Whether you have just purchased your first practice or are a seasoned dental practice owner, you know that your success is dependent on the professionalism of your employees. Your employees are on the front line of your business every day. Not only are they expected to work with patients, they must work well with each other and let you know if any issues arise. But what should you do if you are confronted with a problem? Well, if you have an employee handbook, then you have a great resource at your fingertips.
The DNA Of Your Dental Practice’s Employee Handbook
There are many reasons to have an employee handbook. An employee handbook is a central location for your dental practice’s rules, regulations and benefits. So what exactly should you include in yours?
- Your practice’s mission statement
- Job descriptions for employees
- Scheduling – the hours required for each job and your policy on tardiness
- Benefits and eligibility
- Vacation and sick time benefits
- Performance evaluations
- Technology and the use of the Internet and cell phones in the office
- Patient relations policies
- Safety procedures
- Anti-harassment and discrimination policies
An Employee Handbook Is Essential To Your Dental Practice
The employee handbook is an essential line of communication between you and your employees as it defines your expectations. If you have an employee handbook you should review it annually and update it for any changes. The handbook should be given to your employees along with an acknowledgement form that states they have read it and agree to abide by your rules and regulations. Finally, be sure to include the acknowledgement form in their employment file.
Keep your office running smoothly and avoid potential problems. When you develop your own employee handbook, you define how you want your office to run.
Contact Our Dental Practice Professionals
Need more information about how an employee handbook can work for your dental practice? Contact Rea & Associates. Our team of bright dental CPAs can help you plan your employee handbook and help ensure you’ve got all of the right components.
By Dan Bialek, CPA (Mentor office)
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A dental practice’s financial statements have a bunch of different items listed. Most dental practices use the cash basis method on their financial statements. Basically, this means that income is recorded when the cash is collected as opposed to when the work is performed. So why at the end of the year does your remaining cash balance never equal your dental practice’s profit? There are a couple of main reasons and here they are:
- Depreciation. If you buy a piece of dental equipment and get a loan to pay for it, you may take an accelerated depreciation method to expense it all in year one of the purchase. So, your cash outflow is only the monthly loan payment, whereas your dental practice expense is the entire cost of the equipment. This isn’t quite as good as it sounds though, as in year two the opposite will occur. You will have to make the monthly loan payment, and won’t be able to take an expense for it (other than the interest on the loan), since you already depreciated the asset in year one.
- Loans / Debt. If you’re collecting on a loan receivable, you will have cash coming into the dental practice, but only the interest income affects your profit. The principal payments received don’t get recorded as taxable income on your income statement. Conversely, if you have a loan payable or debt, the interest expense is the only part of the payment that affects your profit. Therefore, you will have a cash/profit difference at the end of the year.
- Tax Adjustments. Some of your cash outflows are not deductible. For instance, only half of your meals and entertainment are a tax deduction. Also, club dues, penalties, and federal taxes are not deductible. So if you are paying these from your dental practice, you have a cash outflow, but not an expense, thus creating a cash and profit differential.
- Distributions. If your practice is an S-corporation or a sole proprietorship, you may take a draw or a distribution when you have cash available. If you do this, you are taking cash out of the practice, but this is not an expense on the corporation’s books. Similarly, you do not include this as part of your income on your individual tax return.
Dental Cash and Profit Help
There are other reasons why cash and profit could differ for a cash basis taxpayer, but these are some of the common points. If you need any other help understanding your financial statements, contact our team of Bright Dental CPAs today.
Author: Dan Bialek, CPA (Mentor office)
You’re busy. Your employees are busy. And you know that you have been collecting your dental practice’s accounts receivables on a timely basis, but something isn’t right. Your bank account doesn’t reflect all of the work that you and your employees put into your practice. Maybe it’s time to review a cash flow statement with your financial advisor.
What is a Cash Flow Statement?
A cash flow statement is a report that shows the cash your dental practice generated and used during a specific time. It reflects how changes in balance sheet accounts and income affect cash, and since cash inflows and outflows are the heartbeat of your practice – it’s critical to review.
The DNA of a Cash Flow Statement
A cash flow statement is divided into parts:
- Operating activities. These activities include the money received as a part of everyday operations, such as the money you collect from patients, any interest you receive on loans or bank accounts. These collections are netted against the payments you make to your employees, payments for supplies, office expenses and other general business expenses needed for your day-to-day operations. The net result is either a net cash increase or decrease from operating activities.
- Investing activities. These activities are considered the purchase and or sale of your assets, including the purchase of new equipment and leasehold improvements on your building.
- Financing activities. These activities include the cash received on a loan and the repayment of principal on loans. It also includes the cash that was paid to you, the owner, as a dividend, distribution or withdrawal depending on your type of entity.
The cash flow statement doesn’t tell you the profit earned for the period since it does not include non-cash items such as depreciation. The cash flow statement will tell you exactly how much actual money your dental practice has generated and in which areas it was spent.
Dental Practice Cash Flow Help
By reviewing the statement with your financial advisor you will be able to manage the inflows and outflows of cash and know why your bank account is growing or shrinking. Contact our team of Bright Dental CPAs today to determine if your dental practice has a cash flow problem. We can help you evaluate it and get you pointed in the right direction.
Author: Dan Bialek, CPA (Mentor office)