In this episode, Dr. John and Wendy sit down with Chris Sands, owner of Pro-Fi 20/20 CPAs, an accounting, tax, and financial consulting firm for dental practices. They go over the common mistakes and challenges practice owners have when it comes to managing their dental practice finances. They go into detail how dentist owners can be financially savvy, what numbers they should be looking at, and what you need to do now for taxes.
- Top financial mistakes that are common among dentist
- How dentist financially measure the success of their dental practice wrong
- Why you shouldn’t have your accountant prepare financial statements
- Why many practices have such a high percentage of overhead, and what they can do to decrease it
- What you need to know about 2020 taxes
- Why it’s imperative to talk to a CPA right now if you took out a Payment Protection Loan (PPP).
- 3 strategies of what you can prepay for the year to lower your tax bill
- Why you should get a CPA that focuses on just dental practices
Chris Sands focuses on counseling dental business owners as a result of his first-hand experience working in a dental practice. His goal is to help them grow and understand the importance of being fiscally responsible in their business.
Chris helps educate doctors about the importance of having accurate business accounting records and a proactive relationship with their CPA to develop tax strategies for both business and personal finances.
Chris is active in the dental industry where he regularly lectures at conferences, study clubs, professional association meetings, and workshops and publishes articles on
business and finances in the dental industry. Visist https://profi2020.com/ to learn more
Grab a FREE copy of our book.
The Ultimate Guide to Doubling & Tripling Your Dental Practice Production…How to Build an Unstoppable Dental Practice With The Freedom to Enjoy It! It reveals our 5-step process for success in any dental practice regardless of your size, location, and situation –> Click Here
Download the Recession Recovery Checklist.
Dr. David started with our Critical first 100 days checklist, which we have updated to the most recent version entitled The Recession Recovery Checklist. This is where every practice should be starting. Go to www.RecessionRecoveryChecklist.com to download your copy today
Find our video podcast updates by Wendy and Dr. John on our facebook page : Here.
EP 75- Transcript
EP 75- Chris Sands
[00:00:00] Welcome to the double your production cast with a Team Training Institute, the one place designed for dentists and their staff who want to grow their practices by following in the footsteps of those that have done it or in the trenches who know exactly what you're going through. And now your leaders, the stars of the podcast, Dr. John Meese and Wendy Briggs.
Dr. John: All right, everybody. Welcome to this episode of the double, your production podcast. I'm Dr. John Meese and I'm here with my partner, Wendy Briggs. How are you doing Wendy?
Wendy Briggs: I'm great. Good to see you doctor John
Dr. John: And we are so happy to, with, to have with us. Chris sands, Chris is a CPA and he deals entirely with Dennis.
His company profile 2020 CPAs is really one of the ones that I, that I think really has the dental. the dental market figured out and really is, is helping dentists at a level that's very, very unusual. So Chris, welcome to the podcast.
Chris Sands: Thank you so much, dr. John and Wendy. It's an honor to be here with you both and actually, in full disclosure, I'm not the CPA.
I've got a large team of CPAs that I have had at my disposal to help the dental industry, but, I myself do not file tax returns.
Dr. John: Okay. Very good. Well, we're, we're excited to [00:01:30] have you on there. Chris and I met recently, Chris knows some of our TTI team and coaches and he and I just met recently and we had a fabulous conversation.
I thought we've got to get you on a podcast because you really speak to some of the things that I speak to Dennis about. And even though we really didn't know each other until just recently, we still have a lot of the same ideas around. around managing an office, and financial reporting. So I thought we would dig in and I've got there are five things that I think most dentists because they just don't know, they're not trained.
They didn't get any business training for the most part. There's no counting or finance training. So they just don't know. So they don't know how to use the professionals around them. And a lot of CPAs. Like it that way. Right? Cause they got a quick, simple, Oh, I just fill out this thing. And tax return goes in.
This is quick and easy. But that when that's the relationship you have with your accounting and finance professionals, then you are not getting all of the benefit of their knowledge and experience and expertise. So, so here are my five things that I see dentists do all the time. And I want you to, to kind of comment on them, because they're just so common and some of them I think will probably make you laugh.
So first one is many dentists measure the success of their practice by the amount of money in their checking account.
Chris Sands: I think that's absolutely true of any small business owner [00:03:00] and certainly of dental practices. You know, I think that the, I think that stems from believe it or not, a lot of people, when you first start out in your business and your learning, that's the first thing you have access to is your bank account.
