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In this episode, Wes Read, CPA and financial advisor, highlights a common mistake among dental practice owners: treating financial planning as a one-time task instead of an ongoing cycle. Just like dental hygiene requires regular checkups, financial hygiene needs consistent monitoring, updating, and adjustment
Wes explains the fourth phase of financial planning: Implement → Monitor → Revise → Repeat. Following a structured rhythm ensures clarity, accountability, and faster progress toward financial independence.
Seven Key Activities for Dental Practice Owners:
Wes notes that traditional CPAs often focus on historical data and compliance, while dental-specific financial advisors help align practice cash flow with personal financial goals, creating real traction toward wealth.
Key Takeaways:
Resources Mentioned:
Transcript:
Wes Read: [00:00:00] Welcome back everybody to another episode of the Dental Boardroom podcast. You know, one of the biggest mistakes I see dental practice owners make isn't in the treatment room. It's actually in how they manage their financial planning rhythm. And too often owners treat planning as a one-time event instead of what It really is an ongoing cycle.
Think for your business and personal finances like a patient and you give them care. You don't just clean a patient's teeth once and call it done. You schedule them six months a year. You monitor, you adjust. Financial planning works the same way. So today I wanna talk you through the recurring sequence of activities every practice owner should build in their calendar.
How often should you revisit your business plan? How often should you update your cashflow forecast? When should you sit down for a tax strategy review, and even how often you should reassess your personal risk tolerance in your investments. [00:01:00] By putting these on a deliberate cycle, you create financial hygiene that's just as critical as clinical hygiene in your practice.
So as you know, up to this point, we've covered the four phases of financial planning for dental practice, and each of these phages sort of has some subsections to them, but the main phases are to organize your team, your strategic team, number one. Number two, complete a personal financial plan for financial independence.
Number three, complete a business financial plan that supports your personal plan. And now, number four, implement, monitor, revise and repeat. That is the substance of today. What is the cadence of activities and meetings look like so that you are maximizing the rate of financial independence? Alright, let's go ahead and show these.
Um, here's a little grid that I've got and if you're watching on YouTube, again, you can see this. For those not, I will narrate it. Uh, on the [00:02:00] screen, I show a column for each month of the year, and then the rows are the following, the following activities. These are financial planning activities. Number one, reviewing your financial statements in your practice.
This is your profit and loss. As your balance sheet. If you're with practice CFO, we do a CFO analysis every month that dives deeper into your economics and breaks down into each category like labor or collections or operating income, uh, cash balance, debt payments, that kind of thing. So review these.
That's number one. Review financials. Number two, update your long-term financial plan. This is where you go back to the, to the whiteboard and you say, okay. Previously we had, we had wanted to retire at age 63 and have X amount for living, yada, yada. And how often do you go back to that whiteboard and update that based on changes to your life and changes to your desired [00:03:00] future?
So that's updating your long-term personal financial plan. And then there is updating your personal spending plan. How often do you revisit your budget on how much you need to spend? And then number four is to complete a tax projection. Five. How often do you update your family payroll? How? How often do you change your own payroll structure for you and if on payroll, your spouse and kids?
Then we have, what is this number? 1, 2, 3, 4, 5, 6 is updating. Okay. The doctor payroll, so I actually have two here. Updating the family payroll. How often do you do that and how often do you update the doctor Payroll. And then lastly, complete a cashflow forecast or projection. Allocate surplus capital. So in the last couple episodes I talked about this financial forecast.
This is where the rubber meets the road and you get traction in your financial planning progress. Is that financial planning forecast? 'cause then you make [00:04:00] critical clinical decisions around what to do with your dollar in order to grow your personal wealth. How often are you doing that cashflow forecast and allocating out your surplus to different financial planning strategies?
So those are the seven different items that I have on here that are inside of this sort of process of financial planning for a dental practice owner. How often do you do these, and how often do you do them with somebody who is helping coach you? Now, in my case it's with the CFO advisor. Here at Practice CFO, we have, I think, 10 CFO advisors who are meeting every day with our clients.
