Like many other small business owners, do you often feel frustrated when reading your financial reports? Do get frustrated when you don’t receive or understand the information you rely on from your financial team? What is the difference between dental accounting vs. dental practice financial analysis?
Dental accounting is the process of balancing and reconciling your past. Accounting tells you numerically where you have been, showing the numerical results—good or bad—generated by the activities you performed. Bookkeeping and accounting do not include translating these past numbers into future actions or activities that will lead toward your desired outcome.
For most small businesses, the person who performs the accounts payable (A/P) role may not be specifically trained or experienced—let alone expert—in processing, aggregating, filtering, projecting and simplifying the future actions needed to meet and exceed your expectations. The role that performs accounts payable and bank deposits reporting forwards the summary of bank deposits and A/P information to a bookkeeper. (And in many practices, these are the same person.)
The bookkeeper then makes sure all the financial information is present and “accounted” for in order to “balance the books”. As a side note: in our decades of observing practices, this is where the fiscal roles and responsibilities stop, although the Doctor often hopes this person will help give observations and recommendations of what the owner needs to do next. The owner wants to know, “What have we been doing that is working well so we can keep doing it to build the practice?” And conversely, “What have we been doing that has not been working well, so we can try to change it?”
In a high-performing and profiting organization, financial data is elevated to a controller whose role is to effectively confirm data accuracy-to reconcile and make sure the information is correct, including both expenses and deposits-and to then transpose fiscal that data into the desired business management and fiscal analysis reports which provide the next level of information to the Chief Financial Officer (CFO)of the organization.
Next, the role of the CFO is to gather, translate, interpolate, project, and succinctly summarize the data into suggested future action to the Chief Executive Officer (CEO) and/or owner. This role is focused on profit and performance of the organization and on determining which actions are required to enhance both.
Successful businesses and practices will have each one of these positions filled. In small businesses (and most practices) each of these roles may be part-time by itself or, as in some practices, combined into one position including A/P, bookkeeping and possibly controller. This is most often included in the position of office manager. However, few practices are aware of the next proactive leap which is the need of a controller and CFO who can gather, simplify and translate the numbers into suggested actions for the owner.