As small group practices add new locations and build the infrastructure needed to become a dental support organization (DSO), they need to look closely at their accounting practices.
Using best accounting practices for a DSO is especially important if the group plans to sell in the future. Like selling a home, practice owners need to make their DSO appealing to buyers.
However, instead of upgrading home appliances, you’ll want to update business accounting practices to draft a clean, reliable blueprint of your practice’s financial stability.
And while brand-new appliances may appeal to homebuyers, potential investors want finances with history.
This means you should ensure you use the appropriate accounting practices for years before seeking a buyer.
In accrual-based accounting, revenue is recorded when a transaction occurs (is “earned”), not when it is actually paid.
Including accounts receivable and accounts payable on the statement enables your DSO to predict future cash flow and financial gain–profitability.
Larger companies always use accrual-based accounting. The goal of accrual accounting for dental groups or DSOs is to create quarterly financials for comparison and a 12-month rolling period to provide an accurate financial picture.
From this, you and potential buyers know if your DSO is financially stable, consistently profitable, or growing in profitability.