Greg Penfold is an accountant with Humphrey & Co., chartered accountants, business and tax advisers. He specialises in acting for dentists and is a member of the Association of Specialist Providers to Dentists( ASPD).
The ASPD has over 27 members in the UK offering professional services to dentists. The members include major banks, solicitors, accountants, financial advisers, practice valuers and sales agencies, insurance advisers and leasing and finance companies. Each ASPD member is well qualified within its own area of expertise to provide dentists with industry specific guidance or advice on every aspect of dental practice business.
Whether producing your annual accounts or carrying out a special exercise, being prepared will ensure the necessary ground work has been carried out when you receive the request to forward the books and records to your accountant.
You may also be able to help by preparing some of the routine schedules in house. This will mean the accountantâ€™s time (and fees) can be better spent advising you on your business.
I detail in this article some of the ways in which you can help your accountant when preparing for your year end.
Keeping them informed:
Your accountant will be better prepared if he or she knows about any changes within your practice which could affect the year end accounts and possibly your tax. Examples could include:
- refurbishing a surgery
- converting your NHS patient list to private
- business strategy e.g. adopting a practice plan
- changes to the record keeping system e.g. using a new piece of software
- key personnel changes
Better communication with your accountant will help to minimise misunderstandings and avoid unnecessary work at the year end.
Tax law stipulates that a self employed dentist must â€˜maintain and retainâ€™ their business records. Doing this will not only ensure you keep on the right side of the tax rules but will help your accountant to extract quickly and easily the information needed to prepare your practiceâ€™s financial statements.
Engaging a bookkeeper to maintain (i.e. collate, write up and process) your practiceâ€™s income and expenses either on a weekly or monthly basis will mean that your time is better spent running your practice rather than getting bogged down in the paperwork.
A bookkeeper will analyse your payments and receipts so that information can be easily extracted, for example obtaining year to date figures for the bank.
They will also file your invoices in a logical order (numerically, alphabetically or by payment date) to make it easier for you to find any one of them if needed.
A bookkeeper (or payroll bureau) will ensure that your employees pay and tax are dealt with in a timely fashion. There are penalties imposed by HM Revenue & Customs for missing deadlines for filing PAYE forms and paying over tax and National Insurance deducted from your employees.
It also follows that ensuring staff are paid correctly and on time will result in a happier work force.
By establishing and maintaining certain procedures you will be able to keep better control over your business.
Procedures may include:-
- how patient charges are collected and recorded through your accounting system
- the timing and method of paying lab fees and material suppliers
- maintaining a stock inventory
- the date and method of paying staff
It is important that you discuss the procedures with your accountant. He or she can then advise you if you are operating in the most efficient manner.
A dental practice should always carry a certain amount of stock. This will need to be counted at the year end date and the value (at cost) given to your accountant. To ensure that the stocktake is carried out efficiently and accurately you should consider the following points:
- stock items should be stored neatly and logically to make counting easier
- the member of staff involved in counting the stock should be given clear instructions
- try to minimise the movement of stock during the count. Where possible deliveries of materials should be kept separate until the stock take has finished
Unless you hold a large amount of stock at your practice it is unlikely that your accountant will need to attend the stocktake. For smaller practices a stocktake should take a matter of minutes rather than hours!.
There are a number of schedules which have to be produced in order that the accounts can be prepared. Your accountant can prepare all of these schedules but obviously if you were to produce some of them in-house it would save time and fees.
You may wish to consider the preparation of some of the following schedules:
- a detailed list of additions and disposals of dental and other equipment (assets) with a copy of the appropriate purchase or sale invoices attached
- schedules showing each item of stock held, the quantity, unit value and total value.
- a list of your patient debtors at the year end including how much they owe you and how long they have been outstanding. Indicate any which are unlikely to be paid (bad debts)
- a schedule of the petty cash balance at the year end, together with details of cash received from patients but not yet banked
- a list of creditors i.e. dental and other suppliers who have invoiced you at the year end but were not paid until after
Employ a Practice Manager
Employing a Practice Manager will undoubtedly help with all of the above. The BDPMA have produced an Advice Sheet stipulating the competences of a Dental Practice Manager.
Often a well run dental practice is not attributable to the principal who owns it but by the practice manager who runs it from day to day. A good practice manager is often worth their weight in gold in terms of financial management that is associated with any dental practice.
As a dentist your time is best spent practising dentistry, treating patients and keeping up to date with the latest techniques. Paying somebody else to do the paperwork will inevitably lead to a cost but the following time savings may well outweigh that cost:
- Paperwork is in better order for the accountant
- Time is freed up to attend courses and hone your clinical skills
- Day to day staff issues can be dealt with quickly without your involvement
By getting your accounting records and information to the accountant soon after your practiceâ€™s year end means they are able to pick up on any errors in your system so these can be rectified quickly. Of course they can also let you know your tax liability well in advance of the payment date. This can only be done, however if you are prepared!