Financial planning for 2010

As 2009 was ending, many dentists were getting calls or were initiating them to their accountants or other financial advisors. Everyone was in a panic, requesting last minute assistance with what may be owed on their federal and state tax obligations for 2009. Others were speaking with their investment advisors hoping to find out what gains or losses they were going to be reporting on their 2009 tax returns and whether or not it was too late to change the results and path of their portfolios. What most of the dentists had in common with each other was the timing of the calls that they were making and the inability to think logically about what had to be done and when it could be done so that sound decisions could be made regarding their financial results for the year not yet completed. It seems obvious now that the time to speak to an advisor of any kind is not at the last minute but when there is plenty of time to address an issue so that the decision regarding that issue could be made with out haste. The dentists that are in dire need of aid at the last minute always appear to be the same. They do not learn their lesson from year to year. When is it the right time to begin planning for your financial affairs for 2010 and the future?

The right time and the right advisors

Thinking logically, the right time for planning is now. The year is just beginning. The basis for planning and decision making is when there is no panic and advisors can be chosen who will insist on frequent discussions and portfolio reviews so that their input is available on a regular schedule. Let’s look at some types of advisors, determine the amount of time needed with each, the cost attributed to each and the results that the dentist should expect from prevailing on the service of each of those advisors. Remember that a good advisor can only discuss ideas and give advice based on the input that is received from the dentist so that the dentist must expect to contribute an accelerated effort compared to the past in order to achieve the desired result and not have that last minute panic attack.

Who will lead?

The most likely candidate for the most frequent contact is the CPA who has familiarity with dental practices, their cash flow, tax and other financial challenges. Just like a patient who is advised by the dentist to establish a good oral hygiene recall routine, the dentist should have constant contact with his or her CPA because that advisor probably has more data about the on going financial affairs involving the dental practice and the dentist who is the owner of the practice. Using quick books, or some similar tool for financial reporting, the dentist and the CPA can spend time discussing results of operations, ideas regarding retirement plans, financing techniques and other more sophisticated matters that do not require the dentist to pay high fees for detailed lower level services that can be performed by the dentist directly or by an employee of the dentist at a much lower cost than that charged by the CPA. Payroll is another matter that can be performed by an outside service bureau or directly by the dentist and not by the CPA. Depending on the complexity of service provided, a CPA with experience in working with dentists would charge between the approximate amounts of $6000 to $12,000 per year for frequent, possibly one hour per month conferences and for the over view of book keeping and payroll services and preparation of the dental practice tax returns and the personal tax returns of the dentist. The advice offered on a regular basis would over come the need for a panic call at the end of the year. The out of pocket costs for book keeping and payroll services should be about $1500 to $3000 per year, based on a practice grossing about $500,000 to $750,000 per year. Proper planning regarding a retirement plan could reduce taxes by up to $100,000 in a given year or on a constant basis. This type of situation can not be addressed at the end of a year. Time is needed to digest the concepts and to design the type of retirement plan that benefits the dentist and not the staff at the expense of the dentist.

The financial planner

In conjunction with the CPA who has a good deal of experience in working with dentists, a good financial planner should be high on the list of contact for the dentist. The planner should also have experience in working with dentists. There should be a good deal of communication between the planner and the CPA as well as with the dentist. Beware of conflicts where the planner offers products such as insurance, stock portfolios, annuities and other items for sale instead of only offering good solid advice. The number of eyes watching over the dentist for his or her protection is an important consideration for the dentist’s protection of his or her assets and income flow. “Yes” men or women should not be part of the dentist’s dream team. Exchanges of ideas are important for a healthy dose of input and for the final decision making procedures by the dentist. Those without their own agendas should be on the team. The conflict between one advising which product to be sold and gaining commissions on that product is one that the dentist should avoid. Advisors typically charge an hourly fee with no commission involved for a sale. Those selling products charge a percentage of what they sell. Keep those advisors separate for the ability to decide without advisory conflicts.

To sum up...

Start today by contacting your CPA. If your CPA does not have experience with the world of dentistry, think about retaining someone who does. The cheap fee that may be charged could be based on a lack of experience. Protect yourself and the value of your practice by engaging someone with expertise in your field. Isn’t that what you advise your patients when they as questions regarding oral hygiene.

Bruce Bryen is a partner in The Snyder Group and managing partner for Bryen & Bryen LLP, Certified Public Accountants. Based in New Jersey, Mr. Bryen specializes in deferred compensation such as retirement plans, income and estate tax planning, the determination of the proper organizational format, asset protection and structuring loan packages for presentation to financial institutions. Bruce is also experienced in providing litigation support services and has testified on numerous occasions as an expert witness. Contact him at 800-988-5674, ext. 112.