430: Your Practice’s Most Important Numbers to Know

Morgan Hamon, president of HDA Accounting Group, is on the pod! HDA is a dental-specific accounting group, and knows dentistry inside and out. Kiera and Morgan discuss profit margins, benchmarks, and AR aging, plus why having good financials will help you make smarter decisions.

A profitable practice is more helpful for patients, more secure for team members, and less stressed out in times of uncertainty. Don’t run your practice blind; get a good CPA.

About Morgan: 

Morgan is a graduate of the University of Arizona school of business. Following graduation, he was commissioned as an officer in the United States Navy and served for over ten years as a Naval Aviator flying carrier-based F/A-18 Hornets. During that time, he deployed to Persian Gulf and flew combat missions over Iraq in support of Operation Southern Watch. He also served as a flight instructor and landing signal officer for newly winged Naval Aviators transitioning to the Hornet, training pilots in air-to-air combat and landing on aircraft carriers.

After leaving the Navy, Morgan obtained a master's degree in accounting with a concentration in taxation from Metropolitan State University of Denver.  He is a Certified Public Accountant (CPA) and is the co-founder and President of HDA Accounting Group leading a large staff of professional accountants delivering a variety of financial accounting and tax services.   Morgan regularly conducts practice profitability advising for over 500 dentists nationally, helping them analyze their financial data and identifying strategies for profit improvement.

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Podcast Transcript:

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0:00:05.7 Kiera Dent: Hey everyone, welcome to the Dental A Team podcast. I'm your host, Kiera Dent, and I have this crazy idea that maybe I could combine a doctor and a team member's perspective, because let's face it, dentistry can be a challenging profession with those two perspectives. I've been a dental assistant, treatment coordinator, scheduler, filler, office manager, regional manager, practice owner, and I have a team of traveling consultants, where we have traveled to over 165 different offices coaching teams. Yep, we don't just understand you, we are you. Our mission is to positively impact the world of dental, and I believe that this podcast is the greatest way I can help elevate teams, grow VIP experiences, reduce stress, and create A teams. Welcome to the Dental A Team.

0:00:51.0 KD: Hello, Dental A Team listeners. This is Kiera, and you guys, I am so excited. It's always fun when I'm getting ready to start a podcast, and the person on the other side of it is somebody that I have just idolized. I refer to their company all the time, and then I'm like, "Oh my gosh, it's you," and that was what just happened with this guest. [chuckle] Today, I'm bringing you guys Morgan Hamon. He is the President of the HDA Accounting Group.

0:01:13.3 KD: So, you guys know we have a lot of accounting groups that we work with at the Dental A Team. I'm really pro vetting them and finding out... One of the things I love about HDA is they literally have incredible forms for profitability of a practice, also, watching all your different overhead, and you guys know we're super, super pro. But something really fun about Morgan before we bring him on is that he is a graduate of the University of Arizona School of Business. So after that, he actually was commissioned as an officer in the United States Navy and served for over 10 years as a naval aviator, flying carrier-based F/A-18 Hornets. So I'm dying to find out about that, 'cause he was deployed to the Persian Gulf and flew combat mission over Iraq in support of Operation Southern Watch. Insanely cool stuff. So not only are you a CPA... And sometimes, CPAs can be boring people, so the fact that you did this, and I say that with love to all my CPAs, I was almost fired from a CPA firm once upon a time 'cause I talked too much. So I'm super jazzed. So Morgan, welcome to the show today. How are you?

0:02:09.8 Morgan Hamon: Thanks, I'm doing well. I appreciate being here.

0:02:12.0 KD: Yeah, awesome. Okay, so I brought you in. You are with HDA... CPA, which is amazing. We have a client in Hawaii right now looking to work with you guys. Several of our clients work with you. So, you guys, Eide Bailly, those are my top two CPAs profile, top three that I usually refer. So I'm super jazzed to have you on the podcast, but before we dive into CPA stuff, which I'm always excited about, because I feel as a business owner, that was where I was the most weak, and so I'm excited for you to share some tips and ideas, but tell us about flying... Being... Flying Hornets. Just kinda give us a quick... Like, one or two stories, 'cause I'm dying to hear about that.

