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12.09.05 Issue #196  
The "Perfect" Gift isn't always Green

Sally McKenzie, CEO
The McKenzie Company

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The calendar turns to December and there you are wishing you could skip right over this month. You know what’s waiting for you, like the ghost of Christmas past. You’ll be forced to look back on the last 12 months and make up in fell swoop for moments throughout the year when staff performance was less than stellar.  Bonuses for all, you tell yourself.  It’s quick and it’s easy. Actually, it’s costly and it’s foolish.

Holiday bonuses lure you in like that box of creamy chocolates. Once you start, it’s very difficult to stop, and soon you’re paying with bulging overhead. Most likely, you give the same amount or the same salary percentage to all employees and tack on an extra few bucks for Sue and Jane who have been with you the longest. What does that nice, fat check tell Sue who’s been there a long time but is as enthusiastic about her work as a CPR dummy, and Jane whose ability to perform makes FEMA look like a well-oiled machine.

What do you want that bonus to say to your employees? Great job or Happy Holidays?  Is it a gift? Is it a reward for good, mediocre, or poor performance? Is it hush money to keep the team from complaining when they have to skip lunch, stay late, or you forget to say thanks for a job well done?

If you’re going to give bonuses to your employees I recommend you tie them to excellent individual performance and make them part of the annual salary review. Rather than using them to show thanks and appreciation once a year, take 60 seconds to recognize at least one employee every day for something they did that you considered exceptional and share that accomplishment with the entire team during the daily huddle. Appreciation and gratitude given with sincerity, are priceless to the employee and don’t cost you a dime.

This holiday season, start a new tradition in your office. Sit down and write a personal note to each of your employees. Think about their contribution to the success of the practice and share that with them. The note can be simple and straightforward but must be completely sincere. During the staff holiday gathering hand it to the staff member with a sincere “Thank you.”

If you are giving holiday gifts, establish a budget. The gifts don’t need to be expensive but they should reflect that employee’s individual likes or interests. Gifts purchased en masse, such as those crates of oranges, are often viewed as meaningless tokens of obligation rather than genuine expressions of appreciation. Certainly giving gifts that are personalized takes time and thought but mean much more to the employee and the cost is less likely to sour your festive spirit. For example, consider tickets to the theatre for the Broadway enthusiast, enrollment in a Pilates class for your fitness buff, a gift certificate to a craft store for your scrap booking fan.

After the New Year bring in the team and tell them that you would like to involve the entire staff in developing a holiday party that everyone (including yourself) can enjoy next year. Provide a budget, designate a committee, and seek input from all. Then make a list of what you will do to show appreciation to your staff throughout the coming year. Consider the following:

  1. Give a rose for each year of employment on the employee’s anniversary.
  2. Send a handwritten letter to the employee’s home regarding their accomplishments and value to the practice.
  3. Treat the team to the movies and snacks.
  4. Create an “above and beyond the call of duty” award.
  5. Pay dues to auxiliary professional organizations for the employee.
  6. Schedule planning meetings off site at the zoo or a museum and allow time for the team to enjoy the excursion.
  7. Give extra paid vacation time between Christmas and New Year’s.
  8. Encourage all staff to catch each other going above and beyond. Share those “acts of excellence” with the doctor and the team.

Next year, rather than whipping out the check book to carve out a bigger chunk of the practice pie, sit back and enjoy the holiday season and the satisfaction of knowing you’ve shown your appreciation and thanks to employees throughout the entire year. 

Interested in having Sally speak to your dental society or study club? Click Here.

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Tax Tips for Dental Professionals

Bruce Bryen, CPA
Partner, The Snyder
Group, LLC

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1. Initiate or upgrade a retirement plan. If you have an “off the shelf” employer-sponsored retirement plan, such as a 401K, profit-sharing, SIMPLE, or SEP plan, you may think you are doing all you can to plan for retirement. But as a dental professional, if you pay more than 30K in taxes each year, you will reap much greater tax advantages by implementing a retirement plan designed for you through your business. A  Defined Benefit Retirement Plan is customized by actuarial and accounting professionals to maximize retirement savings, and reduce your taxable income. Additionally, any employer sponsored retirement plan can be upgraded to give you greater retirement savings, and to reduce your tax burden NOW. In fact, a properly designed defined benefit plan may allow you to save up to $100K per year for your retirement — far more than the defined contribution plans you can use for your business, and a great deal more than the limits set for individual retirement accounts. The goal is to accumulate wealth more quickly to meet your retirement goals.  And, the older you are, the more this type of plan benefits you. Best of all, with an experienced professional leading the way, designing and implementing a plan can take less than 10 days.

If you have had a profitable year, saving more toward retirement makes sense in the long-term and short-term.

2. Get a retirement plan deduction for 2005, without paying into the retirement fund until fall, 2006. Did you know that with the right type of retirement plan, you can earn a tax deduction in the current year and not make the payment for that deduction until you file your tax return? If you use extensions to file your tax return, this can mean not funding your deduction until September or October of 2006, depending on your business entity structure. This opportunity exists for both cash basis taxpayers and accrual method taxpayers.

