An important consideration for both owners and associates is whether to participate in dental insurance plans and how much revenue to derive from insured versus non-insured patients. While being in-network can provide a steady stream of insured patients, it also means accepting the insurer’s reimbursement rates, which are typically lower than rates for cash-paying clientele. Owners and associates need to run the numbers to determine if the volume of insured patients makes up for the discounted rates. 

The size of a dental practice is another key variable affecting income and operations. Larger practices with multiple dentists can capture economies of scale and potentially offer more services by having specialists on staff. However, they also have higher overhead costs to cover facilities, staff, equipment, and administrative expenses. Smaller practices sacrifice some efficiency for greater control, flexibility, and a more personal patient rapport. In the end, both ownership/associateship and practice size impact work-life balance and earnings. 

The Important Things You Need To Know…

You’re a dentist and looking at the benefits of being a dental practice owner vs associate dentist. The fact is, there is no one-size-fits-all answer to this as the choice largely depends on your career goals or which setup you feel most convenient.  

To know what will be best for you, a few questions should be answered: what are the costs of starting a dental practice? Does going independent benefit more you tax-wise? What accounting issues for dentists are you likely to encounter along the way?  Are you prepared to deal with the demands of running your own dental clinic or enjoy the freedom from complex financial responsibilities as an employee? 

Let’s take a look at the different aspects and issues of being a dental practice owner vs associate in this article. 

Dental Clinic vs Individual Practice: Understanding the Differences

Starting with the basic, it’s important to understand what dental practice owner vs associate dentist is. Sometimes, people make the mistake of using dental clinic and private dental practice interchangeably, but these two are completely different set ups.  

Dental Practice 

With clinical practice, the company hires W-2 employees or outsource from agencies for additional dental dental-related services. W-2 employees are traditional workers who work for an employer and receive paychecks from the employers. Also, dental practice can have one or more owners and six to eight dentists, plus hygienists, and a receptionist, among other staff.  

Individual Practice 

An individual dental practice involves self-employment or independent contractors who may work in a clinic. The owner operates a smaller team of dental associates and can control their own working hours. For example, an individual practice can have one dentist, an assistant, and a receptionist only.  

Who Makes Up a Dental Practice? 

A typical dental practice consists of several key members who work together to provide comprehensive oral healthcare services. Here are the main members that make up a dental practice: 

• Dentist
• Dental hygienists 
• Dental assistants  
• Front office staff 
• Dental laboratory technicians 
• Specialists  

The composition of a dental practice can vary, and some practices may also include additional support staff such as dental consultants, marketing personnel, or IT specialists, depending on their specific needs and organizational structure. Obviously, a larger dental practice will have more and the smaller ones will have only the critical staff members. But how much do they get paid?  

If you are planning to get into the business, this is what to consider when starting a dental practice, among others. That is because understanding the financials will allow you to go through a well-planned startup, whether you are looking at a small or big dental practice. 

Small Practice vs Big Practice: How Overhead Costs, Insurance, and Other Costs Factor in the Dental Industry  

A small dental practice has a different set up than a big one, especially in terms of back-office administrations, operating costs, and the paperwork required by insurance companies.  

To really understand the business, it’s also important to look at how each member of the organization is earning or how much an employer pays them. Sometimes, you would think you’re making money as an owner without understanding the segments, specifically with insurance companies.  

Accounting Issues for Dentists: Insurance, Profit and Cost Centers, Chart of Accounts, and Taxes 

Accounting is a critical aspect of any organization. Small and large practices can easily make important financial decision if there is a dental CPA or dental financial advisors to back them. The size of your clinic is almost irrelevant because you will be dealing with the same things – insurance, taxes, profit and cost centers, chart of accounts, etc.  

While they may seem insignificant for individual dental practices, most need help from a dental practice CPA or dental practice financial advisors still. The accounting for dental practice owner vs associate may differ in some ways but are equally beneficial. 

Insurance Matters

The topic of insurance is a complicated one. There are lots of insurance companies out there, including Medicare, and each has a different requirement than the other. And they are a big factor that can affect your profit. 

How many of your clients are using a particular insurance? 

It helps to know which insurances are widely used by your target clientele. By accepting the most popular plans within your community, you increase accessibility and convenience for potential patients, making your practice more attractive. Additionally, familiarity with common plan coverages, deductibles, and co-payment structures allows you to provide accurate estimates and streamline the billing experience.  