0:02:48.4 MH: Sure, yeah, so I... My family is all CPAs: My dad's a CPA, brother, cousins, and I... That wasn't what I wanted to do growing up. I wanted to be a fighter pilot, so I went off to college. Navy paid for it, which was a super deal, and then I owed 'em some time after that, of course, so off to flight school... Did an operational tour in F-18s as a West Coast guy, and that's where we went over to the Persian Gulf over Iraq and all that. And after that, I was an instructor pilot on the F-18. So that was... Definitely my favorite part of my service was teaching the young pilots how to actually use the F-18 as a weapon system and land it on the carrier, which was probably... Obviously my favorite part of naval aviation. It was pretty exhilarating. Could be incredibly stressful too, especially at nighttime. And I think... There's definitely a few stories where I was just absolutely terrified, [chuckle] because the weather was terrible, there's nowhere else to land, the ship's rocking around, and you literally have to figure it out or you're not gonna see the next day.

0:04:01.8 KD: Yeah. That would be terrifying.

0:04:02.8 MH: And it's all gonna be happening in seven minutes.

0:04:06.8 KD: In seven minutes.

0:04:07.8 MH: [laughter] It's very... So it really... It grows you up really fast, and I think... After close to 11 years, my wife and I were ready for a little more normalcy in our life, so... Moved off to private industry. My wife's a nurse; she's been in healthcare for 25 years. But in terms of... What the Navy did for me and how I apply that to business is, you learn to assimilate a lotta data, complex data, and sorta hash out what you really need to know so you can execute in a very timely manner. So, there's a lotta noise. You learn how to disregard that and boil it down to some key action items that'll get you through the mission, and that's how I approach business ownership myself. And I'm definitely not the typical CPA. My value is not that I can know... Like, I'm the best accountant in the world; far from it. But I do know how to run a business and systemize. And being a business leader is a completely separate skillset from being a clinician, and I see that. I get it. And the reports that you mentioned, those full-color dashboard-style reports that practice profitability analysis, that is straight from my Navy background. It just serve up what you need to know: Here it is. Here's the checklist, so to speak, so that you can make it happen.

0:05:47.7 MH: So that's a bit of my background and where I came from. I cofounded HDA Accounting Group with my dad Ken in 2009. So we were the two owners for a long time, and then... For your listeners out there that perhaps use us, they'll know Courtney for sure. She's our tax partner. We made her a partner just over three years ago, which was probably one of the best decisions we ever made. She's wonderful. The client's love her. So there's three owners, I'm one of 'em, and I spend the bulk of my time meeting new doctors, doing what we're doing right now, and then spending time with our clients trying to help 'em make money, make more money.

0:06:28.5 KD: Yeah, for sure. That's fun. I love that you shared... I mean, thinking about trying to fly and land a plane. One, that would be hard, and then try to put it on a moving target, and wish you luck, and if you don't make it, you're dead, and so, just the... I was like, "Wow, that's kinda like tax deadline, right?" Like, so stress advance to get there. [laughter]

0:06:46.1 MH: Yep. That's... It puts stress in perspective. [laughter]

0:06:49.8 KD: I bet it does. It's like...

0:06:51.0 MH: Your hardest day in accounting. Death is not on the table.

0:06:54.1 KD: Okay, so... This might not be something you wanna talk about, so we can always cut this part of the podcast if need be, but were you ever really in combat, or did you get to primarily be away from that? So, thank you for your service. I'm just always curious, like, how was that?

