Our Guide to Bookkeeping for Dental Practices
Unfortunately managing a successful dental practice goes beyond just patient care.
While treating patients is at the heart of what you do, running the business side of things—like keeping track of payments, handling insurance claims, and balancing your books—can quickly become overwhelming.
Imagine you’re wrapping up a busy day at the office, only to realize you still need to sort through payments and track down an insurance reimbursement that’s overdue.
Sound familiar? It’s easy for the financial side of your practice to pile up, but with the right strategies, you can keep it all under control.
We’ve put together a simple guide to help you streamline your bookkeeping, so you can focus more on your patients and less on the paperwork.
Whether you’re new to practice ownership or just want to tighten up your processes, these tips will help you keep your books in check.
Let’s get started.
Psst… Prefer to put your dental bookkeeping on autopilot? You can reach out to our team any time to see how we can help.
Why Bookkeeping Is Important for Dental Practices
Let’s start with the basics—why is bookkeeping so important for dentists?
Sure, every business needs accurate books, but for dental practices, it’s especially important for a few key reasons:
Financial Clarity: Without clear records, it’s hard to know how your practice is performing. Are you profitable? Are expenses creeping up? Good bookkeeping gives you a real-time view of your financial health.
Tax Compliance: Missing tax deadlines or having inaccurate financial records can lead to audits or fines. Accurate bookkeeping keeps you compliant with tax laws and avoids costly mistakes.
Cash Flow Issues: Running a practice means you have ongoing operational expenses like rent, salaries, and supplies. Poor bookkeeping can create cash flow problems, making it tough to cover these costs.
Higher Taxes: This is a big one. Dental practices have a range of deductible expenses, like equipment, staff salaries, and utilities. But if your books aren’t in order, you might miss out on deductions that could save you thousands in taxes.
Our Tips For Smoother Dental Bookkeeping Practices
Now that we’ve covered why it’s so important, let’s dive into how to make your bookkeeping process easier and more efficient.
Whether you’re just starting or want to improve your current system, these tips will help streamline your dental bookkeeping.
#1 Set Up a Custom Chart of Accounts
A solid foundation for your bookkeeping starts with a customized chart of accounts. Rather than using a generic template, you’ll want a system tailored to your dental practice’s unique needs.
For example, your chart should track important categories like patient payments, dental supplies, equipment costs, and staff salaries. With this setup, you can quickly see where your money is going and where you might need to adjust your budget.
To make things easy for you, we’ve created a dental chart of accounts template that you can download and use as a great starting point. Check it out here.
#2 Regularly Reconcile Your Transactions and Bank Statements
Reconciliation is a crucial part of keeping your finances in order. This means making sure that your internal records—whether they’re patient payments, insurance reimbursements, or supplier invoices—line up with external records, such as your bank statements.
Doing this regularly, whether it’s tracking payments from patients or comparing your financial records to your bank statements at the end of each month, helps ensure that everything is accounted for and nothing is slipping through the cracks.
If a payment gets missed or an insurance claim doesn’t process correctly, reconciling will help you catch it early and keep your cash flow healthy.
#3 Keep a Close Eye on Cash Flow
Managing cash flow is crucial for keeping your practice running smoothly. Even though you’re not open 24/7, your practice still has ongoing expenses, from rent to salaries and supplies.
Accurate bookkeeping gives you insights into your cash flow so you can stay ahead of any potential gaps. For instance, if you offer payment plans to patients, you’ll need to forecast how that might affect your cash flow in the coming months. Keeping track of these factors ensures that you can cover your costs without stress.
#4 Understand Your Tax Deductions
Good bookkeeping isn’t just about keeping your practice organized—it’s also one of the best ways to save money come tax season.
Dental practices are eligible for a wide range of tax deductions, but to take full advantage of them, you need to keep detailed records of every eligible expense.
Here are some examples of common deductions for dental practices that could save you money:
Dental Equipment: If you’ve recently purchased new equipment like x-ray machines, dental chairs, or sterilization tools, these expenses are tax-deductible. Under Section 179 of the IRS tax code, you can deduct the full cost of qualifying equipment in the year it was purchased rather than depreciating it over several years. This can lead to significant savings, especially if you’ve made large equipment investments.
