Make Your Practice Shine with a Standardized Dental Chart of Accounts
CPAs and Accountants have a love/hate relationship with QuickBooks and other small business accounting applications. We love how it provides a fully featured, affordable bookkeeping solution. We hate what happens to reports like the Dental Chart of Accounts when it isn’t used properly.
In dental accounting, we often see books that are not in good shape. Highly qualified dental bookkeepers are rare. Staff that may have multiple duties and wide practice management skill sets that are not primarily bookkeeping are often put in charge of the books. Expert advice or training is not always obtained. Let’s be clear, this is stepping over a dollar to save a nickel.
If your books are inaccurate and difficult to understand, it’s going to cost more than you might realize. Very commonly, more than half of the time a CPA spends on a dental tax return is simply fixing bookkeeping errors and figuring out what transactions were posted where, and why.
It shouldn’t be this way, and it doesn’t have to be.
What if your bookkeeping reports were reorganized into a proven format that has been optimized for dental practices, one that provides better information about your practice, and can be easily understood by any CPA? Out of all the bookkeeping changes that we usually recommend, this may be the most important.
What is a Chart of Accounts?
A Chart of Accounts is simply the list of all income, expense, and equity accounts that are needed for business bookkeeping. It also determines the organization and appearance of the financial reports that you generate. Take a look at an example of our Standard Dental Chart of Accounts, then compare that to the last financial report your office generated. For most of you, the difference will be obvious.
What are the key features?
Professional Tax software doesn’t work without account numbers. If you aren’t already using them, your CPA must manually add account numbers each year and match them to prior year account numbers. It’s much more efficient and cost-effective to establish standardized account numbers upfront.
The numbering order must follow basic accounting standards. All accountants know an account that starts with 1 is an Asset, 2 is a liability, and so on. The numbers have a standard system that allows accountants to quickly find items that we need to analyze.
Dental Specific Categories and subcategories.
Income and expenses in our standard chart of accounts are categorized strategically into meaningful groups which aid financial analysis. The account names are customized specifically to dental practice accounting. This helps your accountant, but it can be even more helpful for your own understanding of the practice financials.
It’s as simple as that, but don’t underestimate the value. Balance sheet, income, and expense accounts have a long-standing standard system that all accountants understand. Our chart of accounts customizes that specifically for your dental practice. Reinventing the wheel by making up your own system may be an expensive mistake.
This isn’t just about saving money at tax prep time.
A standardized dental chart of accounts can help you and your dental accountant efficiently benchmark your practice to historical data. That data can be your own or regional or national data of your peers.
The standard chart of accounts makes your financials better for you and your accountant. When you generate a report, it will be more meaningful to you. Your financials will actually help you run your business, as they should.
When your accountant can understand your bookkeeping, you save money in fees, get the best tax deductions, and get better advice. They can provide useful analysis without wasting brain power and billable time cleaning up and interpreting the financials.