09 Oct Dental Bookkeeping Basics for Growing Practices
You can perform a root canal with utmost finesse and spot a cavity a mile away. But when it comes to dental bookkeeping, you’re a little less confident.
Sure, you can manage money fairly well, and balancing a spreadsheet isn’t too difficult. But you know there’s something you’re doing that could be done better.
If you’re like most dentists and are wondering if you’re doing your books the right way, this guide can help.
Whether you’re looking to improve accuracy, efficiency, or are simply troubleshooting a specific problem, these dental bookkeeping basics can point you in the right direction.
Dental bookkeeping basics
Reconcile Financial Information
The primary purpose of bookkeeping is to reconcile financial information and make informed decisions based on those results.
If your dental bookkeeping isn’t done right, you’re making business decisions with poor information. Then big problems arise, like internal theft, unpaid bills, uncollected receivables, tax delinquencies, and unpleasant run-ins with the IRS.
When keeping financial records, be sure to include:
- Point of Sale transactionCompany bank accounts
- Medical insurance billing
- Accounts payable
- Accounts receivable
- Cash flow
Use this information to compose a profit and loss summary which can then be incorporated in your monthly financial report.
Check How You Make Financial Decisions
After you reconcile your financial information correctly, you are ready to make informed decisions based on those results.
Some questions to ask yourself:
What are my biggest expenditures?
For most dental practices, it’s employee payroll, followed by facility and equipment costs. But if you notice you’re spending a lot more than normal on business expenses like Xylocaine 2%, polishing discs, or sterilization pouches, you might want to check out why that is and possibly find another vendor.
How does my cash flow align with my financials?
As your business grows and money starts coming in, be aware of how much is profit and how much should be designated for expenditures.
Just because you see an increase in your bank account doesn’t mean the money is spendable.
Where is my income coming from?
Knowing where your money is coming from can help you evaluate the success of your practice.
Are accounts receivable being paid more quickly or are you actually seeing a growing number of office visits? Is there an increase in new patients or are returning patients visiting more frequently?
Finding the answers to these questions will allow you to allocate your time to make even more progress.
Are there any financial gaps?
As you review your reconciled financial information, you’ll easily be able to determine any numbers that don’t line up and pinpoint any oddities.
By keeping your books current, you’ll be able to catch most mistakes and implement new protocol quickly before stumbling into a situation that could take months to resolve.
Avoid Common Dental Bookkeeping Mistakes
Just like brushing and flossing keep your mouth healthy, practicing good bookkeeping techniques will help your dental practice thrive.
Avoid common bookkeeping mistakes dentists make by:
- Separating your personal and business finances
- Using accounting software (like QuickBooks), instead of a simple spreadsheet
- Managing your practice by your financials, not by your bank account summary
Remembering these tips when doing your books keeps your monthly reports accurate. It also prevents financial data from being poorly represented and gives your practice more opportunity for growth.
Increase Your Profit
As the saying goes, time is money. What are you and your employees spending the most time doing and are those tasks profitable for your business?
Most dentists find when they are solely in charge of bookkeeping, they cannot focus on their practice as much as they would like.
Rather than building relationships with patients, they are sitting in front of a desk. As a result, the office manager will usually be asked to take over all or part of the dental bookkeeping responsibility.
But, an office manager is not typically trained to handle the wide range of small business financial details like a professional bookkeeper or certified public accountant. An office manager who oversees bookkeeping cannot attend to administration like they were originally hired to do.
Instead of helping the practice run more smoothly, they are combing through numbers, and doing so much more slowly than a professional. This gets expensive if you pay them hourly.
If office tasks are left incomplete, the entire practice suffers: employees become frustrated, turnover rates increase, and patients leave.
As you re-evaluate your practice’s bookkeeping process, you’ll find the time you spend crunching numbers is better spent somewhere else. If this is the case, we would highly recommend considering outsourcing your financials.
Here are a few benefits of doing so:
- Time currently spent on bookkeeping can be applied to bettering your dental practice.
- You will only pay for what you need and you’ll save money by cutting productivity costs.
- Because your books will be done by experts in the field, you can be confident in the accuracy of the results and can run your practice accordingly.
- Your dental team can focus on dental work, rather than financials, which will improve your patients’ overall experience.
- Instead of having one person responsible for your practice’s bookkeeping, you will have access to an entire team. This means more consistency in dental bookkeeping best practices and more application of financial strategy.
- You’ll have access to some of the best bookkeeping programs, which will backup and save your data for years, making it easy to retrieve financial records later down the road.
Check out this post for more signs it’s time to outsource your bookkeeping.
Looking for help with dental bookkeeping?
At Two Roads, our services are designed with dental practices like yours in mind. We want your business to run smoothly! Then, you can enjoy what you do without having to worry about whether column A pairs properly with column B.
By allowing us to handle those dental bookkeeping details, you can focus on your practice and patient care. If you want more information on how you can take the next step, please contact us.
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This post was first published in 2015. In 2020, it was updated just for you!