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$AVE BIG DOLLARS

        Authored by Evan Reynolds, President of Dental Space Advisors

How To $AVE BIG DOLLARS When You Renew Your Office Lease

Most dental professionals are searching for ways to cut their overhead cost, however, many largely ignore the valuable opportunity to materially reduce one of their largest operational costs. This opportunity comes in the form of an office lease renewal which usually only comes around every five or ten years. Most dentists wait until there are only a few months or even weeks left on their lease to start discussions regarding lease renewal terms. This procrastination results in the landlord possessing all of the advantage as they know you have no intention of going anywhere else. The building owner will usually offer the busy dentist a “preferred renewal rate” and that generally ends the negotiations. The dentist never really had a chance in this one-sided scenario however it is very common for the vast majority of dental tenants. The biggest problem is that most dentists do exactly the opposite of what they should do when they are renewing their lease and in the process forego significant savings. A dentist that leases 2,000 square feet can easily forfeit $20,000 to $40,000 over the term of a typical dental lease by failing to effectively negotiate their lease renewal.

The key objective for a building owner is to maximize rental income and your goal is to minimize rental cost as much as reasonably possible. So how do you go about effectively negotiating your lease renewal? The short answer is that you approach it as if you were absolutely going to move your practice to a new location. It is important that you convince the landlord that you have serious, viable relocation alternatives and that there is a real possibility that you will move. Every communication with the landlord must reinforce the premise that you are diligently evaluating the alternatives in the market. This may include relocating to a new lease space or perhaps purchasing an office condominium. The landlord needs to know as early as possible that you are considering other options and that they have something to lose. It is often costly for a landlord to re-lease a space as it much more preferable to renew an existing tenant. They will have a vacancy for a period of time after you leave and will have to spend money on refurbishment and leasing commissions.

The objective is to maximize your negotiating leverage and this can be a challenge for most dental tenants. Dentists are at a huge disadvantage in the world of commercial real estate. They often have to sink large dollars into their space for build-out and are usually hesitant to move due to potential patient confusion (not to mention the hassle of moving itself). The building owner views a dental tenant as being largely captive. They are aware of the tendency for dentists to stay where they are for long periods of time. The average dental tenant stays in one location for about 18 years.

You may think that this strategy requires too much time and effort, however, you should hire a commercial real estate broker (at least nine months prior to lease expiration) that specializes in working with dental tenants to manage the process and lead negotiations. Very little of your time is required if the process is managed appropriately by an experienced broker. The best part is that the broker exclusively represents your interests and is paid by the building owner. Landlords much prefer to negotiate directly with the tenant and might discourage you from having representation. The fact is that your broker’s commission is a small fraction of the overall savings that can be generated by effective representation (the landlord’s broker typically gets a greater fee if the tenant does not haverepresentation). Hiring a broker also reinforces the idea to the building owner that you are serious about evaluating other alternatives.

In addition to the cost savings that can be captured during a lease renewal, there are other aspects of your lease that can be improved. You can potentially eliminate a personal guarantee that was required in the original lease (important when selling a practice), get your security deposit refunded or change other terms of the lease that need improvement.

Effectively negotiating the renewal of your lease can save you significant dollars and the opportunity only comes around a few times during your career. Make sure that you take advantage of this opportunity and put more money in your pocket instead of the building owner.

IRS Disaster Relief: What you need to know

Disaster Relief for Hurricanes Irma, Harvey and Maria Victims

Hurricane season has hopefully seen its climax in the Northern Hemisphere for 2017. The IRS is offering tax relief for victims of Hurricanes Harvey and Irma, and has extended that relief to victims of Hurricane Maria. In general, the IRS said it is now providing relief to individuals and businesses anywhere in Florida, Georgia, Puerto Rico and the Virgin Islands, along with parts of Texas. The relief postpones various tax deadlines, giving individual and business taxpayers until January 31, 2018 to file any returns and pay any taxes due.

Those eligible for the extra time include:

  • Individual filers whose tax-filing extension runs out on October 16, 2017. Because tax payments related to these 2016 returns were originally due on April 18, 2017, those payments are not eligible for this relief.
  • Business filers, such as calendar-year partnerships, whose extensions ran out on September 15, 2017.
  • Quarterly estimated tax payments due on September 15, 2017 and January 16, 2018.
  • Quarterly payroll and excise tax returns due on October 31, 2017.
  • Calendar-year tax-exempt organizations whose 2016 extensions run out on November 15, 2017.

