February 24, 2022Practice Management
4 Ways Dentists Make Cash Flow Mistakes
While you might have a handle on the dental side of things, the business side of running a dental practice can impose a lot of difficulties on many dentists. These difficulties can greatly hinder your ability to grow your practice and reach long-term goals.
One of the most common areas many dentists struggle with is managing their cash flow. But how can you fix that?
Well, here are 4 common cash flow mistakes that dentists make, and what to do about them:
1. Not Paying Your Taxes Correctly
This is not about tax evasions or ways to wiggle out of paying taxes. How the practice has to pay its taxes ties into how the practice is structured, such as a sole proprietorship or S-corps.
These types of entities have different formulas for paying taxes, and the wrong one can have massive implications for your cash flow. Start by reviewing your current business structure and see which types of tax payment you should be making, and which you are making currently.
2. Huge Overhead Costs
An efficient practice will usually have about half its costs in overhead, but if your percentage is a lot higher than that, then something is not running efficiently there. Huge overhead costs can slash your cash flow tremendously, so you need to be reviewing these costs to see if you might be spending your money on things your practice can do without.
3. Having Cash for Unforeseen Expenses
Dentists always want to improve their practice, and generally don’t think twice about acquiring that new piece of equipment that can offer their patients the best experience. The problem is, they usually want to make these purchases all at once.
But it’s important to ensure you always have money in your account for unforeseen expenses, like a piece of equipment you already have needing to be repaired.
4. Too Many "Cheap" Decisions
If you need to purchase a new piece of equipment for $40,000, you might pause and really think about if you are ready to invest. But smaller investments can add up fast, so if you’re spending thousands every month on whims, you are not managing your budget correctly, and your cash flow ultimately takes a hit.
How Can You Fix Your Cash Flow Problems?
Being business-savvy is not a quality dentists need to offer their patients the very best experience. But to run a dental practice, and a successful one at that, you need to give the business side of things a lot more thought, especially if you routinely bump into problems with your cash flow.
If you are looking for help with paying your taxes or handling your accounting needs, Jonathan VanHorn and his team are at your service.
To find out more, reach out to the Tooth & Coin team now!