They're doing the clinical planning around this whole process. In these past 10, 11 episodes I've done here on financial planning for a dentist, they are making sure that it's happening, that it's, uh, being, uh, regularly revisited and [00:05:00] that all action items coming outta meetings are executed properly. So that's what the CFO advisor does.
Maybe you can get your tax CPA, you're gonna have to, you're gonna have to direct them a little bit and, uh, 'cause I don't think most CPAs are gonna be doing this stuff outta their own free will. Uh, they're not really designed to do forecasting and future planning. They're designed to do historical data gathering and give you a, uh, financial statement and file a tax return.
So it is a sort of a unique type of. Person that does this type of financial planning specifically for a dental practice owner. Alright, so the first one, reviewing your financial statements. That is done every month. So as you go across the page, there's literally an X under each month column. So January x, February X, March X.
Every month you should be reviewing your financial statements. Now, here at Practice CFO, as you know, we have a report that targets. [00:06:00] Uh, certain goals and these reports will show you whether or not you achieved those goals. So review those, ask questions. What doesn't look right? Ask us, ask your CPA when something does not look right.
Be an informed reviewer, an informed reader of these financial statements. And in time, every, the more you do it, the more it becomes natural and the more you become versed financially. The rest of them I had doing that with a financial advisor, specifically a financial advisor who can speak the language of dental cash flow in a dental practice, who speaks the language of dental tax planning, who speaks the language of dental 401k planning and, uh, structuring your payroll W2 to be a specific way for specific outcomes.
Most financial planners are very generic. They're gonna tell you how much you need to save every, every month in order to retire at a given date. They'll plan social security income, [00:07:00] they'll plan, uh, inflation rates, rates of return on your investment, all that stuff. But that's very, very standard. The real financial planning where you get traction and actually creates surplus cash that you then invest for growth is by going deep into the business cash flows.
That's a very specific type of financial planning service. And so, uh, what what we do at practice CFO with our CFO advisors is in these other areas, doing the long-term financial plan update, updating the personal spending plan, completing a tax projection, updating the doctor and family payroll, and completing a cashflow projection.
That's what essentially we're using our tools to Do. You come into the office or We do a virtual meeting and we uh, we revisit each of these and have the discussion, what's going on in your practice? You have eyes in the things that we don't. What's happening with your, with your labor, your team, what's happening with your, your building and renovations and equipment and, and your schedule and your hygiene and all [00:08:00] of that.
What's happening? We need you to inform us that, and then we can bake that in to our financial forecast and then we can sort of make all of these decisions very precisely. So how often do you do update your long-term financial plan? So this is the plan where you're looking out on the future of your life and you're defining your life.
How often do you revisit that? I recommend once a year, and I like that to be in the first quarter. Now, on the page here that I'm displaying, it's in January where you say, okay, it's a new year. What's changed in my life? What's changed in my perception of, of me, my relationship to myself and what I want out of life, and what do I want that's gonna have a dollar sign attached to it or a cost.
What do I want for my kids' education? Has that changed? What do the goals I want for my life or my spouse and I? What are goals together? And just revisit that once a year. By doing that, you're becoming very intentional about the way you live your life, and that's where financial planning for your life [00:09:00] is very much an aspect of life planning in general.
So I would say once a year to update your long-term personal life plan slash financial plan. Onto the next one. How often should you update your personal spending plan? Meaning how often do you go through and sort of add up how much you're spending in the different areas in your personal life? Just do that budget.
You know, it might take an hour or two. Shouldn't take that long, but I think it's a good idea to do that once a year to really understand. So if I say how much? How much do you spend personally, you should be able to know that answer fairly precisely. It gets a little tricky when you're a business owner because some of your personal expenses, you're running through the business and you know, and whatnot.
