Bookkeeping can be a time-consuming and tedious process. While it is imperative to the financial health of your business, it can take away valuable resources from focusing on patient care.
Fortunately, with a bit of planning and some helpful tips, you can create a successful dental practice that offers exceptional service to your patients, has impeccably managed books, and has constant access to the most up-to-date financial data.
1. Avoid mixing your personal and business expenses
Far too many businesses make this mistake when they first start up. Mixing your personal and business expenses may seem easier, but it can complicate things in the long run. Not only will combining your personal finances with your dental clinics make it complicated to get a realistic view of your current financial position, but it can also make tax time a more complex process.
Investors and lenders will look for precision and professionalism in your financial data. Neither of these is possible when your personal finances are combined with your practices'.
2. Streamline your operations by going digital
There are several software programs and apps that you can use to help streamline your clinic's operations and make things run more efficiently.
Choose a cloud-based accounting software to do your bookkeeping. This will allow you to collaborate easily with external bookkeepers and accountants without them having to come into your practice to obtain the data. It can also integrate with other tools like Dext Prepare to help manage your expenses.
A program like Dext Prepare will allow you to capture your invoices and receipts by taking a snapshot of them with your smartphone. It can quickly and easily extract vital information from these documents and export it to your accounting software. This simplifies the entire process, eliminating the need for manual data entry, and means that you don't have to store the physical documents, leaving a clean and easy-to-follow audit trail.
It is always advisable to have a paperless workflow process in place. Storing all of your documentation in the cloud makes it easily retrievable and ensures everything is kept safe and secure.
3. Leverage your dental management software for data
Many of the newest dental management software programs, like ClearDent, now include crucial functionalities like time tracking, billing, and inventory management.
You can obtain key invoicing and billing information from this software and export this data into your accounting software. Not only will it streamline the billing process, make things more efficient and eliminate the need for manual data entry, but it will also minimize the number of errors you have.
4. Set up your chart of accounts properly
When you first set up your accounting software, they will provide you with a general chart of accounts. But to get meaningful insight from your bookkeeping, you need to consider how you want to see your finances organized. A proper chart of accounts will help you measure and report on the most critical factors of your business each month.
Different dental practices may want to track different things depending on their unique business models. For example, your hygienist and dentist's payroll expenses should go under the Cost of Sales. However, your receptionist and bookkeeper's payroll expenses will be tracked under your overhead expenses. You may also want to consider tracking the revenue from each service you provide to analyze the profitability of each service line.
If you choose to work with an experienced bookkeeping firm like Enkel, you can get the professional assistance you require when setting up your chart of accounts.
5. Monitor your cash flow regularly
Far too often, cash flow gets confused with profit, but it's important to remember that these aren't the same thing. Many dentists think that profit represents excess cash they can spend on purchases, but this isn't necessarily true.
Cash flow is the money that flows in and out of your business. You need to monitor these fluctuations to understand if your practice has sufficient cash to pay its expenses. Monitoring your cash flow can identify potential shortages ahead of time so you can deal with these situations proactively.
6. Keep track of your equipment and depreciation
Dental practices have an enormous amount of expensive equipment. You are misstating your expenses if you expense all of this equipment when you purchase it.
Your equipment is a fixed asset and should be depreciated over its useful life. By managing and tracking the depreciation value of your equipment, you will be better able to comply with your audit requirements.
7. Set up proper tracking if you have multiple locations
A consolidated view of your entire operation is not very useful if you have multiple practice locations.
To better determine how each site performs, take advantage of your class or location-tracking functionality in your accounting software. Understanding the performance of each individual location is crucial so that you can compare financial results across all of your practices and find ways to improve each clinic.
8. Consider outsourcing
Outsourcing your bookkeeping is a great way to ensure your dental practice has up-to-date bookkeeping.
In many dental offices, the receptionist or office manager is responsible for bookkeeping, and in most cases, this personnel isn't adequately trained to handle this task. Hiring an in-house bookkeeper can be extremely costly and doesn't make good financial sense for most practices, so outsourcing to a bookkeeping firm is your best option.
A bookkeeping firm is trained and experienced in handling the specific needs of your dental practice. The right firm can help you keep your books current, run detailed and thorough reports, and even manage your payroll. Not only will this ensure that you always have access to the most up-to-date financial information, but it will also save you considerable time and money.
What to Consider When Hiring a Bookkeeper for Your Dental Practice
When looking for help with your financial data, it's important to remember that hiring a bookkeeper for your dental practice isn't the same as hiring an accountant. A bookkeeper will focus more on the day-to-day record keeping of your clinic, while an accountant will focus more on tax preparation, forecasting, and advisory work.
Knowing the difference between these two roles is important because even though an accountant can perform your bookkeeping duties, it will be much more cost-effective for your clinic to hire a bookkeeper to maintain your books throughout the year.
Plus, having a separate bookkeeper and accountant will provide additional oversight on your books. When year-end comes around, your accountant can review the books prepared by your bookkeeper and identify any potential errors.
Here are some of the most essential tips you need to consider when searching for the right bookkeeper for your dental practice.
1. Do they have experience working with dental practices?
A bookkeeper who has experience working with dental practices will better understand how to set up your specific accounts for proper tracking. They will also be able to identify which metrics you should track and how much detail you should aim to derive from your data, dictating how granular your chart of accounts is.
A bookkeeper who is experienced in the dental industry will also be able to identify if it's in your best interest to break out your revenue by types of dental services such as hygienist check-ups, braces, or root canals, for example, or your payroll costs by hygienists, dentists and admin staff. The payroll costs for your team of practitioners will be listed under your cost of goods sold category, while your admin staff will be listed under overhead expense.
An experienced bookkeeper will also help you manage insurance billing and accounting tasks. They will be familiar with accounting systems used by dental clinics and what you need to keep your books up-to-date and accurate.
