Simple accounting mistakes can cause major financial problems for a growing dental Practice. In order to avoid these, Practices must have an accurate and well-maintained accounting system in place.
Understand the differences between cash flow and profit.
Many dentists and in-house accounting staff do not understand financial reports and may wrongly assume profit equals cash available. This mistake could result in a Practice owner making purchases and incurring penalty and overdraft fees. For this reason, it is important to know the different between the two.
Profit is the result of revenue less expenses for a certain period of time. Cash flow is money moving in and out of the business from the beginning to the end of a month. If a Practice owner wants to know how much money the Practice has available, they are looking for the cash flow number.
Do not accidentally record transactions in a previous period.
It is important to “close the books” on a monthly basis. A common mistake is to accidentally enter transactions from a previous period. This will result in balance adjustments that do not match the bank balance or financial reports. If this error goes unnoticed, all future reports, tax documents, and cash figures will be incorrect. The mistake can become a larger issue and result in misrepresentation of cash and penalties from the IRS.
Use an industry standard chart of accounts.
When building your accounting system, a dental accountant should set up and track accounts according to dental industry standards. Our dental team focuses on establishing a dental specific chart of accounts. This way, we can provide the insight necessary to streamline and grow your Practice.
Work with a dental specific CPA.
It can take a while for owners to notice mistakes made by inexperienced accounting employees. For example, they may not realize a mistake has been made until they receive high tax bills, notice incorrect cash account reconciliations, or theft occurs. For this reason, it is crucial for Practice owners to work with an experienced dental specific CPA.
Our team of professionals wants to help you save time, money, and implement an effective accounting system. To learn how we can support your Practice, contact us!