Payroll

80% of dentists are likely to be embezzled and their CPA can't stop it.

David Harris has one of the most interesting jobs in the dental biz. He is an expert at stealing from Dentists.

Let me repeat that . . . David is an expert at stealing from dental practices.

David is CEO of Prosperident, a forensic accounting firm that detects fraud and embezzlement.

We asked him about one of the biggest problems in the industry and why it is so difficult to solve. Dental office embezzlement will strike nearly 80% of dentists in their career, according to the ADA and most will never discover it.

We met David at an industry meeting for dental business advisors and we recall proudly spouting off about our company, Crossroads Tax Advisors, and how we built the firm from scratch for dentists, use cutting edge technology and security, and put systems in place for dentists that are rock solid - likely making it difficult to steal from OUR dental clients.

David smiled and quietly said, "Steve, if someone wants to steal from a dentist, the greatest dental accounting firm can't stop it." I was floored and we talked some more about that . . .

David revealed that the core issue is the separation of the software:  bookkeeping software like Quickbooks and Practice Management software like Dentrix, etc. don't talk to each other.

One simple solution that a dentist can take is to reconcile merchant serv. (credit card transactions), third party financing (Care Credit), and bank statements TO their PM software each month.

In the very least, this provides a check and balance between the two.

If a dentist really thinks they are being embezzled, check out David's website www.Prosperident.com and take the survey to determine your "embezzlement score" and find out if you are at risk.  

As always, if you aren't working with a good dental CPA, put yours to the test with the Dental CPA Checkup at www.crossroadstax.com 

Dentistry at warp speed? Learn how to slow down and produce more

Dentistry at warp speed? Learn how to slow down and produce more

In dentistry, better can be less. Sounds weird just saying it. Better can be less. We are in a dental industry that often rewards “more” and views a tireless drive as success.

We strive for more patients, more collections, hard charging growth, more profit, more efficient technology, etc.

 Don’t get me wrong, there is nothing wrong with progress but when a dentist in a successful practice feels flat worn out and unsatisfied by Tuesday, well, then we have a problem.

I want to introduce you to a long-time friend Larry Guzzardo, dental practice management consultants and expert teacher and communicator. Larry has been helping dentists for years learn how to slow down and be happy.

I asked Larry to join us to share a specific solution for a problem.

The problem is that some dentists watching this might feel frustrated and tired, feeling like you are on roller skates going operatory to operatory in a rush, exhausted by the end of the day.  

 Larry teaches how to slow down, spend more time with the patient, be more deliberate, and more productive at the same time.

If you want to make changes with your team, contact Larry Guzzardo through this posting link or go to his website www.larrymguzzardo.com.

He’s intuitive enough to benefit your practice even with a phone call. 

If your dental practice accountant is not proactive and isn’t helping you daily with your practice goals, consider the Dental CPA Checkup and put your CPA to the test

 

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?”

Or  

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?”

 Or

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:
http://bit.ly/schedule-your-appointment-with-crossroads

 

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.

METHODOLOGIES

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.

RECOMMENDATIONS

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:
https://www.in.gov/dor/4305.htm 

and here is a link to the list of participating schools:
 https://www.doe.in.gov/sites/default/files/choice/18-sgo-participating-schools-june-2018.pdf