Short Course on Businesses – What You Need To Know

A Guide to Bookkeeping and Accounting for Dentists Accounting is necessary to make informative business decisions and for tax purposes. The most commonly used methods are cash accounting and accrual accounting. Small businesses that generate under 5 million dollars in revenue each year, are eligible to elect either cash or accrual accounting methods. An online search on cash vs. accrual accounting will return many well-written articles by qualified CPAs, comparing the pros and cons of both methods. It can get confusing, as some accountants will advocate accrual accounting whereas others will make a strong case for cash accounting. Depending on the type of business you have, one method is certainly more advantageous than the other. Dental, medical, and other similar service type businesses should use cash accounting. If you have a basic bookkeeping software program at your fingertips, you probably won’t need a full-time bookkeeper’s assistance. As long as you are able to stay on top of recording all of your business’s expense and income transactions, you should be fine. Software programs can save you a lot of trouble, by providing monthly balance sheets and taking the pain out of tax preparation.
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Accrual accounting is far more complex and also results in higher business expenses due to requiring the services of an accounting professional. Accounts receivable and accounts payable entries require regular monitoring in order to accurately reflect a business’s finances. Medical and dental practices that take commonly used insurance have an inflated sense of accounts receivable. In other words, patients don’t always take care of their bills nor do insurance companies pay claims in a timely manner.
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The low reimbursement rates by insurance companies and relatively low patients collection can pose a real problem for dental and medical practices using the accrual accounting method. It becomes a huge problem when a small business is not prepared for a significant accounts receivable write off down the road. Although cash accrual accounting is preferred among small service-based, medical, and dental business owners, it doesn’t mean you can avoid having to pay a CPA entirely. Regardless, it’s important to keep things simple. Most small business owners use cash accounting for this purpose. Since cash accounting is not the end all be all and offers very little insight into income forecasting and expense cash flows, professional advice is highly recommended. Instead of hiring someone full-time, most small businesses choose to outsource their accounting and bookkeeping. Small businesses and dental practices should look for top-quality medical and dental bookkeeping professionals. Your financial records need to be looked after if you want your business to thrive.