If you are a growing dental practice, you know that it’s incredibly important to make sure that you have your finances in check. In our experience, simple bookkeeping mistakes can cost a dental practice at least £1,000 per year.
Small errors can gradually build up and cause much larger financial issues down the line. Most accountants will advise that it is crucial that you hire an experienced external bookkeeper to organise your finances, using bookkeeping software such as Xero to ensure that your practice stays financially healthy. We encourage you to subscribe to the model that will help you run a more successful business and there are occasions where it may be better for someone internally to do the bookkeeping. If you have experts in their respective fields helping you run your practice, who are also experienced and capable of doing your practices bookkeeping, then we would recommend that they are your first option. For example, you may have a practice manager that is really good with numbers, enjoys it and understand software like Xero. In this case, they would do a much better job than an outside accountant (or bookkeeper).
The point here is that SOMEONE needs to take ownership of the bookkeeping and make sure they know what they’re doing.
Here are some mistakes that you might already be making if you assume that you don’t need a professional:
Trying To Do It Yourself
Seeing as you made it all the way through dentistry school, you might not think that accounting or bookkeeping is as hard as people say it is. How tough can it be to keep track of money, anyway? You’re good at mathematics, for goodness sake!
The thing is that there is more than meets the eye when it comes to recording financial processes and gathering transactions accurately and efficiently. There are terms, legal issues, rules, and many other things that an accountant would have experience in. Keep in mind that these financial professionals have studied hard and have been required to take extremely difficult exams to reach their professional position.
Dentistry is your specialty, and accounting is theirs. You wouldn’t have an accountant work on your patients, just like you shouldn’t work on your practice’s bookkeeping. A recent example: I had a call from a dental practice owner complaining about his existing accountant and his large tax bill. I offered to do an analysis of his bookkeeping and accounts. We found that the practice owner’s wife was doing the bookkeeping, which se did not understand and she hated doing it, but they wanted to save money. Now, this is completely understandable, why spend money on something that looks like you can do it yourself?? Here is your answer: In our analysis, we found that the practice invested in new equipment that was not even included in the bookkeeping and therefore in the accounts. No tax relieve was claimed on these expenses and that was one of the reasons why the tax bill was so high. Just the difference in what the tax bill was and should have been would have compensated three times over in appointing a dedicated person doing the bookkeeping.
Not Fully Understanding The Terminology
Not knowing the different terminology that comes with accounting and bookkeeping can lead to some costly mistakes. Some words such as cash flow and profit may sound similar, but the two are quite different and mixing them up can lead to larger issues. There are small things that need to be understood by whoever is taking care of bookkeeping. Example: What is the difference between cash flow and profit for dental practice owners?
Incorrectly Closing The Books
Your bookkeeper should already know that your books need to be closed on a monthly basis. This is in order to prepare for financial statements, to reconcile different accounts, and to complete many other important accounting tasks. After closing the books for the month, changes shouldn’t be made to those accounts. An inexperienced bookkeeper might accidentally add to a previously closed period of transactions. Remember this for interview questions for hiring a bookkeeper for your dental practice.
Failing to Use Reputable Accounting Systems
There are far too many dental businesses that think just any old accounting software will do. A practice should look into what they will need to do with the software in order to find the right one for their practice. It is important that your financial statements are accurate for when tax season comes around. An inexperienced bookkeeper may not know this, thus leading the practice down a slippery slope of mistakes that could have been avoided. I would presume that every dental practice owner, would agree that the practice management software in running a dental practice is critical to the success of the practice. Whether it is using Software of Excellence, Carestream R4, Systems for Dentists or Dentally. Imagine running the practice, without having a diary to look at, or clinical notes. The same is true for bookkeeping and accounting software. Software like Xero is Quickbooks is arguably as important as you practice management software.
Hiring an experienced Bookkeeper
Working with an accountant is crucial, but finding one who specialises in your industry is even better. Having an accountant that specialises in the dental sector will enhance the accounting quality of your practice. An accountant will guarantee that all financial statements from your practice are prepared according to HMRC’s guidelines. Since they are schooled in accounting, they will know these standards. In addition to being an accountant, if they have experience in dentistry, they will already know the financial needs that are specific to your industry.
The Peloton provides accounting & bookkeeping services for Dentists across the UK. Get in touch today to see how we can help.