Clinical Double Standard: Why Great Doctors Settle for Bad Accounting

Announcer:
Hello everyone. Welcome to the Millionaire Dentist Podcast, brought to you by Four Quadrants Advisory. On this podcast, we break down the world of dentistry finances and business practices to help you become the millionaire dentist you deserve to be. Please be advised we do speak with an honest tongue and may not be safe for work.

Casey Hiers:
Hello and welcome. This is Casey Hiers back at the Millionaire Dentist Podcast in studio with co-host Jarrod Bridgeman.

Jarrod Bridgeman:
Casey, not only are you back on the podcast, you're back in the office. You were on vacation. Before that, you had been traveling. You were hardly ever here. You don't sit still.

Casey Hiers:
Can I deduce that you missed me?

Jarrod Bridgeman:
I did, a lot.

Casey Hiers:
... or is this just an observation?

Jarrod Bridgeman:
I missed you a lot. Yeah. I was hoping you'd come back and treat me to a real nice lunch or something, but you know.

Casey Hiers:
Love that.

Jarrod Bridgeman:
Casey, last week, while you were out, we had brought in Austin Hooker, who's a CFP, to talk about market volatility and that kind of stuff. And as you know, the state of the world right now, people are kind of scared about that stuff. And so I thought, why not just pile on? Why don't we just pile on top of that? It's more educational, but sometimes our education can bring up some feelings towards this.

Casey Hiers:
There's a movie called The Ugly Truth, and I think that sometimes the ugly truth is important. Yeah, market volatility. That was a great topic last week with some good expertise and some historical perspective on it.

Jarrod Bridgeman:
I learned quite a bit. It was pretty interesting-

Casey Hiers:
Nice.

Jarrod Bridgeman:
... to be honest. How was-

Casey Hiers:
Are you going all in on crypto now?

Jarrod Bridgeman:
Yeah, to the moon. So this week, I hope our listeners know that it's April 15th, tax time week, and we should kind of dive into that. I know we talk about taxes here and there. I wanted to ask, are you seeing any kind of trends out there in the world of dental accounting?

Casey Hiers:
Tax trends, dental accounting.

Jarrod Bridgeman:
Tax trends.

Casey Hiers:
Yeah. I can tell you the biggest one. A lot of practice-owning dentists and specialists have come to accept a very poor standard of care when it comes to their taxes. We've talked about this in many variations and versions over the years, but it's just a reminder almost monthly that there's a poor standard of care out there in most people because they provide great dentistry, or orthodontia, or endo, or whatever their specialty is.

They provide such sterling care to their patients. They assume and expect that those whom they compensate have that same pursuit of excellence. And unfortunately, boy, after our presentation, just from the tax part, a lot of people come up, and they're like, "I just thought that that's how it is and how ... I didn't know. " And we'll get into what that is, what those triggers are. But yeah, I would say a poor standard of care in dental accounting, and people just settling for it.

That's probably the biggest trend that I see out there.

Jarrod Bridgeman:
Why do you think they do settle for it? Is it ... In my mind, it might be a mix between not having previously owned a business, and so that they don't really know how it kind of should be, or it's been 10, 15 years or so, and it's kind of just what they think the normal is.

Casey Hiers:
I think the first one is people's lives are so busy, right? They've never been more busy. And between family and hobbies and practice ownership and life and exercise, the idea of trying to wrap their arms around one more thing is so daunting sometimes that they're just like ... I mean, let's go back to a dating analogy. Well, you're dating someone, and they're pretty good, and you're like, "Ugh, I don't want to go out there and try to do all this again, so I'm going to settle." And unfortunately, some people do that. But in the professional sense-

Jarrod Bridgeman:
Why are you looking at me?

Casey Hiers:
No, no, no. But in the professional sense, I think there's an element of that is, gosh, trying to figure this out and get it fixed. And it sounds like a lot of work-

Jarrod Bridgeman:
And it's one of the few things you actually did delegate, probably.

