We’re rounding up on the end of the financial year here in Australia, which means that businesses across the country are turning their attention to taxes. When we think about our dental practices as a vehicle for wealth creation, it’s important to ensure that you have all your ducks in a row. If you don’t have a comprehensive financial plan and an experienced advisor, you are likely paying too much in taxes and opening yourself up to future problems.
These are the most common accounting mistakes that dentists make – not only when tax time comes around, but all throughout the year.
You haven’t hired a bookkeeper and accountant.
There’s a great philosophy that can work in any area of business: do what you’re good at and pay others to do what they’re good at. Not only does then ensure that you maximise the time that you do have to bring the biggest benefit to your business, but you’re also ensuring that every other area is equally well managed.
Most people dread adding up long columns of numbers, balancing accounts, and the other tedium that comes with bookkeeping. Chances are, if you’re a dentist, your passion isn’t numbers. So if you’ve been staying up late to get the bookkeeping done, it’s time to put down the calculator.
You think bookkeepers and accountants are interchangeable.
The bookkeeper and the accountant both play a crucial role in your affairs. The bookkeeper is the details person. She tracks everything your doing. The account is the Big Ideas person who is in charge of the overall strategic direction of your business’s finances. Three big core ideas your accountant can counsel you in is tax effectiveness, risk reduction, and asset protection.
To have a comprehensive financial team in place, you’ll want to hire both a bookkeeper and an accountant.
Your protective structures are not in place.
When you set up a business, you’ve got to factor in the worst-case scenarios to everything you’re doing. Then set up everything around that. There needs to be a contingency plan in the event of death, divorce, or illness.
For example, quite a few businesses have two directors. You don’t need that. From an asset protection point of view, it is risky. It’s important to make sure that you have one person that effectively runs the business on paper. The other person sits back, does the work, and is considered an employee, and who is legally, on paper, not involved in running the business. That’s really important.
This matters because, for example, a lot of people potentially own their homes jointly. This puts the home at risk should the proverbial you-know-what hit the fan. Ensuring there’s a distinction between who runs the business and who owns the home and other assets is proactive risk reduction and asset protection.
You don’t have enough insurance.
In addition to structuring your business to minimise risk, it’s also important to have insurance for future problems. That includes life insurance, asset protection, business insurance. All the insurances. Depending on if you have an event that blindsides you, you need time to recover from that. Sometimes people don’t have time. Insurance can help offer a little breathing room because you have that safety net.
You don’t have the right legal protections.
Everyone should have a will, but when you’re running a business, it is especially important to ensure that the business and your family are protected. Make sure you’ve got quality wills, powers of attorney, testaments to trusts, deeds of mutual wills, or whatever else you may need.
Once you’ve set up all this paperwork, review it every few years. Situations and assets change, and it’s important to ensure those additions are captured in your will. Do it right the first time. You’ve got to get it all done and do it properly and then just go, “Right, breathe, my family’s looked after if something goes wrong here from all levels.”
You are leaving money on the (tax) table.
Most businesses do not claim anywhere near what they’re able to claim legally. These businesses don’t get advised on maximising legal deductions through their business year-in-year-out. Again, finding a good accountant will help ensure you are claiming everything you are legally allowed to claim.
Small businesses making less than $10 million a year, especially, have a lot of options for how to legally claim more tax deductions. This can make a big impact on your taxable income for the year.
Feeding the Golden Goose.
If you are guilty of any of these, maybe you even already knew it was something that needed to be handled, great! Today is the today.
In the short term, now is the perfect time to seek appropriate advice and the appropriate advisor so you can put whatever strategies in place before 30th of June to minimise taxes this year. Claim what you’re legally able to claim.
In the longer term, it’s time to start thinking about your situation and finding the right advice to ensure you’ve got the best asset protection, whether your assets are owned as best way they can for asset protection, whether your structure has got the most tax minimization and flexibility.
Ultimately, your business is a vehicle to generate cash. So the most important thing is to have the right structure in place for asset protection and tax minimization and efficiency and effectiveness.
Finally, have a strategy in place to create wealth long-term for you and your family. At the same time as you’re doing all that, make sure you’ve covered up on all the downside in your business. Review all your insurances, business and non-business. Make sure you’ve got the appropriate powers of attorney in place. Review your estate planning and will.
A good accountant is an invaluable advisor that can offer counsel, support, and advice, but she can also hold you accountable. Finding the right accountant can help you ensure your business’s finances are bulletproof, protect your family, and see your business turn a good profit year after year.
P.S. Whenever you’re ready …. here are 4 ways I can help you grow your dental practice:
- Grab a free chapter from my book “Retention – How to Plug the #1 Profit Leak in Your Dental Practice”
The book is the definitive guide to patient retention and how to use internal marketing to grow your practice – Click Here
- Join the Savvy Dentist community and connect with dentists who are scaling their practice too
It’s our Facebook group where clever dentists learn to become commercially smart so that they have more patients, more profit and less stress. – Click Here
- Attend a Practice Max Intensive live event
Our 2 day immersive events provide access to the latest entrepreneurial thinking and actionable strategies to drive your practice forward. You’ll leave with a game plan to take your results to the next level. If you’d like to join us, just send me a message with the word “Evou’d like to work directly with me and my team to take your profit from 6 figures to 7 figures …. just send me a message with the word “Private”… tell me a little about your practice and what you would like to work on together, and I’ll get you all the details! – Click here