Accounting For Dentists

Tag: dentist

  • What is Accounting For Dentists

    What is Accounting For Dentists

    This series of blog posts will talk about (in no particular order) what Accounting for Dentists is, who it’s for, why I decided to write my own app, and some of the initial design decisions I made in releasing the first public release. This blog post talks about what Accounting for Dentists is.

    Other blog posts in this series:

    1. To All the Tax Apps My Wife Has Used Before
    2. What is Accounting for Dentists
    3. Cloud vs Self-Hosting (TBD)
    4. Data Security (TBD)
    5. Database decisions (TBD)

    Accounting for Dentists is a cross-platform web application that aims to simplify record keeping. It is not designed to be a replacement for an accountant, and it is purposely minimalist. It serves one purpose, and one purpose only: make record keeping for dentists easier. You’ll still need an accountant, but you probably won’t need their help for entering your BAS.

    With these ideals in mind, I set out to create Accounting for Dentists for my wife. I also figured that if it helps my wife, it’ll probably help others too who are in the same boat. Some of my requirements were:

    1. Accessible from anywhere on any device – My wife wanted to be able to use it on her laptop, and her phone, and her tablet, all at the same time.
    2. Secure by default – As a consequence of being accessible from anywhere, the data needed to live on a public server. I wanted the data to be encrypted such that only the owner of the data could decrypt it.
    3. Private – the app does not store any personally identifiable information about users. Any potentially personally identifiable information that is stored (such as invoices, or income descriptions) is encrypted and can only be decrypted by the user. Also, no ads, no user tracking.
    4. For Dentists – My primary user (my wife) is a dentist. So, I want the application to cater specifically for her (and consequently, other dentist’s) use cases. This means that features that specifically target the business use-case of dentists are implemented. The features are more specific, less general.

    For my wife, this means she can:

    1. Enter her SFA income in one shot.
    2. Enter her commission income as an sale.
    3. Enter her business purchases as expenses.
    4. Add invoices to her sales and expenses for tracking (and SFA income).
    5. See her overall sales, expenses, and income, for the financial year.
    6. Have all her BAS data in one place for easy entry in the ATO website.
    Adding SFA income in Accounting for Dentists
    BAS grouped by month for easy entry in ATO

  • Types of Dentist Work Arrangements

    Types of Dentist Work Arrangements

    Dentists (in Australia, at least) have three main kinds of employment contracts:

    1. Salary
    2. Contract
    3. Services and Facility Agreeement

    Of these, SFA has risen in popularity to be the most common form of private employment for dentists. So, how do these differ in practice?

    Salary

    The simplest of these is a salary arrangement. The dentist is an employee and gets paid for their time. They may see a hundred patients or 0, and they (should) get paid the same. Since it is not a business income, they have no business income or loss for that employment and no business reporting to worry about. Any income tax is calculated by their employer and withheld for them. As a bonus, they get paid super.

    Contract

    If the dentist is employed under a contract, they get paid a commission of their total billings (typically 36%-40%). In this arrangement, the dentist gets their total patient billings for a period, calculates their commission, and then issues an invoice to the practice they’re working at for the amount (+10% GST). Since this is a sale (the dentist has sold a service), they must then pay the ATO the 10% GST they’ve collected.

    For example, let’s say the dentist bills patients $10,000 ($0 GST as dental supply has no GST) with a commission of 40%. Doing some simple math, the dentist would invoice the practice for $4,000 + $400 GST. The practice would pay the dentist $4,400. The dentist would pay the ATO $400, and be left with $4,000.

    There’s no super or tax withholding. The dentist is responsible for making sure they set money aside for paying their accrued tax.

    SFA

    If the dentist is employed under a SFA, things get more complicated. Under an SFA, the dentist technically bills the patients and the practice collects the payment on their behalf. As a result, the dentist’s income is the amount billed to patients.

    The dentist then pays the practice an expense for the provision of services and the facility (typically 36% – 40%).

    As a result, the dentist’s income is the amount billed to patients and the expense incurred in generating that income is the SFA expense (+ 10% GST).

    For example, let’s say the dentist bills $10,000 ($0 GST as dental supply has no GST) with a SFA expense of 40%. The dentist (for tax purposes) has earned $10,000, and must pay the practice $6,000 + $600 GST. Typically, the practice will do this on the dentist’s behalf and pay them the difference of $3,400. The dentist then claims the $600 GST from the ATO.

    As with a contract arrangement, there’s no super or tax withholding. The dentist is responsible for making sure they set money aside for paying their accrued tax.

    Conclusion

    From a tax perspective, salary employment is the easiest to manage as the employer manages the majority of the tax obligation. SFA comes in second because the practice will manage the payment to the dentist. Contract is certainly the most complicated because the dentist must now generate their own invoices to send to the practice, increasing the amount of work they must do,