Step-by-step Guide on How to Do Bookkeeping for Dental Clinics for USA Companies

Dental clinic with modern equipment for bookkeeping guide

Due to the complexity involved in increasingly elaborate dental practices, accurate and legal bookkeeping has never been more critical. According to the American Dental Association, the average revenue of a general private dental office was $218,710 in 2023. 

While significant income is good news, it threatens to be counterbalanced by heavier financial management responsibilities to protect profit levels and ensure lawfully compliant business practices supporting company growth.

This article provides a step-by-step manual for accounting for dental clinics in the US. We will delve into the particulars below.

Step 1: Understand Legal Bookkeeping Requirements for Dental Clinics

Understanding and consistently adhering to appropriate bookkeeping laws for dental practices at federal and state levels is essential. Failure to comply risks penalties, fines, or perhaps even unwelcome audits. A few legal requirements are as follows:

Protection of Data

HIPAA mandates secure protection of all patient records, such as financial details, against unauthorized access. This requirement also pertains to any accounting software utilized. 

Filing Out the Right Documents

The IRS necessitates detailed documentation of all earnings and expenditures for tax filings. 

  • Corporations must annually submit returns reporting income, deductions, and credits. 

  • Sole proprietors use Form 1040 (Schedule C), whereas firms use Form 1120. Form 941 tracks payroll taxes and withholdings. 

  • Independent contractor payments require Form 1099-MISC.

Finding Out Fiscal Rate Details

The federal rates ranging from 10% to 37% remain applicable for dental clinics. Additionally, states potentially impose extra rules. For example, California and Florida mandate sales tax on dental supplies. Beyond state charges, investigate local tax rates. At 9.56%, Louisiana has the highest combined state and local taxes in America.

Step 2: Setting Up a Bookkeeping System

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A robust bookkeeping system tailored specifically to the demands of a dental practice is essential. Here is how to establish it:

Choose Appropriate Software

Accounting programs made for dentistry, like QuickBooks for Healthcare or Dentrix, can simplify bookkeeping by automating numerous tasks. These platforms offer features, including patient billing, appointment scheduling, and inventory management, integrated with accounting functions.

Some critical capabilities to look for are as follows:

  • Data security compliance with HIPAA

  • Integration with practice administration software

  • Automated invoicing and payment tracking

  • Payroll processing

  • Tax preparation tools

Generate a Chart of Accounts

A COA is a comprehensive listing of every account used in the clinic’s bookkeeping system. This incorporates assets, liabilities, revenue, expenses, and equity. For dental clinics, your COA might contain categories such as:

  • Patient Revenue

  • Insurance Reimbursements

  • Salaries and Wages

  • Dental Supplies

  • Office Rent

Establish a Record-Keeping Process

Well-organized and accessible records are the foundation of compliant bookkeeping. All financial transactions should be documented, with receipts and invoices stored securely. Digital record-keeping is recommended, using cloud-based storage for easy access and security.

Step 3: Managing Payroll and Employee Benefits

Payroll is crucial for dental clinics and requires precise attention to nuance. Accurately managing payroll involves monitoring employee hours, determining remuneration, retaining taxes, and administering rewards.

Compensation Laws

Ensure observance of the Fair Labor Standards Act (FLSA), which mandates minimum pay and overtime compensation. It's also essential for dental clinics to comprehend specific state laws that could impact how personnel are reimbursed.

Employee Benefits

Besides wages, dental clinics regularly offer advantages such as medical care insurance, retirement plans, and continuing education stipends. Proper bookkeeping should include tracking these costs and ensuring they are accurately submitted.

Forms to Submit

  • Form W-2: Reports wages paid to employees and the taxes held from them.

  • Form 1095-C: Reporting healthcare advantages is provided for clinics with 50 or more employees.

Step 4: Tracking Accounts Receivable and Payable

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A dental clinic depends greatly on reimbursements from patients and their insurance carriers to finance the accounts receivable. Ensuring efficient administration of these accounts is indispensable to sustaining a steady cash flow.

Likewise, the clinic's accounts payable encompasses every debt still due, including amounts owed to suppliers, the landlord, and service providers. Missing deadlines for payment could result in financial penalties and hurt the clinic's credibility. 

Thus, routine reviews must be planned to guarantee prompt satisfaction of all liabilities. Periodic examinations of receivables and payables are necessary to manage cash flow vigilantly and maintain strong business relationships.

Step 5: Prepare for the Tax Season

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Tax season places dental practices under pressure to compile all financial data from the preceding year, guaranteeing accuracy and following IRS rules. Various deductions can lower what is owed, including the following:

  • Operational Costs: Rent, utilities, and equipment purchases.

  • Employee Expenses: Salaries, benefits, and training costs.

  • Marketing: Advertising and promotional expenditures.

Meeting tax filing deadlines is critical to avoiding penalties and remaining in good standing with the authorities. Corporations must submit Form 1120 by mid-March. Solo practitioners have until mid-April to submit Schedule C with Form 1040. Payroll taxes reported on Form 941 are due quarterly without exception. 

Step 6: Concentrate on Detailed Financial Reporting

Regular financial reporting delivers important perspectives into the clinic's operations and aids in pinpointing spaces for progress. 

  • Profit and loss statements outline a facility's earnings, expenditures, and costs over a specific timeframe, demonstrating if the practice is lucrative. 

  • Balance sheets furnish a snapshot of a clinic's current economic situation, cataloging resources, liabilities, and value. 

  • Cash flow declarations track the incoming and outgoing of money, assisting clinics in overseeing liquidity and planning for upcoming costs. 

Detailed reports regarding patient treatment patterns or medication usage trends can highlight areas to refine clinical protocols or better serve patient needs. By dissecting financials and operations analytics, management gains a sharp understanding of how to make wise fiscal choices and strategic changes that foster long-term sustainability and quality care.

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Running a dental practice in the US is not easy. Handling patients is already a heavy responsibility. On top of that, bookkeeping can be a burden. But don’t worry because you seek expert assistance. Handle the bookkeeping needs of your dental practice with the professionals at SamsCashFlow Agency helping you out. Visit https://www.samscashflow.com/#book and call the experts.