1.Not understanding the difference between cash flow and profit – Most dentists and their in-house bookkeepers do not know how to read and understand financial reports. When the dentist requests the figures for a particular period from the bookkeeper, it is a common and costly mistake for the bookkeeper to provide the dentist with the profit figures. The problem with this is that the profit amount does not represent the cash available for purchases. As a result, the dentist makes purchases and incurs overdraft fees and extra charges. Nothing will cripple a growing dental practice faster than having cash flow trouble.
Every business is subject to the same fundamental accounting principles, but their applications vary significantly due to the nuances of each industry. As a result, choosing a generalist accounting advisor is often a mistake for dentists. As a result, you’ll likely have high fixed costs, and you must be careful to avoid cash flow issues. Just be sure you choose one who’s had clients like you before, so they understand the nuances of accounting service for the dental industry. Alternatively, dentists can switch to a fee-for-service approach, which involves setting your prices for services and collecting payment in full from patients upfront. You or the patient can still submit a claim to their insurer for reimbursement if there is one.
Informed Patients
Recording accurate patient information is essential to the practice of dentistry and fundamental to the delivery of quality patient care. It provides invaluable data, which can be used to assess the quality of care that has been provided and to properly plan for treatment going forward. A dental practice has the potential to be an extremely lucrative business. However, if office managers and staff, are not trained in effective bookkeeping principles, and many of them aren’t, a practice is unable to secure a high margin of profitability. Even though the dentist may not do the bookkeeping, as a business owner, it’s imperative that he at least understands the accounting process for his practice. Overall, dental bookkeeping requires attention to detail and base knowledge of bookkeeping guidelines.
Therefore, dental businesses must continually evaluate their billing practices to stay competitive. Monitoring regulatory and guideline changes can help identify areas for improvement and introduce best practices. Dental billing regulators ensure patients are handled fairly and ethically. Therefore, the Health Insurance Portability and Accountability Act (HIPAA) sets rules for keeping patient information private and safe.
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In contrast, the dentists’ and hygienists’ payroll would be considered to be part of the Cost of Sales. Problems can also arise when a dental practice owner plans to sell their business at the end of their career. While that’s a long-term financial goal, it creates many accounting challenges regarding practice valuation and retirement planning. The unique aspects of running a dental practice can complicate these processes. For example, accounting for your revenues properly despite the complexities of insurance billing can be one of the most significant challenges.
That’s because litigation is one of the most significant risks in the healthcare industry, and you can’t afford to leave yourself exposed. As a result, dentists generally must choose from corporate and LLC structures. This handy tool allows you to make an Accountants Copy for your accountant, who can then make adjustments to your finances, entries for tax purposes, etc. With QuickBooks, you can continue to write checks, create payroll, and run reports without any time delays or having to reenter any information. QuickBooks Report Finder creates reports to determine whether you are making or losing money. By assigning various accounts when writing checks, these reports make it easier to evaluate expenses and the costs of materials used in your practice.
Our Office
This includes records prepared by other doctors that the dentist may have received. Whether you are providing the records directly to the patient or transferring them to another clinician, as a general practice, you should not let the original files out of your control. The physical copy of original dental records (if kept in hard copy) is the property of the health care provider that created it.
And the QuickBooks Online reconcile feature will walk you through reconciling any account on your balance sheet. It also leaves you and your CPA historical reconciliation reports which CPA’s depend on for their review work. Give it a try if you haven’t, then add this to your checklist to be done every month. Have you ever looked at your bank account and did not know why the balance was too high or too low? If yes, we suggest creating a new protocol where you have a new financial report every month. A financial report will allow you to fill financial gaps and stay up to date on your accounts receivable and payable.
We have a different checklist for the end of the year when closing the books for the CPA to take over. For example, one important rule in our bookkeeping process, (but so rarely followed by almost every practice that comes to us) is each and every transaction in QuickBooks needs a vendor name. It’s super easy to miss because dental bookkeeping of the way QuickBooks imports the transactions from the bank without the names in the vendor column but has it in the memo. Let me know if you’d like me to explain the importance of this and how to do it in more detail, but this is a good example of what you have to remember to do before you start doing anything.
Budget vs. Actual Reports can then be produced to determine how on-target you are with your practice goals. At a recent convention, a dentist walked into a QuickBooks® workshop and asked why he should use QuickBooks instead of Quicken®. We help dentists stop feeling lost with their Profit & Loss report by transforming it into a benchmarking tool that measures success.
