Whether we’re working with a new dental client or fixing the financial reporting of an existing one, there have been a handful of common mistakes that we see so often, we thought we’d record them in a blog so you can avoid the same mishaps.
Dental bookkeeping doesn’t have to be hard or overwhelming; in fact, with a good CPA to guide you and a little extra time, you can stay on top of your practice’s financials easily. Here’s how, with QuickBooks.
Remember that the basics hold true regardless of which accounting platform you use: don’t comingle funds, keep track of receipts, and use a separate credit card for all practice transactions.
- Separate expenses into a parent account – direct expenses – and sub-accounts – like wages, payroll taxes, supplies, etc.
As long as it’s related to procedures, it’s a sub-account of direct expenses. Repeat this practice for types of payment received, like insurance or patients, and indirect expenses: anything not tied to dental procedures. The benefit once these accounts are established is that you can easily run reports and view practice financials as a percentage of collections and compare against industry benchmarks.
- Include as much detail as possible when entering transactions.
Take the time with your data input now, and generate a clear, easy-to-read financial statement later.
- Integrate with your bank accounts.
Once you enable the option to download statements directly into QuickBooks from the bank or credit card company, QuickBooks will automatically code all the transactions and memorize recurring ones. With QuickBooks, and financial reporting in general, automation is your friend.
- Reconcile cash on a regular basis.
Cash flow management is the downfall of many dentists; don’t let it be yours. One of the easiest mistakes to make is letting transactions pile up, especially toward the end of a reporting period. While there are ways to enter a transaction and date it for a closed period, doing so without the right bookkeeping knowledge can cause a lot of problems, like inaccurate cash flow and A/R, A/P, and profits that are misrepresented.
At a minimum, you should know when, where, and how your cash needs will happen; the best sources for meeting cash needs, like extended financing or a reserve account; and not being afraid to utilize those resources as cash flow needs arise.
- Run regular reports.
Generating regular reports for cash flow, profits, and losses allows you to keep tabs on the state of your practice and better positions you to understand the difference between cash flow and profit. These reports will also enable you to plan for the future, now.
There are many other ways to utilize QuickBooks to run your dental practice more efficiently and transparently. Look for more financial tips on the Dental CPAs blog.