But okay, my daughter and I wrote a book a couple of years ago called Financial Secrets to Grow Dental Organizations. From my perspective, that was my gift to the industry, because I was just getting so many phone calls and people asking, "How does the finance part of this work?" and "How do all these things work?" — having been the CFO of two very large DSOs.

And what my daughter and I are now doing — we’ve teamed back up again — and we’re just in the beginning process of… because the book that we wrote was basically, "Hey, here are all these financial tools, clarity tools, that you can use to build and grow your business and make it successful."

Ken Kaufman: Now what we’re going to do is write a whole storyline around what happens when you want to try to monetize your business — when you want to try to sell it, or you want to try to bring new partners on, and those sorts of things. So we’re kind of going to that next step. Right now, we’re in character development mode. My daughter is a novelist, and so that’s why she even bothered to team up with me. Otherwise, she’d be like, “Dad, why would I want to help you write a book about dentistry? I could care less about that.” But she creates characters, and then we are building a storyline so we can follow the journey.

She told me yesterday that ultimately, she loves the name Alexis. And so, the dentist entrepreneur we’re going to be following through this journey is Alexis. And we’re going to — through her eyes — see what it’s like to sit down with a private equity group and decide if we should partner or not with them, how do you find the right investment banker, and what are the attributes that you care about the most there.

So that’s a little bit about the book. Hopefully, I haven’t shot myself in the foot — because if it never materializes, that would be very sad — but we’re very committed to getting it done. It’s just, that type of a project is a six- to twelve-month project.

Lester De Alwis: Yes, of course. I think the listeners of this podcast are very lucky to hear about this — the very first glimpse of this book. So I think it’s going to be very interesting to see this live when it comes all back into action.

Now, I just want to come back — when it comes to financial clarity — what kind of numbers are we looking at when it comes to financial clarity or financial independence for a practice?

Ken Kaufman: Yeah, so I want to be clear about financial clarity and why it’s so critical. It is just so, so important. Okay? And I think I actually shared this with you before, Lester, but the way that I portray this is — there was a time when I was driving on the freeway doing about 70 miles an hour, and there was just this huge rainstorm that came out of nowhere. And before I knew it, the rain was coming down so hard, the windshield wipers couldn’t go fast enough — we lost all visibility ahead of me.

And that was an extremely scary moment. I thought that I might die, because I didn’t know — should I try to turn one way or the other, or just kind of hold on for dear life and hope everybody else is doing the same thing and they’re not gonna crash into me?

Ken Kaufman: I think of that experience, and that actually is the whole reason why I came up with the term “financial clarity.” Because sometimes when we’re running our businesses — especially if we’re in scaling mode, trying to add locations and add modalities and all of those sorts of things — when we do not have clarity, anxiety goes up dramatically.

And it’s true — it’s true more with finances than almost anything else. I think the principle is generally true, but with finances, maybe it’s even augmented. Because most people have kind of a weird relationship with money — wanting to feel security around their money, but also wanting to feel like, “Well, I’m growing it, and it’s going to be a nice nest egg maybe down the road,” and different things like that.

And people have emotions also that they don’t know that much about finance or accounting or those sorts of things.

Ken Kaufman: So when we talk about financial clarity, the reason why I emphasize it is because when you have financial clarity, you now have the confidence to move forward with whatever it is you’re deciding that you want to do next — in terms of your growth, in terms of how you’re doing everything inside of your business.

When you don’t have that clarity, all of us do the same thing. We’re going to double clutch. We’re going to pull back. We’re going to probably say no to certain opportunities that we should have said yes to — and could have generated more money for us — but we are going to hold back because we don’t have the clarity.

And so to the degree I can influence — at any level — anybody inside the dental industry: the more you can do to get financial clarity, the more confidence you will have as a leader, and the more money you’re going to get when you need to go and raise debt financing or anything like that. It’s just this huge waterfall of benefit and value that comes as soon as you invest to get to financial clarity.

Lester De Alwis: Yeah, and I think it also basically becomes peace of mind, right?

Ken Kaufman: Oh yeah.