0:07:06.4 MH: It was limited exposure. So back then, when I was there, it was still Operation Southern Watch, so it was not full-blown conflict. However, they did not want us there, they would shoot at you, but they were scared to turn on their radars, so they would not typically engage with missiles, the more deadly type of anti-aircraft threat that we would face. They're too scared to turn 'em on, 'cause we would have countermeasures to deal with that. So they would just... They would shoot artillery at us, and so, you were just... You could barely see... You knew it was there, and it was sort of concerning, 'cause you're a couple hundred miles into Iraq. If anything happens, you're not gonna receive a warm welcome, if you had to eject or something. So it always definitely had your attention. I remember my first mission; it was at night. I was... I had butterflies, just 'cause we're almost all the way to Baghdad at night, you're on night vision goggles, it's a big strike package; the biggest thing I'd ever done before; you're aerial refuelling over Kuwait, both inbound and outbound; a lot going on.

0:08:16.9 MH: And... While we're on this topic, before these types of missions, you're in a brief for two to three hours ahead of time. There's a lot of moving parts; a lot of things you really need to know. But when you get in the jet, you have a kneeboard card where you write stuff down. You have a strike packet, but you've got a very finite amount of time to put some notes, and that's where you get really good at cutting through the noise and putting down this... "No matter what, I need to know this." And that is how I approach the business, with that report we prepare monthly, but also... When the COVID crisis went down last March... I think we all remember it very well. It was very scary, and we didn't know what was gonna happen. We're getting shut down, we got sent home. Our dentist got completely shut down.

0:09:16.4 MH: So I... When you're stressed, one thing I learned in the Navy was, you need to... They had a term for it, compartmentalization. You need to put that in a compartment, and then get out your compartment, that is your training and what you know how to do, and you just gotta focus on doing what needs to be done when it needs to be done. And so, I started putting out content. I use Constant Contact to reach out to all our doctors, and just giving 'em updates on the crisis, saying "This is all noise, concentrate on this, do this," like PPPs coming on, this rapidly changing massive government program... At the height of the crisis, I was putting those out maybe every third day. There were times when I was getting 40 to 50 emails an hour from clients.

0:10:13.9 KD: Wow, I'm sure, 'cause it was terrifying.

0:10:15.8 MH: Yeah, everyone's like, "What do I do?", so... I would hear from people like my friends. They're like, "Oh, you know, the COVID, you're getting lots of house projects done." I would say, "No!" [laughter]

0:10:25.6 KD: "No! I'm putting out fires!"

0:10:26.5 MH: "I'm working! [laughter] I'm working 12 hours a day." I've never worked harder. So... But that was how I generated those newsletters was, cut through the noise, do these action items, and then stand by. And... So that was... I have a lot of very positive feedback on that, and I owe a lot of that just to my Navy experience, 'cause that's how we did things.

0:10:49.7 KD: Sure.

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0:10:52.2 KD: Are you guys sick of trying to figure it out on your own? I know I am. When I'm trying to run a business, sometimes, I just think like, "There's got to be a better way to do this." And so for me, my answer has been to find someone who's done it and does it really, really, really well. I'm talking the best of the best of the best. I want someone who's been in my shoes, somebody who understands what I'm going through. When I was looking for the consulting business, I found a coach who literally has run a consulting business. Well, that seems like the perfect fit. So you guys, right now, we have a few spaces open in our Platinum Consulting. That is in the consulting where we actually come to your practice. We help you get systems implemented. We don't just tell you what system to implement, we actually implement them with you and for you. You guys, it is one of the best investments I've ever made is to hire a coach who understands the business I'm in, who's lived it, who's done it. And that's what we in the Dental A Team do: We literally, physically fly to you. So if you're sick of trying to figure it out on your own, if you just want somebody who understands you, join our Platinum. I'd love to have you. I'd love to have our consulting team come out and see you, be in your office, be with your team, and truly help you get on to the easy path of dentistry. It doesn't have to be hard. So join us in the Platinum. We'd love to have you.

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0:12:12.3 KD: That's such an interesting way, Morgan, of just kinda how you're combining your worlds. I mean, my undergrad was marriage and family therapy, and then I now coach a bunch of dentists, and I'm like, I feel like half the time, I'm talking to you about your personal life. Tell us about your business. [laughter]

0:12:26.6 MH: I'm sure that comes up.

