Keeping your dental practice’s accounts organised and up-to-date isn’t always easy, and it’s certainly rarely ever fun, but it is one of the most important aspects of being a dental practice owner.
A well-kept set of accounts not only helps manage your cash flow and lower your tax bill, they will also be crucial whenever it comes to raising finance for your business.
In this guide, we’ve tried to make accounts for dental practice owners a little bit clearer.
Automate your dental practice accounts
After 20 years of experience working with dental practices and through owning dental practices myself, it is evident that across the entire industry many practices are using out-of-date procedures and technology to run their dental practice’s finances & accounting.
The days of handwriting ledgers, updating cumbersome spreadsheets, sending boxes of invoices to your accountant at the last minute before the looming submission deadlines, fortunately no longer exist!
The last few years have seen a revolution in the accountancy world. The technology has evolved to the point that much of the sending and processing of invoices can be done with simple technology systems.
Going digital with your accounts doesn’t just mean an end to endless paperwork. It also reduces the amount of manpower required to process accounts, both in the dental practice and in the accountancy office, saving both you and your accountant time, effort and money!
Click here to watch our webinar on how to structure your dental practice accounts.
The importance of cloud accounting software in a dental practice
One thing we often see in common between poorly-run practices is that they have yet to embrace digital accounting and cloud software. Some practices are still relying on paper records for their accounts. Paper records are on their way out and digital accounts are the future.
We have seen many cases of missed opportunities to save tax or improve the profits of a practice. Or at best, the benefits are achieved 6 –12 months too late due to historic accounts reporting.
Typically (and back in the day) there would be a one-off meeting with your accountant after your year-end to go through the historic figures and discuss ways to improve going forward.
The problem with this is the word “historic”. By the time your accounts are finalised and you’re sitting down with your accountant, it’s often 6 months after the year-end, meaning some of the data you’re analysing could be 18 months old!
Real-time accounting is important because it brings so many benefits to a small business. It’s easier, simpler, faster, cheaper. In short, it’s just better.
Use cloud-based bookkeeping and invoice scanning software.
With the software available to you today, there is no excuse to not be automating your finances in your dental practice. To do this, you need to make sure you are using cloud accounting software, like Xero. We use Xero to run our clients’ dental practice accounts and tax.
When you rely on paper records, you waste time and effort paying invoices, sending files and documents, missing key financial trends and a real-time analysis of your accounts.
Now, however, you can simply scan your invoices into software like Hubdoc. The key information is then extracted automatically and fed into Xero, which processes and prepares the accounts.
With your bank account securely connected to the process, your dental accountant can match off any payments that you make, any income that’s coming in, and reconcile the bank account quickly. All without waiting for paper records to be sent anywhere.
Instead of having to keep hardcopy records of all your invoices, receipts and documents, storing them and then shipping them off to your accountant when needed, all you need is a smartphone or scanner!
Simply take a photo of your receipts, invoices etc. via the cloud accounting app, or scan the documents with a scanner, and send them off via the app or email.
All your invoices are also stored in Xero too, so trying to find an old invoice is easy as they all reside in the Cloud, accessible 24/7 from anywhere with an internet connection.
Another benefit of digital accounts is that you can also make payments directly from your cloud accounting software like Xero. Instead of paying each individual invoice separately, which is time-consuming, you can tick all the invoices you want to pay and make one single payment to all suppliers you choose.
This means you can process and prepare your dental practice management accounts much quicker and easier, which means the annual accounts are easier and quicker to prepare. All of this can really help you spot cash flow problems sooner and organise your tax calculations and payments.
Simply put, when you automate your dental practice accounts and finances, you save yourself time, effort and money.
Watch our webinar on automating your finances with Hubdoc and Xero.
Share and collaborate with your dental accountant.
By having everything available on the cloud, what you see on the cloud is also what your accountant sees too, allowing your accountant to see real-time information on your practice’s (or your personal) expenses, finances and accounts.
Most accountants will be able to provide advice on tactics and strategies to improve your practices finances, and this is far easier with a clear, instant view of your accounts.
Sharing your accounts and finances digitally with your accountant allows them a much clearer picture of the financial health of your business, which in turn helps you to collaborate more effectively with either them or any other financial advisors.
With constant updates and real-time data, you and your accountant will be able to analyse trends, manage cash flow and identify potential issues far earlier than with old-fashioned hardcopy accounts.
The technology allows you to collaborate and work together to improve the value of your dental practice performance easier than ever before.
You can use cloud-based software from any device with an internet connection. Online accounting means small business owners stay connected to their data and their accountants. The software can integrate with a whole ecosystem of add-ons. It’s scalable, cost effective and easy to use.
Anyone in your business that needs it can have access at any time. You can restrict and retain far more control over who has access to your personal information.
Click here to watch our webinar on tax saving strategies for dentists.
