Most dental organizations upgrade too late, and usually only as a result of a crisis.

As a cottage industry, dentistry has not historically allocated much in the way of time or resources to the accounting and payroll functions.

‍In the beginning, it is looked at largely as a compliance exercise. The basics of accounting for dentistry are just that, basic. Therefore, the accounting function starts out as more of a bookkeeping function typically done by someone in the office with little to no accounting background. This individual is often a wearer of many hats and performs the bookkeeping tasks, as well as HR, marketing, operations, and any other miscellaneous tasks. For those organizations that have given the accounting function a bit more attention, an external accounting firm may perform the accounting and bookkeeping tasks. Regardless of who does it, the objective is the same: make sure there’s enough money in the bank for bills, payroll, and distributions.

This approach might be enough for a single dental practice to scrape by, but as the dental organization grows in size and complexity, so should the financial competencies.  

Once a dental organization scales to include multiple practices and/or multiple legal entities or ownership structures, the demand of the accounting position changes. Typically, third-party accounting firms are not a good fit as they either don’t specialize in dentistry or they do and their deliverables are too complex for an emerging Dental Service Organization, with little in the way of actionable analysis.  

As an organization commits to growth, it requires a more multi-faceted financial professional.

The roles and responsibilities of this individual should include:

• Ability to design and implement processes for the recognition of income and expenses
• Ability to oversee current processes and identify necessary changes
• Hiring and managing staff to take-over the accounting processes
• Oversee cash flows and understand cash burn rates of the organization
• Development of financial analysis and objectives
• Management of banking relationships
• Support of legal and compliance directives

Unfortunately, many dental organizations found out during the COVID-19 shutdowns that they did not have the appropriate financial resources and competencies in house. Non-financial leaders that depended on their financial person often discovered that company resource could not appropriately identify the company’s “burn rate” or rate at which the company’s fixed expenses outrun any available cash inflows.  

You can understand why this can be extremely problematic during a government imposed shutdown of dental practices.

Although COVID-19 is a generational event, those owners that did not allocate the proper resources may have lost their investment, or at least a significant portion of it. If nothing else, having the proper financial resources will limit the stress and anxiety for the non-financial professional.

Ultimately, the worst possible time to discover your organizations’ financial inadequacies is during a crisis. As Spark consultants, we highly encourage you to evaluate your own financial expertise. Do you have the financial professional you need to ensure your dental organization not only survives, but thrives now and in the post-pandemic times?