Using Financial Statements to Manage Your Dental Practice
Feb 19, 2015
The financial health of your practice can be assessed by analyzing its financial statements. Financial statements allow you to observe where your practice’s money came from, where it is going, and where it is now. Based on this information you can determine the future of your practice. Delving into the makeup of your payor mix, patient mix, product and service offerings, and the length of time it takes to bill and to collect will allow for maximization of revenue. Assuredly, you have regularly been told to increase your fees/prices annually while still staying within regional market rates and maintaining patient value. Likewise, it is recommended that you review participation in contracts prior to a renewal for the best possible reimbursement rates. Focusing on the revenue side of the practice generally can wield larger returns than focusing on keeping expenses low.
That said, of course, prudent business practice dictates you should evaluate the need and purpose for each expenditure made. It is advisable to periodically shop among vendors for discounts, to renegotiate vendor contracts for reasonable rates, and to review debt for opportunities to refinance, to reduce your overall costs. Salaries and related payroll taxes and benefits are a large expense for a professional office. If you have not already done so, consider an incentive pay structure and bonus system, opposed to an annual cost of living increases. Appreciation through gestures and recognition, and also non-cash benefits are typically well received.
Once you have fully reviewed and evaluated maximizing revenue and minimizing expenses the recommendation is to look at your balance sheet for the assets and liabilities you are ‘investing’ in as a company. Accounts receivable may be one of the largest assets. Do you regularly and diligently focus on collecting amount due to you – sooner than later? Do you monitor purchases and supplies inventories so not to stock excess items which ties up cash and income? Debt, as was mentioned previously, may be better suited to be paid off, paid down faster than required or refinanced.
After exhausting all the financial management techniques, processes are the next area you may want to focus on. Keep your coding current to minimize errors and rework. Define steps in all functions of the practice to avoid time ineffectiveness and inefficiency at all levels. Optimize patient scheduling to maximize the benefit of everyone’s time. Limit overtime paid with closely watching staffing. We can work with you on where you could make financial changes and also help with reviewing and identifying areas in your practice where streamlining operations may help optimize your practice’s bottom line.
By: Michelle Klement, CPA
Categories: Healthcare & Dentistry
Your 2014 Tax Return and the Affordable Care Act
Feb 10, 2015
The Affordable Care Act requires everyone to maintain health insurance for themselves and their family members (with a limited number of exemption)s. New for 2014, taxpayers will need to verify compliance with this mandate on their individual income tax return.
For each month of 2014, taxpayers and everyone claimed on their return must do one of the following: (1) maintain minimum essential coverage, (2) qualify for a coverage exemption, or (3) make a shared responsibility payment with their tax return. Those individuals covered by a qualified plan for the entire year need only “check a box” on the Form 1040 attesting to their coverage. A new form, 8965, is used to report an exemption from the coverage requirements. This same form and its instructions are used to calculate the shared responsibility payment.
Individuals who purchased health insurance coverage through the Health Insurance Marketplace will receive a Form 1095-A showing the advance payments of the premium tax credit they have received. This information will then be used to complete new Form 8962 to “true up” the actual credit they were eligible for against the amounts they received in advance. Any credits they have due will increase a tax refund; if they calculate too much credit received in advance, the difference will reduce their tax refund.
Under the coverage provisions, a taxpayer is liable for not only himself or herself, but also for any individual the taxpayer can claim as a dependent. Therefore, children must be covered under a qualified plan or the parent will be liable for the shared responsibility payment.
Senior citizens are not exempt from the coverage rules. However, Medicare Part A, Medicare Advantage, Medicaid, and TRICARE programs are qualified health insurance plans.
If your income tax return is prepared by a professional return preparer, be ready to document your health insurance coverage for the year so the return will be accurate.
By: George Monger, CPA
Categories: Healthcare & Dentistry
Dental Office Operations Audit
Feb 05, 2015
Many dental practices are often managed by a small team. The staff may complete the day-to-day tasks, like billing and office maintenance, but the overall management of the practice is the owner’s responsibility. The owner may be a great dentist, but that doesn’t always equate to having a great practice. Inefficiency and waste may be affecting the practice, resulting in lost revenue. However, with small changes increased efficiency may be achieved. Applying various tactics may provide less waste, more time, and more money.
Automation In our highly technological society, performing day-to-day tasks manually is often a waste of time. Appointment reminders, scheduling updates, and billing calls are a few tasks that can be automated. Email and text messaging can also be effective and time-saving methods to communicate with patients.
Cross- Training Every staff member has specific responsibilities, but sometimes it’s necessary they perform other duties. If someone is absent, that team member’s tasks must be completed. Other staff should be expected to help out, but they must be appropriately trained. Everyone in the office should know how to handle most front office responsibilities.
Communicating In the office and with patients, the main time-waster in many dental practices, is poor communication. This is not limited to discussions in person or on the phone. Billing statements and patient information forms should all be user-friendly. Also, staff should be educated about the types of questions typically asked by patients and should be able to respond knowledgeably, or to know who to ask for the appropriate information.
Outsourcing Dentists are trained to be dentists – not business owners. Caring for patients is their main focus, but for the practice to be successful, the office tasks must also have the necessary attention. Before those tasks become overwhelming, consider outsourcing. Many reputable third-party providers can take over tasks like payroll, accounting, and record keeping. An affiliate of William Vaughan Company, WVC RubixCloud is an outsourced accounting solution that leverages state-of-the-art technology to process all of your accounting functions. Check out our site: http://www.wvcrubixcloud.com
Every practice has the ability to make improvements. Evaluating your practice’s day-to-day functions and determine where modifications can be made will reduce time and money wasted.
Categories: Healthcare & Dentistry
TAX ALERT 2014
Dec 31, 2014
The president signed a one-year extension of more than 50 expired tax breaks. Some of the extended provisions include:
For Individuals: • Deductions for certain expenses of eligible school teachers • Deductions for state and local general sales taxes • Deduction of qualified tuition and related expenses • Tax-free charitable contributions from IRAs
For Businesses: • Research and development credit • Section 179 – enhanced expensing deductions • First year bonus depreciation • Work opportunity tax credit • Reduced recognition period for the built-in gains of S-corporations
The reinstatement of more than 50 expired tax breaks is a positive thing for 2014 for individual and business taxpayers. Please refer to a recent William Vaughan Company blog for last minute actions to further reduce 2014’s tax liability.
Contact your William Vaughan Company professional for additional information on the specific provisions that could benefit you.
Categories: Healthcare & Dentistry
Thinking About Hiring Your Children In Your Dental Practice?
Dec 04, 2014
Generally they will be in a lower tax bracket than you. Therefore, you can shift income from your higher tax bracket to your children’s lower tax rates.
In order to qualify as a deductible business expense, there are four criteria that must be met.
- The compensation must be shown as an ordinary and necessary expense connected with the practice.
- The pay must be reasonable, defined as the amount normally paid for similar services.
- The services must actually be provided.
- The compensation must be paid.
Your child is eligible to contribute up to $5,000 to an individual retirement account (IRA). Thus, in 2014, your child can earn $11,200 without paying any Federal income tax if they contribute the full $5,000 to an IRA.
They could also decide to contribute up to $5,000 to a Roth IRA. They would then pay about $500 of federal income tax, but all the qualified distributions from the Roth IRA would be then tax-free.
Categories: Healthcare & Dentistry