Dental Accounting: Common Mistakes and How to Avoid Them

Accounting for dental practices is crucial for ensuring the company has good financial health. It can help practices analyze their profitability, cash flow, and budgeting to make better business decisions for their growth. Accounting can also help companies catch issues early on and find areas they can improve.

When starting a dental practice, certain financial challenges may arise that you weren’t prepared for. These challenges can make or break the success of your business, so it is important to be precise and accurate in your accounting practices. Fortunately, our team at Cooper Norman has all the accounting knowledge and experience to help your business overcome any of these challenges.

Whether you work with an accounting firm to help with your finances or do it in-house, it is important to understand common mistakes and things to look out for specifically for dental accounting. This blog will explore these common mistakes and how to avoid them so you can be prepared for anything that comes your way.

1. Mixing Personal and Business Expenses

One of the first steps you should take before starting your dental practice is to open a business bank account solely for the income and expenses of the company. When you start mixing up personal finances with that of your business, it can take a lot of work to separate them when tasked with completing financial reports or filing for taxes. Confusing income and expenses between your dental practice and personal life can make your records and statements more susceptible to errors, while you’re wasting time trying to separate them. Keeping them separate will keep you organized, keep your finances accurate, and protect your assets.

2. Not Having the Right Chart of Accounts

A common mistake that dentists run into with their finances is not having an industry-grade chart of accounts to keep all aspects of their financial records consistent and organized. A chart of accounts consists of the necessary accounts (income statement and balance sheet) needed for proper bookkeeping. The problem that many dental practices face is not using a chart of accounts that directly applies to the unique set of finances for dental companies. Using a generic chart of accounts can cause bookkeeping, even done by professionals, to become disorganized and accurate. Using a dental chart of accounts will provide you and/or your accountant with a system and format that will remain consistent as your business grows.

3. Working With an Inexperienced Accountant

If you work in the dental industry, that has most likely been your primary focus over the last several years to perfect your craft. You may have some knowledge of accounting principles, but chances are you don’t have a ton of experience with it. That is where hiring an accountant/bookkeeper will save you. However, it is important to hire an accountant who has a lot of experience, education, and knowledge of dental accounting specifically. A less experienced accountant, especially in this field, can make costly mistakes that your company will have to pay the price for. Do your research and make sure you are in trusted hands when it comes to your business.

4. Thinking Profit and Cash Flow Are the Same

A common misconception many think when starting a business is that cash flow and profits hold the same value. Profits consist of the money left over after the business has paid its expenses, while cash flow is simply the money that comes in and goes out of the business in a given period. Interchanging these two things can result in extra fees and hinder overall bookkeeping. It is important to know the difference, especially when making large purchases so that the available cash is recorded correctly. To avoid this, make sure that both the income statement and cash flow statement are presented before making financial decisions.

Choose Cooper Norman for Your Dental Accounting Needs

As mentioned above, one of the best things you can do for your business is to hire an experienced accountant to take care of finances. It will save you time, and energy, and ensure accuracy with all financial records.

When you work with Cooper Norman, you can trust that you are getting the best. We have been serving Idaho businesses for the past 70 years and understand the challenges each different industry faces. We are constantly aware of changes to regulations, keeping your business continually compliant. Our accountants understand the implications of dental accounting and will help prevent them for your business. Contact us to see how we can help your dental practice thrive!