Monitoring dental practice cash-flow and analyzing overhead should be executed, forensically, each month. Highly accurate and timely, monthly practice reconciliation is the key to impacting your profitability and ultimately - your retirement savings. Utilizing cutting edge technology, like "cloud computing", can help achieve that. How many times have you increased collections; however, cash in the business accounts doesn't budge? Have you wondered "where did the money go?" Most CPA's are trying to complete as many tax returns as possible, as a result they are limiting the number of expense accounts on your profit & loss statement in order to speed up the tax prep process. This translates into limited analysis of your overhead because more data, more sub-accounts, and more analysis simply takes more time. For example, you have one "repairs & maintenance" account but it might include entries for dental equipment, computer repair, or building repairs. If you were that detailed on your profit and loss statement, you could debate the options of continuing expensive repairs to that old Pelton chair or plan to buy new one, as an example.

Often, my new clients share stories about how they were just about to contribute a large contribution toward their profit sharing plan when they got that huge tax surprise that I referenced earlier. That year's retirement savings just went down the tubes and now we play a catch up game with more stress and pressure. It's a cycle that can be prevented. Your accountant is basing tax estimates off last year's taxes because they are not monitoring your practice monthly. If they were, they would have been able to better predict your tax liability much earlier and made adjustments accordingly rather than "short-circuit" the entire year's retirement funding.

Some new clients reveal they discovered a tax surprise the previous year and, as a result, instructed their accountant with a panicked voice that they did NOT want to owe more money in the future. The CPA's solution? She increased their pay in order to increase their tax withholdings. After a 3% decrease in profits last year, this solution resulted in a $71,000 tax refund! No wonder cash was tight in the practice since almost $6,000/month additional money was being paid to the government. Wouldn't it make sense to decrease their withholdings? If their accountant was monitoring the tax liability and had a pulse on personal finance as well, this could have been prevented.

Are you doing payroll yourself to save a few bucks? As a dental accounting firm that has experience with the complex world of regulation and oversight for employee pay and retirement funding, it's our opinion that it's simply not worth taking the risk for errors and the penalties that are associated with it. There are so many changes to withholding tables and filing responsibilities between the federal, state, & county agencies that it is not worth the risk. In addition, I see too many instances where the payroll data is not entered correctly into Quickbooks - which leads to incorrect analysis of your overhead. A reputable, reasonably priced payroll company should charge you around $50 per pay period for a typical dental practice. This makes your life simpler and alleviates liability at the same time. $100 per month well spent, I would venture.

David Harris, CEO of Prosperident, the world's largest dental embezzlement investigation firm, states "3 out of 5 dentists experience some type of fraud in their career." You cannot always prevent fraud because it's often executed "off the books", but strong internal controls should still be implemented. Remember, it is frequently the most trusted employee who commits the fraud. Is your "key employee" writing checks & doing the bank reconciliations? In my experience this is often the case. There must be proper checks and balances for strong internal controls and it's your CPA's job to notice these weak controls and recommend change.

Technology in the business of dentistry is ever-changing but accounting systems are often like old relics stuck in the past. A holistic approach needs to be taken to implement real change in your office or you'll never get out of the cycle of saving a meager $20,000 a year for retirement.* Your CPA should examine your accounting processes as a whole; otherwise, you just just have a "tax preparer" and frankly, you deserve much, much more.

*  The ADA Survey on Investment and Retirement reveals dentists save 17.3% of family net income - roughly $26,000/yr.

Chris Cuadros, CPA , is Director of Tax & Accounting for Four Quadrants Advisory Companies, a firm exclusive to the dental industry. After years of working with dentists, Chris discovered a better way and built Four Quadrant's accounting systems from scratch - the way a dentist would do it. Quickly becoming known in the industry as the "external CFO" for dentists, Four Quadrants Advisory offer educational webinars, lectures, and expert articles on the business of dentistry and building a great retirement - all found at www.4quadrantsadvisory.com. Chris can be reached at ccuadros@4quadrant.com and 877.720.6213.