And, and, and many, many doctors I find even do their own bookkeeping and they use their books, their QuickBooks, as, as a glorified check register, honestly, what they think they have is, is, bookkeeping or accounting, but it's, it's nowhere near following the rules of GAAP, generally accepted accounting principles.
And they sometimes, help themselves on the test turn. Sometimes they hurt themselves. Those, those books end up feeding into to creating a tax return. But what can be missed if all you're doing is tracking your bank account. the biggest, this thing is seeing, you know, are, are you winning?
Are you losing? It's not just from a, from a cash position, but from a productivity, you know, you're, you're, you're paying out certain expenses amongst your people and your, your revenues may be trailing that. So I can't be seen just by logging into your online bank accounts.
Dr. John: No. And, and, you know, most people found this out this year because, you know, in dentistry we typically use this month's money to pay last month's bills.
Chris Sands: Exactly.
Dr. John: And, and when COVID happened, then there was no this much money, but we still had last month's bills. And so a lot of people figured out that wasn't the best method of really, you know, identifying your financial success or your financial position, because it, it just, isn't a good measure for that.
There's lots of [00:04:30] good measures. That's just not one of them.
Chris Sands: Right. And how do you know how you're compared to last year? You know, if you're comparing yourself, are you growing or not growing and can't, can't just see that by logging into the bank account.
Dr. John: Yep. So my second, biggest thing that I see dentists do that, that they'd be helped if they didn't is they have their accountant prepare financial statements.
some have them prepare them quarterly. some of them twice a year, some of them yearly and often they're getting those financial reports some distance from when they closed, when the book's closed. Right. So they're not getting information at the right time to make decisions that they need to make on improving their business.
So do you ever see this one?
Chris Sands: Nonstop all the time? So, I think that, you know. The premise here is that most, most doctors, I don't think understand how or why they should be reading a financial statement. How can they use it? And because of that, there's no, there's no real desire to see that maybe more frequently once you, I understand that.
I think you want to see it more frequently. I relate your, your financial state to an X Ray. And if you were, about to perform a procedure on, on any patient, You would take an X Ray. And if you didn't take that x-ray and you perform the procedure that you'd be performing malpractice. And every time that a patient comes in for their six month or annual visit, they need to maybe update that [00:06:00] x-ray so you can see what has changed.
And is it current? Is that x-ray accurate? The same thing happens in business. We have to always see the most current state of affairs. And be able to, hopefully it's a quality financial x-ray, we're looking at that we can clearly understand. And it's current so that we can make decisions in real time of what's going on.
And that's, that's a problem, you know, in financial or in, in accounting in general, accounting is historic in nature and reactive. and I think in, in probably. it's, it's one of the things that if you're not engaged in a, in a relationship with your accountant to learn about your business, there's no, there's no fire.
There's nothing prompting either you the dentist or, or your accountant to get those to you in a more timely basis. So I saw that when we created our company, in one of our, one of our pillars, one of our guarantees is all of our clients received their financials by the 15th of the following month. Or they're free because otherwise they're outdated.
They're not useful to them.
Dr. John: Yep, absolutely. So. Most dentists when they get their financial statements from their accountant. they look at them, there's some information on there, but often the accountants will set up the chart of accounts and the income statement in a way so that they comply with tax law, but not necessarily in a way that gets, gives them the operational information they need to drive their business.
Right. So one of the great example [00:07:30] of this is I have a, one of our clients. Has all of his credit card charges, they all go to supplies. Everything. So, you know, if he takes his team out to dinner that's supplies, if he buys consulting like credit card that's supplies, so he doesn't have the information.
He has no idea where he stands as far as managing his costs.
Chris Sands: Yeah, that you know, that that relationship with most, most accountants is what's called a financial accounting relationship and a financial accounting relationship is compliance only. It's just to keep you compliant with your tax filings and to keep you out of trouble.
But what most people desire and what they need in their business and what they, what they desire, at least when I interview them about what they want in a relationship, falls in there, or a category of, of managerial accounting. And that's, that's what you're describing is having a relationship where it's not just to feed you your documents and give you, give you your numbers.
But to actually, you know, have it, maybe have a coaching session with you too, to teach you as the manager or owner of your business, how your business is performing and how to make changes. To move closer to the goals that you set out. And if everything is in a typical, we, when we see financials, when they're delivered to us, if they're, if they come in, like what we see, they're typically in a lazy alphabetical order, that's just a print out from QuickBooks.
