Why You NEED to See Double

The requirement that most new dental school graduates carry to their first business opportunities, namely being able to pay off their tremendous amount of student debt, means many of them learn more about finance much sooner than dentists of my generation. I was told many times during my training that I should pay attention to my dentistry and the money would come – as if paying attention to both dentistry and money could only be accomplished at the expense of the dentistry.

In their defense it was still possible to open a practice, pay your bills and with some determination and hard work, build a business that provided adequate and even substantial financial reward. This was actually not a good thing, since many dentists paid little attention to financial things and most were not fluent in the language of finance. It was the rare dentist who could read and understand a balance sheet and knew dual entry accounting. New graduates must be financially literate, and so do the old ones like me.

Business expenses are deducted from revenue to determine the simplest form of profit in a business, but all expenses are not created equal. When your business buys and pays for something that is not immediately consumed, you have acquired it. It is an asset that increases your net worth exactly as much as the funds used to pay for it decreased that net worth. So, the acquisition of an asset is a net zero activity in dual entry accounting and will not appear as an expense on your practice ledger – even though you paid for it with cash.

Before you cry foul understand that assets depreciate over time and the business can expense a portion of the cost of the asset each year. Depreciation is a double-edged sword, and many young dentists are cut by it when depreciation is used to decrease tax liabilities when an asset has debt associated with it that is paid off over time. Ask me how I know about that!

Would a financial management course, or a leadership course for dentists that included financial management, be something you would find beneficial? Let me know what YOU would like to learn about when it comes to finance.