Common Dental Accounting Mistakes You Need to Avoid

accountant

Reliable cash flow is necessary for a dental business to run profitably and grow. Dentists like you are adept at caring for patients and running a business, but managing a company’s books presents different difficulties. 

Many small dentists frequently make mistakes and overlook crucial dental accounting details, costing them thousands of dollars in lost revenue. In today’s blog, we’ll look at errors dentists should avoid if they want to be reimbursed for their debts.

CPAs for dentists use a sophisticated accounting system to guarantee the smooth operation of your dental business. Specific dental accounting errors are only detectable by a trained dental CPA. Here are the common mistakes in dental accounting: 

Thinking That Financial Flow and Profit Are the Same

Let’s define money flow and Profit briefly before we continue with this topic. Profit – An organization’s Profit is calculated as the difference between its expenditures and revenues over a specified period.

Net Profit is calculated by finalizing a Profit and Loss Statement and deducting all business costs. Cash flow determines how much money enters and leaves a dental practice over a specified period. After the cash flow equation is computed, depreciation expenses, account receivables, and inventory is considered. 

Many dentists we’ve helped work with accountants or bookkeepers who aren’t conscious of the critical difference between cash flow and earnings. Inaccurate financial reports that pressure business proprietors to make unprofitable decisions are the results. 

Maximizing your profits should be your primary objective as a company owner. Your finances are flawed if your revenue flow keeps growing, but your profits don’t. Contact an experienced dentistry CPA immediately to learn how to avoid this mistake and increase your revenue.

Misclassifying Expenses and Distributions

You might be getting a salary or distributions from your profits if your business is set up to suit your needs. One of the biggest mistakes we see small dentists make is incorrectly classifying these, leading to underpayment of estimated taxes and attracting the IRS’s wrath. A qualified dental accountant and bookkeeper help you categorize these properly so that you don’t irritate the IRS and cause them to look into your business.

Not Timing the Recording of Changes Correctly

Dentists make the costly mistake of not closing the accounts at the end of each month. You’ll have a lot of issues trying to match up your bank statements with your financial statements if your accountant doesn’t close your month each month, which will cost you a lot of money. 

After your accounts are closed, you shouldn’t make any changes; doing so will ensure you always have access to the most current financial records. The company’s month-end financial records are created, all accounts are reconciled, and any outstanding debts are paid as part of book closure activities. 

Failing to Monitor KPIs  

A dental practice is, after all, a business. If you don’t measure performance indicators and properly track them, you’ll miss out on information that could help your company. The fundamental elements of a business are profits and costs, also referred to as revenue and expenditures. You’ll lose out if you don’t record your spending and consider your revenue when deciding how to grow. 

Working with an Inexperienced Accountant

Any dentist who works with a CPA who lacks medical industry knowledge could make a costly mistake, and the last mistake on the list is the one that costs dentists the most in lost income. Why? They aren’t aware of all the claims, deductions, and tax breaks that boost your dentistry practice’s profitability. 

The benefit of working with an experienced dental accountant is that they can help you to identify areas where you can cut costs and save money. They will be able to review your practice’s financials and advise on areas where you can make cost savings, such as reducing expenses or increasing efficiency. This can help to reduce your overall costs and improve your bottom line.

Conclusion 

A CPA for dentists has years of experience in the industry and has helped many dentists scale their businesses effectively by using services like retirement planning for dentists, dental accounting, and tax planning for dentists. Call dental accountants immediately to learn how our effective dental bookkeeping solutions can help you grow and develop your practice.

Ash Dental CPA offers bookkeeping services to dentistry clinics of all sizes. We are aware of the specific energy present in dental offices. Given the market’s volatility, the dental industry frequently experiences financial problems. Committing your success to a knowledgeable dental CPA, as a result, is essential. Make an appointment with an accountant for the dentist today!