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Selecting and Working With An Accountant

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As I begin my journey of becoming an associate and eventually buying out a private practice office, I am realizing that there is a lot of trust that is put into lawyers, accountants, and appraisers.  Specifically, I am currently looking into selecting and working with an accountant.  First, finding an accountant is often by word of mouth referrals, or referrals from a banker and/or attorney.  Some questions to ask when interviewing accountants would be:  

 

    • What makes you different than other accountants?
     

 

    • Will you do any tax planning?
     

 

    • What’s the typical year look like if I was your client?

    An accountant’s timeline during the year begins around the end of September to review the numbers from the year. December 1st begins year-end planning, and by February 15th, they are preparing your tax return--which need to be submitted on April 15th.   

    So, what are all the roles of an accountant? He or she should be well versed in many areas including, but not limited to, bookkeeping, payroll, tax returns, personal property returns, and sales tax returns.  Each accountant can provide as many or as few services as you prefer.  Some dentists request that all the work be completed by an accountant; others want to be more hands-on in their practices and prefer accounts to address specific areas. An accountant is typically paid quarterly or monthly, which allows you as a client to manage cash flow easier, rather than paying an accountant one lump sum at the end of the year.  Remember that their goal is to provide more value than you as a client are paying.   

    One major area in which an accountant can help is coordinating both the practice and your personal financial goals.  Accountants will help with savings goals, cash planning, and how to efficiently take money out from the business for tax benefit purposes.   

    Accountants will also help you set up an entity for your practice.  Why create an entity?  This is the cheapest insurance you can buy; it will allow you to essentially separate your eggs into separate baskets. If the practice fails you will only lose the money invested, and creditors look to the assets owned by the entity to satisfy their debts.

    S-Corporations and LLC are the two most common types of entities in the dental field.  An S-Corporation provides limited liability and protection from being personally liable for debts, shareholders are required to pay their share of income tax on income (whether or not they received money), there is 100 person shareholder maximum, and the owner must take a salary. An LLC allows flexibility with income allocation, there isn’t much paperwork, and is cheaper to create. Additionally, a self-employment tax must be paid on profits of $400 or more in an LLC, there are no limits on shareholders, and few fringe benefits (such as group insurance, medical reimbursement plans, and medical insurance).   

    As dentists we will go through many phases of life, and our goals will constantly change.  This is where it is important to have an accountant step in and help achieve those goals.  When we start out as an associate, we are focused on production, then our goal moves to paying down debt and saving money in a retirement account. After an established lifestyle is created, we are concerned with helping our children and spouses for their futures, then we look towards retirement and transitioning our practice for resale value. Finally, an accountant can help you with estate planning.

    There are many advantages to working with an accountant who shares the same values as you.  Accountants have the awareness of how our business work, the ability to understand revenue structures, and the understanding of equipment and how it will produce revenue.  Finding and continuing a relationship with an accountant will be a key piece in your ability to be successful.