0:12:28.9 KD: So, I am curious how you talk about... I love that you brought up the examples in the conversation of... That you had to just cut through and see the things that are the most important. You have a two or three hour debriefing, and you've really gotta know your most important things, because honestly... Truly, at that point, in my opinion, it is life and death. And so, I would imagine, not that we're gonna have the same comparison with a practice of life and death, sometimes, it can get that way. What do you feel are the most important metrics or numbers or data that a practice should be knowing? You have all this accounting information, you work with hundreds of dentists... Obviously, I've got my opinions, but... This is where you're the expert on this. So tell me kind of what are the main key factors that, if I could only watch so many items on my practice, what should I really be watching to make sure that I'm a successful practice?

0:13:14.1 MH: So... First and foremost, the number that I think... Not every... Just practice owner, any business owner. What you need to know, I think, at all times is, what is their profit margin? And I hear stories from clients. They're at Starbucks or whatever with their colleagues, and they'll use someone else, and... As an accounting firm, and they'll ask their friend, "Well, what's your overhead in your practice?", and they'll say, "I don't know." And... They're horrified. Like, "How could you not know what your overhead is?" So first and foremost... And just to clarify, as a CPA, I think in terms of margin. Sometimes, dentists think in terms of overhead. We're kinda about the same number: A 40% margin, 60% overhead, so you have to know your profit margin. And that's not just being greedy or just trying to count the dollars. If you think about a business, owning a business is difficult. It's stressful, it's risky... All of our doctors signed a personal guarantee on probably a half a million dollar note or thereabouts. If they bought the real estate, it could be a seven-figure note; that's very stressful.

0:14:28.1 MH: So, if you're... And then you have employees, [chuckle] which is... If we're gonna talk current events and some frustrations, we could definitely talk about some staffing, but... So you have all these responsibilities and challenges and risk. If the profit is not there, why are you doing this? Why own a business if you do not receive the corresponding financial reward that should accompany taking that risk and taking on that workload? So profit margin, hands down, you have to know that. Then you also, I think, need to know what's influencing profit margin, and that is... The equation for profit margin, okay, is total revenue, less expenses divided by total revenue. So, there's two sides of that: Revenue and expenses. So what impacts profit? Well, we can definitely look at the expense side. How much are we spending? Do we have any categories that are maybe... Maybe we're overspending? So that's one thing to consider.

0:15:33.7 MH: The other thing to consider is the revenue. Are we collecting enough money? That can be influenced by your fee schedule. Inflation is real this year. Something to consider. But I think the bigger challenge specific to our industry, the private dental practices, is collections. If you do the production, and that doesn't ultimately result in some timely collection, that is going to erode the profit margin very quickly. So, if profit is low, I think people are predisposed to ask "Where am I overspending? What's preventing me from having that?" And in my opinion, more often than not, it's because they're not collecting money. And we see that because... Most CPA firms are pretty tax-oriented. They wanna do a tax return, maybe do some tax planning. The bookkeeping is sorta "Eh, as long as somebody does it and gives us a P&L, we can do the taxes." But that's not how we do. We certainly do tax planning and tax returns, but we have to have up-to-date data all year. And the intent to that is to... If we have to have this data for taxes, why not use it along the way and make as much money as we can?

0:16:48.3 MH: So, where I'm going with this is, if you have a CPA who's fairly tax-oriented... All of our clients and your clients, they have pass-through entities, whether that's an escort partnership or sole proprietor, so they pay tax on their individual or joint personal tax return. That's done on a cash basis. Because of that, most CPAs, they don't care about AR, or product... Whatever is in Dentrix or Open Dental, forget it; they don't care, 'cause it doesn't impact their world. Every month, we ask for the total production collection, and I wanna see what the AR aging looks like. Not that it has anything to do with... It'll never hit their books. It'll never hit their taxes. But it is on page one of our practice profit analysis, because if we're trying to diagnose a low profit margin, we have to know if the practice is collecting money, and the AR aging is what's gonna tell us that.

