Blog · Video · 4 minutes ·
And what each one costs you in taxes, IRS letters, and missed profit.
Some of our clients come to us after doing their own bookkeeping. Others had a spouse keeping the books, or came from another bookkeeper. Either way, we see the same five mistakes again and again. DJ Bhola, CPA, walks through each one in this short video.
5 Common Mistakes in Bookkeeping for Dentists · @bookkeepingfordentists
The five mistakes
Every bank and credit card account needs to be reconciled every month. Reconciling makes sure your accounting software is not missing any transactions, so your financial statements are complete and accurate.
If you miss expenses, you overpay in taxes. If you miss collections, your chances of getting an IRS letter go up. Either way, you end up paying more, in professional fees or in taxes.
The fix: reconcile every account, every month.
During the construction phase of a new practice, the bank pays a number of expenses for you. Each of those expenses needs to be recorded on your financial statements. The loan balance in your books should match the loan balance at the bank.
After the practice opens, the same rule applies. If you buy equipment with a loan and never record that loan, you can miss the deduction for the equipment altogether.
The fix: record every loan completely, and check that your books match the bank statement.
Some dental practice owners pay personal expenses from the business. Those expenses then get recorded as business expenses, often because that is how QuickBooks categorized them. This is incorrect and can get you in hot water with the IRS.
It can also become a legal issue during a lawsuit, so talk to your attorney. If a personal expense does get paid from a business account, record it as a distribution, not a business expense.
The fix: do not pay personal expenses from your business accounts.
Bookkeeping is not just entering transactions in the accounting software. You also need to follow IRS rules and regulations. If those rules are not followed during the year, fixing the problems later can be expensive.
The fix: learn the rules that apply to your practice, or work with someone who already knows them.
If you do not enjoy bookkeeping, it is tempting to leave it until year end, or even later. By then, it is hard to remember what the transactions were for.
Late books are only useful for taxes. You lose the ongoing benefit of using your numbers to improve the practice during the year.
The fix: do your bookkeeping every month.
Bookkeeping is not just putting information into QuickBooks.
Beyond data entry
Avoiding these five mistakes is the starting point. A bookkeeper who specializes in dental practices can do much more than keep your books clean.
Learn why we only work with dentists, or see how your practice compares in our Dental Practice Benchmarks report.
More posts: Bookkeeping for Dentists Blog.
"We share information that helps dentists increase profits, reduce taxes, and stay compliant with the IRS."
FAQ
We provide bookkeeping services for dentists all over the USA. Tax preparation is only available for dental practices located in Texas.
Still have a question? Call 512-497-4946Every month. Monthly reconciliation of every bank and credit card account makes sure the accounting software is not missing transactions and that the financial statements are complete and accurate.
Personal expenses paid from the business should be recorded as owner distributions, not business expenses. Recording them as business expenses is incorrect and can cause problems with the IRS. It can also become a legal issue during a lawsuit, so talk to your attorney. The best practice is not to pay personal expenses from business accounts at all.
During the construction phase the bank pays many expenses on your behalf, and each one must be recorded. If the loan is not recorded completely, the balance sheet is wrong and you can miss deductions, including the deduction for equipment bought with a loan.
It is not recommended. By year end it is hard to remember what transactions were for, and the numbers are only useful for taxes. Monthly bookkeeping lets you use your numbers to improve the practice during the year.
Yes. We provide bookkeeping for dental practices nationwide, including California. Tax preparation is only available for dental practices located in Texas.
If you own a dental practice and want an accountant who understands your practice, we would be glad to hear from you. Tell us about your practice, or call and talk to a CPA who works only with dentists.
Call us: 512-497-4946