3. Pay all liabilities before December 31st. Borrow money if you have to. Most dentists are cash basis taxpayers, which means you report the money you collect as income and deduct the money that you pay as an expense. But many dentists miss the opportunity to deduct items that are owed before the end of December because they don’t have the cash on hand to pay the bill in December. That’s a mistake. Here are some ideas that can help you pay the bills in December, and will help you maximize the expenses you can claim in 2005. Defer your own bonus for 2005 until 2006. Use that money to pay liabilities in December. By doing this you have effectively reduced your income for the year, as well as increased the expenses you can claim for 2005. You can pay yourself a bonus in 2006, instead. Talk about a win-win situation! Other ideas to maximize your year end deduction include; borrowing from or paying bills from a credit card (you can pay the credit card bill in full in January, eliminating finance charges, and perhaps even racking up extra rewards points offered by your credit card company), or borrowing from a specialty lender which offers lines of credit for dental professionals.

4. Acquire equipment or furnishings by year’s end if you need them! Section 179 of the IRS code now allows you to write off $105K in one year. This means you can and should accelerate your depreciation expense by purchasing needed equipment, supplies and materials before December 31, and put them to work for you by that date. Under this rule, the tax savings can occur in 2005 even if you pay for it over a period of years. This means you can arrange financing and pay for the equipment with some of the tax savings that you are getting now, enjoy the tax benefit and the additional revenue that the equipment will be producing for you over the term of the loan. Now that’s smart thinking.

5. Update or expand your office space with leasehold improvements. The depreciation on leasehold improvements is now available in an accelerated format. In October 2004 the IRS rules changed to allow you to write off any leasehold improvements within 15 years instead of 39 years. Improvements must be in place before January 1, 2006 to qualify.

This is especially important if you are thinking about a longer term on your lease. You may be able to afford to create a much more modern and attractive office format by expensing those leasehold improvements over a much shorter period than before. You may be able to negotiate a lower lease payment by letting the landlord know that you will be improving the value of the property for the landlord. The lease negotiation works because the landlord will see a way to upgrade the value of the property without investing in it directly.

6. Write off bad debt. You can realize a 100% deduction on business bad debt, if you abide by IRS rules. The IRS defines bad debt by industry guidelines. For a specialist, this may mean 120 days; for a generalist it may mean 90 days. An effort must be made to collect the debt. For cash basis taxpayers, of course, there is no write-off possible for bad debts because the receivable was never reported as income.

Bruce Bryen, CPA has successfully assisted dentists with their personal and financial matters for over thirty years. As a partner in The Snyder Group, he delivers creative strategies and prudent financial strategies to help dentists build and protect wealth at every stage of their careers. His extensive expertise includes financing, debt restructuring, retirement planning, and tax advising to help dentists keep more of what they earn.
He can be reached at 1-800-988-5674

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Do You Have The Right Keys To "Start-up" Your Practice?

Belle M. DuCharme
RDA, CDPMA. Director
The Center for
Dental Career Development

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You’ve picked the “ideal” location for your new dental practice.  You have been an associate long enough and want to do things your way.  You are excited, scared, in debt, overwhelmed, confused but confident that all will go well-eventually.   Then you start waking up in the middle of the night asking yourself some or all of these questions:

• How do I find and hire the right people?
• What personality types are best suited for my dental office positions?
• What can I afford to pay my staff?
• How do I write a job description?
• What benefits should I offer my new employees?
• Should I accept insurance plans?  Which ones?
• How much do I need to produce per hour to meet my overhead?
• What kind of advertisements should I place and where?
• How do I know if my fees are within range for the area?
• What kind of patient do I want to attract to my practice?
• What kinds of people make up the demographics of my practice area?
• How do I market my practice to establish my own niche?
• What are the proven systems that will insure that my practice runs smoothly?

The above questions are a representation of real questions that are proposed during the two-day intensive “Start-up Program” that I lead at McKenzie Management.  All of these questions are answered plus many more as we delve into the intricate details of what it takes to set up a successful business plan for your individual dental practice.  There are no “cookie cutter” answers because the information discussed is relevant to your practice location, demographics and psychographics your vision of what you want your practice to be and your temperament/personality type.

One of the most exciting parts of the Start-up Program is the Community Overview Report that we provide as part of our service.  This report is a detailed study of the demographics and psychographics of your practice neighborhood. Psychographics looks at various psychological characteristics such as behaviors; trends, culture and purchasing habits of people that live in specific areas whereas demographics look at race, age, gender and lifestyle.  With this information you can target certain groups with marketing pieces designed to appeal specifically to their spending habits.  With so much money going into marketing a new practice it is better to spend it wisely aimed at where it will produce the best results.

Staffing the dental office remains the biggest challenge in the business of dentistry.  A Start-up Practice needs dedicated and committed team members just as an established practice does to thrive.  A key to survival is knowledge of what characteristics and skills will be necessary in the key people that you hire.  The Start-up Program covers these concerns in detail.  Writing a characteristic and skill profile for your new hire, refining a job description, writing ads and teaching you about networking to find this special person are all included.  Also, how to read a resume, do a phone interview, in person interview and the testing of applicants is covered. 

Establishing operational policies, understanding the numbers necessary to run a practice and how each system in the practice is interrelated contributing to the success of the practice is the core of this program.
Call it Dental Business 101, a required course for success.  Experience tells me that without the right keys for your Start-up you may have trouble getting your practice into first gear.

For more information about McKenzie’s Practice Start Up Program email or call 1-877-777-6151.

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