0:17:44.5 KD: Yep. Amen. [chuckle]

0:17:46.1 MH: So, that is... It's profit margin. You have to know some expense benchmarks, and you have to watch the AR aging. Those are the top three.

0:17:58.3 KD: I totally agree. And I love that you said that, because, ironically, I just came back from a practice, and they had multiple partners in there, and I didn't feel like I was super savvy on business at all when I started. I think most people, who's our businesses... I didn't know what a KPI was, I didn't know what overhead meant, I didn't know... And then, I always was puzzled. I could be making "so much money", but I would never see any of this money, and I think a lot of us get puzzled with that, and we say like, "Well, I'm running this much revenue, but why do I feel like I'm always broke or I don't have any money?" I hear it constantly.

0:18:30.0 KD: And so, I was just in a practice the other day, because my first two years of business, I literally made less than a Starbucks barista, and I was flying all the time... I would travel over 300 days a year. And I'm like, I'm fine to be a Starbucks barista, if I'm working half days, I'm home everyday, I'm going to yoga every single day... I'm totally fine with that salary. But I'm working 90 to 100 hours a week, plus I'm traveling, I'm destroying my body... Where is this money going? It doesn't make any sense. And so, that's where I really got fascinated with overhead and really learning more about the business. But I was just at a practice, they have five partners, and they... I asked all of them, I said, "What's your overhead?" And none of them could tell me. And then they told me they're only checking their margins and their profitability about once a year. And I said, "What?"

0:19:15.6 MH: Yikes. [laughter]

0:19:16.4 KD: That is where I feel... And so, it was interesting, because we were hired to come help their team and to help all these different pieces, and I thought, "You know, that's really interesting, because they're having a hard time making decisions and agreeing because they don't have the dashboard of information that they need to have." And that's what I feel your KPIs, your overhead, having really, really good financials of a practice help you make smarter decisions, and that's what I'm about of. We can make decisions all day long, but why fly blind? For you... Let's go back to flying planes. You can fly a plane blind; you absolutely could. You're probably not gonna get great results with it, but you could do it. So...

0:19:50.1 MH: It's gonna be a short, short duration flight.

0:19:51.1 KD: [laughter] Right, which I also think is very similar to running a practice blind, is it can be a very short duration. And so, watching those numbers, I also think it gives you less stress as an owner. It helps you be a better boss, because you know, "Can I give this person a raise? Can we hire another person? Also, are we collecting the money?" Doctors, if you're producing, you should be collecting money for what you're doing. I would hate to go do a job... Morgan, I'm sure you're the same way, go do a job where I do the work, but I don't get paid to do the work. That just feels... Insanity to me. And so, I love that you guys, as a CPA firm, make sure that your practices know these numbers; it's right in line with what we do. All of our clients have to know their numbers, and if they don't know their numbers, they're going to learn them very quickly, because me as a consultant, me as a coach, I'm flying blind if I don't know what dials to turn. You're constantly turning levers hoping to fix the problem, but not ever addressing the problem at the core.

0:20:42.8 MH: I totally agree, and... Every time I have a visit with one of our doctors... And I don't hold myself out there as a coach, but any time we go over the practice profitability analysis, sometimes, they don't... It sorta head that direction a little bit. And... Because the answer... Sometimes, they can see the numbers, but they don't necessarily know how to tie it together, and so, I try to have... Break it down into one or two action items, because it is... A dental practice owner, they really have finite time to work on their practice. They have their time as a clinician, time as the business leader, time as... Should carve out some time to be the CEO. But there's finite time. So, if we're gonna dedicate some of that valuable time to improve profit, I think they need to be given one or two key action items; use that valuable time on this, 'cause it'll make a difference. And so, that's... Again, another added benefit of having some data is you can, I think, be more effective in your limited time.

