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How To Prepare Your Dental Practice for GAAP Accounting

Melissa LuVisi
October 7, 2021 | 2 min read

If you’re planning to sell or expand your dental practice or dental service organization (DSO), you must demonstrate that the business is in sound financial health. You can do so by showing financial statements compliant with the generally accepted accounting principles (GAAP).

There are many advantages to following GAAP. However, it’s not always easy to navigate the complex rules. Hiring a certified public accountant (CPA) is the best way to ensure that you’re accurately classifying your assets, liabilities, income, and expenses.

But you can’t just hand an accountant a shoebox full of receipts and hope for the best. Before working with a CPA, you should implement the internal systems and processes to collect and compile the appropriate information. This is particularly critical if you have a multi-location practice or DSO.

Here’s how to prepare your practice or DSO for GAAP accounting by establishing consistent processes to gather accurate and timely financial data, gain visibility to all office locations, implement proper controls, and ensure effective communications.

Eliminate Reporting Silos

If each of your dental offices runs its own system that doesn’t play nice with others, you’ll face a lot of friction when you need to track overall performance or generate timely financial reports. The use of disparate systems creates silos, which will cause delays in reporting, require additional effort from your employees, and increase errors. 

Use cloud-based dental practice management software so all offices will enter their data into a centralized location, from which you can generate reports to gain real-time insights into the health of your business. 

Use a Unified Accounting Format

All your office locations should use the same general ledger system and chart of accounts. Doing so will save you a lot of time and effort in reconciling the information when you have to generate reports at the practice level. Meanwhile, run profit and loss and balance sheets at both the practice level and each location to gain a big picture view and a granular understanding of the business’s performance.

Evaluate Accounting Processes

Bookkeeping processes at the individual locations should align with those at the financial office level to ensure consistency and minimize redundancy. This also gives you more control over critical activities related to your finances and helps reduce extra steps in administrative workflows. 

Centralize activities such as cash management, banking, tracking patient revenue, making purchases, processing payroll, and generating financial statements to maintain a high level of visibility and control of your financial performance. 

Facilitate Staff Communications

To maintain consistent processes and reporting structure, administrative staff across different office locations must be on the same page. Weekly staff meetings and frequent check-ins can help you keep everyone up-to-date on the latest processes and reporting requirements. Create a unified culture to ensure that everyone understands the importance of following the same process in reporting their locations’ financial activities.  

Implement the Right Technologies

Cloud computing is the best way to centralize and simplify the operations of multi-location dental practices and DSOs. Staff from different offices can collaborate more effectively and work on the same reports or documents without running into version control issues that can cause errors in your financial statements.

When you select cloud dental software, make sure it’s HIPAA-compliant. Additionally, you should enforce a cybersecurity protocol and provide the appropriate employee training to ensure the safety of your sensitive patient data when it’s shared across multiple offices.

Implementing GAAP in Your Dental Practice

Set a solid foundation for applying GAAP accounting to your dental practice or DSO by implementing the right technology solutions to support unified processes across all offices.

A cloud-based dental practice management platform helps you keep all your financial data in one place, regardless of where they happen. Your CPA can easily gather all the information to generate accurate GAAP-compliant reports, which can demonstrate your business’s financial health to potential buyers and investors.

Book a demo now!

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