But, uh, but you should be able to have a pretty good handle on what that number is. And I tell you, people get it wrong typically by up to 50% all the time. Oh, yeah. Wes, I spend $10,000, uh, a month. [00:10:00] In reality, they're spending $14,000 a month. We tend to underestimate our spending. Okay, so I think it's a good idea to do that once a year.
Now, if you're with practice CFO, pretty much every time we meet I'm asking you what do you, what do, what do you need in your personal checking account every month to live and every few months or so, or every, every year or so, a client will say, Hey Wes, it's it that 10,000 you've been depositing twice a month.
It's actually too much. Or that 5,000 twice a month isn't enough. And then we adjust it. And if we adjust it, let's say I add another 3000 a month, then I have to tell you my. Financial forecast. What does this mean? Does this mean we have to fund less into our IRA or 401k? Does this mean we have less to save for that second house?
Does this mean we have less for this and that? Yeah, something's gonna give when you need to spend $3,000 more a month and your taxes might go up because of that. Because now we may not be able to fund our tax deductible 401k as much due to that consequence. So [00:11:00] there's an interrelationship. Happening across these different variables in your financial ecosystem.
Um, okay, so update that personal spending plan once a year. Next one, complete a tax plan. How often should you complete a tax plan? I recommend completing a tax plan once in June and once in the last quarter of the year, preferably October. November is okay. December's getting a little tight, and here's why.
In order to do a good tax projection, you usually need the tax return from the prior year done because that's your starting point. 'cause then what we do is we say what variations are gonna occur this year compared to last year, and then we determine what is the tax effect of those variations. So assuming there's no big change in tax law now, we did just have some tax.
A tax bill rollout, the one big beautiful tax bill, which by and large [00:12:00] kept the tax code as is. So in a way, it prevented the tax code from reverting back to its pre 2017 tax rates, which was a little bit higher, and it kept 'em at that lower rate. And so in many ways, this tax bill essentially perpetuated the status quo.
So as long as there's no big tax code change from year to year, tax planning is fairly straightforward. Once we have your prior year tax return. Done. And so we try to get, uh, as many tax returns as we can done on their original due dates, which is March 15th for corporates and April 15th for the individual.
Uh, however, given we only have about five weeks to do those corporate returns, uh, it's really difficult to get 'em all done. That said, we do our best. And uh, and then by June, let's say we have, we have most of our clients corps done by June and their personal now June or July, we can do a really good tax plan.
We have two things. We have the prior year tax return done, and [00:13:00] we have enough data in the current year, namely five or six months of financial statements in order to project out what your tax liability is trending toward. And now with those two things in place. We can now in make adjustments to your tax withholdings on your W2 in order to meet your tax obligations.
And we can also start doing our tax strategies that I talked about in my last episode. And then, so you do that in June, you adjust how much you're paying the IRS with each payroll, or if you do quarterly payments, how much you're paying quarterly. And then in October and November you have now another 3, 4, 5 months of data.
On your financial statements to revisit your tax plan and say, are we on track with what we thought back in June? And if you ended up collecting a lot more, or your expenses were lower, we may need to withhold a little bit more in taxes for the past, for the, for the remaining month or two. And vice versa.
If you're collecting less, we can lower the amount of, uh, of taxes [00:14:00] that you're paying. But the key thing is, is that we are adjusting as we go. We are adjusting as we go. We're not waiting until April 15th after the year is over to do our tax planning, because by then it's too late and that's when you get hit with the surprises, and then you detest your CPA, at least for that moment because you owe 20, 30, 40, 50, 80 grand in taxes unexpectedly.
But if you do a tax projection in June or October, around those dates twice a year, you shouldn't be hit with any surprises unless you didn't pay the tax. Estimated payments or adjust your payroll tax withholdings out of your W2 that your CPA or advisor told you to do. If you didn't do what they told you to do, well then that's on you.
