The CPA’s quarterly summary says overhead is 68 percent. Last year’s said 61. Both numbers are probably right, and the difference is almost always what got counted as an expense, not a real change in the practice. This page fixes the definition first and then does the sum.
The formula in words
Overhead percentage equals total operating expenses, minus any owner compensation and owner benefits included in them, divided by collections for the same period, times 100.
Owner pay comes out because it is the thing overhead is meant to leave behind. Associate pay stays in, because it is a cost of producing. Use collections, not production, because overhead is paid from money that arrived.
Worked example: collections for the year $1,080,000. Total expenses on the profit and loss $820,000, of which $180,000 is the owner’s salary and benefits. Operating expenses are 820,000 minus 180,000, which is $640,000. Overhead is 640,000 divided by 1,080,000, which is 59.3 percent.
The calculator
Where each number comes from
Collections: your practice software, not the bank statement. In Open Dental, Reports then Production and Income gives income for the date range. Dentrix’s Practice Analysis and Eaglesoft’s production and collections reports do the same. The bank statement includes refunds going out and deposits from other sources, so it drifts from the software figure.
Expenses: the profit and loss from your accounting software for the same period. Pull the owner’s salary, payroll taxes on it, retirement contributions and personal items run through the practice, and enter that total separately.
The biggest reason two overhead figures disagree is the owner line. The second biggest is lab and supplies bought in December for January, which lands in the wrong year. A twelve-month period smooths most of it.
Reading the result
Overhead is a ratio, so it falls when collections rise as much as when expenses fall. A practice that adds hygiene days and collects more sees overhead drop with no cost cutting at all. Before cutting anything, check the collection rate calculator: a low net collection rate inflates overhead because the denominator is smaller than it should be.
The usual split to track, each as a share of collections: staff wages and benefits, lab, supplies, rent and facilities, and everything else. A line that moves more than a couple of points year over year deserves a look.
Calibic reads production, collections and adjustments from your practice software and shows them by month on the owner dashboard (LIVE). It does not read your accounting software, so the expense side comes from your CPA and the overhead figure is yours to keep. Read-only, built for HIPAA, with a Business Associate Agreement sent with every sign up. See dashboards for owners, the practice KPIs guide, or take the practice health check.