When Is Your Dental Practice Too Big for QuickBooks?

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One thing is for sure, QuickBooks has widespread use in the dental industry and it is perceived as a low cost, great option for dental practices. That is true – until you simply outgrow it. But will you know when you’ve outgrown QuickBooks? When do hidden labor costs or delayed/limited reporting actually become measurable and meaningful? What are your competitors getting out of their bookkeeper, accountant, or director of finance/CFO that you aren’t? With the rapid expansion of group, multi-location and multi-specialty practices, more and more doctors are wondering what are the big dental service organizations (DSOs) doing. The answer is, they drop QuickBooks for fully functional accounting software like Microsoft Dynamics GP that integrates with their dental practice management software. These solutions provide near real-time reporting, and comprehensive drill downs to patient and clinical information by provider, while putting controls in place to help prevent embezzlement. At first blush you may say you are too small for this level of software and the return on investment isn’t there. Chances are you are right if you only have three or four offices and don’t plan on growing. But, if you have more than four offices and your business model is to grow or even exit to private equity, you should consider making the switch.

Things to Consider

Wondering how to determine if it’s time to make a switch from QuickBooks? You will likely get your answer by simply asking yourself a few questions and analyzing various aspects of your practice’s accounting system. For instance, how long does it take to get financial statements generated out of QuickBooks? Can you produce fully reconciled financial statements and close a period within three days of a period end? How much labor resources does it take to produce this? Is your accounting department right-sized? As a rule of thumb your internal accounting staff costs should be about one to two percent of collections, and they should be reconciling and generating complete financial statements by department with separate balance sheets, profit and loss statements, production metrics, statements of cash flow and key performance indicators. You also need to consider not only if your accounting system is meeting your current needs, but can it continue to do so as you expand. If you’re looking to grow your business your accounting system should be able to address the following processes and functionality:

  • Reduce labor – Automate accounting processes and reduce labor.
  • Expedited and accelerate reporting – Provide quick turnaround times, and detailed, useful and meaningfully data/dashboards.
  • Balance sheet/asset and liability reporting and analysis – Provide balance sheet by location/ segment to analyze leveraging and return on investment (ROI) on capital expenditures and cash management.
  • Centralization – Be efficient in centralizing accounting functions as you prepare for expansion.
  • Scalability – Allow you to expand your business without expanding your accounting functions and provide for added value as you scale.
  • Asset protection and controls – Put in place controls to address concern for inter controls, embezzlement and simply things falling through the cracks.
  • Clinical analytics and integrations – Integrate with OpenDental, EagleSoft and Dentrix to provide full analytics of clinical data without any third-party provider subscription.

Beyond your accounting system, you should also be assessing your accounting department’s capabilities and role in the practices’ growth. Do you have the right resources, with the right skillset to take you to the next level? What will your cost to grow your accounting department be? How does your accounting department come into play when a private equity firm or even large buyers and associates are looking to buy the practice or buy-in? Will you look like a business or a group of dental practices scotch taped together? In some respects accounting software and even the internal workings of your accounting department are a case of “you don’t know, what you don’t know.” It is very hard to measure the performance and ROI of your accounting department and finance team for many reasons, but nonetheless important to consider in your path to growth.

Making the Switch

QuickBooks is a good software solution and a great option for a majority of dental practices, but if you plan to grow past the four-office threshold, now is the time to start considering how your operations will function using QuickBooks as you continue down that path. Times have changed. Doeren Mayhew's Dental Division gets calls weekly from our clients about growing group practices or how to compete with corporate dentistry, big DSO’s and private equity firms. The best solution is to invest in your infrastructure. It will make you more profitable, competitive and valuable. So although upgrading your software system can be intimidating from a cost standpoint, it’s a critical aspect of your practices’ infrastructure and will set you up for success in the future. If you think your office may have outgrown the capabilities of QuickBooks or need help assessing your accounting system needs, contact our team of dental CPAs.

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