Dental practice

Dental Office Credit Card Transactions: Three Mistakes to Avoid

Americans paid banks $110 billion in credit card interest and fees in 2018, up 13% from the $98 billion in interest paid in 2017, and up 45% over the last five years, as Fed rate increases have been passed on to consumers. Using credit cards to cover business expenses in the dental practice is common, online purchasing is increasing with credit cards being convenient (see our Sales/Use Tax blog), and small business finds business credits cards an ally to their cash flow – when used properly.

            I’ve had dentist clients, when they first joined my firm, initially recording the dental office expense deduction on the same date that they make payment on the credit card statement - which is incorrect. Per IRS regulation, the credit card charges are deductible when incurred. It makes sense to deduct it when you pay the credit card bill, but its incorrect as a cash-basis taxpayer. Think of it as a loan. You receive the deduction for the $50,000 laser when its purchased - not when the loan is paid off.

            There are three reasons a dental practice should monitor this credit card payment “roulette”.

First, your overhead analysis will never be correct.

Second, vendor payment analysis will never be correct.

Lastly, you may not be maximizing your tax benefits.

            Your business credit card cycle likely ends mid-month, on the 10th for example.  For every credit card charge after the 10th, that will likely be paid 45 days later. That charge will appear on the credit card cycle that ends 30 days, to be due 2-4 weeks after that. If you incorrectly recorded the deductions when the statement was paid, this would render any analysis of your overhead useless – particularly if those credit charges are growing.  Each individual transaction should be recorded and deducted on the same day. Someone once reminded me that 50% overhead is achieved by 10 basis points at a time, little by little, and you got to measure it to change it.

            Most of the time, I see similar transactions simply booked to one account.  All the marketing expenses (or dental supplies or meals & entertainment) will be lumped into one amount for all transactions on a credit card statement.  For example, there could be 5 different marketing companies composing the $3,000 of charges – website, SEO, local baseball team, Demandforce, on and on. The problem with this method is you cannot readily track how much you have paid a specific vendor and renders your marketing effectiveness analysis useless. How will you decide which marketing dollars are effective – per new patient - if you cannot track where the marketing money is going?

            Maybe you stocked up on supplies at year end, on December 20th for this illustration.  If your credit card cycle ends mid-month, those year-end extra expenses will not be recorded in books until late January or early February when the credit card statement is received and paid. This means you stocked up for those extra tax deductions at year end for zero real benefit.

            As the dental industry is rapidly changing and consolidating, it’s moving towards more large organizations paying close attention to reducing operational cost and efficiency. The independent practice owner must pay attention to all the financial “little things” more than ever to maintain their own efficiency and practice success.


Gotcha! Sales and Use Tax in the Dental Office

It’s tax season. We are reminded of the depths to which tax permeates our lives. In addition to Federal & State income taxes, consumers pay taxes on air transportation, cigarettes, driving, hunting, fishing, food & beverage, gasoline, inheritance, libraries, liquor, marriage, real estate, passports, and utilities, and on and on.  As a business owner, there is another can of tax worms we open - corporate, personal property, payroll, and business registration taxes are a few examples.  One tax that has been the focus in the dental practice over the past few years, as internet sales have risen, is the sales & use tax

What is Sales & Use Tax?

When you purchase an item for the practice - let’s say a new pair of loupes - from your favorite local distributor, you will pay the local sales tax that is roughly 4-7%, depending on your state (you may also be required to pay city sales tax).  What if you found a great deal on the internet for those loupes from a company in Florida?  That manufacture will likely not be required to charge you the sales tax because they do not have a “physical presence” in your state.  Now the responsibility to report these non-taxed transactions lies on your shoulders as the owner of your dental practice.  This is the “Use Tax”. 

How do I comply?