Lester De Alwis: Basically, that basically is—

Ken Kaufman: Yeah. And again, if you’re in this mode of, “I’m going to drastically change the landscape of my business by telling insurance to take a hike, and by now being responsible to recruit and find all of my patients — because I realized the insurance company was doing that for me before” — it’s just as critical to your business that you have the financial clarity so that you can maneuver through that process.

Lester De Alwis: Exactly. Exactly. Now, for my final question for you, Ken — what first steps can dentists take to build financial systems that support independence and long-term success?

Ken Kaufman: Yeah, so again, this is a great question. The very first thing you’ve got to do when you think about building out and gaining financial clarity is you’ve got to get your financial information organized in an appropriate way.

And this usually starts with doing bookkeeping. If you’ve got one practice or ten practices, you’ve got to do bookkeeping for all of your practices. And by "you," I mean hopefully you hire somebody — because you didn’t go to dental school so that you could be a bookkeeper, please. Yeah. Don’t do it. Get some — get an expert to do that for you.

So that’s kind of the baseline, so you have at least some information. The challenge with that information that you’re getting, though, is it’s all cash basis. And so, you don’t actually know — like, they’re not accurate financial statements that you can pull from this, because there are things that aren’t being included.

Ken Kaufman: But at least we start with that cash basis. The next step is, you’re going to want to move to accrual — because accrual now gives you accuracy. It tells you actually what is happening, what procedures are being performed — not what cash is coming in and out of the bank.

And, you know, for example, if somebody does full arch and they collect the full fee upfront — well, that could make the revenue of that practice for one month go way up. But if you haven’t provided the service yet, it’s actually just a liability, because you haven’t actually delivered what they gave you the money to accomplish.

And so, going to accrual — and I could give you a lot of examples here — but going to accrual accounting would be the next step to get even more clarity.

Ken Kaufman: Then the next step after that — and this is where it gets fun — once you’ve got good clean bookkeeping, and then we get everything into an accrual basis, now we can do that forward-looking planning. Because we have accuracy about what’s happened historically, we can now start to make assumptions about what could happen in the future as a result of that.

And now you start to get clarity about what’s happening in the future. And the more clarity you have there, the more confidence you have, and the more capability you build around yourself so that you can actually execute and move forward on those growth initiatives — and know you’re not going to run out of money, and it’s actually going to be cashflow-positive for you by the, you know, 15th week that you’ve done this initiative or whatever it is.

And everything’s planned really nicely around it.

So again — gotta do the basic bookkeeping, get yourself to accrual, and then get yourself into these forward-looking tools that will just help you make great decisions on a day-to-day basis, week-to-week basis, month-to-month basis — so you can build a great business.

Lester De Alwis: Exactly. Excellent advice. Ken, thank you for breaking that down so clearly. I think anyone listening in got a lot of great nuggets that they can actually, you know, put into practice — and really understand when it comes to financial clarity.

Ken, thank you so much for joining us today and sharing your insights on how dental practices can use financial clarity to reduce their reliance on PPOs and lead with confidence.

Ken Kaufman: Thank you, Lester. It’s been a pleasure.

Lester De Alwis: The key takeaway from today’s episode is that strong financial systems aren’t just numbers. They give dentists the confidence and freedom to make bold choices — including breaking free from insurance dependence.

And, as always, this podcast is about taking action. First off, if you want to attract more high-quality patients and reduce reliance on PPOs, schedule a complimentary marketing strategy meeting with Ekwa Marketing at lessinsurancedependence.com/marketing-strategy-meeting.

Secondly, if you are looking for mentorship or personalized coaching to build a thriving insurance-independent practice, schedule a complimentary coaching strategy meeting with Gary at thrivingdentist.com/csm.

Now, both of these are complimentary resources, and they are here to help you take meaningful steps forward for the practice and the life you truly deserve.

And if you found value in today’s episode, please share it with a colleague or a friend who could benefit. Together, we can help more dentists take control of their future.

Thanks for joining us, and I look forward to connecting with you again on the next episode of the Less Insurance Dependence podcast.

Until then, keep moving forward — toward a thriving, independent practice.