Maintaining strong relationships with major insurers and staying updated on plan changes can also facilitate seamless claims processing and reimbursement. Ultimately, catering to the insurance needs of your target demographic fosters a patient-centric approach and enhances customer satisfaction. 

Costs and requirements of partner’s insurance  

Sharing overhead costs with another dentist can be beneficial, but there are potential downsides if their accepted insurances impose specific requirements. And there are also potential issues, such as: 

Credentialing and compliance – Insurance providers might require both partners to meet certain credentialing standards, potentially incurring additional costs for certifications or facility upgrades. 

Clinic standards – Some insurances have stringent requirements regarding clinic facilities and equipment, which could necessitate significant investment to comply. 

Policy limitations – Your partner’s insurance choices may limit the procedures or the type of patients your practice can serve, impacting revenue diversity. 

What type of insurances are necessary to protect your business? 

To protect your practice, you need comprehensive insurance coverage that addresses potential risks associated with dental procedures. 

• Professional Liability Insurance (Malpractice) – Essential to protect against claims of negligence or harm. 

• General Liability Insurance – Covers accidents and injuries that occur on your premises. 

• Property Insurance – Protects the physical assets of your practice (equipment, furniture, etc.). 

• Workers’ Compensation Insurance – Required if you have employees, covering work-related injuries or illnesses. 

• Business Interruption Insurance – Covers loss of income in case your practice is temporarily unable to operate. 

It is worth noting that any of the insurances that another dentist signed up for may impact your finances and your set-up. You can split the overhead costs with another dentist, but if their insurance has certain requirements you need to meet as a partner/clinic, it could end up costing you more. 

Cost of procedures: low-cost vs high cost 

The cost structure of procedures covered by insurance will affect your practice’s revenue model. 

Low-cost procedures: 

Routine exams and dental cleaning – These low-cost but high volume procedures are critical for maintaining patient flow. 

Fillings and simple extractions – Such are common procedures that involve modest reimbursement rates. 

High-cost procedures: 

Crowns, bridges, and dentures – Higher reimbursement but might be capped annually by insurance plans. 

Implants and orthodontics – Often partially covered or not covered, depending on the plan. 

Procedures accepted by insurance 

Insurance plans have varying coverage for dental procedures, which directly influences the services you can offer and their profitability. Some considerations include: 

Covered Procedures – Most basic insurance plans cover preventive care (cleanings, exams, X-rays), basic restorative work (fillings, extractions), and sometimes major procedures (crowns, dentures). 

Frequency and limits – Plans often have limitations on the frequency of certain procedures and annual maximum benefits. 

Exclusions – Cosmetic procedures (teeth whitening, veneers) are typically not covered. 

Are you really making money? 

Insurance is a big factor that can determine whether you are making money or not. You must know how many of your clients are using this insurance and if it is worth the time and effort. 

Let’s say you’re charging $80 or $90 for dental cleaning services. This rate may change if you’re contracted with an insurance company, and you will end up charging only $50. Eventually, you will have to write off the extra money. If you are charging the rate per appointment, are you really making money? 

One of the benefits of having insurance or several insurances is that they bring in a lot of clients. This is good for business especially if you are trying to work on volume, where you can service more for six or eight hours a day. Keep in mind that each insurance company is different. You need to understand how they work and their advantages to know if you are signing up with one or all of them.  

Steven of Steven J Wicks & Associates, P.C. says: “You have to look at the model, where you’re at, and where you’re making money.” For example, how much do you make with fillings or crowns or canals and how much time do you spend on each service. At the end of the day, you may be generating more profit with cleaning service compared with the others.  

There’s also the issue of cost centers and profit centers. 

What Are Profit Centers and Cost Centers? 

In accounting, cost centers and profit centers are two fundamental concepts used to analyze and manage different aspects of a business’ financial performance. In this case, dental practice. 

Cost Centers 

Cost centers are specific segments or departments within a business where costs are incurred but do not directly generate revenue. These areas typically include administrative departments, support functions, or production units that contribute to the overall operation of the business but do not directly contribute to sales or revenue generation. 

In a dental practice, what would potentially fall under cost centers are dental equipment such as dental equipment like an x-ray, human resource or accounting departments, maintenance, etc. Although these do not directly generate profit, they are critical in ensuring smooth business operations and that quality services are being provided. 

