Top Three Bookkeeping and Accounting Concerns for Dentists and Orthodontists

So much decision-making goes into running a dental or orthodontic practice. You’re not only taking care of patients, but you also have to consider insurance claims, billing, and investing in better equipment. It can be overwhelming, especially when you have to spend many hours sending invoices or manually recording your transactions. The truth is that bookkeeping and accounting are not really taught in dental schools, but they’re crucial in running a practice.

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In this article, we’ll discuss the major bookkeeping and accounting concerns that dentists and orthodontists face. You’ll also get practical tips to avoid these challenges so you can focus on happy patients instead of number crunching.

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Top Three Bookkeeping and Accounting Concerns for Dentists and Orthodontists

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Running a practice requires organized recordkeeping and adequate budgeting for investments. However, there are several challenges that can complicate bookkeeping and accounting:

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1) Complicated Dental Billing and Insurance Claims

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Dental billing and insurance claims require comprehensive knowledge of different treatment plans, insurance laws, and payment methods. Here are some of the reasons why this can make accounting difficult:

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• Insurance plans with different coverage. With so many insurers out there, dental plans can have unique reimbursement rates, coverage, and exclusions/out-of-pocket payments. This is one of the reasons why the Code on Dental Procedures and Nomenclature (CDT Code) was developed so that everyone can refer to a standardized category of all the treatments. If you’re not using these codes, you might not receive correct and prompt payments.
• Changes in Dental Insurance Law/Policies. Most insurers update their policies at the beginning of the year. This means you would need to stay on top of new coverage plans and rates. Another thing to watch out for is new dental benefit laws, which vary per state and could affect the assignment of benefits or prior authorization. Not being updated on these can mean delayed payments or, worse, denied claims and penalties.
• Unidentified Payment Sources. While credit cards are still the preferred payment method in general, there are now more ways to pay than ever. Some patients, especially younger ones, might prefer bank transfers or digital wallets like Venmo and Apple Pay. If you don’t properly tag or categorize these payment sources, you can overlook some transactions or not record them correctly on your books.

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2) Not Accounting for Expensive Equipment and Supplies

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Equipment and supplies are some of the highest expenses when setting up a clinic. Here are some examples of their pricing:

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• A dental chair alone can cost up to $10,000, depending on brand and features.
• Digital X-ray machines cost around $5,000-$7000 each, while CBCT machines cost $30,000-$50,000 each.
• Orthodontic appliance kits for braces can reach $800 for ceramic or lingual braces.  

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It’s crucial that you categorize these expenses accurately so you can adequately budget for them. More importantly, you can use these expenses for tax deductions. According to Section 179 of the tax code, you can get a tax deduction for equipment, technologies, or assets that are used 50% of the time in your business. For dental/orthodontic practices, these can include chairs, machines, and accounting software.

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3) Not Planning Enough for Expansion or Renovation

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Clinic expansion or renovation is always a welcome development. However, poor financial planning can delay your plans. It can also disrupt your daily operations and cash flow. You might even find yourself getting too many loans just to keep these projects going.

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Here are some things to consider before you commit to large investments:

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• Budgeting. Having the proper budget helps ensures your growth projects get completed. First, start with a detailed list of all the potential expenses of your expansion or renovation, such as permits, and material and labor costs.This will allow you to set aside enough money for delays, mistakes, and unexpected expenses. In general, it’s recommended to add a 10-20% buffer. If you’re planning to hire a contractor, ask for bids that list down all the labor and material costs.
• Construction Planning. Building a new clinic requires pre-construction expenses, such as buying land, hiring an architect and interior designer, and acquiring permits from local authorities. For renovations, you would need to consider the prices for each upgrade, such as any structural changes, plumbing, or cabinetry. Discuss the construction plan in detail with your contractor so you’re not caught off guard by unexpected and last-minute expenses.
• Cash Flow Management. Regularly generate and analyze your Cash Flow Statement. It  will show how well you’re managing your liquidity, including your capacity to fund your operations during disruptions. It includes your financing activities, which show how much of your money is going to existing loan interest payments. This will let you know if you can comfortably take on another loan for your growth projects.

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Tips to Avoid Dental Bookkeeping and Accounting Issues

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Establishing organized, transparent, and optimized financial operations ensures you have stress-free recordkeeping and expense management. Here are some tips:

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• Keep Personal and Business Finances Separate. Open a separate business account so you’re not using your personal savings to fund your clinic. This will also help you clearly label and categorize your business transactions for tax filings/write-offs.
• Enroll in Financial Literacy Courses or Programs. The more you know about managing your finances, the more you can strategize for long-term growth and success. You’ll also learn to identify market risks and opportunities, such as external funding.
• Regularly Review Your Finances. Schedule a monthly evaluation of your statements, records, and key performance indicators (KPIs). This will tell you if you’re on the right track when it comes to your short-term goals and budget. You’ll also be able to identify emerging issues, such as unpaid or aging invoices, before they become unmanageable.
• Use Professional Bookkeeping Services and Technologies. There’ll come a time when your business is going to be too big and complex for manual accounting and bookkeeping. Consider outsourcing to accounting experts who can build an automated system that will capture, record, and categorize your business transactions in real time.

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Decimal Can Make Your Bookkeeping and Accounting Stress-Free

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Managing your transactions and books doesn’t have to be complicated or overwhelming. Decimal’s bookkeeping services for dentists and orthodontists ensure your transactions are recorded accurately and categorized as they happen. We also offer invoicing and payroll support, as well as expense management and tax services, to give you a comprehensive solution.

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Schedule a meeting with us to start building an accounting system that supports your practice’s growth.

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