A Brighter Way
  1. About
  2. Tax
  3. Accounting
  4. Practice Planning
  5. New Dentists
  6. Resources
  7. Blog

Surprised By Low Cash Flow And High Taxable Income?

Work with a dental CPA so that you don’t get caught in a cash flow pinch.

Over the years, I’ve experienced many instances where dental clients are surprised when they realize they have a lower cash flow, but high taxable income. What most clients don’t understand is that this is usually the result of taking substantial tax write-offs for equipment that are financed over several years.

Large tax write-offs are great, especially when you haven’t yet spent the cash. But it’s important for you to be prepared for the opposite: No tax expense, but cash is still being spent to pay down debt.

On an annual basis, one thing I do with all my dental clients is show cash flow calculations and projected taxable income calculations next to each other in an Excel spreadsheet. This immediately highlights the differences. I also find it valuable to show a 5 to 10 year comparison of depreciation expense to principal payments on debt. These two exercises help my clients understand where their money is going and helps them better strategize their next financial steps.

 

If you’re looking to maximize your effectiveness in managing these areas, reach out to a CPA who specializes in working with dental practices. They can help you evaluate your cash flow and taxable income and plan for the future. Email the Bright Dental CPAs at Rea & Associates to learn more.

Make Your Financial Statement Work For You

Best practices for formatting financial statements

Did you know that there’s no “right way” to format or present your practice’s financial statement? It’s true, there are several approaches that dentists can take when crafting a financial statement. What’s most important is that the statement is meaningful to you and is easy to understand and analyze.

That’s where many dentists find it helpful (and critical) to have a CPA who specializes in advising dental practices. It can be difficult for some dentists to determine what is most important to them on a financial statement. Oftentimes, dentists tend to have a financial statement that is backward looking. It tells you the history of your practice’s performance. A CPA focused on working with dentists can help you develop a financial statement that creates best practices discussions and enables you to look forward.

Financial Statement Reporting Possibilities 

Curious to know what are some commonly used items on dental practice financial statements? Here’s a quick list of some reporting possibilities:

  • Show only cash collections as revenue or show production with offsets for contract adjustments, write-offs, and changes in accounts receivable. The “offsets” essentially are changing the production accrual basis revenue to cash basis.
  • List the cost of goods sold, which could include dental supplies, lab expense and hygiene wages.
  • Show percentage of revenue for each expense.
  • Include an expected range or benchmark percentage in the expense description.
  • Group together common expenses, such as staff expenses, facility costs, doctor expenses, etc.

Creating Discussions To Further Develop And Build Your Practice

After you create a financial statement that suits your practice needs, you’ll have a document that can help you identify areas for improvement and areas that are performing well. Your dental CPA can help create discussions addressing these areas. Here are just some of the discussions that could come from formatting your financial statement in a way that works for your practice:

  • Trend analysis (for example: is your revenue stagnant or decreasing and are your staff expenses increasing?)
  • Employee benefits
  • Retirement plan strategies
  • Insurance coverages
  • Planning for future significant cash outlays/equipment purchases
  • Facility lease renewals
  • Collections on patient receivables
  • Marketing initiatives
  • Preparing to sell your practice

If you know that your financial statement could use a tune-up or a second set of eyes, don’t hesitate to contact your financial advisor for advice. Email the Bright Dental CPAs at Rea & Associates to learn more.

Smile … New Tax Form Due Dates Are Coming

Changes, like teeth cleanings and taxes, are just a part of life, which is why you really shouldn’t be surprised to learn that many of the tax form due dates you have grown accustomed to are changing. And, if you want to avoid penalties, you will need to be ready to file your personal and practice’s tax forms on time beginning with the tax forms you file with the IRS next year (2017).

Visit Dear Drebit to learn more about the changes.

Have questions about how these due date changes impact your dental practice? Email the Bright Dental CPAs at Rea & Associates to learn more.

Don’t Let Dental School Loans Get You Down

Graduating from dental school is a big deal – one you should be very proud of. Unfortunately, your obligation to repay your student loans can cut your celebrations short. Happily, there are programs available to help graduates elevate or ease the pain of having to pay back those loans.

