With February underway, it’s time to get back to work. The new year is a perfect opportunity for reflection and renewal. Many professionals reassess their career paths, consider upskilling, or refine their strategies for greater success. For dentists, this is a crucial time to set financial goals that align with both personal aspirations and business growth. Balancing excellent patient care with financial management requires thoughtful planning and deliberate action. It won’t happen by accident.
To kickstart your year, we’ve compiled key financial insights tailored for dental professionals. Whether you’re an associate, practice owner, or specialist, these tips will help you navigate the year ahead with confidence and efficiency.
- Is Your Accountant Meeting Your Needs or Falling Short?
Your accountant should be more than a service provider; they should be a trusted partner in your financial success. Unfortunately, many dental professionals report dissatisfaction with accountants who fail to provide proactive support, strategic insights, or customised solutions.
A great accountant does more than file taxes — they:
- Anticipate Your Needs: They analyse your financial situation to identify opportunities for savings, such as tax deductions related to equipment purchases, continuing education, or practice renovations.
- Provide Strategic Advice: They help you plan for significant financial decisions, such as expanding your practice or managing debt effectively.
- Offer Regular Updates: Staying informed about legislative changes that could impact your finances ensures you are always prepared.
If your accountant is not consistently delivering these services, consider switching to a professional who understands the unique challenges of dental practice management and is committed to your success.
- What Could Potential Interest Rate Changes Mean for You?
Interest rates play a significant role in financial planning, affecting everything from home loans to business financing. With the Reserve Bank of Australia (RBA) signalling potential rate adjustments this calendar year, now is the time to evaluate your financial obligations and explore options to optimise them. Here are actionable steps to consider:
For Personal Loans and Mortgages
- Engage a Mortgage Broker: A skilled broker can renegotiate terms to secure lower interest rates or cash-back incentives for refinancing. This is especially the case in the specialist medical lender market where there is significant competition. Even small rate reductions can result in significant savings over the life of a loan.
- Review Loan Structures: Evaluate whether fixed or variable rate options better align with your financial goals in the current market.
- Utilise offsets efficiently – Many aren’t sure where to accumulate their tax savings funds (both GST and income tax). For those who aren’t sure, rather than holding funds in low bearing interest, saving account or uncertain investments, we always recommend leaving all tax and personal savings in the offset account. This not only does this save you interest on your home loan, but also provides better options tax wise in the future.
For Business Loans and Equipment Financing
- Renegotiate Repayment Terms: Business loans often come with higher interest rates and shorter repayment periods. If cash flow is tight, consider negotiating a “repayment holiday,” which provides temporary relief while you plan long-term strategies.
- Consolidate Debt: Combining multiple loans into a single, lower-interest facility may reduce repayment pressure and simplify financial management. Furthermore, there is always the option of securing any business debt against property. This way you can negotiate a longer payment term and lower interest rate, but always remember to speak with your accountant prior to refinancing to ensure that tax deductibility is preserved, and any asset protection strategies aren’t compromised.
- Are You Using the Right Accounting and Practice Management Software?
Technology plays a pivotal role in managing a modern dental practice. The right tools can streamline operations, improve data accuracy, and save valuable time. However, selecting the wrong software can lead to inefficiencies and frustration.
Practice Management Software
- Integrate with payment systems for seamless financial transactions.
- Offer robust data security to protect sensitive patient information.
- Provide insightful analytics to track key performance metrics such as patient retention, appointment no-shows, and revenue trends.
- Allow for streamlined reporting of patient fees and related expenditure to make paying associates straightforward.
Accounting Software
Choosing the right accounting software is equally important. Look for features that:
- Simplify income and expense tracking.
- Automate tax calculations to ensure compliance. Updated software can help you calculate what GST and/or PAYG debt is payable for your desired time frame, making reporting and compliance a little less stressful.
- Integrate with your practice management software for a holistic view of your financial health. Make sure that the software is versatile in its use, not only for day-to-day operations but offers greater integration with other add-ons that can consolidate practice reporting across multiple sites and provide customised management reporting that focuses on areas you want to see as a business owner.
If your current tools feel cumbersome or fail to deliver these benefits, consider upgrading. Many accounting software’s offer services that will import data from your old file into the new file to streamline the process.
- Budgeting and Cash Flow Management: The Cornerstones of Financial Stability
In a climate of rising costs and economic uncertainty, effective cash flow management is more critical than ever. Poor budgeting can lead to financial stress, hinder growth, and jeopardise long-term goals.
Key Strategies for Budgeting
- Work Backwards from Worst-Case Scenarios: Plan your budget based on conservative revenue projections to ensure you are prepared for unexpected challenges.
- Separate Personal and Business Finances: Keeping these accounts distinct not only simplifies tax reporting but also provides clarity on your true financial position.
- Create Contingency Funds: Allocate a portion of your income to a reserve account for emergencies or unexpected opportunities.
💡TAX TIP
Tax is a big cost, so it’s important to both:
- Minimise to the extent that you legally can
- Ensure you know what tax payments you have coming up so that you can budget for them
This is especially the case given you will no longer be able to claim a tax deduction for interest expenses on ATO Payment arrangement from 1 July 2025 (making this an expensive option to fund your tax bill.)
Improving Cash Flow
- Review Payment Policies: Ensure timely payment of patient invoices to avoid cash flow bottlenecks. With cost-of-living pressures, ensure there are options for patients to fund their treatments if you are starting to see patients struggle to pay on the day of their appointment.
- Negotiate Supplier Contracts: Periodically review and renegotiate terms with suppliers to minimise costs without compromising quality.
- Monitor Key Metrics: As a cost saving exercise, we always recommend benchmarking your costs to the industry average. High-ticket items such as labs fees, materials and wages are often costs that are closely monitored. Generally, these costs sit at a % of revenue and this benchmark will shift as it is dependent on the complexity of the dental work performed within the practice.
- Credit Card and Associated Benefits: Not only do credit cards assist with cash flow crunches, but they have also become a valuable resource for rewards, whether that through a points system or a free membership, it is always worth considering the benefits. Some examples include:
- Earning Points for day-to-day business costs
- Earning points paying tax debt
- Spend x amount and they waive your membership fee.
By adopting these strategies, you can build a financially resilient practice that thrives even in challenging economic conditions.
Final Thoughts
The start of a new year is an opportunity to take stock of where you stand and chart a path toward success. By evaluating your financial relationships, optimizing your loan and software choices, and prioritizing sound budgeting, you can position yourself for a prosperous year ahead.
Whether you’re an associate just beginning your journey or a seasoned practice owner looking to refine your operations, these steps will help you balance the demands of dentistry with the rewards of financial security. Here’s to a successful and fulfilling year ahead!
Author
Keegan Du Preez – Accountant