Dental CPA: Why Hire a Dental Accountant for Your Practice?
Dentists who own their practices are highly trained professionals with the skill and experience to treat patients. Where a dentist’s professional training may be inadequate is in running a business, outside of dealing with patients. One such need may be in the dental practice’s accounting. While many dentists try to handle their accounting without assistance, it can be a costly mistake if you don’t have the proper training.
At Titan Web Agency, we talk to our dental clients about many aspects of practice marketing and growth and that includes the decision to hire a dental CPA and how that can impact practice growth goals. With that in mind, here’s our take on the benefits of hiring a dental CPA and how to hire one for your dental practice.
What is a Dental CPA?
A dental CPA is a Certified Public Account who has specialized throughout their career in accounting and tax reporting for dental practices. While all CPAs learn important accounting skills that could be useful to any business, there are special considerations involved with accounting for dental practices. Hiring an experienced dental CPA is preferable to hiring a general CPA.
We’ll go into detail about how hiring a dental CPA can help your dental practice in the next section, but one of the most important considerations when hiring an accountant is making sure they can identify every potential tax credit or deduction that you may qualify for to help you minimize your tax bill. An experienced dental CPA will already have a deep understanding of the types of expenses that may be tax deductible and can help you with deductions and credits, including depreciation for dental equipment.
Your dental CPA should have experience in the financial aspects of running a practice, including how your finances can impact your operations, marketing, and personnel. They can help you make smart financial decisions. They may even be able to help you decide whether to lease or purchase equipment, how and when to raise dental fee schedules, and how much compensation is fair for your staff.
What Can a Dental CPA Do for Your Practice?
Here are some of the ways that hiring a dental CPA can be beneficial to your dental practice.
Tax Preparation and Filing
The single most important benefit of hiring a dental accountant for your practice is that they can help you with tax preparation to make sure that all taxes are filed and paid properly. That starts with helping you gather information and report on the applicable forms, which may include the following:
Your dental CPA will make sure that you take advantage of all tax deductions and credits that your firm is eligible for to minimize the amount of tax you pay.
Financial Planning and Management
Your dental accountant can help you with planning and managing your practice’s finances. For example, they can help you create a budget every year to ensure you have the money you need to pay for overhead expenses such as your mortgage or rent, payroll, and taxes. They can also help you with succession planning.
Financial planning and management may include payroll management, hiring, and every other aspect of managing your finances as they relate to your practice.
Loan and Financing Advice
There may be times in the course of owning a practice when you require outside financing. Options may include a bank or credit union loan, a line of credit, or equipment financing. If you need to seek financing, your dental accountant can help you evaluate your options.
It can be difficult for a practice owner who doesn’t have accounting or finance experience to compare options when the features and fees don’t allow for an apples-to-apples evaluation. Your CPA will help you scrutinize the financial impact of contracts and choose the best option for you and your practice.
Practice Acquisition, Mergers, and Transition Advice
You may decide that acquiring another practice or merging with a competitor is the best way to achieve your dental practice growth goals. You may also need advice if you’re nearing retirement and planning to sell your practice or leave it to a family member.
A CPA with dental experience can help you navigate the process of buying another practice or selling your own, including reviewing drafts of, or evaluating contracts, and in helping you figure out the best way to transition out of your practice if you sell it or decide to step down and retire.
Bookkeeping and Payroll Processing
Two of the areas where dentists are most likely to make costly mistakes if they attempt to handle their own accounting are bookkeeping and payroll processing. In both cases, accounting errors can harm your practice.
The right accountant can help you set up an easy-to-maintain bookkeeping system and help you choose a reputable payroll provider to ensure that you don’t make mistakes that can lead to an IRS audit. Payroll mistakes can cause issues with both employees and taxing agencies, so it’s essential to choose the right providers and have a system that minimizes the risk of miscalculations and errors.
Regulatory and Legislative Updates
Regardless of where your practice is located, it will be impacted by regulatory and legislative changes at the federal level. Also, there’s a high likelihood that changes and updates on the state level will require some agility as you respond to the shifting landscape.
Your CPA can keep you abreast of any updates relating to your accounting and finances, making sure that you have plenty of notice of any changes in your responsibilities. They can also help you revamp your tax strategy if necessary.
Tax planning may include decisions related to your overhead expenses, payroll, equipment purchases, and more. With help from a dental CPA, you can decide on the most advantageous times to make major purchases to use depreciation deductions wisely.
One of the most common mistakes that dental practice owners make is not thinking about taxes until it’s time to pay or file them. Strategic planning can help you save money while still meeting your tax obligations.
Maximizing Practice Value
If you are considering selling your practice, it’s essential to know how much your practice is worth. You can use various methods to determine your practice’s value, and your accountant can help you do whatever is necessary to maximize the value before you sell.
