Dental Practice Lifecycle: The Developing Stage

by Theron Sikora, Senior Accountant, Jones & Roth Most dentists are in the second stage of the dental practice life cycle. They’ve purchased their practice and made it through the first, tumultuous years, and are now settling into some kind of routine. This stage will continue until you start getting ready to sell your practice, which for most dentists could be anywhere from 25 to 35 years in the future. Although this stage may not be as challenging or exciting as when you first purchased your practice, there’s no reason you can’t continuously develop your practice and always be pushing for a better, more enjoyable practice. So how do you develop your practice? You can get a really good start by focusing on two of the fundamentals: Increase collections and invest in your practice. Increase Collections Collections are the most important part of your practice. You deserve to be paid for your work and your options for your practice are much more limited if your collections are lower than they should be. There are several ways to increase your collections, and it’s not all about more patients, more referrals, more advertising. There are many, many things that you can do to increase collections, but the most impactful changes are normalizing your fees with a fee analysis and evaluating your PPO participation. Before you start on any changes, you need to take time to develop a fee for service schedule if you don’t have one already. If you are charging your non-PPO patients your PPO fees, you’re leaving a lot of money on the table without gaining a lot of...

Dental Practice Life Cycle: The Purchase & Growth Stage

by Theron Sikora, Senior Accountant, Jones & Roth Regardless if you purchased a practice from a retiring dentist or started your patient list from scratch, the first five years of your practice are going to be marked by high debt, tight cashflow, and rapid growth. These are exciting years, but can be very stressful as you will be constantly distracted from your dentistry by the realities of running the practice and being a business owner. Your primary goals for this time should be to implement good systems and create a plan that lets you harness your practice and allow you to reach your goals. Of all the issues you need to address, cashflow, practice administration, and planning growth are the most important. Click image to enlarge  Cashflow, and the lack of it, can be a huge problem for many dentists starting out in their new practices. Often times, the biggest strain on cashflow is the dentist’s compensation. While an established dentist in a healthy practice can expect 30% of gross collections as compensation, a dentist just starting a practice should consider maintaining their associate salary until the practice is through its first year. This allows you to build up a cash reserve, get a feel for the monthly cashflow requirements, and determine how much you want to take as compensation, and how much you want to invest back into the practice to increase your patient experience, standard of care, and, overall, your enjoyment. Sacrificing an increase in salary for yourself in the first couple years and investing in the practice can lead you to a happier and more profitable future. A...

Benchmarking a Dental Practice for Success

by Elliott Tracy, CPA What is benchmarking and why is benchmarking in a dental practice so important? How does my dental practice compare to other practices? What are the most important figures I should be benchmarking? These are many of the questions that I hear on a regular basis when talking with dentists about their practice. My answer to them is always the same. Benchmarking provides knowledge, and that knowledge can help your practice become more profitable. Many dentists do not perform any kind of benchmarking in their practice and therefore never realize the true potential of their practice. With minimal improvements a practice can see a significant increase in cash flow and a better bottom line. What is benchmarking? Benchmarking is the process of comparing your practice data to a data from other, similar practices, and using the outcome to determine how your practice is performing. When you have benchmarking data, especially on a continuing basis, you are able to identify problems that need to be addressed, find appropriate solutions, and then monitor the success of the changes. What are the most important figures I should be benchmarking? I have identified the 10 most important figures that every dental practice should be benchmarking on a regular basis: Office Production per Dentist A healthy dental practice has approximately $900,000 or more in gross annual production. Any production below that amount is not producing enough. What steps can a practice take to improve their production? Consider putting in place daily goals and monitor production more regularly, or consider reviewing your fee schedule and evaluating whether your practice fees are comparable...

How can a Dental CPA help your practice?

by Theron Sikora, Senior Accountant, Jones & Roth What is the advantage in working with a Dental CPA compared to a traditional, general CPA?  A Dental CPA has specific industry knowledge that can help you manage your practice efficiently so that you have more time to focus on your dentistry and more profitability to reach your goals. In addition to the services that you’d expect from a CPA firm like tax preparation, retirement services, investments services, and practice transitions, a Dental CPA can help you get the best available information about the health of your practice, assistance with planning to ensure that you will achieve your personal and professional goals, and excellent advice to help improve the profitability of your practice.  A Dental CPA generally focuses on three areas, when starting business with a new client: Solid Bookkeeping Getting your bookkeeping in order is the first step when you begin working with a Dental CPA.  While this is the most general and basic service that a CPA can provide, the industry knowledge of a Dental CPA can help make sure that the information is presented clearly and in a useful manner to you.  Accounts can be arranged to make sure that the important information is prominent and easy to compare on your statements.  Dental CPAs will also make sure that the accounting principles are being properly applied to your bookkeeping so that when an outside agency looks at your books, they don’t have to question the presentation or health of your practice.  Most Dental CPAs provide monthly bookkeeping services, with monthly or quarterly meetings to review the financials statements,...

Why the details matter when selling investments

If you don’t pay attention to the details, the tax consequences of a sale may be different from what you expect. For example, if you bought the same security at different times and prices and want to sell high-tax-basis shares to reduce gain or increase a loss to offset other gains, be sure to specifically identify which block of shares is being sold. And when it gets close to year end, keep in mind that the trade date, not the settlement date, of publicly traded securities determines the year in which you recognize the gain or loss. Finally, consider the transaction costs, such as broker fees. While of course such costs aren’t taxes, like taxes they can have a significant impact on your net returns, especially over time, because they also reduce the amount of money you have available to invest. If you have questions about the potential tax impact of an investment sale you’re considering — or all of the details you should keep in mind to minimize it — please contact us. ©...