How Important Is A Financial Report For Your Dental Practice?
Financial fraud by employees is another reason for office excess costs. Many times staff steal funds from the office without knowing it.
These employees often hide the fraud by reporting incorrect figures. A dentist who has some accounting knowledge would be able to spot it.
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What Is A Financial Statement?
A financial statement is a written record that shows all business activities and the enterprise’s financial status.
A balance sheet provides an overview of assets and liabilities. A cash flow statement measures the cash generated by the business to finance its operations and costs.
A Practice Statement that is Accurate and Relevant to You
We can’t stress enough how important a financial statement is to your dental practice. Here are some examples of its prominence:
It Helps To Identify Fraud And Inconsistencies
A reliable financial statement is essential for analysing the economic stability and well-being of your practice. It is also helpful in tax planning and financial decisions.
It also helps detect fraud. Dental accountants can help you detect embezzlement or discrepancies within your practice’s financial sector.
You can identify fraudulent financial reporting by staff members using the financial statement. Then you can take corrective action.
This Allows You To Make A Great Future Cash Flow Budget
An excellent financial statement will help you identify discrepancies and assist you in future cash flow budgeting.
If you have a steady stream of income that spans months, it is a good idea to review your monthly revenue and expenses reports and make any necessary adjustments.
Include planned expenses, revenues, and additional workdays—payroll, inflation, payroll, etc. You’ll have a budget that you can use to prepare cash flow. This will allow you to identify revenue-generating actions to be considered.
It Helps You Formulate A Breakeven Analysis
The break even analysis allows you to calculate how much revenue you will need to pay for expenses and make adjustments to the practice.
This is how it works: Divide your costs into fixed costs (rent and utilities, insurance, etc.). Variable costs (staff payroll and lab supplies, dental supplies, etc.)
Your breakeven point is then calculated by subtracting the percentage of variable expenses from your revenue percentage.
A Dental CFO Is Crucial In Preventing Dental Fraud
The Association of Certified Fraud Examiners found that the average business loses about five percent of its revenues to theft or fraud.
It is possible to use a business’ credit cards for personal aggrandizement or manipulate payment records to create a revenue stream for someone’s benefit. Fraud is a crime punishable by law.
Every business has dishonest employees, and the dental office is no exception. It’s a common practice to steal from your employer.
This has been around as long as the business itself. This heinous act is seen as a way to get out of financial trouble by those who perpetrate it. They are often the most trusted employees of their employer.
Dental practices are prone to embezzlement, mainly because of dentists’ tight schedules. Dental practice accounting often has many responsibilities and is frequently overwhelmed with tasks. It is difficult for them to give the same attention to financial transactions as their patients.
A dental CFO can help you prevent or handle fraud in your dental practice. They have the skills and expertise to handle financial misappropriation of all sizes. Below are some of the ways that they do it.
Segregation of Duties
A dental CFO will take steps to prevent fraud in dental practices by segregating the duties of employees. Your business could be at risk if you allow one person to manage all financial transactions and procedures.
This situation could lead to embezzlers quickly committing fraud, thefts, and cover-ups that can have devastating consequences for your business.
How does segregation work? It is simple: the person writing the check should not be the same as the one who approves invoices.
Reconciliation of bank statements should not be the responsibility of the person who handles bank deposits.
The chain of duties should be broken down so that there is no chance of any leakage. These will prevent fund misappropriation.
Conveying Responsibility for Cash Transactions
Dental accounting services are aware that misappropriation of petty cash accounts can be easy. A dental CPA assigns an individual to manage withdrawals and deposits to prevent this from happening.
This employee is independent and requests original receipts of all purchases. They also limit cash withdrawals at any given time. A policy for usage is established and must be adhered to at all times.
Reconciling Bank Statements and Credit Cards
Every dental CPA should use reconciliation of bank and credit card statements to combat fraud in their practice. Fraud can always occur if financial statements aren’t regularly checked.
A dental office bookkeeping can help you reconcile your monthly accounts or teach you how to do it. For every financial transaction, always request original documents.
A CPA firm that focuses on dental is an excellent choice if you’re looking for more expertise in crucial areas of your dental career. Here are the key points to consider when hiring a tax planning for dentists.
Incubator Stage: While you are in Corporate Dentistry or at dental school, it is essential to build the right professional relationships that will help overcome any obstacles to owning dental bookkeeping services.
Growth Stage (first five years of ownership): Decisions such as office location, practice type, office staff, and debt reduction can profoundly impact production, cash flow, client acquisition, and overall debt reduction.
Adolescent Stage: Decisions focused on technology upgrades and remodeling, office design, better workflows, clientele quality, and improved clientele quality.
Maintenance Stage: This phase focuses primarily on retirement savings.
Exit Stage: This phase focuses on maximising the value of the practice to sell it.
Each financial statement that your dentist prepares for you includes vital information that will help you make sound financial decisions. It is crucial to understand your financial statements to gain insight into how best you can run your practice.
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