5 Things to Watch Out for in Your Dental Accounting
There have been many changes in the world of dentistry, and yet the standards and rules of accounting stay the same. And while dental businesses have to keep up with the technological changes, there remains a need to ensure that your operations are running smoothly. Despite the importance of dental accounting, very few really pay good attention to it. This is why we thought that it would be useful to put together a helpful guide on this subject. Read on as we walk you through what to watch out for when it comes to dental accounting.
Not Differentiating between Cash Flow and Profit
A common mistake for dentists and bookkeepers is to confuse profit figures for cash. This leads to making purchases with an inaccurate view of the practice’s cash flow, which then results in spending more than what your bank account actually holds. Remember that cash flow and profits are computed differently. If this is something that is confusing for you, you may refer to a dental accounting expert who can clarify things for you.
Not Recording Transactions in the Correct Period
Closing the books at the end of each month can often result in transactions that can be entered incorrectly. Creating mistakes in reconciling financial statements and transactions from previous periods can result in errors in your tax documents and cash figures. The IRS is notoriously eagle-eyed when it comes to businesses that incorrectly record cash, and can give harsh penalties even for honest mistakes, so make sure to have a system that helps you record correctly.
Not Separating Business and Personal Finances
This is a basic accounting principle: business and personal finances must be separated, or else your bookkeeping process suffers. Sifting through receipts is confusing, time-consuming, and makes it difficult to get a clear view of the company’s financial status. You have to make sure that you enforce proper bookkeeping practices to protect your business and yourself.
Not Managing Payroll Issues Correctly
Minor mistakes in payroll are often made, which can result in disgruntled employees, which leads to issues with performance. Watch out for tax deductions, paycheck errors, missed hours, and incorrect pay rates. It’s not a surprise that taxes and payroll accounts don’t fall under the expertise of dentists, which is why the support of seasoned professionals is crucial for your business.
Not Using the Correct Chart of Accounts for the Dental Industry
Dental bookkeeping is a highly specialized form of accounting, and mistakes are often made when the standard Chart of Accounts (COA) is used to track income and expenses. The dental industry COA is important because this ensures that your line items adequately match industry standards. Experienced bookkeepers and accountants can provide guidance in this area, or even take over the practice for you.
To summarize, we hope that the article has helped you understand the important things that you need to watch out for when it comes to dental accounting. This, in turn, will ensure that you are always on the right side of the law, and you don’t cause any unnecessary disruptions to your practice. Be sure to keep everything that you have learned in mind so that you can make sure that you have a trouble-free way of keeping your books in order.
If you are looking for an accountant for dentists, Ash CPA has got you covered. For over 20 years we have been assisting dentists and other healthcare professionals with practice management, bookkeeping, accounting, tax planning, and more. For more information, check our website today!