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What is your true dental practice expense?

10/14/2013

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When I speak with dentists what I hear most often is that they look over the reports they receive from their accountant.  However, they often don't really understand what the numbers should be and end up comparing them to the year before.

Accountants focus on saving you money on your taxes.  Therefore, most accountant reports include expenses that are tax deductible however are not true expenses.  For example, depreciation and amortization are not expenses that you write a check for.  This can be confusing and often inflate your expenses.  So when calculating your true expense these numbers are not used.  Also total loan payments are often not included either.  Interest is included but principal payments are not.  

Knowing your true expense is important in understanding your overhead.  It has been said before but it isn't about what you produce but what you put in your pocket and that is the difference between collections and true expenses.  This number will also tell you how much you need to collect each month to break even.  When calculating dental team bonuses it is important to know and understand your expenses as well.  This ensures that you are paying a bonus from your profit after your expenses have been met.  

Action Plan: Do you know your true expenses?  If not, what needs to happen to calculate that number?  Put it on your to do list or delegate it to someone who can.

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