Why your dental practice would benefit from an accountant

Bookkeepers keep records. Accountants help businesses to understand what those records actually mean in practical terms. As with the law, accountancy is a broad field so many accountants specialise in a particular area of it such as accountancy for dental practices. Here is a quick guide to dental accountancy and how it can help you and your practice.

Dental accountancy as a speciality

On the one hand, dental practices are, fundamentally, businesses. On the other hand, there are a lot of significant differences between them and most other types of business. For example, most dental practices do a combination of private work and NHS work.

Dentists who do NHS work have to navigate the NHS’ rules, including its superannuation scheme. Participating in this scheme requires dentists to complete an ARR form each year. This must be done absolutely correctly to avoid complications. Furthermore, you will want to claim the maximum level of tax relief on your contributions.

For both private and NHS work, you need to be sure that your practice is staying on the right side of the law, especially tax law. This can be very complex. That’s why it is often hugely beneficial to work with an accountant who specialises in dental accountancy.

As a bonus, accountants who specialise in dental accounting are likely to have a network of connections in this area. This can help them to fill in any knowledge gaps they may have. It may also allow them to point you in the direction of people who could help your business in other ways.

Ways a dental accountant can help your dental practice

Here are some of the specific ways using a dentist accountant can benefit your dental practice.

Taking over a practice

If you’re thinking of taking over an established practice, it’s important to do your due diligence first. Normally, this is just a way of confirming the practice’s financial standing and hence current value. It will, however, also ensure that any questionable financial behaviour is identified and, if possible, addressed.

Completing this due diligence may be essential to convincing lenders to provide finance. Even if you don’t need finance, you’ll want to be sure that you're investing your own money wisely. On that point, an accountant can also review the purchase agreement. They can also advise on whether or not the current structure of the business fits with your plans.

Establishing a new practice

Setting up a new dental practice typically requires significant outlay. It’s therefore vital to ensure that you have sufficient capital to see you through. Having projections from a specialist dental accountant may make it easier to negotiate with lenders.

As with taking over an established practice, a specialist dental accountant can analyse the proposed structure of your business. In addition to making sure that it’s the most suitable one for you, they can help you to set it up.

A note on business structures

Many dental practices operate as limited companies. This separates the company’s finances from the personal finances of the people who own, manage and operate it. It, therefore, tends to offer the most flexibility in operation. For example, ownership of limited companies can be divided between multiple people, sold or bequeathed.

In some cases, however, operating as a sole trader or in a partnership might be more suitable. For example, if a dentist was only working a small number of hours, setting up a limited company might not be cost-effective. Working as a sole trader would probably be more appropriate. Likewise, some dental practices might work best as partnerships.

If a dental practice does operate as a limited company, then it’s important to think about what would happen to the company if one of its owners were to die. It might be appropriate to take out insurance to ensure that the company can buy the deceased’s stake at a fair value. This can avoid issues with company ownership falling into unsuitable hands.

Exiting a business

At some point, the owner(s) of a business will inevitably move on from it. When that happens, the business needs to be either transferred to a new owner or wound up. A specialist dental accountant will be able to talk you through your options. When you’ve decided what you want, they can guide you through the process of making it happen.

Managing your business

Specialist dental accountants can do a great deal to help with the everyday practicalities of running a dental practice. Enlisting their help can not only improve your cash flow but also boost your overall profitability (and make your life easier). Here are some of the main ways they can help.

Dealing with payroll

Using a specialist dental accountant to handle payroll is an easy way to ensure that you stay on the right side of all relevant bodies, especially HMRC. Dental accountants can also supervise payments to freelancers.

Taking care of tax

Tax for dental practices is notoriously complicated. Managing VAT is particularly challenging. Under current rules, essential treatment is VAT-free but cosmetic treatments are subject to VAT. Many procedures can be either essential or cosmetic depending on the circumstances. It’s therefore vital to stay on top of this to avoid unpleasant dealings with HMRC.

It’s also vital to stay informed about upcoming changes to financial laws, especially tax laws. Again, a specialist dental accountant is well-placed to do this and guide practices accordingly.

Management reporting and benchmarking

Specialist dental accountants will be members of the National Association of Specialist Dental Accountants and Lawyers (NASDAL). As such, they will have access to the results of the NASDAL annual profit and loss survey. They can use this data to benchmark your dental practice against the national standard.

This can provide a very useful basis for examining your financial performance and identifying its strengths and weaknesses. Of course, national standards, by definition, are broad. This means that they often need to be examined further and fine-tuned to be applied to specific situations. Again, a specialist dental accountant will be able to help with this.