Casey Hiers:
Yeah. No doubt about it. I think that's one. The other one is, again, people are trusting. They just, "Well, I know this firm. They're local. I go to church with so and-so. My three dental friends use this CPA, so they must be good." It's a jumping to a conclusion that might not be true.

Jarrod Bridgeman:
What are the signs that you see? Poor accounting, what are some good signs for that ... not good signs, but signs?

Casey Hiers:
Yeah. And we give a really good overview on our CE. And boy, I tell you what, to me, taxes isn't the most exciting topic, but that one hits. It lands so often with people where they just sit there, and they go from shock to then confirmation of their instincts, because a lot of people have a feeling or an instinct that, "I don't know, maybe it could be better." And then when we cover these things, they're just like, "Son of a gun, that is me. And I've been settling for this standard for years and"-

Jarrod Bridgeman:
Right. Every year, they forget about it, and then they dread it coming up. Oh, big tax surprise.

Casey Hiers:
Yeah. Yeah. The joke is it's not a tax surprise because I know something bad's coming. Either a big refund or a big bill or something, rarely is it consistent. But the things we cover in the course, or some of the high-level signs, again, what are those? Well, if you're filing late and filing extensions, 75% of the time it's BS, and you shouldn't tolerate it. Now, a lot of CPA firms are really good at rationalizing or explaining away why extensions and filing late, and this, that, and the other. Well, it makes sense. And there's this tactic with accounting. It's called lazy accounting is what it's called.

Now, if we can get a little more technical, if there's other businesses and other K-1s and you've got to wait, there can be some situations where, yeah, you might be on a tweaked schedule. But the majority of people, they've come to just, "Well, I guess we're following later, extending again." That's a big no-no.

Jarrod Bridgeman:
Right.

Casey Hiers:
That's a big sign.

Jarrod Bridgeman:
Just pushing off the work because they probably didn't get to it yet.

Casey Hiers:
I Think it can be a variety of reasons. I've heard a lot of different excuses, and unfortunately, most of them don't hold water. As I said, a small percentage, there are unique custom reasons why, maybe from time to time, that happens. What are some other signs? And again, we touch on this frequently in different variations, but QuickBooks are months behind. Profit and loss statement and balance sheets are behind, and your QuickBooks, your financials, and your taxes say different things. They don't tie out. They need to be saying the exact same thing.

So file late, extended behind on those items, and those items, QuickBooks says one thing, P&L balance sheets say another thing, taxes say another. Those are basic signs, and a lot of folks are not even hitting the mark with what they're getting from their tax team.

Jarrod Bridgeman:
Casey, what are some reasons why that may occur, why those three things may not align?

Casey Hiers:
Yeah, there's not one reason, but sometimes it can be the practice owner is at the office at nine o'clock at night, and when they're exhausted and trying to catch up on QuickBooks, and there's just mistakes made. Bad data. Maybe you have a person on your front office that does those things, and it's not done properly. Or maybe your accounting team does them and ... It's hard to say, but I mean, typically it's lack of proactive accounting that is monitored on a monthly and quarterly basis, looking for trends, patterns, and constantly updating and changing those things. That's the biggest.

And we have a saying here, how much accounting costs you is not just how much you're paying your CPA or CPA firm. It's that, plus how much is bad accounting costing you. So yes, you have your invoice. You have to pay them for a service, and that is a cost. But unfortunately, average or below average accounting costs practice owners significantly more. And it's not just with, oh, you owe more or you get refunded more, and your cash flow gets wrecked. But if you don't have accurate data in your practice, so many practice owners are making big decisions. They're buying another piece of real estate. They're maybe thinking about buying a piece of equipment, or a second home, or sending their kids to private school.

And if your tax situation is wrecked and it's affecting your cash flow, the cost of bad accounting is really bad. And yeah, a fair amount that we see missed deductions and improper accounting, and we structure it correctly, and go back and review the previous three years' taxes and find tens of thousands of dollars that were unaccounted for. Yeah.