In 2014, the Ohio General Assembly passed a law that effectively provides loan repayment for dentists and dental hygienists who practice in underserved areas of Ohio.

Who Qualifies For Relief?

If you meet one of the following criteria, you most likely qualify for the loan repayment program.

  • Dental students, and dental hygiene students, who are in their final year of school.
  • Dental residents in their first year of residency or are currently enrolled in an advanced education program.
  • Practicing general and pediatric dentist or dental hygienist.

Remember: you must be working full-time (40 hours per week) or part-time (20-39 hours per week) in underserved areas of the state serving Medicaid-eligible patients and those who are unable to pay.

Want to learn more about the practice sites that qualify for loan repayment program or want to complete the application for the loan repayment program application and other forms. The Ohio Department of Health (ODH) can help. You can also check out this loan repayment programs fact sheet for more details.

However, if you are looking for more help managing your finances in general, the bright dental team at Rea & Associates is at your service! Contact us today for more dental school tips.

.

Should You Stay Or Should You Go?

Considerations For Dental Professionals Considering Office Relocation

Dental Office Relocation - Dental Practice Advisors

Is it time to move your dental practice to a larger space? Here are a few things to consider before you make the move.

Is your dental practice getting too big for its current location? Then an office move may be in order. But of course these things take time. It’s never easy for a business to just up and move at a moment’s notice. There are a ton of logistical considerations to address even before you start loading the moving truck. This is why you should consider the long-term potential of your chosen location.

  • Does the office get good traffic?
  • Is it easy to find?
  • Will your staff and patients be safe?

Once you are sure the space meets these essential characteristics, you can then assess the property’s other qualities.

Read Also: Office Relocation Made Easy – And Affordable

Choose The Right Office Location

Healthcare professionals need their office space to accommodate unique structural needs while providing a comforting atmosphere to patients. Not every location will be up to the challenge. A real estate broker who specializes in helping healthcare professionals can eliminate inadequate properties immediately – meaning you won’t have to waste your time walking through countless buildings that, for one reason or another, are unable to accommodate your practice. Instead, you will be free to serve your patients and manage your existing office responsibilities.

Finally, unless you are moving to a space that was already being used as a dentist office, you are likely going to have to pay for the space to be converted to fit your needs. Be sure to carefully consider the cost associated with remodeling a particular location and whether or not the move actually makes sense once the dust settles. Look to your financial advisor for help. Only after considering your practice’s financial stability, can you finally determine if relocating your dental practice is the right decision at this point in your career.

Reasons to stay put

If all of these considerations seem daunting or after crunching the numbers you and your team conclude that it’s not necessarily in your best interest to relocate your office at this time, you can still put your relationship with your real estate broker to good use.

Think about it, the last thing the owner of the property you are currently using wants is to have to go out and find a new tenant. From hiring their own real estate broker to market the property, negotiating terms of the new agreement and allowing any new tenant the time they need to build out the space, if you moved your practice elsewhere, they would likely be taking a pretty large financial hit. If you time it out right (about a year in advance), your real estate broker can help you negotiate a better deal on your lease. And the best part is that working with a real estate broker shouldn’t cost you a dime.

Assemble Your Team

Want to make your move as easy and stress-free as possible, assemble your team of professional advisors early to make sure you are armed and ready to make an offer if an opportunity presents itself. In addition to the usual players, your CPA, banker, lawyer, a real estate professional, etc. Contact the Bright Dental team at Rea & Associates and find out what you dental advisory team should look like and how each member should be able to help you grow your practice.

By Ryan Dumermuth, CPA, CFP (Mentor office)

Need help growing your dental practice?
These articles could give you some great ideas:

Revenue Growth Does Not Equal Practice Growth

Your Practice’s Free Valuation Could Come At A Hefty Price

Do You Need A Dental CPA When Buying A Dental Practice?

Rea & Associates, Inc. | Bright Dental CPAs | 7201 Center St, Mentor, Ohio 44060-4858
phone + 440-266-0077