Top Dental Bookkeeping Mistakes that Could Cost You

While starting your dental practice is a good step, growing a successful business goes beyond medical expertise. You'll need to properly maintain your books and financial records as well as you find cavities.

However, since you probably didn't take accounting classes in dental school, you might not know how to keep an effective bookkeeping system. Simple bookkeeping mistakes can build up and cause enormous financial consequences at the end of the year. Consider getting help from a dental associate accountant in Kansas City to handle your financials.

Here are top bookkeeping mistakes that could cost you thousands of dollars in the long run.

Confusing Cash Flow with Profit

While cash flow and profit sound similar, they are quite different and understanding their differences is critical to your dental practice. Profit is a result of subtracting your total expenses from your total revenue for a given period. You can determine this amount after completing a profit and loss statement.

On the other hand, cash flow is the total amount coming in and out of your account every month. It is a measure of your cash flow equation, reflecting inventory, account receivable, and depreciation expenses.

An indication of profit doesn't imply that there's available cash for large purchases. If you make purchases based on a misunderstanding of cash flow, you could incur overdraft fees and extra charges. Similarly, available money is not a reinstatement of profits.

Recording Transactions in the Wrong Period

One of the most common mistakes dentists make is not closing their books at the end of each month. As such, they record new transactions in the previous month. If this error goes unnoticed, especially for a long time, it might be difficult to make corrections later.

Trying to settle your books when the year ends might cause discrepancies in your financial reports. You could even incur harsh penalties from the IRS. Therefore, it's advisable to reconcile all accounts and close your books at the end of each month.

Perhaps you're very busy with your dental practice's day-to-day work and can't remember your monthly bookkeeping obligations. Consider using the services of a dental associate accountant in Kansas City.

Not Using an Industry Standard Chart of Account

The chart of accounts is an accounting tool for tracking money spent or received and preparing financial reports. Some dentists make the mistake of using a general chart of accounts that don't provide a detailed dental practice report.

There are standard charts developed explicitly for the dental industry. They provide a better insight into streamlining expenses, increasing profits, managing accounts, and growing the business.

Not Working with a Dental Accountant

Another common mistake dentists make is trying to resolve their financial records themselves or hiring an inexperienced in-house bookkeeper for the job. However, bookkeeping isn't just a simple data entry position, and making accounting errors could cripple a dental practice.

It's best to work with an experienced dental associate accountant in Kansas City who understands your business's unique financials. While it may seem like an extra expense, a dental accountant will avoid mistakes that can save you from unnecessary tax bills. You'll also save time trying to reconcile bookkeeping discrepancies at the end of the year.