See the disaster relief page on the IRS website (https://www.irs.gov/newsroom/tax-relief-in-disaster-situations) for details about the other kinds of tax relief furnished by the IRS in response to the recent hurricanes. The IRS said it is continuing to closely monitor the aftermath of the various storms, and more updates for taxpayers and tax professionals will be posted to IRS.gov.

Besides additional time to file and pay, the IRS provides other special assistance to disaster-area taxpayers, including:

  • Special relief helps employer-sponsored leave-based donation programs that aid hurricane victims. Under these programs, employees can decide to forgo their vacation, sick or personal leave in exchange for cash payments the employer makes, before January 1, 2019, to charities offering relief. Donated leave isn’t included in the employee’s income, and employers can deduct these cash payments to charity as a business expense.
  • 401(k)s and similar employer-sponsored retirement plans can make loans and hardship distributions to hurricane victims and members of their families. Under this broad-based relief, a retirement plan can allow a hurricane victim to take a hardship distribution or borrow up to the specified statutory limits from the victim’s retirement plan. It also means that a person who lives outside the disaster area can take out a retirement plan loan or hardship distribution and use it to assist a son, daughter, parent, grandparent or dependent who lived or worked in the disaster area. Hardship withdrawals must be made by January 31, 2018.
  • The IRS is waiving late-deposit penalties for federal payroll and excise tax deposits normally due during the first 15 days of the disaster period. See the disaster relief page for the time periods that apply to each jurisdiction.
  • Individuals and businesses who have suffered uninsured or unreimbursed disaster-related losses can opt to claim them on either the return for the year the loss occurred (in this instance, the 2017 return normally filed next year), or the return for the prior year (2016).
  • The IRS is waiving the typical fees and expediting requests for copies of previously filed tax returns for disaster area taxpayers. The relief can be particularly helpful to anyone whose copies of these documents were lost or destroyed by the hurricane.
  • If disaster-area taxpayers are contacted by the IRS on a collection or examination matter, they should be sure to explain how the disaster impacts them so that the IRS can provide appropriate consideration to their case. ~ Jennifer Johnson

Gardening Your Dental Team

Authored by David J Goodman, CPA, MST, fellow member of the ADCPA serving the New York Metro Area

Growing and caring for a vegetable garden is a team effort. A successful garden incorporates the care and maintenance by the gardener. Mother Nature has to do her part by providing rain, sunshine, soil chemistry, and pollinators. The perfect combination leads to a bountiful harvest. What happens if Mother Nature does not do her part? Sometimes you get a harvest (usually not a bountiful one); and sometimes there are no fruits to show for your efforts.

Each year my family plants and cares for a backyard vegetable garden. This year we had a larger harvest than in the past. I have to thank our new dog for joining the team and keeping the critters out of the garden. We planted tomatoes, peppers, zucchini, broccoli, and cucumbers. I find that our produce tastes so much better than what is purchased at the market. Before I get side tracked about the benefits of home gardening, I want to share my thoughts about how this relates to the dental team.

Cucumbers grow on a vine. The vines have tentacles that grow upward attaching the vine to whatever is in its path. For the last few years I have noticed that toward the end of the season, the cucumber vines begin to whither at the roots while the top of the vine still moves forward producing fruit. The fruit does not have the same quality as a healthy vine. Eventually the withering of the vine catches up to the top part of the vine and the plant dies.

I sometimes find that some dentists continue to move forward with their practices while leaving the team behind, just like the cucumber vine. The dentist continues, like the cucumber vine, to reach for the sky (e.g., learning new skills and improving patient care) forgetting the need for a strong, healthy, supporting base to back them up. Over time the practice loses some stability. There will still be fruit to bear at the top of the vine, but will it be the fruit that the dentist desires? As the base withers from lack of direction, appreciation, and leadership, the overall performance of the practice may suffer. It’s as if the team was not watered and provided sunshine. A weak team can eventually cause the practice to whither and even die.