The primary purpose of cost centers is to track and control expenses associated with these areas. By assigning costs to cost centers, businesses can accurately allocate resources, monitor spending, and assess the efficiency of each department or segment. Cost centers are essential for budgeting, performance evaluation, and decision-making purposes within an organization. 

Profit Centers 

Profit centers are specific segments or divisions within a business that are responsible for generating revenue and directly contributing to the company’s profitability. Unlike cost centers, profit centers are evaluated based on their ability to generate profits rather than control costs. 

The primary goal of profit centers is to maximize revenue and profitability while effectively managing expenses. Profit centers are often granted autonomy and are held accountable for their financial performance. They have the authority to make decisions regarding pricing, sales strategies, cost management, and resource allocation to optimize profitability. A few examples of profit centers would be: 

• Sales departments 
• Product lines or services 
• Customer service, PR, or ad 

Cost centers and profit centers serve distinct purposes within an organization’s accounting and management framework. While cost centers focus on cost control and efficiency, profit centers concentrate on revenue generation and profitability, each playing a crucial role in driving overall business performance. A chart of accounts will help you see the big picture. 

What is a Chart of Accounts? 

Basically, a chart of accounts (COA) is a comprehensive list of all the accounts used to record financial transactions. It serves as a blueprint for organizing and classifying the practice’s income, expenses, assets, liabilities, and equity. It plays a vital role in maintaining accurate financial records and generating useful financial reports. 

For a dental practice, a typical chart of accounts may include the following categories of accounts: 

1. Asset Accounts:

• Cash Accounts (e.g., checking, savings, petty cash) 
• Accounts receivable 
• Prepaid expenses 
• Dental Equipment 
• Furniture and fixtures 
• Leasehold improvements 

2. Liability Accounts:

• Accounts payable 
• Accrued liabilities 
• Loans payable 
• Deferred revenue 

3. Equity Accounts:

• Owner’s capital 
• Retained earnings 

4. Income Accounts:

• Patient revenue (subdivided by treatment types, e.g., preventive, restorative, orthodontics) 
• Capitation income 
• Other operating income 

5. Expense Accounts:

• Salaries and wages 
• Employee benefits 
• Dental supplies 
• Laboratory fees 
• Rent 
• Utilities 
• Professional fees (e.g., Accounting, Legal) 
• Advertising and marketing 
• Insurance 
• Depreciation and amortization 

The chart of accounts for a dental practice owner vs associate may be further customized based on the specific needs and size of the practice. It can include additional sub-accounts or break down categories into greater detail to provide more granular financial information. 

Having a well-structured Chart of Accounts is essential for accurate bookkeeping, financial reporting, and analysis. It helps dental practice owners and managers to track expenses, monitor revenue streams, and make informed decisions about the practice’s financial performance and growth strategies. 

Does Your Clinic Need a Dental CPA or Dental Practice Financial Advisors? 

One of the key differences between a dental practice owner vs associate is accounting. Small practices with only a few staff members may find a dental CPA just a luxury, while big practices find one a critical part of the organization. In fact, a dental CPA or dental practice financial advisors contribute a lot in your revenue growth.  

Often, being dental professionals, they overlook the numbers and continue with the same approach without knowing if they are making a profit or not. If you brought in 30 new clients this month, and then suddenly, you are down by 22 the next, you may not be able to notice it, until your dental financial advisors give you the data.   

Knowing such information is crucial in goal-setting revenue-wise. “We set up some kind of a bulletin board that allows you to track and measure the numbers, which will help you make some adjustments and figure out which approach is effective and what else can be done about it,” says Steven.  

How to Run A Profitable Clinic as a Dental Practice Owner vs Associate? Ask a Dental CPA 

There are different ways that a dental practice owner vs associate run their clinics; the members of these organizations also vary. But one key personnel that should always be present, if you are serious about achieving your financial goals, is a dental CPA. Or maybe have dental financial advisors looking after you.  

A dental CPA can help you understand figures, data, and numbers. You will know how much you are making, if you are making money at all, how much you spend, and what adjustments you can make financially to increase your revenue.  

Steve J Wick & Associates, P.C. look at financial statements and help clinic owners set goals in terms of client volumes and revenue growth. Sure, insurances can make growing the revenue challenging but our job is to find ways to make your practice a profitable one.  

Our team offers accounting business services for dentists. Whether you are running a big or small dental practice, we will help you achieve your financial goals year in and year out. Feel free to call us and discuss how our CPAs and dental financial advisors can help!