Your practice is required to file monthly, quarterly, or annually the form to report your Use Tax transactions.  You will report the total of purchases which sales tax was not paid - and pay the tax.  We recommend you review all invoices/statements from vendors to determine who isn’t charging you the appropriate sales tax.  Then, call them to request they start charging you sales tax - this will shift the compliance burden to your vendors.  If they will not or are not required to, you must track the transactions & report to your state/city to pay the use taxes.

Why is this a big deal?

States are looking at all avenues to collect more money as they struggle to keep their budgets afloat.  This Sales and Use tax is “low hanging fruit” - a pretty easy target for them to pick on as internet sales have skyrocketed and most dentists aren’t aware they must pay this tax.

I understand this is an area of opportunity to save some significant cash and the financial impact to your practice depends on how much you order over the internet.  Let’s take just dental supplies for example.  For a $1mm practice with a generous 8% supply budget, that is $80,000 of dental supplies with $5,600 sales tax at a 7% sales tax rate. 

With over hundreds of thousands of practicing dental owners nationally, you can understand why each state is interested in collecting as much sales & use tax revenue as they can from the dental industry. Pay attention to this and include it in your quarterly review with your CPA. If you are not getting monthly reconciliation of your bookkeeping and proactive reporting on your dental practice performance, consider a dental specific CPA – it could make all the difference.

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For your own “accounting checkup”, visit Crossroads Tax Advisors to determine how a dental CPA might impact your dental practice. To get started with the Crossroads Tax Advisors online consultation – a custom evaluation of your own practice opportunities - click here -  How would a Dental CPA impact your practice?

The Devil is in the Details: Properly Categorize Dental Practice Expenses

Your dental office Profit and Loss should be “hyper categorized” to quickly identify and benchmark expenses and determine if they are in line with your expectations for overhead. Let’s assume that “dental supplies” are 6% of revenue on the profit/loss, for example. However, with further scrutiny, this category should not include repairs, office supplies, e-services, small equipment, etc. that could easily be purchased from the same distributor (Henry Schein for example) and lumped into “supplies”.  Managing this properly, one percentage point at a time, is how smart independent dental owners achieve efficient overhead.

            There is another reason to make sure every expense is highly detailed. As you prepare to transition your practice, this detail becomes very important. Every dentist will transition: sell to another independent dentist, sell to a DSO, close the doors, join a group, etc. In preparation for ANY of these scenarios, you will likely obtain a practice valuation. This valuation can vary greatly in its conclusion and appearance from broker to broker, CPA to CPA. All of them, however, will begin with an “adjustment profit and loss”.

            When preparing for a valuation, the expenses in the practice profit and loss will be adjusted by the banker, broker, or accountant to reflect only those expenses necessary to run the daily business and not those expenses that are an “owner benefit”. In other words, it is perfectly acceptable for a business owner to have expenses they incur as an owner that are recognized as a tax deduction: auto expense, phone expense, certain insurance, retirement plans, etc. Many of these expenses are not pertinent to the daily operation, rather they are a benefit to the owner. If you remove the owner and replace them with another that does not elect these benefits, those expenses are “added back” to the net income and increase the value as a result.

            Tax Returns will combine these categories by their nature which is why most banks will require the profit and loss for more detail. Most of the P&L that I’ve reviewed STILL don’t have enough detail:


Insurance:  $8, 600


rather than           


disability insurance:                                 $2,400         

workers comp insurance                        $1,600

business overhead insurance               $   800

health insurance for owner                   $3,800


                                  In this example, the insurance for “health insurance owner” could be adjusted out with the assumption that a new owner would not be required to obtain this as an expense to run the daily business. If the detail is not provided, these add backs are not recognized by the reviewer/preparer.

                                  If you don’t have a dynamite “chart of accounts” and your CPA is not paying attention to the devil in the details, check out a dental CPA as you prepare for your transition as it could make all the difference.

It’s Deductible! Meals, Entertainment, and the Dental Office

I attended a Super Bowl party and was talking with a new dental practice owner.  She is about three weeks into dental practice ownership, so we were talking about business in general over a bowl of chips and buffalo chicken dip.