And every business is unique and has different business [00:09:00] metrics or, you know, the buzz word would be KPIs, you know, your key performance indicators and those things have to be grouped or sub grouped into a chart of accounts along the lines of, of the unique KPIs to your business. So in dentistry, you know, a lot of those things have, can have an inverse relationship.
I think one of the, one of the prime examples that you can never see if your stuff is an alphabetical order, but if you break, break it out into different categories, a prime example, someone comes to me and they're, they're really kind of complaining or squealing that they've got up 40%. overhead of their team, the team expenses.
I, my knee jerk reaction, I immediately jumped to their marketing. I said, I bet if you're a team expenses of 40%, your marketing's at 1% because you don't reinvest enough in your business to, to grow it, to, to, you know, seek out, marketing, to invite more people to the party. Right. And. It's it's a factor of numerators and denominators team expenses, a fixed numerator divided by your denominator of collections.
And to make that percentage go down, collections has to go up and it's, there's a whole recipe there. The marketing and a new patients is just one component, but then a lot of the stuff that you guys do at team training Institute, like the thing with conversion, you know, conversion on hygiene and conversion on, on doctor treatment planning.
Those are the kinds of the kinds of things that you can't always necessarily see in the financials, but they give us the financials, at least on our end, give us [00:10:30] breadcrumbs like a trail to the symptoms, go back and say, you know what? I think you need some, some help and some coaching on this too. There's something going on there.
I don't necessarily think your team is overpaid, but for, for the team that you have, you're not, you're not closing and bringing in the revenue that you should be.
Dr. John: What do we always say about numbers, Wendy?
Wendy Briggs: Yeah, there's so much we could say about that, that last, last bit, you know, numbers, just tell us which questions to ask.
Right? So then we dig in on, on what those questions could be. and we agree with you, you know, sometimes if we look at the numbers, having staff costs that are high means that there's opportunity for us to maximize greater impact with production per visit, you know, elevating patient care. when we do that, then those percentages will always go down.
Right. So I think sometimes I find, and I'm not anywhere close to the accountant brain that I'm sure your team is. But I find that often we find dentist focusing on the wrong numbers, right. They're focusing on numbers that cause pain points. But if they were to focus on moving the knob or turning the dial a little bit in this, on this number, everything would be different, right?
Chris Sands: Precisely. And I'll, I'll add to that, you know, whatever you focus on is what you attract. So if all you focus on are the expenses, you're just going to attract expenses. Sometimes some, you know, I often say too that the cash a cash flow problem is not a real, that's not a real phrase. They either have an expense problem or revenue problem.
And sometimes they got to focus on why they have a revenue problem. [00:12:00] They may not. Really have an expense problem. So yeah,
Dr. John: I haven't really observed any practice that got to, you know, superstar status, by only focusing on expenses, right? The ones that get there always are focusing on revenue drive, not being aware of expenses and being prudent.
but the gold at the end of the rainbow is not at expense reduction for almost every practice.
Chris Sands: Yeah, I think you have to have a focus on both and keep them in order, you know, focus on revenue first and expenses. Second, like you said, you're not ignoring expenses, but if all you're doing is focusing on those expenses and you can't grow fast enough, you know that it's true.
Two parts of the equation. You have to focus on both though. And the example that you used, where the staff
Dr. John: costs were 40%. And we're assuming that in this case, it's a single doctor practice and there's no doctor comp in that staff cost. So that, that number might be inappropriate number for some practices, but, when, when everything's thrown in.
But, but typically if it, if a dentist thinks that number is too high, instead of doing what you did, Chris and talk about, all right, well, how do we change that number? They automatically go to my team makes too much money. I've got too many team members. They, they go to kind of the, the surface, without really figuring out underneath.
And, and that's the kind of analysis that I think, our accounting [00:13:30] teams can really help us with if they're given the chance.
Chris Sands: I would agree. I think that, the, the sad part is that even, even if you do have the ability to. received your financials in a timely basis. It's, it's another, it's another level to have them explain to you, you know, like, like I said earlier, It being a financial x-ray, you know, John and Wendy, you probably do.
You may have a trained eye on how to read an X Ray. I do not. Okay. And vice versa with a lot of doctors that we work with, you know, I have a trained eye on how to read financials and they do not, and it doesn't have to be that way forever, that that can be trained. And the biggest thing is, is having someone to actually speak in layman's terms so that doctors are not scared of the numbers that we find that that's the first barrier is getting over the fear. And it's like, you know, it's like exercising a muscle starting out, it's awkward, you know, when you first start out, but eventually you get more and more used to it and to have, have an analysis of the numbers with a, with, some action items or some tips on what you can go back into the business and do with them. Again, these are just the breadcrumbs leading to, or showing the symptoms of some problem. And sometimes we have an idea of what a few, few problems that could be. They're in the business. and they have to go back and dig deeper, you know, into, into their business.