0:21:52.9 KD: Agreed. And... I will say that I love this, because... Guys, I was like two years into being an owner before I even knew I should be looking at these things. Also, as an office manager, I did not know I should be looking at these items and that I could directly impact them as a team member. I didn't realize, as a team member, I could be impacting overhead and that I could help with profitability of the practice, because I will promise you team members, a profitable practice does more things for their teams. They're able to help more patients, and they're able to be more secure with their employees. Those offices who are highly profitable, we're not stressing as much through COVID; their teams were more secure. The offices who are not profitable, they were in hot water, they were scared, they were closing down doors, they were making very rash decisions. And so I think it just helps you keep, like you said, a more level head.

0:22:34.7 KD: So, I think it's a big, important step of, number one, making sure you have a really good CPA. And you can outgrow your CPAs. I talk to a lot of clients, and sometimes, they outgrow their CPA. Maybe their friend, their neighbor... Guys, that's who I had. I had a neighbor friend who was helping me at the beginning, and I outgrew that CPA. They didn't know how to run a multilevel business with lots of different factors that I was bringing in. They had never had a consulting client. And so, making sure you work with a CPA who knows your world is one of the... The biggest things that I would suggest, and it's hard, 'cause sometimes, we go to church with them, or we see them at the little league game. But I'm really big on, if my CPA is gonna give me my guide for my business, I think it is my moral responsibility to make sure I have a CPA that I can trust, that gives me the correct information in a timely manner, and that way, I can actually steer my business in the correct way versus just guessing all the time, so I don't think it's ever too late to get a really good CPA and to use that, and that's something I love about HDA.

0:23:32.7 KD: You guys have some of the most gorgeous reports. The reason I found out about you guys as a company is because one of my offices came to me with all the reports when I was asking these... The items of "How's your AR? How's your overhead?", and they're like, "Actually, this is what my CPA gives me," and I was like, "Who is this company?" And I literally... I ripped your name off the top of their report and stuck it in my planner, my little notebook that I had from the office, and I'm like, "I need to look into this company." So that's how I actually found out about you guys. So I will say, your reports are stunning. So, Morgan, if people want to just even talk to you guys to see if you're a good fit for them, they're wanting to know more about their business, making sure they know how profitable they are, how do they... How's the best way for them to connect with you? What do you guys do for dentists?

0:24:14.4 MH: So, I visit with all the dentists, if they're looking to make a change. I'll do those personally, and they could either email me or, on our website, there's multiple places where they can set an initial consultation. I am a firm believer, so myself, my leadership team... All our calendars are public on our website, so there is no gatekeeper. If somebody wants to... Has a question and wants to run it by me, for example, once they're a client, they can email me. We're very serious about email response, like, same day. Sometimes, you need to talk those. Sometimes, an email doesn't do it, so we have these 10-minute, 10, 20-minute appointment blocks that anybody can set anytime something's on their mind, so you can also do that with the initial consultation. Those come to me, and I do those. So my email, it's just... It's easy, it's [email protected]. And our website...

0:25:09.4 KD: And I wanna make sure you guys got that. That's H as in house, D as in dental, A as in an academy, H-D-A. So that way, it's really clear of this company's name.

0:25:18.2 MH: Yeah, hdagroupdental.com, that's also our website. So yeah, they could email me, jump on there and make an appointment, I can visit with them. Our... What we specialize in, and this goes along with the discussion you just had on knowing your business, we're very disciplined in staying in a very narrow niche, 'cause I get asked all the time, "Oh, why don't you... Are you gonna do a veterinarian, and... These other verticals?" And the answer is absolutely not. We know dental practices inside and out, and when you're looking through the soda straws, so to speak, in a very particular niche, we have a deep knowledge just in this one industry, and it makes our... It puts us in a position to really be able to help our clients very quickly and very meaningfully. I can't imagine being a CPA in public practice where you just sorta have one of everything. I just can't think of a worse existence. So we're very disciplined in staying in our lane. It is private dental practice owners. Those owner-operator practices, that's who we support, and we have clients just about every state, and... So we're real adapt at working remote.

0:26:28.5 KD: Cool.

0:26:30.5 MH: And staying in touch and making sure that the clients know we're responsive to what's on their mind or what they need.

