Continuing our series of articles where we give advice on your most frequently asked questions.
Nathan Poole ACCA MAAT
Nathan is a Chartered Accountant and business consultant, joining DBS in 1999 he now has over ten years’ experience working exclusively for dentists. He advises dentists on developing their practices through services such as practice acquisition and disposal, setting up in practice, business plans, cashflow forecasts, calculating expense-sharing agreements for associates, implementing management systems, and fee setting. He appreciates being part of a professional and hardworking team that also has fun. Nathan is also the DBS QuickBooks specialist for bookkeeping software; he manages the system implementation and delivers all the training across the practice, and appreciates the depth of knowledge being a specialist comes with.
Question
I have for sometime been worried about the finances of my practice, I have pushed it to the back of my mind; however with the current economy, it is always nagging at me. I can’t switch off from questioning will I be able to pay the wages (including my own) each month. I need to know what my cashflow is and where to start?
Answer
Firstly, it is worth having a decent bookkeeping software program at the practice. I recommend QuickBooks software. It is easier to use than some, and has always had some excellent reporting features.
As a minimum you should be running your profit and loss covering the current year with each month shown separately. Understanding reports like these do not come naturally to everyone but it is a skill worth developing- so persevere. Run the report each month and compare the latest month’s figures to the previous months. When competent with the basic report, you can then go further, running a previous year comparison. You see how you compare and which costs are changing?
Managing cashflow is all about understanding your practice’s finances. Where the money is going out, how much and the income needed to cover these costs. Setting accurate budgets can help you anticipate the bad months allowing you to plan for them, and be more disciplined in the good months.
Being able to see the situation clearly and methodically will also enable you to demonstrate the issues better to your bank and advisers, such that if you do need to restructure your finances, you are in a better starting place as you can show that you run your practice with some basic financial management skills, and can demonstrate the problems easily.
When you have made the decision to invest in software don’t stop there, invest some time and money on some training, getting set up properly will help you get the most out of the system. Accurate data input, if you don’t put accurate data in you will not get accurate reports out. As a minimum we expect all bank accounts to be reconciled, and any items that need deleting get deleted.
If you do not want to do the data entry yourself, work with your accountant when engaging a bookkeeper. Just because someone knows more about bookkeeping than you, does not mean they know what they are doing – standards vary greatly across the industry. The bookkeeper should work with your accountant in the set-up process to ensure it is done correctly. We have seen it proved to be a false economy on a number of occasions when people avoid the cost of training only to get in a mess, and require greater sums of money to sort out the problems.
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