Continuing Education and Licensing Fees: Dentists are often required to attend continuing education courses and renew their licenses. The costs associated with these professional development activities, including travel expenses, can be deducted from your taxable income. For instance, if you attend a dental conference in another city, you can deduct the cost of travel, accommodation, and meals related to that event.
Marketing and Advertising: Did you recently invest in a new website for your practice or run an advertising campaign? Marketing expenses, whether for digital ads, local flyers, or even sponsorships for community events, are tax-deductible. This means that the money you spend to attract new patients could lower your tax bill.
You can read our full list of tax deductions for dentists here.
By keeping meticulous records of these expenses, you’ll be in a much better position to claim all the deductions you’re entitled to, ultimately reducing your tax liability.
For example, say you purchase $50,000 worth of new equipment and spend $10,000 on staff salaries each month.
Tracking these costs ensures you can deduct them, potentially saving you thousands in taxes.
This is why detailed bookkeeping is not just about staying organized—it’s about making sure you’re not paying more taxes than you need to.
Should you outsource your dental practice bookkeeping?
If managing your books feels overwhelming on top of taking care of patients, you’re not alone.
Many dental practice owners find that juggling the financial side of their practice—like bookkeeping, payroll, taxes, and compliance—takes up way too much time.
That’s where a dental CPA comes in.
A dental CPA is more than just a number cruncher—they’re specialized accountants who understand the unique financial and operational challenges that come with running a dental practice.
Here’s how working with a dental CPA can make a big difference for your practice:
Industry Expertise: A general CPA might be able to handle basic bookkeeping, but a dental CPA knows the ins and outs of the dental industry. They understand common pain points like managing patient receivables, reconciling insurance claims, and navigating complex tax deductions specific to dental practices. This means they can provide targeted advice that helps you optimize your practice’s financial health.
Maximizing Deductions: Dental practices are eligible for a variety of tax deductions, from equipment purchases to staff salaries and continuing education. A dental CPA is well-versed in these deductions and will make sure you’re not missing any opportunities to save. For example, they’ll know how to navigate Section 179 deductions for dental equipment or take advantage of deductions related to employee benefits like health insurance.
Staying Compliant: Dental practices have a unique set of compliance requirements, from HIPAA regulations to payroll taxes and state-specific labor laws. A dental CPA helps ensure that you stay on the right side of these regulations, avoiding costly fines and penalties. They’ll also help you meet deadlines for tax filings and make sure your financial records are audit-ready.
Cash Flow Management: Running a dental practice involves balancing operational costs like rent, salaries, and supplies with fluctuating patient payments and insurance reimbursements. A dental CPA can help you get a clear picture of your cash flow and develop strategies to improve it. They’ll help you forecast future expenses, prepare for slower months, and make sure you always have enough to cover your operating costs.
Saving Time and Reducing Stress: Perhaps the biggest benefit of working with a dental CPA is the peace of mind that comes from knowing your finances are in good hands. When you’re not worrying about balancing the books or scrambling to meet tax deadlines, you have more time to focus on what really matters—providing excellent patient care and growing your practice.
Whether you’re just starting out or managing an established practice, outsourcing your bookkeeping & financial management to a dental CPA is a great way to free up your time and reduce the stress of running a business.
Need More Help With Bookkeeping for Dental Practices?
Managing your dental practice’s bookkeeping doesn’t have to be complicated, but it does require covering a few key basics.
Start by setting up a custom chart of accounts that reflects the unique needs of your practice, regularly reconciling transactions and bank statements, and keeping track of your tax deductions.
These steps will help ensure your books stay in order and your practice runs smoothly.
However, if you find that you need extra help or simply want to take bookkeeping off your plate, we’re always here to help.
Head over to our Getting Started page to book your introductory call. Whether you need full-service bookkeeping or just some financial guidance, we’re always here to help.
Until next time!