Dental practice valuation may also be important for estate planning and retirement decisions. It’s common for dental professionals to undervalue their practices, so working with a dental accountant is essential if you’re planning to sell, merge, or retire.
How Much Does It Cost to Hire a Dental Accountant?
When we suggest hiring a dental CPA, the most common question we are asked is about the cost. We understand that there’s a temptation to handle accounting yourself to save money; however, in our experience, we often find that the reverse is true. Hiring a dental accountant is something that can pay for itself in financial planning and tax savings.
A good rule of thumb is that it will cost somewhere between 0.5% and 2% of your annual income to hire an experienced dental accountant. If you opt for basic services, you’ll probably pay 1% or less, whereas opting for a full menu of services will increase the price. You may be able to save by paying an accountant to set up your ledger, create a tax strategy, and recommend a payroll company. From there, you can rely on an experienced bookkeeper to help you with your day-to-day transactions. You should always use a dental CPA to prepare and file your taxes.
How to Find a Qualified Dental CPA?
If you decide you want to find a qualified dental CPA, here are some pointers that will help you do it and avoid choosing someone who doesn’t have the expertise you need.
Step 1: Research CPA Firms with Specialized Dental Expertise
The first step is to identify CPA firms in your area that have specialized dental expertise. A good way to start is by Googling relevant keywords. For example:
Dental CPA + Your City
Keep in mind that some accounting firms may list a full array of industries on their service pages, but that doesn’t mean they have the same level of experience for every industry. You should read accountant bios and see if they have a specific page for dental accounting services.
Step 2: Check for Credentials and Certifications
Any reputable dental accounting firm should list the credentials and certifications of its accountants. While you should certainly check the CPA firm’s website, we also suggest going to CPAVerify.org to check each accountant’s credentials.
Step 3: Check the Firm’s Availability and Location
Any firm you are considering should be close to your location. From the perspective of state taxes and regulations, a local firm is more likely to understand what’s required and can guide you to minimize your state taxes.
Availability is also important. There’s no point in getting to the interview stage if a firm doesn’t have the availability to take you on as a client.
Step 4: Consider the Firm’s Fees and Payment Policies
Fees are hugely important in the decision-making process since you’ll need to be sure you can afford a firm’s services. We should note here that many firms don’t list fees on their websites, so while we do recommend looking, you may need to defer your evaluation of fees until you get to the interview stage.
Step 5: Read Client Reviews
Client reviews can be helpful when evaluating potential dental CPAs. We suggest reviews rather than testimonials because reviews are generally written independently while testimonials are often solicited, and most firms won’t share a testimonial unless it’s positive.
We suggest looking at general review sites such as Yelp, Google, and Angie’s List. If the firm you’re considering has a Facebook page, look at it, read reviews, spot-check a few posts, and look at comments to see if there are any complaints.
Step 6: Prepare Interview Questions
The final step is to interview any CPA firms you’re considering. Here are some questions to ask:
- How many dental practices have you worked with?
- Are you available year-round?
- Will a dedicated person be handling my account?
- How does your fee structure work?
- What tax program do you use? (Many dental offices choose QuickBooks.)
- How much experience do you have dealing with the IRS?
- What’s the most common mistake you see dental practice owners make with accounting?
Make notes of each response. We suggest looking for someone who has worked with 10 or more dental practices, will work on your accounting personally, and has direct experience working with the IRS.
What Can a Dentist Write Off?
Dental practices can often write off items they may not realize can impact their taxes. This isn’t a comprehensive list, but here are some common write-offs you should know.
- Startup costs
- Business expenses & business supplies
- Insurance premiums
- Employee benefits
- Dental equipment depreciation
- Retirement plan contributions
- Rent & Utilities
- Legal expenses
- Mortgage interest
Keep in mind that each of these write-offs comes with limitations and all may not apply to your practice. Your dental CPA can help you identify and take advantage of all applicable write-offs for your practice.
Fast Track Your Practice Growth with the Help of a Dental CPA
One of the most important things you should know about hiring a dental CPA is that doing so can put your practice growth on the fast track by helping you save money on your taxes, avoid overspending, and make financial planning a priority.
Do you need a hand in achieving your practice growth and financial goals? Titan Web Agency can help! Contact us today to get your free consultation.
About the Author
Jared has been preparing tax returns and helping clients with various accounting and tax needs since 2001. He has a broad range of accounting and tax advising experience in several industries including manufacturing, construction, retail, and in working with a variety of closely held businesses in various industries. As a Certified Valuation Analyst in the firm, he also provides a variety of Business Valuation services, from consulting to expert testimony and from IRS compliance to strategic planning and transactions.