Bookkeeping Tips With QuickBooks (Online-Only Article)

February 2012
Practice Management Productivity

By: Karin Gillespie, Certified QuickBooks ProAdvisor

Setting up QuickBooks correctly from the start will save you time and allow you to get more out of your software. One of the key ingredients of creating a successful practice is to understand the ins and outs of managing your money. A well set up and maintained financial management system is the cornerstone of any dental business.  Without well-organized financial records, and the ability to review your data in meaningful reports, your dental practice will not reach its greatest potential. QuickBooks provides dental offices with a system for creating financial structure.

Most practice financial statements are organized alphabetically and require extensive analysis to determine the total for expenses such as staff wages or occupancy costs. This is why we recommend using our dental-specific chart of accounts, so that expenses can be grouped logically by category. In addition, our recommended chart of accounts includes industry benchmark percentages so you can compare your results with industry averages. We use six major categories: Clinical Wages, Clerical Wages, Occupancy, Professional Supplies, Nonoperating Expenses, and Doctor Expenses. If you are just starting out with QuickBooks, the dental chart of accounts can be imported right into your company file. If you have an existing QuickBooks file, your current chart of accounts can be modified to mirror our dental chart of accounts.

It's important to record transactions to the correct accounts in QuickBooks in order to have an accurate picture of your profitability. For example:

  • Loan payments should go to a loan account set up as a liability account on your balance sheet, rather than to an expense account, so as to not overstate expenses.
  • Transfers from one bank account to another should always be coded respectively, rather than to a "transfers" account.
  • Office supplies should have their own account so they are not mixed in with dental supplies.
  • Lunch with a referring doctor or a banker would be coded to meals and entertainment. Lunches brought in for staff during company meetings should be coded to staff meetings.

Sometimes, QuickBooks users have questions about how to deal with credit cards. You should set up a “credit card” account, and all charges from the credit card statement should be entered into QuickBooks using the "Enter credit card charges" screen. Likewise, when a payment is made to the credit card company, the check should also be coded to the credit card account, thus offsetting the charges entered. Most credit card transactions can be set up for downloading in newer versions of QuickBooks. By using a “credit card” account in this way, QuickBooks will keep track of your credit card balances, which is especially important at year end.

The primary purpose of QuickBooks is to provide you with financial and management information to help you run your practice efficiently, make sound business decisions, and prepare your taxes. In this regard, the balance sheet report is also important, as it shows you how much you own (assets) and how much you owe (liabilities). The difference between these two is your net worth or the retained earnings amount.

One way to keep your balance sheet accounts up to date is to record the adjusting journal entries that your accountant makes when your tax return is prepared. You or your accountant should make those entries into your QuickBooks file to ensure that your balance sheet numbers match your most recent corporate tax return. If your QuickBooks data file is kept up to date and accurate, you can run your own financial reports with confidence that they will be a reliable tool to gauge how well your practice is doing.

Our dental clients are most interested in the income statement, a.k.a. “profit & loss report,” which shows where money is coming in (income) and where money is going out (expenses). The difference between these two is your net income.  The profit & loss report summarizes your income and expenses, so that - to put it simply - you can tell if you are operating at a profit or at a loss. You can also have QuickBooks calculate each expense as a percent of income by choosing this option when running a profit & loss report. For example, if the industry average is 13% for professional supplies/expense in a general dental practice, you can compare your dental supplies/expense percentage with the average at a glance!  Once you generate a report in QuickBooks, it can be saved for future use.

Finally, it's important to back up your data to an external location on a regular basis. How often you back up depends on how much data you enter on a daily, weekly, or monthly basis. For instance, if you feel comfortable re-entering one week’s worth of data, then a weekly backup should be sufficient. It’s also extremely important to keep a copy of your backup offsite in the event of a fire or other disaster.

You can set up QuickBooks to schedule a backup procedure daily or on specific dates. If you want to manually make a backup copy: go to “File”; choose “Create Back Up”; select “Local backup” and click “Next”; click “Browse” to choose a location on your computer to save your backup copy to; and click “OK.” Our clients who use Remote Accounting Solutions (RAS) to transfer their QuickBooks file to us will be comforted to know that a backup copy of their data file is made every time a file is transferred. Should our clients ever need another copy of their QuickBooks file, they can retrieve one from RAS.

QuickBooks can be a powerful bookkeeping tool, if used to its full potential.


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