Growing up your grandma most likely used the envelope system. She would have an envelope for meals, one for housing, one for transportation, and one for savings. Why can’t we use this system and apply it to a dental practice?
You can. It’s all about your cash-management system. HP Advisors is the only dental CPA firm certified in Profit First. What does this mean for you? You can turn your practice into a money-making machine tomorrow. Literally, tomorrow. Most business owners use what is called bank balance accounting. The practice has one account, maybe two. It’s human nature to look at your bank account balance and make financial decisions. The more money you have, the more you can spend, right? If the balance is low, we better buckle down and tighten our belts.
Think of your bank account(s) like a tube of toothpaste. Have you ever noticed that when you have a new tube, you use it like crazy? You don’t mind if you use too much or if you lose some down the drain. But, when the tube starts to get empty, you try absolutely everything to squeeze every last remnant of toothpaste out of the tube. We’ve all seen the toothpaste tubes folded many times over. This is known as Parkinson’s Theory, or, the demand upon a resource tends to expand to match the supply of that resource. Sound familiar with your practice finances?
Big Plates vs. Small Plates
You can use bank balance accounting to your advantage. We recommend not having one plate (one bank account) but having five smaller plates (five bank accounts). When you make deposits into your bank account, give each dollar a pre-determined percentage. Here is a sample of accounts and allocations:
OPERATING EXPENSES 50%
You may be thinking, “This is not possible for my practice.” Start slowly and start building toward the end goal. Open a new account at your bank and put 1% of every deposit into the new account. The next month increase it to 2%. Then 3%, and so on. Keep increasing the deposit until you are depositing 15% of collections to the “Profit” account.
This simple system allows you clarity for every dollar coming into the practice. Our philosophy is to help our dental clients:
- Feel less stress.
- Gain control and clarity over their finances.
- Pay less tax.
- Make more profit.
Want to retire a millionaire? HP Advisors is only dental CPA firm that specializes in implementing this system for dentists in the United States. If you’re ready to take your practice to the next level, visit our homepage and chat with a Profit Advisor today.