I looked around the room as she mentioned that there were a bunch of neighbors, existing patients, and potential patients at the party. We started talking about good dental accounting and I asked if she was deducting her meal and drinks as a business deduction.  She was hesitant, wasn’t sure how to answer, so we dug into that a bit while I informed her it was a legitimate business expense - but it’s changing.

Let’s take a look at the IRS definition of meals deducted at 50% for business purposes:  Taxpayers may continue to deduct 50 percent of the cost of business meals if the taxpayer (or an employee of the taxpayer) is present and the food or beverages are not considered “lavish or extravagant.” The buffalo chicken dip was good but certainly not lavish.  The meals may be provided to a current or potential business customer, client, consultant, or similar business contact.

Food and beverages that are provided during entertainment events will not be considered entertainment if purchased separately from the event. Remember, for 2018 and moving forward, a dental business cannot deduct the cost to entertain business colleagues, customers, or potential customers.  Only the meals can be addressed now.

As one of her neighbors cozied up to us, complaining about the Rams offense, I told her that I definitely recommend keeping the receipts for all business expenses and I have a very cool method to capture, store, and share those instantly with modern technology. It’s the little things you improve in a practice that make all the difference in profit and efficiency over time. Take a minute to brush up on new tax laws and make sure your dental office accounting is up to speed.

Why your Dental CPA is Wandering Around the Windy City

For the 154th time, the Chicago Dental Society has hosted a fabulous dental industry meeting in my sister city of Chicago. I make the trek north every year and pound the exhibitors and speakers at the Chicago Midwinter Dental Convention for good dental information for my clients. In the very least, I want to be the most educated dental CPA around, so I attended the convention and learned a ton.  The meeting had 28,924 registered attendees and nearly 7,000 dentists falling into the city for the weekend.  It’s the CDS annual meeting and known as the BIG meeting in the Midwest - always count on it to be cold or snowy.

      I just got back to the office and wanted to share the highlights I reflected on while driving back down I-65 towards Indianapolis.   I was astounded by the number of exhibitors - more than the number of attending dentists, I’m told. I put myself in the shoes of the dentist and feel overwhelmed. I’m reminded of how difficult it is to be a business owner with so many decisions and choices to make in the dental office. The modern dentist wears so many hats: clinician, leader, businessperson, coach, counselor, and on.  The dentist must deal issues around staffing, technology, leadership, marketing, patient satisfaction. Three things jumped out at me from this convention.

1.    Technology – not the cool equipment, I’ll get to that. I mean the management and movement of data. Information is being traded in the cloud, security is more important than ever, and real time advice is being demanded by the dentist to run their practice. Cloud technology and companies that are aggregating data are changing the game. They allow dentists and their advisors to have information on the dental practice at their fingertips and measured in a way that is useful. Dental software is becoming much more robust and powerful.

2.    Banking – seems to be more dental lenders out there than ever. There are really good “dental specific” lenders that understand the dental practice. Interest rates are still low and the conventional loan options for dentists are plentiful. Ask about loans for refinancing old debt or commercial real estate. These “dental specific” banks understand your business and build their loans to help you grow.

3.    Hi Tech Equipment – Specifically, CAD CAM and Cone Beam x ray seem to dominate the convention with cool images and flat screens everywhere. The price is coming down on these items and the tech is getting better fast. Some of the three-dimensional printing technology is exciting – to allow the dentist to design and create night guards, aligners, surgical guides in -office. 

Look for a future article on the ROI of Cone Beam and CAD/CAM. We get calls every day from dentists that want a third party, independent opinion on the viability of some of this technology. We’ll dive into that topic in the coming weeks.

I’m excited about 2019 and the Chicago Midwinter Dental Meeting was a reminder to me that many dentists are on an island by themselves. Find a partner, with your best interest at heart, to help you navigate all the business decisions that arise in your dental practice. It could make all the difference.

