Specialist dental accountant Geoff Long discusses some of the most common – and costly – bookkeeping mistakes that dental professionals make.
The first point to make about the bookkeeping mistakes that we are going to cover here is that they are all completely avoidable. That is important to bear in mind as we go through them, because they can also be hugely costly to your practice. So, these errors can all cause serious financial damage. But with a bit of know-how and experience (and the help of a specialist dental accountant), they don’t need to happen at all. With that in mind, here is a look at just a few of the most common bookkeeping mistakes.
Not closing your books every month
When the month end comes, your books need to be closed, and failing to do this properly is a common mistake that many non-specialist bookkeepers make. So, for example, any transactions or changes to your accounts for June should not be entered in July – otherwise figures right across the board will fail to match once the time comes to make your regular financial reports for the practice. It’s a basic mistake that can be hugely costly, as the original errors, while small and hard to spot on a monthly basis, can have serious consequences over the long term. For example, you could be penalised if your accounts don’t match up with the final tax calculations for the practice, or you might have to pay extra to clean up the mistakes retrospectively.
Failing to manage cash flow
Cash flow is the life blood of your practice – it is basically the money that comes in and out of your business every month. It is what allows to you to purchase essentials, to pay your team and to keep the business running. However, the mistake that many dental bookkeepers make (along with the dentists who work with them) is that they often mistake their profit figures for the amount of cash they actually have available to keep the business running.
For example, the practice’s financial statement might show a monthly profit figure of £3,500 – but many practice owners fail to realise that this isn’t actually the cash they have available to spend. That real figure – your cash flow – is worked out once you’ve taken expenses out – and so if you also have outgoings of £3,000 a month that will leave you with only £500 to spend. Clearly, spending big on your practice when you think you have £3,500 – but actually only have £500 – can cause you to incur unnecessary charges such as overdraft fees.
Not using a specialist dental accountant
Engaging a firm of specialist dental accountants can be the best investment you make for your practice. Why? Well, because just as your patients would never go to a general practitioner for dental advice, it is also the case that a general chartered accountant or a non-specialist bookkeeper will not have the necessary skills or experience to be able to offer you the industry-specific advice you need to keep your practice financially healthy.
That’s because the demands of dentistry – and running a dental practice – are unique. For example, the relationship that a dentist has with the NHS, the rules and regulations that they are bound by and the particular liabilities they face are all specific to dentistry, and only a specialist dental accountant is in a position to really help you to navigate these issues.
So, a firm like Long & Co can give you the benefit of our lengthy experience from working with our exclusively dental client base. But our team is also able to draw on our wide knowledge of the industry to help you to spot potential bookkeeping mistakes – before they grow to become very costly mistakes.
Geoff Long is a specialist dental accountant based in Stevenage, Hertfordshire. He advises on a wide range of dental tax issues and regularly writes for the dental press. Geoff has over 20 years’ experience with dentist’s accounts and is recognised for his proactive approach to dental taxation and business problems.
Geoff can be contacted on 01438 722224 or email email@example.com