“I’ve got a CPA already. And they do a lot of dental. How are you different?”

Well I’m glad you asked. Let’s break it down. There are 2 types of accounting that you can have for your practice: Financial or Managerial. 

Without dwelling too much on the textbook definitions, the distinction between the two is simple. Financial accounting (which you probably have now) is compliance-based and intended for us by external parties like lenders and regulatory agencies. Managerial accounting (which is what you want) is intended for internal use like you, the owner. 

Financial accounting reports are what you get when you rummage through your QuickBooks settings to generate a report based on data that might not even be correct. Looking at you, doctor who does their own books whenever you find time.  It doesn’t provide much insight into your practice, but it hopefully covers the basics. Managerial accounting is… better. Allow me to elaborate. Here are the 6 Basic Principles of Managerial Accounting. And yes, I made these up just now, but they’re good I promise. 

Your bookkeeping has to be correct.

Duh. Shockingly, a lot of practices don’t even have this in place. If you don’t have a trained and designated bookkeeper, there’s a good chance the work isn’t being done correctly. 

Your bookkeeping and reporting must be current.

Another basic one. And again, most practices are missing the mark on this. If your books are behind or if you aren’t receiving reports until months later, it doesn’t matter how accurate they are, they’re useless. For reporting to be effective, it has to be timely.

Your reports need to be organized. 

Printouts straight from your QuickBooks file aren’t gonna work. Your reporting needs to be organized into an industry standard dental chart of accounts and presented in a way that you can use. 

You need to be trained on how to read your reports. 

Have you been trained on how to read a financial report? I work at an accounting firm and I haven’t. So Probably not. You have been trained to be a dentist. For reports to be helpful, you need to understand them

You need to be held accountable. 

For managerial accounting to truly exist, oversight is needed. Having someone in place to guide you through the numbers and help you interpret them is crucial. 

Ya gotta USE IT. Man this is where people really blow it. 

It’s right there in the definition: managerial accounting is the ability to identify, analyze, interpret and communicate financial information. You see how many verbs are in there? You cannot receive managerial accounting, you must participate in it. 

That’s one of the biggest reasons so many dentists miss out on effective accounting work. You ask 10 doctors to describe their ideal accounting relationship, I’ll bet you at least 8 of them describe something eerily similar to what I just went over. But when it comes down to it, most dentists are unwilling to commit either the time or the money to participate in it. If you think accounting work isn’t worth it, look at these emerging DSOs and mega-successful group practices. You think those guys are those winging it on their numbers? Hell no. They’re running on pristine reports and streamlined financial systems. You can too. Just gotta take the leap and invest in it.