Opening your own dental practice is a great first step, but It's important for dentists to incorporate proper bookkeeping techniques into their practices, or they risk losing thousands of dollars.
There are a few bookkeeping mistakes that are common but can be easily avoided if you know about them. Here are the top four common bookkeeping mistakes made by dental practices:
Misunderstanding Profit And Cash Flow
It’s essential to understand the difference between cash flow and profit. The mistake lies within the belief that the profits reflect how much money is available to be spent. This, however, is not the case. Cash flow is how much money is coming in and going out of your accounts.
Profit is what is left after overall revenue less overall expenses. Believing that profit is an accurate representation of cash flow can result in overdrawing your business account and being late on paying bills.
Not Working With An Experienced Dental Accountant
You should always choose a bookkeeper or accountant who specializes in accounting and bookkeeping for dentists. They will make sure all your books are kept in order and you are aware of exactly what your cash flow is like and what your profits actually mean.
Working with an accountant that specializes in dental bookkeeping will ensure an accurate view of the financial conditions of the practice at all times. This guarantees that the practice financial statements are prepared according to the General Acceptance Accounting Principles, the IRS guidelines, and the dental industry standards.
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.
Not Monitoring Key Areas Of Profitability
A dental practice is a business just like any other. While it’s important to keep your patients happy and to ensure that you’re giving the best care, you also need to understand where you’re making a profit.
Often dentists forget this and will ignore their profit reports. This severely limits them in their ability to be able to analyze their business and determine a plan of growth for the future.
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Cloud Bookkeeping, Inc.
3281 E. Guasti Road, Suite 700
Ontario California 9176
Tel: +1 (909) 952-3804