Profitability and pay rises: are your numbers keeping you on course?

There are no less than five sets of accounts on my desk this morning, all sent in by clients who have asked me to take a look at the numbers and offer my observations and suggestions around course corrections that are necessary to maintain profitability.

Thus, of course, it always was.

Without exception, when I start working with a new client, it is necessary to review their existing financial management information systems, and then bring them up to speed in terms of the level of reporting that I consider necessary in order to stay on course.

I've mentioned in this blog before that it is a rare event indeed to meet a client who has all of the appropriate information available, dare I say it even if they work with a dentally-savvy accountant.

In last week's blog on this topic I mentioned those who are either flying blind, on autopilot or at the controls but off course.

In our own private WhatsApp group one of my clients asked me whether there should've been a fourth category – those who are at the controls and on course.

I asked for a Show of Hands amongst the 106 dental businesses that I'm working with at the moment – I'm still waiting for a confident volunteer.

So my work continues and before I leave home for our Leeds workshops today I'm going to attempt to work my way through those sets of accounts and offer the tough love that seems to be becoming more and more necessary.

On a separate note, it is that time of year when many clients are considering pay reviews and I inevitably get the question "what do you think?"

As I took my lunchtime break yesterday, I listened to an interview on sky News with a lady from "The City" sharing the news from the Bank of England that average wages for the UK private sector had increased by 6.6% in the last 12 months.

Out of interest, I decided to visit Gov.UK to check out the statistic.

Unfortunately, the latest published Average Earnings Index spreadsheet only covers the period ending December 2024 but, even on that 12 month analysis, average earnings in the UK private sector were 6.5% up on the previous year.

The significance of this, along with the Rachel Reeves increase in national living wage of 6.4% in the last budget, is that this media coverage is likely to set the bar for pay expectations amongst your salaried team members.

Therefore, if we add together the proposed increase in Employer's National Insurance from 1st April together with pay rise expectations – even without a calculator you can guess that that's going to have a significant impact on your profit margins.

The Sky News reporter yesterday asked his interviewee what she thought the impact of all of this would be on private employers – and the answer was emphatically that British companies would need to put their prices up in order to maintain their profit margins.

Can I respectfully suggest that the sooner you share the same message with your teams, self-employed clinicians and, ultimately your patients – the better.

As to how much you need to increase your prices - well that's another spreadsheet. Ask your accountant and they can't help, ask me.