A team that is not appreciated will struggle to support the dentist on his mission. I have heard from too many dentists that they believe their team does not deserve compliments. From the dentist’s viewpoint, that is because they are not living up to the dentist’s expectations or lack a sense of urgency. I believe that the reason for the disconnect is that the team is not clear on the dentist’s expectations. It is up to the practice leader to share the mission of the practice, getting complete team understanding, and acknowledged team agreement. It does not end here. Reinforcing mission-based behaviors can lead to stronger practice roots and help dentists to achieve the income and quality of life they desire.

Spread some sunshine on your team and watch your practice grow.

SWDC Ticket Drawing Winners

CONGRATULATIONS!

Beverly Rice/Dallas, TX – Dallas Cowboys Tickets

Bret Downing/Canton, TX – Dallas Mavericks Tickets

Jerod Yaeger/Okmulgee, OK – Dallas Mavericks Tickets

 

Reaching for the Stars and How to Keep Them

Employee Retention Tips

Great employees are a vital spark of any business. Losing employees, especially the great ones, is a concern for businesses, whether big or small, because it costs them not only money, but productivity and time. For small businesses, keeping the “great” (a.k.a. the hard-working and productive ones) employees is crucial. Here are a few tips on how you, as an employer, can retain those great employees.

Hire Well

It seems obvious, but employee retention begins with hiring. The consequences of a bad hire have a negative ripple effect across your office, and in some cases, cause your “great” employees to leave. One bad apple can spoil your bushel!   Try adding one or all of these ideas to your next interview:

  • Get at least one personal reference in addition to professional ones, this allows you to ask different kinds of questions which helps reveal their character.
  • Trust your Gut! The stomach is often called the “second brain” because it has almost as many neurons as your brain does. If you have an uncomfortable feeling, there is probably a good reason for it.
  • Be specific with the job description. Make sure you are clear about each aspect of the job and look for someone who has successful experiences with all of those aspects. A bad hire is someone who is great at one aspect of the job you need done, but awful at the others.

Be Competitive and Creative

As small business owner, paying a higher salary to employees may prove difficult, but by staying competitive and creative, you can put together a compensation package that is enticing without breaking the bank. Offer bonuses for a job well done. In addition to bonuses, offer extra vacation days, flexibility with work schedules, work-from-home days (if the position allows), added time to a lunch break one day a week, etc.

Acknowledge Achievements

We all know that employees need feedback to improve and be at their best, both positive and constructive. Provide positive feedback on a regular basis to motivate your employees and let them know their hard work is noticed and appreciated. A simple “awesome job with our patients today” can make a difference.   This goes double if you have Millennials working for you, they feed off acknowledgement. Constructive and/or corrective feedback is also important, especially if there’s an urgent issue or behavior that needs to be addressed.

Listen to your Employees

Its common knowledge for employers to give feedback to their employees, but you must also accept feedback from them. Ask your employees regularly what they need and want from their job and the company. Provide opportunities for both public and private feedback and attempt to create a culture where your employees feel comfortable expressing or offering their thoughts, opinions and ideas.

Encourage a Healthy Work-Life Balance

All businesses have high expectations from their employees. In today’s busy and on-the-go world, the scale often tips to more emphasis being placed on work duties than on home life. Promote an environment that believes home responsibilities are just as important as work ones, this helps reduce stress and pressure within you employees. Staff members that are well-rested and have adequate time to care for themselves and their families, perform better at work.

– Jennifer Johnson

Protect Your Identity

Identity Theft protection is a hot topic in today’s world. Here are a few tips to help protect yourself and your identity.

  1. Keep your personal information secure at home and in the workplace. Best practice is to shred documents that contain personal information before disposal.
  2. Protect your computer with firewalls and antivirus software. Check out www.onguardonline.gov for tips on Internet fraud prevention.
  3. Create strong passwords. This is no fun for anyone due to the need for so many passwords these days. So best practice is that you do not store your passwords on a shared computer.
  4. Set online account setting to send a text or email to alert you if an attempt is made to log in to your account from an unrecognized computer or change a password.
  5. When processing a financial transaction online check the beginning of the web address for “https” (Hypertext Transfer Protocol Secure). An “https” address versus just an “http” address verifies the website and means that nearly all information is encrypted between the website and the user.
  6. Check your credit reports annually. A free annual credit reports is available from each of the three major credit reporting agencies from a jointly operated site at AnnualCreditReport.com. A fourth agency, Innovis, also offers a free report every 12 months.