Jarrod Bridgeman:
Casey, I was going to say, we've seen a few cases here and there where even in one year, 60, 70, 80,000, and taxes actually should have been kept for the owner. And so what kind of difference do you think a chunk of change like that could make for, not only for the practice, but for your life?

Casey Hiers:
Yeah, we've been back and amended taxes, and I'd say 20 to 50 that we found over three years that that happens. I don't know what's ... There's often and just like-

Jarrod Bridgeman:
Infrequently, but I mean, it happens.

Casey Hiers:
More than it should, no doubt about it. And then just again, managing cash flow, having up-to-date data to make decisions. Poor accounting is going to cost practice owners. It's going to be a lot of headaches, a lot of stress.

Jarrod Bridgeman:
So again, it's not the cost you paid the CPA. Now we're talking, it could be 40,000, $50,000 that you should have kept and didn't.

Casey Hiers:
Yeah, no doubt about it. And then beyond that, we talk about this quite a bit as well, Section 179 and shareholder loans. Those things are going to come back to haunt you. Spending money or going into debt is a terrible tax strategy. And if your accountant does a bad job, "Hey, go buy this $100,000 piece of equipment," to help basically the bad accounting. Well, there's another sign, right? It feels like you're getting permission from mommy and daddy to go spend money, but deep down in your gut, you're like, "Huh, this is weird. Why do I have to go spend $100,000 to 'help my tax situation?'" Sometimes there are situations where that is accurate. Most of the time, that is the accountant needing the business owner to bail them out and go spend money to help make their tax situation better. Those are two different things.

Jarrod Bridgeman:
I mean, we've had a couple of CPAs on here over the last couple of years and they've talked about Section 179. It's very much a case of if you need the equipment and it has to be replaced or whatever the case may be, yeah, obviously it's a good thing to use that Section 179. But as you said, if you're using it to try and save a little bit on taxes, supposedly-

Casey Hiers:
Yeah. If you have a tax strategy where you're looking at the next 12 months and you're planning and all those things, yes, that can be important. If you get an email or a phone call in the last quarter of a year saying, "Hey, you need to go spend this money," there's your sign. Your CPA dropped the ball. They did not do a in depth analysis, accurate analysis, and monthly and quarterly monitoring and productive strategy. That's the Hail Mary.

Jarrod Bridgeman:
This isn't like roadwork. This isn't a case where it's like, if we don't spend the budget this year, we'll get less next year from the government. You know what I mean? No, this is your money. It's not a, if you don't spend X amount this year, well, you're screwed next year.

Casey Hiers:
Well, and I've had people that even with shareholder loans, they've joked like, "Oh my gosh, I can't believe people would have those." And then I'll-

Jarrod Bridgeman:
That's a sign, right?

Casey Hiers:
I'll talk to them. They're like, "Oh yeah, that's crazy." And then I'll talk to them a week and a half later, and they'll go, "You're not going to believe this. I have one of those. I didn't know it. Didn't think I had one. Couldn't believe anybody would. And now I do. And I am firing my CPA." And I'm like, "Not yet. We have to go through our vetting process before..." And maybe it's not us, maybe it's somebody else you go to, but bottom line-

Jarrod Bridgeman:
It's time to move on.

Casey Hiers:
... these are all signs. But ultimately, again, it's going to cost the practice owner, and we talk about this, choose your hard. Yes, there might be some time to figure this out and get your arms around it, but do you want to have a terrible tax management situation year after year after year and feel like you're on a hamster wheel? Or do you want to correct the problem, continue to pursue excellence, like you do clinically, and not settle for a poor standard of care of accounting?

That's what it comes down to. But it is interesting that most people, the idea of adding one more thing or project is too hard. And so then instead they're just, again, tens of thousands of dollars typically mismanaged or not recouped or whatever you want to call it. And again, for us, we love helping people save more for retirement and reducing their tax liability. Those two things are so common when we get in there and structure things, just cornerstone baseline foundations of systems and processes save more, have a lower tax liability. That's commonplace for us. We're dental specific. It's all we do. We should be good at it-

Jarrod Bridgeman:
And we are.

