5 Critical Tasks Dentists Often Forget
June 23, 2022
At a glance
- Don’t miss the details: Many dentists don’t know they need to prioritize certain business-specific tasks because they are so focused on providing patient care.
- Impact on your practice: If you overlook key items like sales tax compliance, payroll taxes or updating your employee handbook, you could subject your business to unnecessary risks.
- Next steps: Cover all your bases to avoid tax exposure and partner with a qualified business advisory and accounting team that knows the dental industry.
Schedule a consultation with Aprio today!
The full story:
From learning new techniques to adopting new tools to facilitate care, you know what it takes to run the clinical side of your dental practice. After all, you have spent years studying and honing your craft so you can provide your patients with the best possible dental treatment.
However, there are several business-specific aspects of your practice that could slip under the radar while you’re focused on patient care. If you miss them, you could end up paying a hefty price in the form of higher tax bills, regulatory fines, lost profits or even employee complaints. Here are five of the most critical tasks and business components dentists often miss.
1. Understanding sales and use tax obligations
Sales and use tax obligations are among the many responsibilities and costs that often catch new dentists by surprise. The regulations and laws surrounding sales and use taxes differ from state to state (even from county to county), and the rate at which a product is taxed depends on what it is and what purpose it serves. For instance, if you provide your patient with a prescription toothpaste, it likely will not be subject to sales and use tax since it’s serving a medical purpose. However, if you sell a patient an electric toothbrush that they could easily purchase from Amazon, then you must charge your patient sales tax on that item.
We often see sales tax issues when dentists purchase medical and practice-oriented supplies from vendors. It may come as a surprise, but many vendors in the online marketplace do not charge their customers sales tax appropriately. This can become especially murky if you are purchasing from a vendor that does not have a physical location in your state.
Let’s say that you practice in North Carolina but purchase a batch of new equipment from an online supplier based out of Washington. The vendor will ship the supplies to your location, but if they do not have a physical location in your state, they may not charge you the appropriate sales tax — and you’ll need to self-assess use tax on the purchase.
To avoid sales and use tax slip-ups, make sure you have a grasp on what kind of supplies and equipment in your office are subject to tax. Be sure to charge sales taxes on any tangible property sales you make. Review your invoices, statements and receipts with a fine-tooth comb to find line items indicating sales tax was applied. If you don’t see sales tax added to your equipment, you may need to self-assess your own use tax on the purchase and report it to the state. It’s also essential to enlist the help of a qualified dental advisor with experience and knowledge of state and local tax regulations so you don’t miss any hidden costs.
2. Updating your yearly privilege license
As a dentist, you already know that you must keep your professional license up to date to practice dentistry in your state. But did you know that you also need to update your privilege license (which permits you to do business in your state) on a yearly basis?
If you don’t update your privilege license annually, you can expect to receive a notice and a fine from your state, which could cause a costly disruption in the flow of your practice. If you need help reapplying for your license or navigating the process, enlist the help of your dental advisor, who can also provide you with the most pertinent, state-specific information.
3. Separating your business and personal expenses
From a reporting and recordkeeping perspective, it is essential to keep your personal and business expenses separate; this practice ensures that all of the appropriate items make it to your tax return as deductions. Separating your expenses also allows you to develop a clear financial picture of the business you are building, which can be helpful as you make long-term growth decisions. Plus, when it comes time for you to make a major business transition — for instance, if you sell your business to start retirement — then future buyers will have a clear expectation of what they’re paying for.
4. Facilitating proper payroll accounting
Payroll is much more complex than simply paying your employees’ wages. You also need to ensure that you are filing your payroll taxes in a timely manner and handling complex employment arrangements appropriately (including paying 1099 contractors) so you don’t make mistakes. If you make just one wrong move when filing your payroll taxes, you put your business at risk of being audited by the state for employment compliance.
We recommend that our dental clients partner with experienced, tech-driven payroll providers to reduce the risk of errors. Many of today’s most reputable providers use platforms like Gusto to streamline the payroll accounting process and help ensure regulatory compliance.
5. Updating your employee handbook
It is critical for you to develop and maintain an updated, compliant employee handbook that accurately reflects your standards for employee conduct, your employee benefits program, policies and procedures, and practice rules.
If you acquire or assume ownership over an existing dental practice, then having an updated handbook becomes even more pivotal. In the past, we have seen new dental practice owners accept whatever handbook the previous owner had put into place without truly reading or dissecting it for updates. This could open up your practice to a host of new issues and miscommunication among employees.
Partner with a human resources consultant or dental business advisory team to either develop a new handbook or amend the existing handbook so that it accurately reflects the appropriate expectations under your new ownership. If you are adopting new rules and procedures (for example, a new paid time off policy), then put a reasonable transition and communication plan in place to ensure employees understand and are equipped to navigate the changes.
Even if your practice is a startup and you’re developing a handbook for the first time, it’s still wise to partner with a knowledgeable team so you can adapt your handbook to industry standards and ensure it properly communicates expectations.
The bottom line
With the right team in your corner, you can minimize liabilities and maximize the value of your dental practice over the long term. Aprio’s National Dental Practice provides the financial insights, industry knowledge and strategic planning expertise that you need to achieve profitable growth.
Schedule a consultation with us today.