Dental Practice Accounting System: Details that Paint the Big Picture

As part of our accounting services for dentists, financial statements provide much-needed information to help practices stay on track throughout the year. A good dental practice accounting system is vital for meaningful financial data.Financial statements assess the financial health of a dental practice, which can offer insight that dentists can use to improve their bottom line.

So many times, practice owners follow the status quo and don’t dive deep into their financial matters, and that’s OK. That’s why we are here: to provide dentists with financial statements to give them an overview of what’s happening, as well as offer guidance that may make a difference in the long run. The ADA also has many good information about this as well.

Parts of a Dental Practice Accounting System and its Financial Statements

Dentists can use financial statements to analyze where their practice’s money is coming from and where it is going. A dental practice accounting system will help you achieve this. If a dental practice is experiencing financial difficulties, the statement can help the dentist pinpoint areas where expenses can be reduced.

For the purposes of a financial statement for dentists, expenses generally include:

• Cost of purchases
• Salaries/retirement/insurance costs
• Taxes, utilities, internet/cable, and phone fees
• Rent/monthly installment payment for owned properties
• Repair and maintenance
• Marketing/advertising expenses

Among others, a dental practice’s assets may include:

• Land, building, and property, depending on the current value
• Equipment
• Cash/savings
• Inventories
• Accounts receivable

Dentists’ financial statements typically include one or more of the following:

1. Statement of Financial Position/Balance Sheet

The balance sheet is essentially the core of your financial status. It may include a list of your assets, including property, equipment, cash, and investments, as well as a list of liabilities. It likely also would include a snapshot of what your dental practice is currently worth at the moment minus the liabilities.

Liabilities may include bank loans or other money that the practice borrows or owes, as well as interest, tax, salaries, and accounts payable.

2. Income Statement/Financial Performance

The income statement lists revenue sources and how much revenue is being generated. It may also list the expenses involved in making the profit (i.e. return on investment).

3. Cash Flow Statement

This details how cash is used throughout the specific reporting period, as well as whether your bottom line improved or dropped during that period.

4. Statement of Change in Equity

Equity is the residual interest in the assets of an entity after all of its liabilities are deducted. In simple terms, equity is assets minus liabilities. Items considered when analyzing equity include share capital, revaluation gain, dividends payment, and retain earning or retain losses.

5. General Notes

The financial statement to dentists may include general notes to explain the details found within the statement.

Working with Schultz & Associates for Dental Accounting

Our firm’s dental accounting services will include quarterly financial statements, or more frequent statements as needed. Virtual Dental CPA and accounting services are also available. The financial statements will include a compilation report, as well as all the necessary financial statement note disclosures.  They can be used for internal use or will be prepared for banks, creditors, or any other third parties.

Contact us to learn more about how dentists can use financial statements to better understand their income and expenses. Set up an appointment with one of our dental accountants by calling our office or sending us a message through our website.