Sponsored article by Pro-Fi 20/20 Dental CPAs
“I’ve got a CPA already who is also dental. What makes you different?”
This is a question Pro-Fi 20/20 Dental CPA firm gets quite often. For the longest time we didn’t have a short, simple answer with which to respond. We knew we were providing an “out of the box” new approach to dental accounting; we just couldn’t put it into words. Then we found an answer in the most unlikely of places: at an Intro to Accounting 101 college course. It was staring us right in the face in the carefully bound textbook.
In the simplest sense, the difference lies in the type of accounting Pro-Fi 20/20 delivers. Two of the most essential forms of accounting are managerial and financial. Understanding the difference between managerial and financial accounting will be a game-changer for practice owners.
Understanding the basics
The most important distinction between financial and managerial accounting is the audience: Who is it prepared for? Financial accounting is intended for external audiences, such as lenders, creditors, and regulatory agencies, whereas managerial accounting is intended for internal audiences, such as your management team. Being meant for external use, financial accounting is governed by generally accepted accounting principles (GAAP) and is highly regulated. The end result of financial accounting is the prepared financial statements used to keep a business compliant with various guidelines.
The end result of managerial accounting is much deeper. It’s designed to help you and your team make informed business decisions. From Investopedia, it is “the practice of identifying, measuring, analyzing, interpreting, and communicating financial information to managers for the pursuit of an organization’s goals.”
Practice owners almost never find that their accounting services are helping them to achieve their practice goals. Pro-Fi 20/20 is here to change that. In an entrepreneurial industry such as dentistry, growing your practice means surrounding yourself with systems designed for growing your business.
Financial confidence with managerial accounting
Managerial accounting helps you operate your business. Without a proper understanding of your finances, you’re flying blind! Every day, doctors go out and make potentially business-altering decisions with little to no knowledge of the financial ramifications of those decisions. We want to fix that. We want to fill the managerial accounting void in dentistry by giving doctors the financial confidence to make informed business decisions.
When presented with a choice between financial and managerial accounting, every dentist will tell you they need managerial. However, very few doctors are actually receiving it. For those entrepreneurial doctors who are serious about seeing a change in the way they run their practices and truly lead based on financial facts, Pro-Fi 20/20 is the answer.
Let us break down managerial accounting for you into six basic principles:
Your bookkeeping has to be correct—Sounds like a no-brainer, doesn’t it? Shockingly, a lot of practices don’t even have this in place. If you don’t have a trained and designated bookkeeper, there’s a good chance the work isn’t being done correctly.
Bookkeeping and accounting must be current—Another straightforward requirement, right? If your books are way behind, or if you aren’t receiving financial reports until months later, it doesn’t matter how good the reports are. For managerial accounting to be effective, it has to be delivered in a timely manner.
Relational reporting that is well organized—Printouts straight from your QuickBooks just won’t do. Your reporting needs to be organized into an industry standard chart of accounts and presented in a way that is meant to be read and understood.
Reading the financial reports—Have you been trained on how to read your financial reports? No, you’ve been trained to be a doctor. Let Pro-Fi 20/20 take on what you shouldn’t have to. You may not be using these reports to their full potential for practice growth.
Being held accountable for tracking your numbers—For managerial accounting to truly be present, oversight is needed. It’s important to ensure that you are taking advantage of the reports and supporting practice goals.
Use it!—It’s right there in the definition. Managerial accounting is the ability to identify, analyze, interpret, and communicate financial information. You cannot receive managerial accounting. You must participate in it. You can have the most thorough and detailed reporting in the world, but if you don’t use it to inform your decisions and run a better practice, then you aren’t reaching your full practice potential.
For most doctors, implementing effective managerial accounting will require a shift in mindset. You must be willing to embrace being a business owner. We know you are a great doctor; now it is time to take pride in running a profitable, healthy, and successful business.
SIDEBAR: 3 year-end tax tips for your practice
By Brent L. Saunier, CPA
These tips will help improve your tax position for the year.
1. Evaluate your business entity type. Ask your CPA if your entity structure is the most advantageous option.
2. Review Section 179 depreciation schedule options. If you need any equipment added to your practice that can help generate more revenue, you may be able to immediately write off all of it before year-end. Ask your CPA if you have enough tax basis in your business to write off all of the asset value before making the purchase.
3. Consider cost segregation. If you own your dental office building, or if you did any remodel/renovation/tenant improvement, this could be one of you largest tax deductions ever.