#dentalcoaching #dentalcoach #training #chicagodentalsociety #midwintermeeting #education #ce #dental #dental practice #dso #dentists

It’s that time of year again !!!

I’m not talking about Valentine’s Day or basketball’s March Madness right around the corner. I’m talking tax season. If you’re an independent business owner - particularly a dentist - you might be wringing your hands again, dreading another year of tax prep and wondering if this year will be different. I’ve worked in the business of dentistry for over 20+ years and I hear the same questions over and over . . .

my cash flow seems ‘lumpy’ and I can’t put my finger on it. will I have another year-end tax surprise?”


I feel like my practice is moving more quickly than I can keep up – my profit and loss is always a few months old. How can I make changes in the dental practice with revisionist history?”


I feel like I’m on an island by myself, how can I get accounting partner that will give me pro-active advice?”

If you work with a traditional CPA, then you are required to fit into the systems and processes that they created for ALL kinds of business owners and hope it works out for you.  

What if you worked with a CPA firm that was built from scratch for dentists?

Implementing smart technology in any business allows for efficiency. When you’re efficient in the accounting world, that equals speed. In the dental business model, speed transfers into better business awareness, profit, and activity that is forward-moving . . . not revisionist.

 For example, examine the management of practice expenses. New technology is providing a lot of options for your receipt, statement, & invoice storage systems. Traditionally, a dental office would keep a receipt box or manila folder to gather expense receipts and deal with them month-end or a later date.  Maybe you have an online storage system; however, it isn’t connected to your Quickbooks. 

What if there was a way to keep digital copy attached to the transaction in Quickbooks and have all the details aggregated automatically? 

I recommend a “digital document management system” at your fingertips. Use the Receipt Bank application on your phone. You and/or your Office Manager will simply take a picture of the business receipts wherever & whenever you incur a business expense. Artificial Intelligence will automatically categorize these transactions and remember them. Your scanned checks and card payments are connected as well.  In the event of an audit, you have a perfect bank of receipts at your fingertips and you just snapped a picture and moved on. These expenses are automatically connected to your Quickbooks and the CPA team seamlessly reviews the downloads in real time.

Utilizing a modern expense-management system is only one step towards better efficiency – resulting in more timely and accurate bookkeeping. The benefit to your practice is a monthly reconciliation of your Profit and Loss. Now you can act upon opportunities and challenges revealed in your practice with your CPA. You can benefit from pro-active advice instead of feeling like your driving while looking in the rear-view mirror.

It’s that time of year again, will this one be different for you?

Put Crossroads Tax Advisors to the test and schedule an online Consultation to give your dental practice the “checkup” it deserves.

Click here to get started:


Cybercrime Uses Social Engineering Techniques to Steal Employee Credentials and Commit Payroll Diversion - Dental Practices, Pay Attention !!!

Cybersecurity should be high on your priority list with all the cyber criminals out there. We know that you don’t want one more thing to worry about as a dental practice owner. However, if you don’t pay attention to it now - it’s going to cause much more of headache down the road.


Cybercriminals target employees through phishing emails designed to capture an employee’s login credentials. Once the cybercriminal has obtained an employee’s credentials, the credentials are used to access the employee’s payroll account in order to change their bank account information.

Rules are added by the cybercriminal to the employee’s account preventing the employee from receiving alerts regarding direct deposit changes. Direct deposits are then changed and redirected to an account controlled by the cybercriminal, which is often a prepaid card.


The FBI has 9 suggested mitigations for scams like this, starting with:

  1. Alert and educate your workforce about this scheme, including preventative strategies and appropriate reactive measures should a breach occur.

  2. Instruct employees to hover their cursor over hyperlinks included in emails they receive to view the actual URL. Ensure the URL is actually related to or associated with the company it purports to be from.

  3. Instruct employees to refrain from supplying log-in credentials or personally identifying information in response to any email.

  4. Direct employees to forward suspicious requests for personal information to the information technology or human resources department.

