AUTHOR: The Dental CFO
November 05, 2021
Small business owners who engage accountants and financial advisers often use “CFO” and “CPA” interchangeably, even though they can entail wildly different responsibilities.
A CFO is the chief financial officer of a company and is responsible for the long-term financial strategy, forecasting, and execution. CFOs have a broad knowledge base and are primarily looking at future growth, not historical data. The CFO of a large company will oversee more functions and hire the right financial professionals for different roles within the company, as well as partnering with external accounting firms for corporate audits and tax preparation. When it comes to small businesses, this work is sometimes handled by the company owner or an individual or team of people with a more hands-on role in day-to-day operations, handling tax, accounting, and financial obligations directly.
Whereas a CPA, or certified public accountant, is a financial professional who has undergone the CPA licensing process. For most US states, this entails a bachelor’s degree in accounting or a specific number of credits, a minimum number of work hours under a CPA’s supervision, and passing a rigorous four-part exam. CPAs are experts in accounting, tax laws, and compliance, looking at historical data, maintaining records, preparing and filing taxes, and managing tax audits. Often, CPAs will also offer payroll services.
Many CFOs are licensed CPAs, but CPA certification is not required to hold this position. Additionally, most CPAs never cross over into a CFO role.
How Do Dental Practices Benefit from a CPA?
CPAs often support dentists and business owners with financial recordkeeping; federal, state, and local tax filings; and payroll. Since the CPA is generally not an employee or owner of the practice, their scope is usually limited to these duties and helping dentists with past financials when requested, like applying for bank loans or needing an accountant’s verified letter to get a personal lease or home mortgage.
CPAs don’t usually assist with longer-term planning and business strategy. Some will offer this service, in addition to practicing in specialized areas of tax law or financial reporting, but generally they focus on routine filings for their clients. It benefits most dental practices to hire an external CPA for these filings rather than handle it themselves. For small practices, it often doesn’t pay to hire a dedicated accountant on staff. Medium practices are likely to have a bookkeeper in-house but engage an external CPA for more complex filings. Larger practices will often employ a mix of in-house staff for financial recordkeeping and an external CPA for tax filings and one-off engagements.
When hiring a CPA, seek one out who is familiar with the dental industry or specific tax issues that you have run into. Depending on where you live and practice, a CPA who is familiar with local tax laws and financial reporting standards is preferable to one who isn’t. This is especially crucial if you live or practice in multiple states, as is common in the northeastern US.
How Do Dental Practices Benefit from a CFO?
Unlike CPAs, who focus on the more routine financial obligations to help dental practices stay compliant with accurate books, CFOs turn their focus to a more top-down perspective. A CFO for a dental practice will assess numbers and deliver strategic financial advice designed to optimize the practice’s financial success and make plans for long-term profitability and growth.
When engaging a CFO, take a look at other practices they have worked with and which goals they helped the owners accomplish. Are you looking to grow your practice or simply make yours more efficient? CFOs will examine the tax and financial elements of your practice in the present but also make long-term plans for the future (CPAs’ focus is often on just the following year, namely with tax planning).
Some CFOs will also offer the same services a CPA does, like tax preparation and bookkeeping, but not all of them do. Regardless, a CFO is much more involved in both business operations and long-term strategic planning for the practice.
Do I Need a CFO?
We’re all familiar with CPAs – we lean on them heavily during tax season and especially if we’re audited. But a CFO? That sounds like an expensive luxury!
There are ways to get this expertise without breaking the bank, but first – why do you need the guidance of a CFO? You’re a dentist by trade, not a financial/business advisor. Experienced CFOs know finance, accounting, strategy, operations – they understand how the different functions work together. They look for waste, they look for trends, they look for efficiencies and optimizations. It’s how their mind works. If business and numbers are not your forte and you really want to operate and grow your business, setting yourself up for a healthy retirement, it may be time to engage a CFO.
Let your CFO dive into all your numbers – revenue, expenses, overhead, investments, etc. Talk to them about your practice goals. Work with your CFO to formulate a strategic financial plan. He or she will provide reports and KPI (key performance indicator) metrics along the way to share where your money is going, what kind of return you’re receiving on investments like software and equipment, how efficient your business is operating, and year over year projections. And if you’re considering selling, merging, or acquiring, a CFO can guide you through these complicated processes.
As indicated, this c-level position can be a costly internal hire. But there are other models – you can engage an outsourced CFO. In this relationship, you get dedicated service at an agreed upon rate and frequency without paying a full-time salary plus benefits. Looking for someone with dental CFO experience is highly recommended, since the industry has unique challenges and opportunities only known by someone with this industry experience.
Why You Should Choose The Dental CFO
Essentially, The Dental CFO is an outsourced CFO. But we’re actually much more than that! We are your “one stop shop” for all of the specific tax, financial, and strategic business needs of dental practices, including accounting, CFO services, practice management consulting services, new start-up assistance, and even human resources. We handle the business side of your practice, so you can focus on your patients!
And our solutions are flexible, scalable, and affordable! Our programs are customized to meet your needs today and to scale with you as you grow.
With The Dental CFO’s CFO Core program, you don’t need to worry about finding the right dental CPAs who can take care of your books and taxes. We can take care of this task for you and provide not just your numbers, but a comparative practice report using our proprietary technology, so you can see how you stack up to local and nationwide dentists. All regulatory compliance like payroll, local taxes, business licenses, and workers’ compensation are handled. And you’ll meet quarterly with your dedicated CFO to review progress against goals.
Our Strategic Direction Program helps you develop long-range plans for your dental practice, whether you’re wanting increased efficiency, growth, and/or expansion. We meet with you to assess your practice, discuss your vision, identify long-range goals, and develop an action plan. This action plan includes clearly defined steps, areas of responsibility, and deadlines to keep you on track.
No practice can grow or prosper without the right team in place, which is why The Dental CFO offers practice management consultations designed specifically to review your human resources processes, tools, manuals, training, staff compensations, team performance, and more!
Our 360-degree view of dental practice management goes beyond books and taxes, taking a look at the entire practice. By partnering with The Dental CFO, you not only strategize with experienced dental CPAs and Chief Financial Officers, but you’re given the programs and tools to help your dental practice succeed. Our clients regularly perform better than national statistics and have experienced a variety of benefits including improved employee morale, increased productivity, and enhanced leadership.
The Dental CFO is here to handle finance, human relations, and overall business management so you can focus on patient care. Contact us today to speak with one of our friendly and professional dental practice experts.