So that's another unique thing that, you know, being a non accountant and seeing [00:15:00] this, this problem, working in the dental practice first and seeing this problem in the accounting industry was the reason I ventured out to start our firm was to have a place where you can have a quarterly or monthly phone call with someone who is an ally working for you and with you to work toward your goals for your business and your personal finances.
It just does not exist out there.
Sorry, sorry. Oh, no.
Wendy Briggs: I was just going to second that and say I've seen a few social media posts in recent weeks from dentists asking about accountants. Right. and one particularly stands out where he said yet, again, I'm hit with another, you know, six figure tax, quarterly, amount owed. And I asked my accountant, you know, what else can we do?
And he said, well, you're in that 37% tax bracket. What do you, what do you want me to do? You know, and I thought he was basically saying, does anybody have any good, you know, dental, CPAs, they can recommend. And thankfully your name had already come up and I just seconded that, but that's what they're looking for.
Right. And I don't think they quite know how to ask for it, but what you're you just described as what many dentists want. As someone who can help guide them on those decisions. And like Dr. John said, you know, making sure that they're, they're doing some strategic planning and they have those financial statements in real time is, is, has got to be really helpful for some.
Chris Sands: Well in tax taxes is one of the largest, you know, cashflow expenses of the business. And what you just described [00:16:30] is the, the reactive nature, you know, financial accounting, when you're, when you're getting that analysis on a more frequent basis and you're being proactive in saying here here's how much we've made year to date. Here's how much we've generated an income and income taxes. And then you can come up with those strategies and advance to, to reduce taxes. But that's the most common way that we receive clients is that someone gets a big tax surprise and they don't, they don't understand why. And not every time, it's not always the CPA's fault.
Sometimes it's the business owner's fault, but they don't know any different. And the CPA's are sometimes left, wondering how come, how come these business owners don't understand? You know? And it's, it's all a community, a flaw or a failure in communication and education.
Dr. John: Always looking backwards instead of looking forward, you know, and that is just the one little tweak that's so necessary for our clients.
We call it the CFO gap that, that, you know, they have a bookkeeper, they have an accountant that's doing a year term financial accounting. they just don't have anybody to put the numbers and the analysis together. They have nobody that's thinking forward. Everybody's thinking backwards. it's all historical,
Chris Sands: Another great phrase.
Before getting into this business, I used to dog CPAs because I would say, you know, CPA comes in and counts the body at bodies after the war's over.
Dr. John: Yeah.
Chris Sands: And a lot of times that's what happens the, the, the month of the year is done and the CPA comes in and does an [00:18:00] accounting of what happened. And that's not a lot of good to you.
What's where, where the real value is, is taking some of that data and creating plans for the future to make changes.
Dr. John: So there's never been a year like this one, when it comes to. Taxes, right. It's going to be crazy. No one knows really, for sure. What's going to happen to PPP money. Is that going to be taxes?
It's not going to be taxed and there's still so many things up in the air. and so it's, it's going to be a wild and wooly tax season for you. Isn't it?
Chris Sands: It is. And you know, if you're listening to this and you haven't done a tax planning session with your CPA, yet I implore you. Over the next two months, to get that in when right, this is this being such a unique year with all of the PPP money and all of the, incomplete or, or the, the, the decisions that have not yet been made by Congress.
We have to give everybody two different numbers for their estimated taxes. This year. One is the, the, your, your normal estimate, what you've generated so far. being able to deduct the payroll and payroll taxes like usual. But as it stands right now, the IRS, the IRS is interpretation is if you got freedom, money from the government, through the PPP program, since it was free money to you, and you're getting it forgiven, you're not going to get to deduct the payroll and payroll taxes that you used it on normally in a normal year, you would, and it makes logical sense.
However, [00:19:30] You know, in this economy, you know, I, my personal opinion is we might be in a, at the beginning of a recession or right now. And if that doesn't get fixed, it could torpedo us into that. And I, I hope that I hope I'm an optimist. I think that hopefully they'll come through and fix that because if it doesn't a lot of the, a lot of what we're seeing, there's a six figure difference.