2. Can they leverage new technology?
Over the past few years, accounting technology has advanced considerably. A great deal of new accounting technology on the market could help you streamline your bookkeeping processes. You want to ensure that the bookkeeper you hire is familiar with these accounting programs and applications, knows which ones suit your practice, and can help you install them and migrate your data.
The bookkeeper you choose should also be familiar with your dental management software, which leverages your data for reporting purposes. By selecting someone who stays up to date on the latest bookkeeping and dental management software, you ensure that your processes will always be as efficient as possible.
3. Do they have the ability to grow with your practice?
One of your main goals is to grow your practice by increasing the number of patients you see or expanding to new locations. When this occurs, the number of accounting transactions that will need to be handled will also grow. You need to make sure that the bookkeeper you choose can cope with your practice's growth without sacrificing your financial data's quality, accuracy, or timeliness.
If you choose an in-house or part-time contract bookkeeper, there may be a capacity limit to the amount of work they can handle themselves. However, an outsourced bookkeeping firm will have unlimited resources to take on more work and scale alongside your business.
4. Can they provide support with other accounting tasks?
Many other accounting tasks accompany your bookkeeping; not all bookkeepers are qualified to handle these jobs. Payroll, for example, should only be handled by someone with formal payroll training to ensure that your business stays up-to-date and compliant with the changing payroll legislation.
You should consider hiring a bookkeeper or outsourced bookkeeping firm with payroll training to help you manage these complex duties.
5. Should you hire in-house or outsource?
While bookkeeping is a necessary requirement of any business, it probably doesn't require a full-time employee to get the job done. In many cases, the receptionist or office manager will do most of the bookkeeping tasks. This can be problematic. Since they likely don't have any formal training in bookkeeping, you could end up with errors in your books, leading to inaccuracy in your financial data.
To avoid this serious issue, you may want to consider outsourcing. Outsourcing your bookkeeping to a professional bookkeeping firm is an excellent way to save your clinic money while getting the bookkeeping expertise that you require to keep your books up to date. They handle their staff's hiring, training, and management, so you don't have to.
Six Reasons to Outsource Your Dental Practice's Bookkeeping
1. Gaining back precious time
Bookkeeping is a time-consuming activity, and it can take up much of your time if you don't have a dedicated resource working on it.
By outsourcing your bookkeeping, you won't have to spend your time managing your books. You will be able to focus more of your energy on your practice and make better decisions for your clinic.
2. Lowering your clinic’s costs
When you outsource your bookkeeping, you can save significant money for your dental practice. You won't have to hire an in-house bookkeeper and, therefore, won't have to pay additional costs for payroll deductions, CPP, EI, vacation time, etc.
Outsourcing your clinic's bookkeeping has many financial benefits, such as having someone personally manage your finances without having to pay for training, vacation time, and other expenses.
3. Keeping your books current
When you outsource your bookkeeping, your outsourced bookkeepers will ensure that your books are kept up to date throughout the year effectively and accurately. Outsourced bookkeeping firms handle tasks such as:
- Entering invoices and expenses
- Daily cash sales reconciliation
- Paying vendors
- Bank and credit card reconciliations
- Generating financial statements
- Assisting you with setting up your chart of accounts
- Accounts receivable collections
- Payroll and other accounting tasks
An outsourced bookkeeping firm can also take care of revenue recognition and ensure your revenue is recorded accurately. Plus, when tax season rolls around, your books will be up to date, making it easy for your accountant to identify tax deductions for your business.
4. Visibility on cash flow
Outsourcing to an experienced bookkeeping team will give you visibility on your cash flow and your clinic's profitability. They can create monthly financial reports that include balance sheets, cash flow statements, profit and loss statements, and AR aging reports to help you manage your collections.
Cash flow visibility is important if your clinic requires capital to purchase new equipment or if you need to reduce your costs in anticipation of a period of restricted cash flow. They can also help you keep track of your expenses to know where your cash is going and identify areas where you may be overspending.
An outsourced bookkeeping firm will help you track insurance billing, keep your AR up to date, and see just how much insurance companies owe you.
They can help you create custom reports that will track the profitability of each new and recurring patient and measure the overall growth of your practice. And, if you have more than one practice location, an outsourced bookkeeping firm can help track the performance of each individual practice, allowing you to compare their performance.
5. Scaling alongside your growing business
As your dental practice grows and you begin to expand your patient base, you will have to deal with an increase in invoices and insurance balances that need to be followed up on.
While these tasks are highly time-consuming, they may not require the help of a full-time employee. When you choose to outsource, you can work with a team of professionals that can handle your extra workload. They can grow with you as your business grows and even take on the bookkeeping work of new locations as you open them.
6. It will allow you to leverage technology efficiency
Most outsourced bookkeeping firms utilize cloud-based accounting software and other cloud-based tools like QuickBooks Online, Dext Prepare, and Plooto. These can help you streamline your bookkeeping processes and store your source documents safely in the cloud. An outsourced bookkeeping team will stay on top of the latest technological advancements, allowing your business to be as efficient as possible.
There is a lot that goes into managing a dental practice. You need to focus on acquiring new patients, delivering excellent service, and managing insurance billing, just a few crucial tasks. You are good at what you do, and so are outsourced bookkeeping firms. They specialize in bookkeeping and other back-office accounting services.
If you are looking to save time and money on your bookkeeping, outsourcing may be the solution you are looking for. Enkel has a staff of trained bookkeeping professionals who can help you manage your dental practice’s financial data and keep your books current. Contact us today to find out exactly how we can help you grow.
By following these helpful tips, you will be better able to manage your clinic's bookkeeping requirements and ensure you always have access to the pertinent financial data you require.
