A growing dental practice needs stable cash flow for it to run successfully. Dentists like you are experts at helping people and running your medical practice, but accounting for a business is a whole different ball game. Many small dentists often overlook vital aspects of dental bookkeeping and make mistakes that cost them thousands of dollars in lost revenue. In today’s blog, we’ll be taking a look at mistakes you should avoid as a dentist if you want to take home what you deserve. So, let’s dive in.
Dental Accounting Mistakes Only A Professional Dental CPA Can Catch
Mistake #1 – Treating Cash Flow And Profit Like One And The Same
Let’s take a quick look at what’s cash flow and what’s profit before we delve into this topic. Profit – An organization’s profit is calculated by subtracting expenses from revenues for a specific time period. Net Profit is calculated after completing a Profit and Loss Statement and deducting all operational costs from it. Cash flow – A company’s cash flow is calculated by comparing money coming in and going out of a dental practice during a specific period. Once the cash flow equation is computed, accounts receivables, inventory, and depreciation costs are considered. Many dentists we’ve helped employ bookkeepers or accountants who don’t understand the fundamental difference between cash flow and profit. The results? Inaccurate financial reports that mislead business owners into making financially unviable decisions. As a business owner, your sole focus should be on profits and increasing your profits. If your cash flow keeps rising, but your profits don’t, then it means your financials are flawed. Speak to a professional dental CPA in Maryland today to understand how you can avoid this mistake and grow your bottom line.
Mistake #2 – Forgetting To Record Transitions In The Right Time Period
An expensive mistake dentists make is not closing the book at the end of every month. If your accountant doesn’t close your month every month, you’ll face many issues when you reconcile your financial statements with your bank statements which will cost you dearly. Once your books are closed, no modifications should be made to them, which will ensure that you always have updated financial records on hand whenever you need them. Reconciling all accounts of the business, preparing month-end financial statements, and ensuring all dues are cleared are all included in book closing activities. Are you making this grave mistake and recording your transitions in the wrong time period? Please speak to an expert dental accountant in Maryland today to learn how we have helped over 50 dentists get their finances on track.
Mistake #3 – Misclassifying Expenses And Distributions
If you’ve structured your business as per your needs, you may be drawing a salary or taking distributions from your profits. One of the biggest mistakes we see small dentists in Maryland make is that they don’t classify these appropriately, which leads to underpayment of estimated taxes and invites the wrath of the IRS. A professional dental accountant and bookkeeper in Maryland helps you classify these correctly to ensure you don’t irk the IRS and provoke them to do an audit of your business.
Mistake #4 – Failing To Monitor Key Performance Indicators
A dental practice is a business at the end of the day. If you don’t measure performance indicators and track them properly, you’ll lose out on insights that could help you grow. A business is fundamentally built by two costs and revenue, i.e., profits and expenses. If you don’t track your expenses and consider your profitability when making growth decisions, you’re missing out. Is your CPA letting you make this mistake? Talk to us today to learn how we can help you.
Mistake #5 – Using An Non-Standard Chart Of Accounts
A chart of accounts is created when we track how funds are received and spent to make the financial statements for a specific period. For example, if your bookkeeper or accountant uses a chart of accounts that are generic and not specialized to a dental practice, then you’re making an unforgivable mistake. In scenarios where non-standard charts are used, the financial statements and records are always skewed, which leads to wrong decisions because of a lack of insights.
Mistake #6 – Working With An Inexperienced Accountant
The last mistake on the list is also one that costs dentists the most in lost money—working with an inexperienced CPA who doesn’t understand how the intricacies of the medical industry can be an expensive mistake for any dentist. Why? Because they simply aren’t aware of all the claims, deductions, and loopholes that make running your dental practice more profitable. An inexperienced dentist will also overlook many key things that an experienced dental accountant can catch and rectify. For example – A friend of mine told me this story where a dentist lost over $3,50,000 over 24 months due to employee theft, and they didn’t even know about it until they brought in an experienced specialist dental CPA to help them. A CPA for dentist like Sigma has years of industry experience and has helped multiple dentists scale their business effectively with the help of Tax Planning Services for Dentists, dental accounting services, dental bookkeeping, retirement planning for dentists, and much more. Talk to us today to understand how we can help you grow and scale your dental practice with the help of effective dental accounting solutions. Our friendly team of In Maryland is always happy to help.