In the taxes owed for the year. So it is imperative that you do a tax planning session with your CPA before the year is over and see if you've set aside some cash for that. Otherwise we're going to be stuck in what I call the tax loop, all of 2021. most people likely, extending their returns and waiting until October of 2021 to pay the 2020 taxes.
So we'll see.
Dr. John: Yeah, then, you know, so we've had several clients contact us to find out about prepaying for consulting so that they can, because the expense structure this year is all screwed up. They were trying to move expenses from next year, this year by prepaying. Is that a strategy that makes sense?
Chris Sands: No doubt. So in addition to doing a tax planning session on what's occurred for the year, you gotta, you got to sit down with someone and think strategically on what can you prepay for the year. And there's, there's some, some go tos that I think are always no brainers, a couple easy ones first, you know, you know, you're going to have supplies every year.
You're going to order supplies and you may look at what you, what you spend in the first quarter of this year in supplies and you [00:21:00] can open a tab, your supply vendors for next year. You could send them an early check, Hey, open a tab and you get to, you don't need it separate or part ways with your cash.
You can do it on a credit card and you can deduct that this calendar year you could, by law, you can actually prepay up to 10 months rent. Most people don't know that you've got to be careful about when, when you do do it. Cause it's a strategy of the manager going forward. And then without not a doubt, I mean, this being such a tough year, consulting and coaching is one of those things that, you know, as everybody else draws back in their, in their marketing or their spending in their business to grow it, this is the time to double down smart business owners know that when, when there's a retraction, you have to do the opposite and you have to reinvest in your business, reinvest in your people.
If you as a business owner are scared, your team is scared as well. And you you've got to. Invest in coaching them and make sure that their mindset is right. So if you're thinking of doing any consulting or coaching in the coming year, talk to those coaches and consultants and you can prepay this year.
Again, you might, you might do that on a credit card. You might do that with a loan. You're not necessarily, changing your cash position. You don't have to part ways with all of the cash. You get to take the expense this year. And pay it, pay the rest of it off, going forward. So that those are three, no brainers that we talk about every, every single year.
And I, there's a huge value. You know, the other two are focused on just expenses. This is the one area that you get. You get a [00:22:30] great tax deduction. You get to, you know, use tax free dollars to invest in yourself and your business and coaching. And I'm a huge fan of that.
Dr. John: Yeah. Okay. Awesome. Awesome.
Wendy Briggs: I would just say just a quick shout out for our coaches, right?
Because Chris. You know, a lot of dentists are looking for investments that give them an ROI, right. And a good ROI in real estate, you know, 5, 6% or whatever it may be. And you could probably speak to that better. I have to say our coaches are amazing. And the ROI that we're seeing come out of these practices that have, I have made the choice to double down that happens, invest in their teams is mind blowing.
And it's, it's super awesome to see, and I'm so proud of our coaches. So shout out to our amazing world-class coaches for the results that they're getting, but that's exactly why some practices of reaching out and saying, "Hey, you know, it's time, I want a good ROI for next year. but can we start that now?"
And absolutely we can. Well, and you, you both, have done a lot of work in the, in the DSM space. I oftentimes say, you know, industry is a better bet than Wall Street when it comes to return. And if that wasn't so DSOs, wouldn't wouldn't have come about it wouldn't exist. There, there are plenty of business people who are smart enough to realize that there's such a great return on a business and that business model of dentistry.
That, most small private practice owners are foolish not to reinvest more in their business. That's way more controllable, especially with everything, all the fear of the future, where that you're not in control of the election and the [00:24:00] economy, and all, you're not in control of that, but you are in control of your business and you know, that model.
So I'm a huge fan of reinvesting their first.
Dr. John: Awesome. Some of the reasons why I liked dental CPA firms is. When, you know, Chris has hundreds of clients and so he sees numbers all the time and when a general accountants, they see numbers from a lot of different angles, they may not catch the nuances because of a specific one.
And when they focus on a specific one, they catch the nuances. That's one advantage. Second is they have a pool of people that they can benchmark, right? So what they can tell you, here's where you are on this. You're you're not doing as well as your peers. This is a place of opportunity for you. And the third thing is when they focus on one industry that they learned to speak the language of dentistry and they learn to speak the language of finance and they can, they can translate between the two.
And so Chris, I want to thank you for being on our podcast today. Really glad to have met you and really excited about working with you and your team, in the future, and really appreciate you being here. Thank you. Thank you so much, dr. John and Wendy. It was an honor. It's been an honor and privilege to get to meet you.
Chris Sands: And thank you for hosting me today.
Wendy Briggs: Thanks everybody. It's great information.