  5. Ensure that log-in credentials used for payroll purposes differ from those used for other purposes, such as employee surveys.

  6. Apply heightened scrutiny to bank information initiated by employees seeking to update or change direct deposit credentials.

  7. Monitor employee logins that occur outside normal business hours.

  8. Restrict access to the Internet on systems handling sensitive information or implement two-factor authentication for access to sensitive systems and information.

  9. Only allow required processes to run on systems handling sensitive information.

A School Scholarship Tax Credit

School Scholarship Tax Credit For Indiana Residents

The new tax law made effective for 2018, The Tax Cuts and Jobs Act (TCJA), has a number of ways it may impact your tax return for this year.  For example, you may not itemize on your tax return this year.  The standard deduction for a married filing jointly couple has risen to $24,000 and a large component of the itemized deductions may not benefit you as much as you think.  

The deduction for all state taxes paid will be limited to $10,000 (ie state income taxes, real estate taxes, personal property taxes, & general sales tax).  If you are in this situation, we have discovered another way to donate to your favorite school for a 50% state tax credit!  This helps fund participating schools & churches and ultimately gets you a state tax credit (which you may not get any tax benefit without filing a Schedule A this year).  

Indiana limits the tax credit to $14 million dollars (so $28 million of donations) in their fiscal year (July 1, 2018 - June 30, 2019) but you must donate before year end to claim on your 2018 tax return.  


Here is a link to the Indiana website explaining the School Scholarship Credit more: 

and here is a link to the list of participating schools:

Article for Progressive Dentist

Aren’t all CPA’s the same? No - & here is why

Certified Public Accountants are everywhere. You can find excellent, well-qualified CPAs in your church, through your kids’ schools, or even hanging out in your neighborhood. You can call them up by the dozen on Google. Maybe you already work with one.

But if you don’t hire a CPA who specializes in the dental industry, you probably won’t get the best possible results.

Your CPA should never just be the “guy who does your taxes.” He or she should be someone you chat with several times a year to make sure you’re doing what’s best for your practice—especially when you’re considering a big decision.

You need that person to know dentistry—not just numbers. Nothing against your neighbor or your current CPA. They just don’t know dentistry like a dental CPA, so they can’t ask the questions—and deliver the answers—that make your practice as profitable as it can be.

Meaningful Questions

Sharing your practice’s financial statements with a typical CPA is like showing x-rays to a patient. They understand what they’re looking at, but they don’t have the in- depth knowledge to gain real insight or make the most effective recommendations.

For example, I was recently looking over a profit-and-loss statement from a prospective client I’ll call Jeff. His practice showed about $800,000 production, but only $10,000 in lab fees—very low for his production level, and a sign that he’s not doing enough complicated, higher-margin work. By the way - his old accountant praised him for lowering his overhead last year with reduced lab fees.

Asking him about his lab fees sparked a meaningful discussion that included lots more questions from me: Do you and/or your staff need help with selling skills? Do you use an intra-oral camera? It’s not just a diagnostic tool—it’s a sales tool, because it’s easier to discuss procedures when the patient can actually see what you’re talking about.

Can your patients afford more advanced dentistry? Do you offer alternative financing options? How do your patients pay? Is there room for savings on merchant card fees?

A typical CPA might not even know alternative financing was available for dentists, and would almost certainly know nothing about intra-oral cameras. When your trusted advisor has some idea of the common struggles in your industry, he or she can ask better questions—and give you better advice.

How can a CPA make a recommendation on an equipment purchase if he doesn’t know the difference between loupes and a handpiece?

Knowledgeable Conversations

Here’s another example. A client I’ll call Susan called the other day to run an idea past me: Should she spend $50,000 to build out another operatory? A typical CPA might ask her how much revenue the new chair would generate, weigh that number against the investment, figure in the depreciation on the buildout and the equipment, and advise her to go ahead. After all, it should pay for itself within a few years.

