Dental Bookkeeping is not an easy task. It holds a lot of essential data and facts that help dentistry businesses in managing critical operations. A speck of mistake can cause a colossal blunder. Minor errors in bookkeeping produce a ripple effect in larger calculations of the finances. As a dentist, you know how to treat your patients, but bookkeeping is a foreign idea for you. Most dentists know very little about bookkeeping which creates issues regarding the management of the finances inefficient way.
Bookkeeping is a domain of dental practice accounting. That’s why it becomes necessary to gather an understanding of bookkeeping before stepping into this process. It is because a small mistake can cause you to lose a significant amount. Here, we will tell you the most crucial four errors that can cost you thousands if you don’t pay enough attention.
Not differentiating cash flow from profit.
The difference between cash flow and profit is significant to understand to avoid any issues further. Profit means the difference between expenses and revenues for a fixed period. While cash flow stands for money flow or liquidity. If we are talking about money availability, then it is about the cash flow that differs from profit number. Unfortunately, most bookkeepers don’t have enough information or knowledge to understand this difference. That’s why dentists don’t get a clear picture of the financial matters of the business.
The data entered in these books is also used as a base for several other critical decisions concerned with the business. An errorful foundation can only produce errorful builds. In such scenarios, dental CPA comes out as a great solution because they are experts in their field [accounting].
Incorrect stamps of time and date for transactions
All the transactions are done on a fixed date and time. This may not seem like a big thing, but all these time and date stamps also play an important role in classifying the whole scenario of bookkeeping. CPA for Dentists understands the value of closing books at every month-end as it marks the end of a specific calculative financial phase. But if the transactions are not mentioned in their respective time frame, they can alter the whole calculation of the accounts. The closing of books is concerned with reconciling different accounts. This further leads to the formation of reports and data for decision-making. The ending also mentions the termination of further transactions in that time frame.
Not incorporating industry-standard chart of account.
The expenses and garners of money are recorded in the chart of account. It is also used for calculating and presenting the final finance report. When we try to set up an accounting system, the formation of different accounts is needed. This should be done according to the standards of the dental industry. Most bookkeepers make a common mistake: to incorporate a general chart of accounts instead of standard levels. It can also cause the formation of the wrong chart of the account entirely. Now the same data will be used to prepare further financial reports. The effect of these financial reports is that the dentists don’t get the exact evaluation of the data and get a blurry idea about their practice growth. Professional accountants do not make such mistakes for dentists. The issue for drawing accurate results arises due to such errors leading to hazy decisions for the business.
Multiple entries for income and expenses
This is a common yet perilous mistake for any bookkeeping practice. If we mention the same income or expense multiple times in the accounts, it can ruin the whole calculation. Numerous mentions of income may cause an overstatement of net income, while multiple remarks of expenses may cause an understatement of net income. Mainly it occurs by recording the same check multiple times. This is primarily for the bills that have longer termination times. Similarly, numerous accounts receivables entries in case of delayed payment may occur. Such issues provide a hampered calculation and data for further practice.
Conclusion
If such mistakes are also hazing you, it is time to take severe steps to correct your dental practice accounting. It is because such errors can cause substantial material losses. Avoid multiple entries, use a standard chart of account, and take the assistance of a accountants for dentists to manage your finances effectively.
