Seasonal dips are commonplace in many industries, not least the dental industry. But the trick to staying steady throughout slower months, is to be consistent in tracking the right numbers, protecting cashflow, and making smart financial decisions.
With help from an accountant for dentists, your dental practice can use accurate data to maintain financial reports, reduce surprises, stay stable, and protect its financial health so that even quieter times of year feel manageable.
Here’s how to use financial planning to make seasonal dips more manageable:
Confirm your financial statements
Before an inevitable slowdown, check that your books are clean by reviewing your monthly profit and loss (P&L), balance sheet, cashflow, trends in collections, overhead expenses and any pending or upcoming obligations.
Review cashflow and not just profitability
If collections are lagging or expenses come early, even a profitable month can create cashflow problems. Custom reporting or trend dashboards can be used to help you identify your normal seasonal pattern.
Check for bottlenecks in collections and insurance
Collections are often what drive a practice’s financial security on a day-to-day basis, and before quieter periods, dentists should look at how fast revenue is turning into cash, and where claims are getting stuck. By aligning your practice management software with financial software and bookkeeping, you can gain a clearer picture of your financial ratios.
Build a 90-day forecast
It doesn’t need to be complex, but you do need to be able to make assumptions that are realistic based on the most up-to-date financial reporting. If your forecast shows a month predicted to be a little tight, be sure to evaluate your financing options ahead of time, make intentional adjustments to spending, or move the timing of discretionary projects.
Protect cash by aligning tax planning with seasonal projections
Forecasts and tax planning should always be closely intertwined; a slow month that coincides with a big tax bill can create stress that could easily have been avoided had you reviewed such things as payroll structure, year-to-date profit, expected annual taxable income, retirement account contributions, among others.
Planning keeps the finances of your practice in alignment with your household plan.
Evaluate big financial decisions
While buying new equipment, upgrading facilities, or investing in training can all support growth, it’s important to time them appropriately. During seasonal lows, assess such things as your current debt capacity, the value of your practice, and cash reserve requirements before making any major financial commitments. Then, sit down with your dental accountant and make some strategic plans.
Check internal controls
Slower months are an ideal time to check all of your internal controls and governance. With financial security, you can protect yourself better from issues such as unnoticed spending and missed filings. Never underestimate the importance of engaging with dental bookkeeping in Fort Lauderdale, as this can keep you compliant and help to prevent penalties and interest from incorrect tax filings.
Financial planning is the cornerstone of successful dentistry, and if you’re a dentist with your own practice, taking full advantage of the services offered by your accountant, tax expert and bookkeeper, can help make even the quieter months, feel more manageable. Remember that many firms specializing in the dental industry offer accounting, tax and bookkeeping services in one package, making it even easier to plan your finances, all year round.