But a typical CPA might not recognize that the real question wasn’t about revenue at all—it was about Susan’s ability to make more effective use of her available resources.

Here’s the rest of the story: Susan’s hygiene was booked out eight weeks, so she figured she needed another hygiene chair to clear some room on the schedule, alleviate overtime, and increase production. But I knew she already had four chairs— one hygiene, two operatories and one overflow—and that she complained about feeling overworked. So I asked her how often she used the overflow chair, and she said about 25% of the week.

I said, “Why do you want to spend all that money, when you already have a chair available?”

Instead, I recommended that Susan hire a part-time hygienist to work the overflow chair two days a week. If her business continues to grow, she can make it full-time & revisit the buildout. Meanwhile, she can see how she handles the workload of checking one more hygiene chair, while she’s generating more revenue—without spending $50,000.

That’s the kind of knowledgeable conversation I have with dentists every week. How could a typical CPA, without a deep understanding of the business of dentistry, make the right recommendation?

Buying a Dental Practice?

The most critical time to consult with a dental CPA is when you’re buying a practice. While a typical CPA will give smart advice and help you avoid obvious pitfalls, only a dental CPA can analyze the current practice thoroughly enough to make sure you’re paying the right price for the right practice.

Let’s start with the basics. Any good CPA will take the practice’s net income, make adjustments for owners’ compensation, owner insurances, and discretionary expenses, and multiply by 2.5 to get a ballpark purchase price. He or she may even know that a rule of thumb for purchasing a dental practice is to pay 65% of the previous year’s gross revenue. For example, take a practice with:

$1,000,000 gross revenue - 74% overhead = $260,000 net income $260,000 x 2.5 = $650,000 $1,000,000 x 65% = $650,000

You get the same number. So who needs a dental CPA?

Who Needs a Dental CPA?

You do—if you don’t want to overpay or buy a practice that doesn’t fit your desires. Your typical CPA won’t know to ask about all these variables:

Why is the overhead so high? I usually look for something closer to 60% for a general dental practice.

Is the current dentist overpaying his staff? Should you ask him to let someone go before you buy the practice?

What kind of practice is it, really? Is there a balanced mix of hygiene and treatment, or is it more of a “prophy machine,” with all hygiene and little advanced treatment? There is nothing wrong with that business model, but is that what you want to purchase?

Is the location ideal? Does the practice location provide greater visibility to the public? Is it in a desirable area for the type of patient you want to attract?

Is the existing staff a good fit for you? What if you’re a relatively young doctor, but the staff are all approaching retirement?

What are the patient demographics? Older or younger? With kids or without? Are they affluent enough to pay for higher-margin procedures? Do they have dental insurance?

Does the patient count make sense, considering the other practice data? An active patient is defined as a patient that has had treatment or hygiene within the last 18-24 months. Does the patient count make sense with the number of days worked, product mix, and practice production?

A dental CPA, taking all the above into account, would caution you against paying $650,000 for this practice. Its high overhead and low visibility location suggests that a lower multiple would be appropriate.

A dental CPA would also know how to gauge the practice’s growth potential, based on questions about your skills relative to the current procedure mix:

Can you keep pace with a $1 million practice? Are you comfortable checking two or three hygiene chairs and keep one or two operatories going?

Do you have the expertise to replicate the current dentist’s procedure mix? Does selling dentist place 40 crowns a month? Do they use a Cerec or E4D machine? Do they do soft tissue, laser and other minor endodontic procedures?

Can you add to the procedure mix? Or will you have to refer out procedures such as implants, Invisalign®, or endodontic and periodontal work?

Only a dental CPA can analyze the current practice—and assess it against your skills and experience—to derive the most accurate purchase price.

There are lots of great CPAs, but when you’re making major decisions about your career and your practice, you’ll want a CPA who knows dentistry nearly as well as you do. Have a neighbor who’s a CPA? Share a friendly beer—but share your business questions with a dental CPA.