Dentists, Are you getting the "full" benefits of your financial team?
Firstly, as a Dentist and business owner, you need to be current with your financial data. This helps you to make wise business decisions, helps to ensure a healthy cash flow and have accurate information for your taxes.
But wait, is this the only expectations you have for your financial team (bookkeeper and accountant)? It shouldn't be, they can do so much more.
We will start with your CPA. What else should you, the dentist expect from a good CPA. Most dentists understand that the accountant and/or CPA's role is to verify your data, analyze it, generate official reports, perform audits and prepare your taxes.
Most of these roles, many CPA's will only do "re-actively". A good CPA or accountant is more "proactive". This means that they should be meeting with their dental clients to also provide information for forecasts and opportunities for growth throughout the year.
Also, your business and personal tax returns are one of the most important financial documents in your dental career. Not only does it determine what you pay to the government, but it determines if you can get a loan, add a partner, purchase a practice or sell yours.
With this much at stake, it should not be something you do damage control at the end of the year with. For example, a CPA might encourage year end spending to reduce taxes. This is fine if you have enough cash flow or don't have to overextend yourself with credit or high interest loans. You could end up spending more than your taxes are reduced.
So what does a "proactive" CPA look like? What are the things a dentist should look for?
One is that they ask for details and not just at the end of the year. Your CPA should be requesting your General Ledger and not just your Income( Profit and Loss) Statement. This will help them check for possible missed deductions or any errors. Even the best bookkeepers can make errors. Another set of eyes catch will it sooner. Mainly, the CPA can pinpoint opportunities ahead of time.
They should be checking bank statement balances, especially if the dental practice entity is an S Corporation. S Corporations file balance sheets with tax returns. The bank balance needs to match or Adjusting Journal entries should be made. This will help prevent any IRS audits. The CPA's Adjusting Journal Entry also should be shared with the bookkeeper to be recorded in your accounting software.
It should also be important to your CPA that you have a good bookkeeper that understands the dental business. Not just one they have on staff to keep your business in one place. Remember, a CPA's business has a focus mainly on your taxes.
They should also recommend the best accounting software for your needs. I have had dentists tell that their CPA said it would be fine to use "Quicken" and do the books themselves. Quicken is not a business software and could mean costly clean up fees for the dentist. If the dentist does not have the time or knowledge to do his own books this could also mean costly clean up fees.
So what about your bookkeeper? They do record your transactions and manage your financial information in a way that can be used by your CPA's and Accountants. However, with automation these days, it enables a good one to do so much more.
A "good" bookkeeper can combine your financial information with your Practice Management software (ex. - Eaglesoft) to help you see the bigger picture. There are also applications/software your bookkeeper can recommend to integrate your PMS and Accounting software. Reports that the bookkeeper generate internally can help you, the dentist, improve cash flow, create a budget and use benchmarking techniques to improve your bottom line.
Another benefit of your bookkeeper should be streamlining your processes. These include gathering information and documents, paying your bills and doing payroll. This means you, the dentist. can spend your time with patients and building your practice.
Streamlining your processes can also help with internal controls. You might not know it, but 60% of dentists experience fraud sometime in their career. Something that should not be overlooked.
Lastly, the relationship between your CPA and bookkeeper should be one that works together to increase your bottom line.
A CPA and bookkeeper should provide documents to each other when requested or quickly respond to any questions. If not, it could hinder them from doing the great job that they do.
Another important factor to watch for is if your financial team is keeping up with the times or are they "old school". Does your financial team still have your on desktop and requesting you provide bank statements? This can be a big waste of time for you. Being in the dental field for many years, I know that a good dentist keeps up on the latest research and technology for patients. Shouldn't you, the dentist expect the same of your financial team?