5 Step Technology Assessment
Paul Lipcius CPA |CFO Advisor |PracticeCFO
Paul@PracticeCFO.comAround year-end we constantly get questions from our clients about whether or not to make equipment purchases. Drs tend to think that equipment purchases are a “silver bullet” for tax planning but this is somewhat misguided. Yes, you can deduct equipment by way of depreciation. Yes, you can accelerate that depreciation in certain circumstances by taking Section 179/ bonus depreciation. And yes, a tax deduction today is more valuable than a tax deduction tomorrow (time value of money). But ultimately, your tax benefits are only a bi-product of how much you spend on the product. Using a simple tax rate of 40%, for every dollar you spend, you save 40 cents on your taxes. And if I told you about a great investment that cost a dollar and gave you 40 cents back, would you buy it? Well that would certainly depend on what that other 60 cents is doing for you… That all aside, reinvesting in your business with state-of-the-art equipment can be one of the most profitable decisions you can make. And we encourage our clients to think about the decision more holistically and not from a taxation perspective. Not only can it provide financial/ profitability rewards, but it’s a great way to enhance the patient experience and the workday quality of you and your staff. If you’re thinking of reinvesting in your practice and enhancing your technology, we recommend the following five-phased technology assessment:
- Clinical Outcomes – will it provide a more pleasant experience for my patients, increase the quality of my work, and decrease the risk of failures and reworks?
- Case Identification & Acceptance (imaging) – will it help me, my patients, and my staff identify issues that were previously going unnoticed?
- Utilization – will my current production mix justify this technology? If not, am I referring or neglecting enough cases that this technology would otherwise enable me to perform?
- Cash-flows – does it help me save on other costs or add enough production to offset the monthly cost?
- Branding – can I market the benefits directly to patients and prospective patients and if so, how will my patients view my commitment to their oral health by adding this technology?