A Dental CPA costs more than a general CPA or tax preparer. The real question is, is the additional cost worth it? Here is what you need to know to decide for yourself:
The average annual fees of a Dental CPA:
Monthly transaction download + reconciliations $7,200 - $9,600
Monthly bookkeeping (above) + full bill paying $13,000 - $15,000
Preparation of Personal tax return $2,000
Preparation of Corporation/LLC tax return $5,000
Mid-Year/Year-End tax planning + meeting $3,000 - $3,500
Financial review after year is complete $1,500
The average annual fees of a Dental CPA as a percent of your income:
We see Dental CPA fees on average between 0.5% and 1% of income, based on practices under $3M in revenue. If you get a full load of services, it might go over 1% of income, but I rarely see it go beyond 2% unless a lot of special consulting is involved. In that case, maybe your revenue should start increasing from that extra service, making the percentage of income reasonable over time.
Why a Dental CPA?
I'll be the first to tell you that many Dental CPAs are really good at what they do. We work with 100s of CPAs, and we see a vast difference between the Dental CPAs versus the Generalist CPAs. When a CPA works with only dentists, it enables them to focus their services to fill the needs of your practice better.
A Dental CPA is more knowledgeable about helping you find specific ways to minimize taxes, increase revenue, and improve the health of your practice with dental-specific key performance indicators like overhead benchmarks.
It may not be important to utilize all of the Dental CPA services offered, but I believe some of them would be worth the extra cost compared to a generalist CPA. Below is an overview of some of the services Dental CPAs offer and my suggestions. But every practice and every Dental CPA are different, so I encourage you to do your own research and shop around for your perfect solution.
Are the Dental CPA bookkeeping services worth it?
Bookkeeping is the foundation of everything your CPA does. If the transactions and data in the bookkeeping aren't correct, then your tax return (and tax liability), or any financial metrics or key performance indicators, will not be correct either. In the accounting industry, that is known as "garbage-in, garbage-out."
So, is the Dental CPA bookkeeping service worth the cost? If you're not using our dental bookkeeping services here at Percentology, then yes, a Dental CPA's bookkeeping service will be better than anything you currently have and worth the cost. You should utilize your bookkeeping data for more, like making improvements rather than just for taxes. Dental specialty bookkeeping provides the foundation to utilize your financial reports to improve your practice.
However, a dentist recently transferred her bookkeeping from a large, well-known dental CPA firm to Percentology (us). I won't name names, of course, but I was shocked at how poorly the bookkeeping.
Needless to say, dental CPA firms provide better dental practice bookkeeping than general CPA firms, but Dental CPAs don't provide the best bookkeeping since their primary service is not bookkeeping; it's taxes.
Why you should pay your bills in-house:
In the bullet-point list of services I have at the top of this blog post, you will see a dental bookkeeping option that includes bill paying and check writing. I don't believe using either a generalist CPA or a Dental CPA to pay your bills is worth the cost, and it causes more complexity and cost in your operations than it saves.
Paying your practice bills can be streamlined and improved very easily. You can eliminate much of the work if you put everything on a debit/credit card and set up automatic payments.
Tip: Don't add your bills to QuickBooks, and don't pay them by handwriting checks, either. You're adding double-duty wasted time to the process.
For bills that need monitoring, such as dental supplies and laboratory fees, you may want to have your office manager or spouse audit those invoices as they come in, making sure you physically receive what you're paying for, and there are no mistakes. Then, use bill-paying software like Melio to track and pay those bills that aren't on automatic payments. Just don't connect the app to QuickBooks. That will make your bookkeeping a mess.
Dental CPA tax preparation is the good stuff:
Every CPA firm can "do" a tax return. They have accounting degrees and experience preparing taxes. However, the tax preparation services of most Dental CPAs are by far the best I've seen. Why? Because of what they know about your dental practice while preparing those taxes. They are very thorough, and because they work with mostly dentists, they know what to look for while ensuring you get every tax deduction possible.
Here is the part I love about Dental CPAs, which you may not know. Since dental CPAs are a little higher in cost because of their experience, they provide higher-quality training for their staff. I know this because I was one of them at the start of my career, and I am thankful every day for getting that higher-quality training I would have never had at a general CPA firm.
A lot of the larger dental CPA firms are really awesome at "tying" every balance sheet account to a paper trail for accuracy before preparing the tax returns. For example, if you have loans, a Dental CPA will match each loan balance on the Balance Sheet report to the actual bank's principal balance (paper trail). This ensures your loan payments are correctly applied in bookkeeping, where the principal portion reduces the balance sheet account, and the interest portion is expensed and deducted on the Profit and loss report.
We got a new client from a Generalist CPA who didn't match the balance sheet balances with paper trails like Dental CPAs do. When we began doing the bookkeeping for this new client, we always "tie" the balances like a Dental CPA does, and we found that the generalist CPA missed $30,000 worth of loan interest deduction on the prior year's tax return because the balance on the books didn't match the bank. Ouch. 😳
What's special about Dental CPA tax planning?
Mid-Year and Year-End Tax planning is when the Dental CPA will annualize your current year-to-date numbers to try and estimate what your tax liability will be at the end of the year so you can strategize around the estimates. This is really helpful in relieving you of any significant surprises so you can plan ahead. Were you hoping to upgrade some equipment soon? Well, during this tax planning process, your dental CPA can help you decide if it's a good time to upgrade for a tax advantage.
Dental Practice Overhead Benchmarking
The special part of dental CPA tax planning is benchmarking your dental practice overhead percentages to see your performance against industry averages. Then, they usually add in consulting with a meeting to go over the numbers with you.
You can read more about dental overhead benchmarks with my posts below:
I've always liked the mid-year and year-end tax planning meetings while working in the Dental CPA firms. It gave our dental clients actionable information to work with, and I felt like I was making a real difference for them, not just preparing tax returns. I think this service is a valuable one if you are on the fence.
Conclusion:
Yes, Dental CPAs are more expensive than most generalist CPAs. However, their services also provide more value because of their vast knowledge and experience in dental practice accounting and tax preparation. I believe the tax services they offer, including tax planning, are worth the cost.
P.S. Our dental bookkeeping service works well with most general and dental CPAs, and the CPAs love our work because we make their tax and consulting work much easier. 😉
Download our free Dental Overhead Benchmark Template:
Discover how your practice spending compares against other practices without paying the high cost of a Dental CPA. Just drop your numbers right from your Profit & Loss report into the spreadsheet.
