Running a dental clinic involves a lot of hard work and long hours. But more often than not what many dentists find the most challenging are the non-dental parts of running a business – such as the book-keeping.
As a dentist it is perfectly normal that your experience is mainly focused around taking care of patients. However if you’re going to be keeping your own books, you cannot afford to limit yourself to that alone.
If nothing else knowing some of the more common accounting mistakes that dentists make should help you to avoid them, and maybe understand why it is so important that it is done right:
- Incorrectly categorizing income and expenses
Not all money that comes into your dental practice is income, and not all money that flows out of it are expenses. If you incorrectly categorize the money coming in as income, you could end up paying more on taxes than you should.
On the other hand if you incorrectly categorize the money flowing out as expenses, you could end up inadvertently filing the wrong amount in your tax returns seeing as you can only deduct some business expenses.
- Conflating cash flow and profit
It is easy to see why many dentists incorrectly view cash flow as being the same as profit. Despite their similarities the two are very different, and the available cash in the cash flow is not the same as the profit.
To put it in simple terms the profit is the revenue minus any expenses, but the cash flow is the money flowing in and out of your accounts. If you don’t differentiate between them you could end up in a situation where your cash flow can’t sustain the business.
- Accidentally recording transactions in the wrong period
Although it may seem strange, dental practices very often accidentally record transactions in the wrong period. That in turn can cause issues later on, and impact all the accounting reports that are prepared as well as your tax documentation and cash flow figures.
The best way to make sure this doesn’t happen is to get into the habit of ‘closing the books’ every month. If you reconcile your books on a monthly basis it will provide you with the opportunity to verify all transactions and make sure they aren’t recorded incorrectly. In other words any mistakes will be caught early.
If you’re feeling a headache from all that accounting talk and wish you could just focus on the dental part of your business – that’s not a bad idea. The fact of the matter is that you could hire a dental accountant from https://hivebusiness.co.uk/ to take care of your books on your behalf.
All said and done it is up to you which route you prefer. If you opt to manage the accounts on your own you need to be prepared for what you’re getting into. On the other hand if you prefer to outsource it, you should look for a reputable accountant that can do the job well.