But assuming you do, you shouldn't owe anything unless you just have a really ineffective CPA or financial advisor doing this tax flow, this tax projection. All right. Let's go on to the next one. How often do you have to update family payroll? Well, to be honest, if [00:15:00] your kids and spouse are on payroll, just to maximize.
Tax deductions and to fund the 401k for the spouse. Then you can get that set up in January and then just fix it. And you don't need to change it for the rest of the year because by January, you know what the tax code is around 401k contributions and the standard deduction. You know what you need to in order to set up the family payroll, uh, that your kids and spouse, and then you just set it and forget it for the rest of the year, and then you revisit that in January of the next year.
Sometimes I'll even do the full payment of one pay period. Knock it out, then it's done. Uh, and you don't pay that dollar 50 per deposit per paycheck, you know what I mean? If you really want to get efficient, but it looks more legitimate if they're paid evenly throughout all pay periods of the year, it looks more legitimate to the IRS.
So update family payroll really once a year is all that's needed. Now, the doctor payroll, that's different come January. Everything that is phased [00:16:00] out on your payroll deductions resets in January. I'm talking about your social security, which is the big one, which phases out. It's somewhere around a hundred or 2025 right now.
I think it's around 170,000 plus or minus. Once you hit 170,000 in W2 for a year, let's say you're in October and you hit it and your total comp is two 30 for the year. Anything above that, roughly one 70 isn't subject to the 12.4% FICA tax or social security taxing, which is 6.2 employer, 6.2 employee.
And so you, if, if your payroll is fixed every month, as soon as you hit that 170,000 for the year of W2, your very next payroll, you're gonna see a net deposit increase. You're gonna see a large amount deposit in your personal account from payroll. You're gonna see that larger deposit occur because it didn't have the social security withheld out of it.
And that's a beautiful thing. Some states have like state disability, um, uh, [00:17:00] income that has to be, or insurance that has to be deducted that phases out. Different states have different things that are phased out, but in January everything resets. And so that's why if you adjusted your payroll in the last quarter of the year after you hit the social security target.
In order to get your fixed budget, and let's say your budget's 15,000 a month for living expenses come January, that 15,000 is gonna drop to like 13,200 because the F attacks and all the phase, the things that are phased out, kick back in, and now you have to actually pay those again. So in January, I like, I like to do, uh, I like to, to do a, uh, an update to the doctor's p and l, uh, sorry, the doctor's payroll, and here at practice CFO.
December, early January is so busy getting all of our doctor's payroll set up so that we are starting off the year right, based on an initial early forecast for the new year for tax withholdings, tax deductions, 401k contributions, that kind of thing, kids on payroll, spouse and payroll. Then [00:18:00] as the year goes on in those same months that we like to do the tax update, we like to do the cashflow projection and update the doctor's payroll.
So that's June and October roughly. That's when we like to update the doctor's payroll based on how the year is actually panning out. And then the last item complete a cashflow projection and allocate surplus. So that's that critical activity of forecasting your cash flows and then making clinical decisions about what to do with your money.
That is also the same months as your tax projection and updating your doctor payroll. Those three things happen collectively. At the same time you do a cashflow projection, it allows you to do a tax projection, you analysis. You analyze those two things in relation to each other, and then you structure the doctor's, the owner's, payroll for the right amount of tax withholdings.
The right four oh K withholdings, the right net deposit for personal living [00:19:00] and the right gross W2, in order to maximize that 401k or defined benefit plan contribution, which is a function of your gross W2. So there's a lot of elements that are tethered into structuring your payroll. You gotta do a cashflow forecast, one out of that tax flow forecast.
Then you revisit the cashflow forecast to update it with the tax forecast, and then you structure the doctor's payroll to make sure that all of these obligations are being met effectively. And so I have this as a PDF. I'll see if I can get it added to the show notes. You can, uh, set it, lock it in your calendar and do these things every month.
