You must already know that a Dental CPA costs more than an ordinary CPA or tax preparer. The real question is, how much more does a dental CPA cost, and is it worth it?
The average annual fees of a Dental CPA:
Monthly transaction download + reconciliations $7,200 - $9,600
Monthly bookkeeping (above) + full bill paying $13,000 - $15,000
Preparation of Personal tax return $1,500
Preparation of Corporation/LLC tax return $5,000
Mid-Year/Year-End tax planning + meeting $3,000 - $3,500
Financial review after year is complete $1,000
The average annual fees of a Dental CPA as a percent of your income:
I see Dental CPAs fees on average anywhere between 0.5% - 1% of your income, based on practices under $3M in patient fee income. If you get the full load of services, it might go over 1% of income, but I rarely see it go beyond 2% unless there is a lot of special consulting involved. In that case, maybe your revenue should start increasing from that extra service, making the percent to income reasonable after time.
Why a Dental CPA?
I'll be the first to tell you that many Dental CPAs are really good at what they do. We work with 100s of CPAs, and we see a vast difference between the Dental CPAs and the Generalist CPAs. When a CPA works with only dentists, it enables them to learn a lot, and improve their services around the needs of dental practices. A Dental CPA is more knowledgeable in helping you with specific ways to minimize taxes, increase your revenue, and improve the health of your practice with dental specific key performance indicators like practice overhead benchmarks.
It may not be important to utilize ALL of the Dental CPA services offered, but I do believe some of them would be worth the extra cost compared to a generalist CPA. Below, I have given you an overview of some of the services offered by Dental CPAs and my opinions. But every practice is different, and every Dental CPA is different, so I encourage you to do your own research and shop around for your perfect solution.
Are the Dental CPA bookkeeping services worth it?
The bookkeeping is the foundation of everything. If the transactions and data in the bookkeeping aren't correct, then your tax return (and tax liability), or any practice overhead benchmark calculations for that matter, will not be correct either. This is known as "garbage-in is garbage-out."
So, is the Dental CPA bookkeeping service worth the cost? If you're not using our services here at Bookkeeping for Dentists™, then yes, a Dental CPA's bookkeeping service is going to be better than anything you currently have, and worth the cost. You should be utilizing your bookkeeping data for more, like making improvements rather than just for taxes. Dental specialty bookkeeping provides the foundation you need to improve your practice.
However, we do it better than the Dental CPAs. A dentist who was in the process of joining us said, "Using my accountant for bookkeeping is the same as a dentist doing the hygiene. I shouldn't be wasting money on my accountant to do the bookkeeping when I could easily delegate to you for less, and get way better results. My accountant should focus on taxes and the big picture, while you guys focus on the details special for a dental practice."
You decide. 😉
Why you should pay your bills in-house:
In the bullet-point list of services I have at the top of this blog post, you will see there is a dental bookkeeping option that includes bill paying/check writing. I don't believe using either a generalist CPA or a Dental CPA to pay your bills is worth the cost, and it causes more trouble than it saves.
Paying your practice bills can be streamlined and done better in your practice very easily. If you put everything on debit/credit card and set up automatic payments, you've eliminated a ton of the work.
Tip: Don't add your bills to QuickBooks, and don't pay them by hand writing checks either. You're adding double duty wasted time to processes.
For the bills that need monitoring, such as dental supplies and laboratory fees, you may want to have your office manager or spouse audit those invoices as they come in, making sure you physically received what you're paying for, and there are no mistakes. Then use a bill paying software like Melio to track and pay those bills that aren't on automatic payments (pictured below).
Dental CPA tax preparation is the good stuff:
Every CPA firm can "do" a tax return. They have accounting degrees and experience preparing taxes. However, the tax preparation services of most Dental CPAs is by far the best I've seen. Why? Because of what they know about your dental practice while preparing those taxes. They are very thorough, and because they work with mostly dentists, they know what to look for while making sure you get every tax deduction possible.
Here is the part that I love about Dental CPAs, and you may have no idea. Since Dental CPAs are a little higher in cost, they can have higher quality in their staff's training. A lot of the larger Dental CPA firms are really awesome with "tying" every Balance Sheet account to a paper trail for accuracy before preparing the tax returns.
For example, if you have loans, a Dental CPA will match each loan balance on the Balance Sheet report to the actual bank's principal balance (paper trail). This ensures your loan payments are being applied correctly in the bookkeeping, where the principal portion is reducing the balance sheet account, and the interest portion of each payment is being expensed and deducted on the Profit & Loss report.
We got a new client from a Generalist CPA that didn't match the Balance Sheet balances to paper trails. When we began doing the bookkeeping for this new client, we always "tie" the balances like a Dental CPA does, and we found that the generalist CPA missed $30,000 worth of loan interest deduction on the prior year tax return because the balance on the books didn't match the bank. Ouch. 😳 🤦♀️
What's special about Dental CPA tax planning?
Mid-Year or Year-End Tax planning is when the Dental CPA will annualize your current year-to-date numbers to try and estimate what your tax liability will be at the end of the year, so you can strategize around the estimates. This is really helpful to relieve you of any major surprises and you can plan ahead. Were you hoping to upgrade some equipment soon? Well, during this tax planning process, your Dental CPA can help you decide if its a good time to do that upgrade for a tax advantage.
Dental Practice Benchmarking
The special part of dental CPA tax planning is that they are also benchmarking your practice overhead percentages to see how you're doing performance-wise against industry averages too. Then they usually add in consulting with a meeting to go over the numbers with you. I've always really liked the mid-year and year-end tax planning meetings when I was working in the Dental CPA firms. It gave our dental clients actionable information to work with, and I felt like I was making a real difference for them, not just preparing tax returns. I think this service is a valuable one if you are on the fence.
You can read more about dental overhead benchmarks with my blog posts below:
Yes, Dental CPAs are more expensive than most generalist CPAs. But they also provide more value with their services because of the vast amount of knowledge and experience they have with dental practice accounting and tax preparation. I believe many of the services they offer are worth the cost.
The larger dental CPA firms have expanded services to provide more consulting, so they not only help build tax strategies, but they also want to help you improve your practices. Try asking a Generalist CPA how much your hygiene department should be producing, or if you're ready to hire an associate... I think you'll be getting a blank stare. But a Dental CPA will be able to help you at the drop of a hat. That's pretty handy to have in your back pocket, and it could be worth the investment if you are looking to improve and need help like that often.
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Sona Wegner, MBA ❤
Founder, Bookkeeping for Dentists™