0:26:37.7 KD: That's amazing. I really love that. And just to clarify, guys, I did not know accounting world, I still look like I do. So, Morgan, correct me if I'm wrong, but there's bookkeeping, which kinda reconciles your books. Then there's your CPA, who does tax filing for you. They also make sure that you're within... You guys have it in the correct categories. And then you have your tax planning, which is a completely different world. And then you can also have a financial advisor as far as investments, your 401Ks, your trusts, your funds, all of that. Is that correct? Have I gotten this...

0:27:07.5 MH: Yeah, I... No, you've got it just right, so... And... It's actually a really good thing to discuss, and I talk about it on... Every time I meet a doctor for the first time, I try to explain this very carefully, 'cause one question I'll get is... Alright... It's... Whether it's our firm or anyone else, they'll... The question I will get is, "So if HDA... If I decide that's a good fit and I come with you guys, who's my person?" And the answer is, there is not one person; you actually get three, because one person can't do it all. So it starts just like you said, the bookkeeping... Sometimes, that gets called accounting too; it's really referring to the same thing. It is tracking all the dollars, doing all the reconciliations, preparing financial statements. When that is done, every one of our clients gets assigned a staff accountant. And we like to have a lot of permanence there as much as we can, so they just get to know the practice inside and out, we know what they're buying and everything. And they... So the coding's all very accurate. And the clients get to know the staff account, but that's all gonna be transactional-related. They're gonna do the reconciliations, prepare the work papers, assemble the practice profit analysis, and deliver it.

0:28:17.8 MH: When the client has questions, like you mentioned earlier, "Why do I feel like I'm working myself to death and the bank balance is flat?" That is not going to be a question for the staff account. That's with me, or Lauren Dunn, also a CPA former auditor... Really excellent accountant; better accountant than me. She's a fabulous accountant. So she and I do the practice profitability analysis calls and talk about the financials. Then, as you pointed out, when it comes to tax, totally separate skillset, and at our firm, that's led by Courtney, our tax partner, our team of senior tax advisors. And that... They do both the tax returns and the tax planning. So those two are very separate, but they're done by the same folks, because it requires that skillset. So the tax planning is absolutely the most challenging thing we do, because, as you know, revenue and expenses change every month. It's a very equipment-heavy industry. So somebody finally pulls the trigger on that Xerox machine they've been thinking about in November. That can change things overnight in a hurry. So, we look at everybody's tax situation quarterly. And in quarter one, we don't really know what's gonna happen during the year. Our dentists don't... If I could pick... Accurately choose every peak and valley on a client's...

0:29:43.6 KD: [laughter] You'd make a lotta money.

0:29:45.5 MH: On a client's revenue curve, I wouldn't be a CPA, I would day trade and be rich.

0:29:49.3 KD: I would too.

[laughter]

0:29:51.3 MH: So... But what we can do is just take a look... A reasonable look, how is the practice doing at this point, and what is a reasonable estimate that we could make to keep people on track, avoid those under-deposit penalties. So that's quarter one and quarter two. Quarter three, which we're just wrapping up now, and then quarter four, that is where we have much more hard data, where we can do some more accurate forecasting to see where we are, and then just make sure we're checking the box on all those tax strategies. We don't wanna leave any money on the table. Not necessarily, but we wanna make sure everybody's prepared, so we're having those discussions now. We're letting people know now what we think the 2021 tax liability is gonna be like seven months in advance, so there's lots of time to plan. It's never awesome news. Every successful practice, you're gonna have some type of effective tax rate no matter who you are, and if you're making big money, those can be big numbers. We do what we can to mitigate that and avoid as much tax as possible, but at the end of the day, we still gotta do some plan... Plan ahead. So that's tax planning. And then, when it gets into the business coaching and consulting, that is outside of our area of expertise and into yours. If it is financial planning, we don't do the financial planning. That goes into a separate level of expertise, so... And I...

0:31:17.7 KD: That's really helpful.

0:31:19.0 MH: Yeah, we're all part of the team of advisors, but the monthly accounting, the profitability advising, and the tax and tax planning, that's our world.

