How To · 7 min read
Your P&L holds three numbers most owners read wrong. Here is how to read each section the way a dental-specific accountant does.
May 2026 • 10 min read
Your profit and loss statement is the single most important financial report your dental practice produces. It tells you where your money came from, where it went, and what was left. But most dental practice P&Ls are structured for tax compliance, not for running a practice. The categories are too broad, the benchmarks are missing, and the story the numbers tell gets lost in generic labels like "revenue" and "expenses."
This post walks through each section of a dental-specific P&L, explains what the numbers mean in the context of your practice, and gives you the commonly published dental practice benchmarks to compare against.
Most general bookkeepers put one number at the top of your P&L: "Revenue" or "Income." That single number hides three distinct concepts that matter in dental.
This is the total value of dentistry performed at your full (UCR) fee schedule. It represents the work your team did, valued at the rates you set. Gross production comes from your practice management software, not your bank account.
If you participate in PPO networks, you have agreed to accept fees lower than your UCR rates. The difference between what you charged and what the carrier's fee schedule allows is a contractual adjustment. This is not lost revenue. It is revenue you agreed not to collect when you signed the contract. On your P&L, contractual adjustments should appear as a contra-revenue line that reduces gross production. How large they run depends entirely on which plans you are in and what you negotiated, so pull your own adjustment percentage rather than reaching for an industry average.
Net production (gross production minus contractual adjustments) is the amount you were entitled to collect. Net collections is what actually landed in your bank account. On a well-structured P&L, both numbers are visible, and the gap between them tells you whether you have a collection problem or a timing issue.
If your P&L only shows one revenue line, you cannot tell whether a change in revenue came from doing less dentistry, taking deeper PPO discounts, or simply waiting on insurance payments. All three look the same on a single-line P&L.
Below revenue, your P&L should show the direct costs of delivering dental care. These are costs that go up when you do more dentistry and go down when you do less.
Composites, cements, impression materials, disposables, PPE. Commonly published benchmark: 5 to 7% of net production. If your supply cost is consistently above 7%, you may be overstocking, using premium materials where standard would suffice, or not tracking usage at the provider level.
Crowns, bridges, dentures, implant components sent to outside labs. Benchmark: 5 to 7% of net production. Practices with heavy crown-and-bridge volume will trend toward the higher end. Practices investing in in-house milling (CEREC, Primemill) may see lab fees drop but equipment costs rise.
Combined supplies and lab fees should run 10% to 14% of net production, which is simply the sum of a healthy 5% to 7% supply cost and a healthy 5% to 7% lab cost. Under 11% is a strong number rather than the ceiling. This is your cost of goods sold (COGS) equivalent. If clinical costs are above 11%, look at lab pricing first. Lab fees have more variance and more room for negotiation than supplies.
Operating expenses are the costs of running your practice regardless of how much dentistry you perform. These are your fixed and semi-fixed costs.
All W-2 wages, payroll taxes, and benefits for non-owner employees: hygienists, assistants, front desk, office managers. Benchmark: 25 to 30% of net production. This is typically the largest single expense category in a dental practice. Within this, hygiene labor specifically should run 8 to 10% of net production.
If staffing is above 30%, check whether you are overstaffed relative to production, whether your fee schedule is too low (inflating the percentage), or whether overtime is driving costs up.
Base rent, CAM charges, property taxes, building insurance. Benchmark: 3.5 to 6% of net production. Dental leases are long-term commitments, so this percentage is hard to change quickly. But it matters for practice valuation and for new associates evaluating whether to buy in.
Digital marketing, SEO, mailers, patient referral programs, community sponsorships. Benchmark: 3 to 7% of net production. Newer practices or practices in competitive markets typically spend at the higher end. Established practices with strong referral bases can spend less.
After subtracting clinical costs and operating expenses from net production, you arrive at net income. But in a dental practice, net income on the P&L is not the same as what the owner takes home, because some of that profit is already spoken for.
Owner compensation (salary, distributions, retirement contributions, health insurance, personal vehicle expenses, CE travel) needs to be separated from practice profitability. When owner compensation is mixed into operating expenses, the P&L makes the practice look less profitable than it actually is, or hides an owner who is overpaying themselves relative to production.
The benchmark that matters here is adjusted EBITDA: earnings before interest, taxes, depreciation, and amortization, measured after paying every dentist, including the owner, a fair-market clinical wage. For a solo owner-operator, healthy adjusted EBITDA runs 15 to 18% of collections; for a multi-provider practice it runs 18 to 25% or more, with anything over 20% considered investment-grade. Solo practices sit lower because the owner is the production, so a market wage absorbs most of the margin, which is why they are usually valued on SDE, Seller's Discretionary Earnings, the same figure with the owner's pay left in and closer to 35 to 45%, rather than on EBITDA. If your number is below its range, your overhead is too high, your production is too low, or the owner's pay is not set at market.
Here is a reference table for the key P&L benchmarks. All percentages use net production as the denominator and reflect commonly published dental practice benchmarks. These ranges are guidance, not audited figures, and they vary by region and practice mix.
| P&L Line Item | Benchmark |
|---|---|
| Collection Ratio | 98 to 100% |
| Supply Cost | 5 to 7% |
| Lab Fees | 5 to 7% |
| Total Clinical (COGS) | 10 to 14% |
| Team Staffing | 25 to 30% |
| Rent/Occupancy | 3.5 to 6% |
| Marketing | 3 to 7% |
| Total Overhead | 55 to 65% |
| Adjusted EBITDA (of net production) | 15 to 18% solo / 18 to 25%+ group |
If your P&L does not break expenses into categories this specific, your bookkeeper is probably using a general chart of accounts rather than one designed for dental. That makes benchmarking impossible.
If you want to see how your own practice measures up against these ranges, our free Dental Practice Benchmark Scorecard lets you drop in your numbers and check each line in about two minutes.
P.S. Reciprocity Accounting delivers a monthly P&L built for dentists, so the numbers actually make sense at a glance. See how we can help your practice.
Then your books are recording deposits, not revenue in any meaningful sense. You need at minimum three revenue-related lines: gross production, contractual adjustments, and net collections. Without that breakdown, you cannot calculate net production, and without net production, none of your benchmarks work. A standardized chart of accounts fixes this.
Monthly, within 10 days of month-end close. If your books are not closed until the 20th or later, you are making decisions on stale data. The review does not need to be long. Fifteen minutes comparing this month to last month and to the same month last year will surface anything that needs attention.
For tax filing, your CPA may use cash basis. For management reporting (the P&L you actually use to run your practice), accrual or production-based reporting gives you a much cleaner picture. Cash basis P&Ls distort dental practice financials because of insurance timing lag.
Total overhead includes all practice expenses (COGS plus operating expenses) minus owner compensation and owner discretionary expenses. Divide by net production. The benchmark is 55 to 65%. If yours is above 65%, the answer is usually in staffing or rent, since those are the two largest cost categories.