Madison Poe

Cover Your Assets Part II: Know the signs

Almost 1 out of 6 dentists have been, will be or are being embezzled.

In a recent post we outlined the profile of a typical embezzler and were troubled to discover they often look like model employees. So if embezzlement is a big risk but you can’t spot an embezzler by appearance, how do you know it’s happening? Fortunately even expert criminals leave red flags to help bring a problem to your attention. Some things to look for:

Increase in:Decrease in:
·        Accounts Receivable·        Collections
·        Patient adjustments·        Job performances
·        Bad debt write-offsAlso look for:
·        Refunds·        Employee lifestyle changes
·        Overhead·        Disorganized books

One major area of concern is Cash Receipts. Here the crafty embezzler can find many ways to siphon cash from your practice to her hand. One way is called “lapping.” In this method:

Patient A owes $400—pays $400—staff embezzles $400

Patient B owes $400—pays $400—payment is credited to Patient A

Patient C owes $500—pays $500–$400 is credited to Patient B; staff embezzles $100

At this point the accounts for Patients A and B look great. Patient C’s account shows he hasn’t paid but unless he receives a past due statement, he’s in the dark. The embezzler avoids that problem by continuing to post payments just in time to avoid past due balances and continues to drain a bit off the top when convenient. But your A/R will continue to rise. And you will often find patient accounts with incorrect balances—they just come to your attention in various ways. You may chalk it up to mistakes that happen from imperfect employees. But continued “mistakes” can be a big indicator of things more nefarious.

Be sure it’s standard practice that the patient receives a receipt at check-out, with account balance details if possible. These days, customers are often asked if they want their receipt and frequently decline. Don’t allow that. Just the fact that the staff member knows someone is seeing the posting helps deter them. Print out your Day-Sheet daily and keep them in a secure location only accessible by you. These should be reconciled to your appointment book and to your daily receipts. Checks should be electronically deposited daily. Cash should be taken to the bank daily or secured in some way. Credit cards should be batched out daily. The longer the delay in any of these tasks, the more opportunity there is for manipulation.

Just some key procedural steps and a little vigilance cuts down on key opportunities for theft—theft of your family’s income. Your practice is important in your life—be watchful of it! – Lynn Ledbetter

Help Wanted: Things to Consider When Hiring an Associate

When you think you are ready to hire an associate, consider why you think you need one.  Are you just too busy?  If so, is it because your systems are a mess, or do you really have too many patients for one doctor? A good problem to have!  And at what point are you in your career?  We have some clients who need associates but the owner dentist is too young to consider an associate for a possible buy-in scenario.  In that case, you have to be sure you don’t recruit an associate with ownership aspirations.  What else should you consider?

  • Make sure you have enough patients to support a second dentist. How many patients should that be?  Most practices should be seeing 30 to 45 new patients per month.  According to industry sources, 85% of those should accept treatment.  No associate wants to just do the procedures that you don’t want to work on.  So, consider the associate will see the new patients.  Then you will need to attract at the very least, 30 new patients per month for the associate to have an opportunity to produce over $10,000.  Any less than that and you are risking patient relationships by being too aggressive with treatment.
  • Take a look at your systems. Make sure the reason you are busy is because of the patients, not your systems.  Take a step back and really look at those systems.  Better yet, hire a consultant to take an objective view of the practice.  Sure, it’s expensive.  But it’s the best investment you will make in your practice.
  • Be realistic. Do you have the space necessary to support another dentist and the related staff that comes along with bringing on an associate.  Right away you will need another chairside assistant.  Eventually, you are going to add front desk and hygiene personnel to support the increase in patient flow.