0:31:28.8 KD: Fantastic, because I wanted... And I'm so grateful you broke this down, because I will be honest, when I thought I hired a CPA, I thought they did everything, and I think that's a very common misconception. I didn't realize there were four people to this, just like I learned with marketing. There's not just a marketer, there is a brander, there is this, there's this, there's this. Like, SEO. And I thought, "Wow, I just don't understand." So I think it's really important for people to differentiate, because I was getting frustrated with my CPA not giving me tax advice. But at the end of the day, that's not what they specialize in.

0:31:58.6 KD: So as soon as I figured that out... 'Cause I'm like, "Why am I always feeling like I'm being hit with these huge tax bills?" 'Cause my CPA can tell me what my taxes are. They're really good at preparing that, but as far as tax strategy and planning and figuring it all out, that's not necessarily their world. And so, once I finally differentiated that, they all work hand-in-hand, things got a lot clearer for me as a business owner. So, guys, make sure you're looking at that. Do you have somebody who's a really fantastic bookkeeper, keeping all your books super clear? Do you have somebody who you can talk to about like, "Hey, I don't feel like I'm making any money?" Are you getting consistent reports every single month? I am a big believer, and Morgan, it sounds like you're the same way. Every month, I feel like you should be getting your financials.

0:32:38.0 MH: Absolutely.

0:32:38.8 KD: Then, do you have somebody who's doing your tax strategy? I used to have somebody call me in November and tell me what my tax bill was, or beginning of December. November was generous. It usually was the first week of December, and I'd cry my eyes out every single year, just because I'm like, "How did we not prepare for this? We've had 11 months, and now we're on month 12." It was very stressful for me as an entrepreneur and a business owner. So, I love that you said you guys do tax planning earlier. I'm a big believer. You're right. It's gonna fluctuate, but at least kinda having a plan starting mid-year, then touching base right before Q4, 'cause there's a lot of things that can be done, and I can make smarter decisions with more time, and then moving into financial planning. So, that was insanely helpful. I love the reports you guys do. I'm a huge advocate of the reports you guys do. I think they're gorgeous and they're so helpful. So guys, I would definitely recommend, if you like your CPA, rock on, keep 'em. Like I said, I have about three that we recommend, and HDA is one of them. So, if you're considering it, I think it's a great time. We're not into Q4 yet, and so it's a great time; now is the time that you can change... Get those things kinda squared away. That way, you have a really great... Just direction and guidance. So Morgan, it was such a fun conversation with you today. Thank you for podcasting with me. Thanks for your knowledge.

0:33:48.4 MH: No, you bet.

0:33:49.4 KD: I love it.

0:33:50.3 MH: I really enjoyed it. We covered a lot of good stuff.

0:33:53.1 KD: We did. So guys, go check 'em out. And if nothing else, make sure you know your practice profitability. I'd say if you don't know that, set that as a 2021 or 2022 goal, because the sooner you have that information... Even if it's bad, [chuckle] that's okay, 'cause then you can start making correct changes. If it's great, fantastic, you can make even smarter decisions. So I would just challenge everyone listening, if you're an office manager and you don't know your practice profitability, find out. That way, you can help. I really suggest team members should also know office overhead. That way, they know how they can help guide it, and it's not just one person trying to do it. So, Morgan, it was a pleasure. Guys, go check 'em out, HDA Accounting Group. Check 'em out. They specialize in dentists, they work in all the states. So Morgan, thank you for your time today. I super appreciate it.

0:34:34.0 MH: It was my pleasure. I really enjoyed being here. Thank you.

0:34:36.2 KD: Of course. Alright, guys, thank you so much for listening, and I'll catch you next time on the Dental A Team podcast.

[music]

0:34:43.3 KD: Alright, Dental A Team listeners, that's a wrap. Thank you so much for listening, and if you loved today's podcast, go leave us a review. It takes you five seconds, and your review helps more offices, more practices, more team members just like you find out about the Dental A Team. Thank you guys so much for being part of my Dental A Team family.