Deciding which tasks to outsource to an accounting services for dentists and which ones to keep on your payroll is a common predicament for many growing dental clinic owners. Realizing that you have outgrown your current internal capacity is often the turning point where outsourcing specialized parts of your accounting or financial management becomes essential.
When you are in this predicament, remember, what you choose to outsource vs to keep in-house is a decision that has the capacity to impact your clinic’s financial future for the next five to ten years. Because, having the right arrangement within this hybrid accounting system means you can either accelerate your growth through strategic financial insights or risk stagnation due to mismanagement, if done incorrectly.
So, how do you make the correct choice? While navigating this question, the rule of thumb is to have clarity in handling day-to-day financial operations internally. Delegate the more complex, strategic, and regulatory aspects, such as tax planning, consulting, and financial planning for dental practices.
However, this is not a clear-cut solution as the right mix for a startup of dental practice differs significantly from that of a multi-location group. What works in year one will likely cause bottlenecks by year five.
This blog helps you navigate this complexity by laying out a framework for your practice, outlining exactly which functions to delegate and which to manage internally. It also presents holistic guidance and factors at play that every clinic owner should know when distributing the accounting workflow for their clinic.
What Is the Difference Between Outsourcing vs In-House Dental Accounting?
Before bifurcating your accounting workflow, it’s important to understand what each accounting approach entails. To help clinic owners understand the intricacies that come with each of the accounting approaches.
The difference between outsourcing and in-house dental accounting lies in who performs your financial tasks. In-house means relying on dedicated employees within your clinic for direct control, while outsourcing contracts to a third-party firm to handle your finances, offering specialized accounting services for dentists and cost efficiency.
Both of these different approaches to accounting entail different forms of financial requirements, overhead costs, and operational management requirements. The following table lays out an in-depth differentiation of both of these accounting experiences for a dental clinic:
| Feature | In-house Accounting | Outsource Accounting services for dentists |
|---|---|---|
| Location & Structure | In-person presence ensures direct personal interaction and assimilation | Remote online experts to ensure virtual operations. |
| Expenses & Effectiveness | Greater fixed expenses: Salary, perks, taxes, training, and equipment cost ($65,000-$72,000 or more per year per individual). | Less variable expense: Flexible payment for services rendered, typically 4-8% of collections, turning fixed into performance-based expenses. |
| Expertise & Focus | Generalist skills; training required continuously to keep updated with dental coding and insurance updates | Specialized dental experts devoted solely to RCM tasks. |
| Operational Control | Full, direct control of workflows, processes, and patient communication tone. | Less direct, relying on established firm protocols, though often better for reducing denial rates. |
| Data Security | Your responsibility: Your responsibility: Involves handling your IT security, firewalls, and healthcare compliance. | Firm’s responsibility: Unique, high-end security services (e.g., encryption, artificial intelligence monitoring, compliance checks). |
| Staffing & Continuity | Vulnerable to staff turnover, sickness, and vacations, which disrupts revenue flow. | No staff turnover concerns: Reliable year-round support with backup personnel immediately accessible. |
| Technological Implementation | You acquire, install, and maintain the PMS software, hardware, and cybersecurity measures. | The firm supplies sophisticated AI technology, automatic posting, and cloud analysis. |
| Cash Flow Impact | Potential for cash flow problems; delayed claims management during peak periods. | Efficient cash flow: High clean claim pass-through rates, usually resulting in an average accounts receivable period of less than 25 days. |
Framework for Choosing Dental Accounting Functions to Outsource or In-House
Having a framework to refer to when deciding which parts of the accounting workflow to outsource and which to keep in-house is essential. Adopting a systematic method enhances the management of your clinic’s finances.
Having a methodological approach also allows you to navigate your clinic’s dynamic accounting requirements because the framework is able to evolve alongside your clinic’s changing financial management standards. The following section lays out a decision-making framework to help you navigate which accounting works to outsource and which to keep in-house:
Criteria for Strategic Evaluation (The “Why”)
First, assess the practice’s current situation and future goals to determine whether outsourcing is necessary.
Complexity of the Practice: There are some clinics operating from just one office and having a fairly simple structure, which can manage on its own. For clinics operating from multiple offices, working with a DSO, or running a specialist practice, outsourcing companies can provide more complex services.
Internal Resources: Assess the efficiency of your internal resources. Do you have a dependable and experienced in-house bookkeeper or does your office manager struggle to take on more than patient management?
Cost Effectiveness: Compare the overall cost of hiring an employee within the clinic, considering salary, fringe benefits, employment taxes, and software subscriptions, against the stable aspect of outsourcing using a fixed fee payment system.
Future Goals: Do you want to merely manage the information generated each day, or do you need financial advice for expanding your clinic?