Review the financial statements once a year, long-term financial plan, once a year, update your personal spending budget once a year, update your family payroll, and then multiple times a year in January, June and October, update the doctor's payroll and in June and October do the cashflow forecast and the tax projection, and really what is [00:20:00] the business financial planning doing that.
January, June and October is the best scenario. That is the cadence. Everybody, if you do this cadence, I guarantee you your financial hygiene is going to be remarkably clean and those, those financial teeth, so to speak, they're gonna do the job. You are gonna get financially independent, way faster by, by a significant magnitude faster than your average dentist who isn't doing these things.
Because this creates clarity of the pathway. It creates accountability, it creates good decision making, and it does it on a regular, systematic basis. And that right there moves the needle every week, every month, every year. And it's amazing how fast a good dentist that's cash flowing well in their practice can become financially independent and create so much flexibility to live the life that they want.
And with that. [00:21:00] That concludes the financial planning for a dental practice owner turning financial chaos into financial freedom. This is a s, this is a, this is a process, everybody. This isn't a product. It's not a one-time solution. It's not a quick fix. This is behavior, it's habit, it's systematic, it's reporting, it's activity, it's meeting with your advisor.
It is a fluid living thing. Do that. You'll look back 10, 15, 20 years, and you'll be so grateful for yourself for putting forth that effort to do this type of financial hygiene and defining your life. It's a beautiful thing. Thanks everybody for listening to this extended series on dental financial planning for a practice owner.
We've got many other great topics coming ahead for you in the Dental Boardroom Podcast. Stay tuned until next time.
Wes knows what's best for dental practices. He's been doing this for a long time and he sees lots of practices. He can tell me how our practice is doing, and what we can do to increase our productivity. With past CPA's, there were no ideas. It was all coming from me, saying "I think I can do better, but I don't know how." I come in to meet with Wes and he says "You CAN do better, and I know how."
PracticeCFO is in hundreds of dental offices around the country. They know what numbers should look like. They know what percentages of payroll, rent and supplies should be, and they will hold you accountable to those numbers, which will really help you stick to your plan and your path of growth and savings. That is invaluable
Whenever something comes up, whether it's building or practice related and we weren't sure where the numbers would go, PracticeCFO has been instrumental in helping us figure that out. I can't say enough of how important that is - that it goes beyond that initial partnership. They make sure this business marriage works.
When I go home from work, I don't spend a whole lot of time stressing about what my books look like, or how much I owe in taxes. By using PracticeCFO, the burden of keeping track of a lot of the big financial numbers and metrics are taken off my plate.
PracticeCFO helped me develop a plan for the future. I have colleagues that work with other accountants that don't have a plan - they just look at the numbers of the practice and that's it. There's no plan for 10, 20 years from now. But with PracticeCFO, you get that. PracticeCFO makes you feel like you're they're only client.
(In reference to his practice sale) What could've been super stressful, wasn't! When picking John and Wes, it was from word of mouth recommendations and other people's experiences from the past that really did it for me. And it turns out that those recommendations were right on the line.
Wes knows the business side of dentistry. His comprehensive plan will organize your personal and professional finances so you can focus on taking care of patients. Massive ROI.
I can’t say enough good things about everyone at PracticeCFO. Everyone on the team is professional, organized, knowledgeable, helpful and kind. They also respond to emails and phone calls immediately and are always happy to help. They have helped me navigate year-to-year as a business owner. PracticeCFO gives me peace of mind that my business is in good hands.
I love Practice CFO! They have helped me obtain a practice and maintain a practice. They are incredible people who are on top of everything and make owning and running the business portion of a practice easy. They couldn’t be better for my business and my sanity. They have every detail of the business and taxes taken care of where all I have to do is show up and follow their easy steps to success!
Practice CFO has the best tools I’ve seen for personal tax and financial planning in addition to top-tier corporate tax and accounting services. I have been very pleased with the level of quality service. They manage my monthly bookkeeping and accounts payable. It is a great system and saves me a ton of time, and it allows us to have monthly financial statements within a week of month end.
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