Monitoring and improving key performance areas
Software packages such as Xero allow you to automatically run a variety of financial reports for you to analyse over a whole variety of time periods.
For instance, most cloud accounting software packages allow you to run reports such as Profit and Loss, Balance Sheets and Cashflow Reports. You can also create your own templates for reports so that you can see the exact data and trends you want.
These reports make it far easier to keep track of your accounts and finances by doing a lot of the leg-work for you. Instead of wasting your time and effort poring over an entire month’s invoices to spot trends, simply run your favourite saved report and see the data instantly.
We advise clients to run such reports at least quarterly so they can assess and routinely judge and keep up with the performance of their dental practice.
This used to be an area that only large businesses with internal accounting teams could tap into. Nowadays, however, with the help of real-time accounting, any sized business can have access to this data to monitor and improve their practice performance.
If you want to make good decisions, you need to base those decisions on good and timely information. Without such information, changes that you make in your business will be more like wild guesses than informed decisions.
Knowing and understanding the key numbers in your business helps you and your advisors to spot trends and take appropriate action to improve your business’s performance. Your accountant can then spend time really adding value to your business, providing you with better advice and alerting you when things go wrong.
Click here to watch our webinar on money saving tips for dental practice owners.
Save money in your dental practice with cloud accounting
We had a client who was paying £450 a month for 3 days of bookkeeping (using manual keystrokes and traditional software). With the implementation of Xero (our preferred Cloud Accounting platform), this was reduced to half of that for a day, saving £4,500 for the year.
The point here is, there is amazing technology available to automate the majority of this necessary evil work. If you are not utilising this, you are basically throwing your money away.
In order to have a business that is operating to its best potential, accounting information needs to be in real-time and your accountant should be able to access this at any point. Not 6-18 months after the event, when it is often too late.
We saw another client recently who saved a whopping £200,000 in tax, simply through having up-to-date information that we had access to!
Click here to listen to our podcast episode on how to reduce your tax bill as a dentist.
Work smarter with accessible data in the cloud
The beauty of this software is the flexibility it gives you to run your business from work, home, or on the go. You can be confident that you have an up-to-date picture of how your business is doing, no matter where you are.
Software updates can be developed and delivered faster and more easily in the cloud. This means you don’t need to worry about installing the latest version and you’ll get access to new features instantly. With cloud accounting software, you have the option to run your business remotely, from anywhere in the world. And when data is fluid and accessible, the possibilities are endless.
Make quality decisions
With the technology available to small businesses today, there is absolutely no excuse to be using out-of-date, old fashioned accounting systems. You could be running a far more efficient and profitable dental practice simply by doing digital with your accounts!
By switching to digital cloud accounting software, by using the online functionality to share and collaborate with your accountants and financial advisors and by using the automatically-generated reports, you can ensure that you make better, quicker, more informed decisions to continually improve the efficiency and profitability of your practice.
By looking at the performance detailed in the reports you can identify and interpret areas that need changing in your dental practice, whether it means cutting costs, increasing fees, or increasing marketing activity.
Understanding the management reports can only help you run a more efficient and successful dental practice.
Click here to watch our webinar on how to improve profits by understanding your finances and accounts.
Traditional software problems
Small business accounting software that’s not available via the cloud can be tedious.
Traditionally, it can suck up far too much of your business’s time and effort. This doesn’t add value, and takes the fun out of being in business. Cloud software can save your company time and money.
- The data in the system isn’t up-to-date and neither is the software. This means events such as changes in regulations cannot be reacted to in a timely manner and the benefits of adopting changes are 6-12 months delayed (or too late!).
- It only works on one computer and data bounces from place to place. For example, on a USB drive. This is not secure or reliable.
- Only one person has user access. Key people can’t access financial and customer details.
- It’s costly and complicated to keep backups (if done at all).
- It’s expensive, difficult and time consuming to upgrade the software.
- Customer support is expensive and slow
Security and Business Continuity
As a small business owner, you might be concerned about a cloud service provider storing your data. But the cloud is one of the most secure ways to store information. For example, using cloud software, if your laptop is stolen, no one can access your data unless they have a login to the online account. With cloud software, this is where the data lives –as opposed to on your hard drive.
In the event of a natural disaster or fire, being in the cloud means business productivity doesn’t need to be affected because there’s no downtime. All of your information is safely and securely stored off site. As long as you have access to any computer or mobile device connected to the internet, you’re back up and running.
In addition to this, if you invite users to view your data, you can control the level of access. This is much more secure than the old-fashioned way of emailing your files or sending out a USB stick with your data on it.
Cloud-based software companies ensure that the security and privacy of data about you and your organisation is always airtight. If you use online banking, then you’re already primed to use cloud accounting. Cloud security is world class
Click here to read 10 cyber security issues dentists should consider.
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