Casey Hiers:
Yeah, but that's the definition of, wow, that's beautiful. I'm saving more money for the future, and greedy Uncle Sam's going to get less money. That's the idea.

Jarrod Bridgeman:
Yeah. And that money you're saving, that more money you're saving could be used in various ways; investing or, you know what I mean, maybe replacing that front office person that was kind of being bad on the books to begin with.

Casey Hiers:
Well, you can save it, invest it. And yeah, you're going to get 20, 25% some years, and other years you might get 8 or 10%. But regardless, if you have a good investment strategy and a good investment team, that money can be really grown and used in important ways.

Jarrod Bridgeman:
But instead of doing all that crypto, right, just hoping I hit the lottery on that one.

Casey Hiers:
Dentists love crypto and real estate, man. And listen, real estate can be good, but man, people I speak with in this industry, they have such a singular lens for real estate. And when we break it down, sometimes, yeah, there's some good moves, right? There's some good geographies and situations and good deals, like good for you. It's like an addiction, though.

And some people, if you look back at the last 12 years, they've averaged 4 or 5% return on ... If you distill it down and try to compare, it's apples and oranges, but trying to compare growing money this way, growing money this way, do it all. And so many times it's just, what's my next piece of real estate? What's my next piece, next piece, next piece?

Jarrod Bridgeman:
When there could've been better returns on something else.

Casey Hiers:
Yeah, you want multiple baskets, not one. Boy, real estate is, it's a powerful drug, man. And again, we're not saying real estate's bad, but you need liquid savings, right? You need 401(K), you need brokerage.

Jarrod Bridgeman:
What if I buy stars? You can buy a star and name it after somebody. That's kind of a thing, right?

Casey Hiers:
Get your certificate.

Jarrod Bridgeman:
That's right.

Casey Hiers:
Yeah. But yeah, as a business owner, it's on you. Again, you're the CEO, and if your tax situation isn't pristine and-

Jarrod Bridgeman:
I mean, if you drop the ball, who's there to pick it up for you?

Casey Hiers:
Well, people like to have excuses and blame, right? But ultimately, do not settle for a poor standard of care in accounting. A lot of times, you don't even know if you have or don't have one. But those are some signs that we went through that if there's smoke, there might be a little fire. And again, you're the one that's going to get hurt, your family, you. Your business can put you in a bad situation. Choose your heart.

Jarrod Bridgeman:
Yeah, exactly. As you said, don't settle in the world of dentistry, but do settle when you're dating, is what I heard. Casey, thank you so much for stopping by. We are going to be in Hartford, Connecticut, and Providence, Rhode Island, this week. Have you ever been to Hartford before?

Casey Hiers:
I think so.

Jarrod Bridgeman:
Yeah.

Casey Hiers:
I'm like Where's Waldo, man?

Jarrod Bridgeman:
I know.

Casey Hiers:
If I had the dots on a map, I have flown in and out of Hartford, Connecticut.

Jarrod Bridgeman:
That'll be pretty exciting to get there.

Casey Hiers:
I'm frustrated because it's like an hour and a half from New Haven, which is the pizza capital of the world, and I was going to go grab a couple slices. However, a three-hour round trip isn't going to fit into my schedule. So there's your no for me.

Jarrod Bridgeman:
Keep it classy. Thanks, Casey.

Announcer:
That's all the time we have today. Thank you to our guests for their insight and for sharing some really great information. And thank you to you, the listener, for tuning in. The Millionaire Dentist Podcast is brought to you by Four Quadrants Advisory. To see if they might be a good fit for you and your practice, go on over to fourquadrantsadvisory.com and see why, year after year, they retain over 95% of their clients. Thank you again for joining us, and we'll see you next time.