Keep in mind, again according to industry sources, that 80%, that’s 4 out of every 5, associateships or dental partnerships don’t work out.  Why most of them fail is due to expectations that didn’t correlate between the dentists or weren’t communicated during the search for the associate.  Be transparent.  Go overboard.  Meet, build a relationship.  Take the candidate to dinner, lunch or better yet some sporting event where you have a captured audience for several hours and can talk, talk and talk some more to get to know each other.  Obviously, this doesn’t happen overnight.  You have to start before you really need someone, but you can see it coming.  Or if you are too close to the operations to see the details, ask us for our opinion.  We work with several hundred dentists and have seen many situations with associates over the last 15+ years. – Robert Edwards

2017 Filing Requirement Changes and Contribution Limit Updates

KEY Filing Requirement Changes and Contribution Limit Updates for 2017:

The list below describes changes to tax rules for 2017 that you will find important, so read and enjoy……

    • Filing Deadline Changes for Partnership Returns – Partnership returns are now due 2 ½ months after year-end, which is March 15th, for calendar year firms. A six-month extension can be requested for those needing more time. If you were a client on 3/15/17, we have automatically filed an extension or prepared a tax return for filing on your behalf.
    • Filing Deadline Changes for Regular Corporations – Regular corporation returns are now due 3 ½ months after year-end, which is April 15th, for calendar year firms. A five-month extension can be requested for those needing more time. The deadline for S corporations has not changed.
    • Filing Deadline Changes for Owners of Foreign Accounts – Returns for owners of foreign accounts are now due April 15th, up from the prior deadline of June 30th.   A six-month extension can be requested for those needing more time.
    • 2017 Standard Mileage Rate – The standard mileage rate for business driving is 53 ½ cents per mile.
    • 2017 Depreciation Limit – For 2017, $510,000 of business assets can be expensed. This amount phases out dollar for dollar once over $2,030,000 of assets are put into service during the year.
    • 2017 Social Security Amounts to Note – The Social Security wage base is $127,200 in 2017. The amount needed to qualify for coverage is $1,300 per quarter or $5,200 for the year.
    • 2017 HSA Contribution Limit – The limit on deductible HSA contributions in 2017 is $3,400 for self-only coverage & $6,750 for family coverage. Individuals born before 1963 can contribute an additional $1,000.   Minimum policy deductibles stay the same at $1,300 for singles & $2,600 for families. Taxpayers age 50 & older can make catch-up contributions of $1,000.
    • 2017 Retirement Plan Contribution Limits – The 401(k) contribution limit is $18,000. Taxpayers born before 1968 can contribute an additional $6,000. These amounts apply to 403(b) & 457 plans as well. The contribution limit for SIMPLE plans is $12,500 & taxpayers age 50 or older can contribute an additional $3,000. The limit for defined contribution plans is $54,000.   Retirement plan contributions can be based on up to $270,000 of salary.
    • 2017 Gift Tax Amount to Note – The gift tax exclusion amount is $14,000 per done.

Sales and Use Tax for Dentists

Sales and Use Tax for Dentists

In general dental services and appliances are exempt from sale and use tax. However, the sales of non-prescription tooth pastes and tooth brushes can be subject to sales and use tax. See Sec.151.313 http://www.statutes.legis.state.tx.us/Docs/TX/htm/TX.151.htm

If you decide to sell non-prescription items to your patients, the first step is to apply for a Sales and Use Tax permit. You can apply for a permit online using Webfile https://comptroller.texas.gov/taxes/permit/. The Sales and Use Tax permit also allows you to be exempt from paying sales tax on any items that you purchase for resale.

Next, you need to set up your dental software to track taxable transactions to allow for accurate record keeping. Contact your software help desk for helping in creating the necessary monthly taxable activity reports.

If you are required to collect sales tax on non exempt transactions such as toothbrushes and toothpaste, your reporting and remittance schedule depends upon how much sales tax you are collecting within a monthly, quarterly or yearly time frame. You are required to file a Texas Sales and Use Tax Return (Form 01-117) and submit the collected tax based on the collection levels below:

You must file Monthly if you collect $500 or more tax in a month.

You must file Quarterly if you collect <$500 per month or <$1500 per quarter.

If you collect less than $1,000 in tax per year, then you need only file one per year. However, if you are collecting close to this level of tax then a quarterly filing pattern is a safer option.

The Texas Comptroller allows multiple methods for reporting and payment including paper filing and Webfile (see https://comptroller.texas.gov/taxes/sales/filing-requirements.php). Your tax professional can assist you.