There is a saying made famous by Stephen Covey that has stuck with us for years. The saying goes, “begin with the end in mind”. While these words can mean many different things to many different people, to us, they mean that it’s never too early to start planning for your retirement.
As a dentist with your own practice, your eventual retirement requires a great deal more planning than that of the average person. Hiring a dental accountant can reduce your financial waste, helping you to retire sooner with confidence.
If retirement planning feels like it’s still a long way down the road, consider what has to be accomplished in order to ensure success:
In-depth debt reduction strategies
A strong practice exit plan (estate planning)
A retirement funding plan
Understanding risk management
And, if necessary, providing for your family.
It’s never too early to start working your way through this list. In fact, its recommended by most accountants that you meet with your advisor at least once a year to report on your progress and make necessary adjustments.
Think of a dental accountant like a financial coach. Among the many services offered, accountants can help you find the right pensions, properties, and business opportunities to invest in while you’re still working. As your revenue starts to increase, they can also help you understand where your money is being spent in order to put you in better financial shape once you’re ready to retire.
When you do retire, an accountant will also help you divvy up your assets while making sure they don’t fall into the wrong hands.
Most dentists are experts at what they do. They keep teeth healthy. Many of those same dentists are less experienced in making sure their books are well kept and accurately reflect the financial health of their practice. Both of these skills are absolutely critical to maintaining the longevity of your practice. With that in mind, here are 3 common bookkeeping mistakes that could be costing you thousands of dollars and eventually your entire business.
Understanding financial reports is no easy task. The complexity can often be confusing for inexperienced people, leading to some costly mistakes. Commonly, a dentist/in house bookkeeper will mistake profit figures for the amount of available cash. This is not correct. As a result of this mistake, dentists make purchases hat incur overdraft fees and charges costing your practice a lot of money. Profits are computed using a profit and loss statement. Cash flow however, is measured using a cash flow equation and factoring in depreciation expenses, inventory, and accounts receivable.
Accidently Recording Transactions in the Wrong Period
Another common mistake is made as practices “close the books” at the end of each month. As your in house bookkeeper reconciles accounts and prepares your financial statements, transactions from previous periods can be wrongfully entered. If this mistake goes unnoticed, all of your future reports will be wrong as well as you tax documents and cash figures. As you can imagine, that is not good news. Misrepresentation of cash, whether or not it was an honest mistake, can mean a doubling of repair costs and harsh penalties from the IRS.
Not Working With an Experienced Dental Accountant
Trying to manage your financials yourself or hiring and inexperienced bookkeeper can spell disaster for your practice. High tax bills, theft, common cash mistakes and more are all results of an unreliable accounting system.
Art Wiederman, a co-founder of the ADCPA, hosts a podcast called 'The Art of Dental Finance with Art Wiederman, CPA'. This podcast will help you to meet your personal and business financial goals through saving taxes, investing and planning wisely and managing your dental practice to be as profitable as possible. We highly encourage you to listen to Art's Podcasts!