Running the clinical side of a dental practice involves mastering new techniques and implementing new tools and technology to deliver top-notch patient care. The downside is that while you are busy focusing on your patients, you may inadvertently overlook critical business functions that could result in lost profits, compliance issues, or tax fines.
Here are the top five crucial business tasks that dentists often miss:
1. Sales and Use Tax Obligations
Sales and use taxes can be surprisingly complex and vary by state and even county, applying to items as minute as toothpaste or toothbrushes. For instance, prescription toothpaste may be exempt from sales tax due to its medical purpose, while an electric toothbrush directly purchased by a patient may be taxable.
Online dental supply purchases can often seem enticing but can sometimes be presented with the absence of sales tax. Be careful when online deals occur which may appear to be discounted but the seller is not charging sales tax to further entice you. You are ultimately responsible for paying sales tax – either when you buy it or declaring on your tax return at a later time. If you are to omit paying the tax and are audited, the taxing jurisdiction will determine the amount for you. With companies like Patterson, they help ensure you are not omitting this critical tax compliance process.
To avoid making costly sales and use tax missteps, ensure at the time of purchase that the appropriate tax is assessed. Make sure you charge patients the correct sales tax on products sold at your practice. It is wise to consult with a dental advisor knowledgeable about state and local tax regulations to avoid hidden surprises.
2. Yearly Privilege License Lapse
When they are inundated with appointments, procedures, and patient needs, many dentists often forget to update their yearly privilege licenses. These documents allow practices to operate their business in their state. Failing to update this annually can result in fines and critical, costly business disruptions. If you need assistance with the renewal process, a dental advisor can provide valuable guidance and state-specific information.
3. Business and Personal Expense Separation
This is a common bad habit among many small business owners — not just dental practices. It is vital to keep your personal and business expenses separate for accurate financial reporting and recordkeeping. This exercise not only ensures that you take the proper tax deductions, but it also provides a clear financial picture of your business, which can help you facilitate long-term financial planning. Additionally, if you hope to sell your practice in the future, potential buyers will want to see a transparent record of your practice’s financials sans your personal expenses.
4. Proper Payroll Accounting
Managing payroll goes beyond paying wages to your employees; it should also include timely payroll tax filing and proper accounting of unique employee arrangements, such as payments to 1099 contractors. Payroll accounting errors can expose your business to compliance issues and audits. To minimize risk, consider partnering with an experienced, tech-driven payroll provider that can streamline the process, minimize errors, and help ensure regulatory compliance.
5. Employee Handbook Updates
It is crucial to update your practice’s employee handbook on a regular basis, at least annually. Your employee handbook is your practice’s best tool for setting clear expectations regarding employee conduct, benefits, policies, and practice rules. If you acquire an existing practice, it is important to review and update the handbook to avoid issues stemming from outdated or mismatched policies. Consider teaming up with an HR consultant or dental business advisor to develop or revise your handbook to ensure it meets current industry standards and effectively communicates expectations.
By addressing these often-overlooked areas, you can minimize liabilities and enhance the long-term value of your dental practice. If you need help or are worried that your practice may be falling short in these areas, contact your Patterson territory representative, who can connect you with Aprio, our strategic dental business advisory and CPA partner.