Function Analysis (The “What”)
Assess the risks, complexity, and frequency of each task to decide whether they should be performed by yourself or outsourced to accounting services for dentists .
| Accounting Function | Ideal For | Why? |
|---|---|---|
| Daily Sales/Cash Posting | In-House | The posting process needs to be done in-house due to the need for immediate and real-time integration with dental software. |
| Accounts Payable (Bill Pay) | Hybrid/Outsource | It can be outsourced but better managed by scanning and approval processes in-house. |
| Payroll Processing | Outsource | Due to the high potential risks involved regarding tax penalties and errors, it’s best outsourced with specialized automated solutions. |
| Bank/Credit Card Recon | Outsource | High volume, low risk, and best done by specialized computer technology. |
| Financial Statement Prep | Outsource | Need to utilize specialized expertise in dental CPAs with experience in analyzing and bench-marking KPIs. |
| Tax Planning/Strategic Advisory | Outsource | Needs expert level advice on tax planning and management for business scalability. |
| Inventory Tracking | In-House | Requires frequent updating based on the rate of usage by the dentist. |
Outsourcing Decision Checklist
The accounting tasks you decide to outsource should meet certain criteria. The first criterion is the need to incorporate external accounting services for dentists due to a lack of resources or expertise within your clinic’s current capacity. The easiest and straightforward approach to have a safe approach around outsourcing is through a systematic checklist, like the one portrayed below:
- Is it confidential? While sensitive payroll data is often kept close, high-quality, secure outsourcing partners can often manage this with better compliance than an untrained internal employee.
- Is it routine? Outsource high-volume, low-judgment tasks, such as bank reconciliations, to reduce mundane tasks for your team and leverage technology.
- Is it strategic? Outsource tasks that require high-level analysis, such as tax strategy and industry benchmarking, to maximize profitability.
- Does it require clinical context? Keep clinical supply tracking and patient-specific billing queries in-house, as these require immediate, day-to-day interaction with the clinical team.
Implementation Phase
Successfully transitioning to a hybrid or fully outsourced model requires a structured approach to ensure no data falls through the cracks.
Map Current Workflow: Document exactly how money enters and leaves the practice. This includes understanding the flow from patient payment in the operatory to deposit in the bank, and from invoice receipt to final payment.
Roles Defined: At the outset, determine what roles the internal team must play, and make sure they do not include tasks that they are not comfortable doing or that they are unable to perform, such as complex accounting tasks. Set up effective means of communication with the external team.
Data Transfer and Transition Process: Arrange cloud-based channels for transferring financial information so that sensitive information does not get emailed around. The process of data migration should be done step by step to ensure accurate and seamless data transfer.
KPIs and Review Process: Some of the KPIs that will help gauge the effectiveness of the outsourced arrangement may include days in receivables, payment collection rate, etc. Conduct monthly meetings with the external team to examine the performance reports and address any discrepancies.
Frequently Asked Questions from Dental Clinics Before Outsourcing Specific Accounting Tasks
Since outsourcing can be a major change in a clinic’s current workflow, most practice owners have their own sets of valid concerns regarding security, expertise, and operational expertise. Below are answers to some of the most common questions dental clinics ask when evaluating the shift from complete in-house to outsourced accounting.
Is there any revenue leak due to lack of consistency in our bookkeeping process?
It is not uncommon for a lack of consistent processes in bookkeeping to directly result in revenue loss within a dental practice. Without proper processes, insurance payments can be lost, patient payments missed, or invoices paid twice. Consistent processes ensure this does not happen.
Will a dental CPA be able to give us a more proactive approach when it comes to taxes compared to our current accountant?
A dentist-focused CPA will certainly have the advantage of knowing about unique metrics and benchmarks related to the dental industry, something that a regular CPA may not have. This means they can give us a more proactive approach by giving us recommendations on how we can achieve the best possible results when it comes to taxes.
Is too much resource being utilized for the training of accounting employees in-house?
Often, clinics overlook that the cost of training in-house accounting staff involves more than just their salaries. It also includes the time they spend, subscription fees for the software used, and potential errors caused by their initial lack of expertise. If they leave, then the knowledge void created will have an impact on the flow of cash. But outsourcing eliminates this hassle.
Is there a necessity for a division of responsibilities for both outsource and in-house accounting departments?
A division of responsibilities is necessary for both the purpose of internal control and risk management, regardless of whether an outsourcing approach is adopted. In order to safeguard against any possibility of embezzlement or theft on part of employees, it is wise to leave in-house staff responsible for physically handling transactions (like dealing with payment transactions at the front counter). Outsourcing will take care of reconciliation and AP.
Key Takeaways
For dental clinic owners, the ideal accounting approach involves managing all low-risk activities that are performed regularly within the practice, such as cash postings, inventory management, and bill approvals. Meanwhile, higher-risk processes like preparing payroll, reconciling banks, preparing financial statements, and tax planning should be outsourced. The best dental accountants in the market can handle these tasks efficiently.
With the help of the above criteria, it is easy for you to decide which services should be outsourced while others should be done in-house. You can avoid making some common errors that other dental offices have made in the past by looking at the complexities of your organization, your costs, your weaknesses and strengths, and your goals. Outsourcing allows for cost savings, improved cash flows as a result of faster reimbursements, and increased safety through technology.
