You sacrificed time, money, and kept a high level of dedication to get through dental school so you could own your own dental practice one day. Now that you’ve achieved your dream, there are a few other details that go along with the business side of it that maybe you’re not as prepared for as finding a cavity. At the very least, for many business owners, it’s difficult to find time to do the accounting and bookkeeping side of things when you want to focus on what you’re best at.
Here are some mistakes that you definitely want to avoid if you are still handling your own dental practice books.
Industry Standard Chart of Accounts
A chart of accounts, according to Wikipedia, is “a created list of the accounts used by an organization to define each class of items for which money or the equivalent is spent or received. It is used to organize the finances of the entity and to segregate expenditures, revenue, assets and liabilities in order to give interested parties a better understanding of the financial health of the entity.”
When setting your accounts up, it’s important (and a real time saver) to set them up based on the dental industry’s standards. Using a general chart or an inexperienced accountant will not set you up with a good foundation. Then when it’s time to prep your financial statements, they won’t have the best possible insight to improve your practice’s efficiency, potentially costing you money and a headache.
Misunderstanding Profit and Cash Flow
This sounds like common sense, but when there’s a lot going on in one month it can be difficult to keep track of everything. Cash flow is only the amount of money going in and out of your business account each month, where profit is your whole revenue minus your expenses. It’s important to look at this cash flow statement to determine if you can use profits that quarter to make a big purchase or not. There is always the option of equipment financing if it makes sense based on your numbers.
Not Monitoring Areas of Profitability
While providing the best possible services to your patients and helping them with their dental needs, you are still operating a for-profit business that your and your family’s livelihood depend on. In other words, profit is important, so you can keep providing your much-needed services.
Knowing where your business is making the most profit can affect your marketing efforts and where to invest more money (ie. equipment, employees, etc.). By keeping your books up-to-date throughout the year, you can keep a close eye on your numbers and make sure you’re making the most informed decisions at all times.
Not Closing the Books Monthly
While this may not seem like a big deal, it can potentially cause some major problems. If your business isn’t checking and verifying your accounts and preparing monthly statements, mistakes can go unseen which can potentially cause an issue with the IRS at your year-end. So, stay organized and it will leave you better off in the long run!