3 Steps to Tax Savvy Dental Equipment Purchasing
By Jim Zenk, CPA/JD
There is a 3-step process that the most astute dentists use in purchasing dental equipment. This also happens to be the process we follow at my firm, Trident CPA Services, LLC.
The 3-Step Process
The 3-step process leverages the best aspects of the relationships that a dentist has with:
- Their preferred sales consultant,
- Their dental CPA, and
- Their banker.
The busiest time of year for many dentists is July and August. September usually brings a lull in production. Savvy dentists utilize this lull to take stock of their practice’s dental equipment and create a list of equipment needs and wants for their practice. Next, they consider the business and tax implications of purchasing dental equipment in the current year versus the next year. Finally, they line up low-cost financing through a trusted banker to ensure purchase at low interest rates without impairing practice cash flow. Timing is critical, because many other dentists attempt to purchase equipment in the final weeks of the year as a last-ditch effort to save on taxes. Astute dentists, however, place their orders well ahead of the pack to ensure availability and timely delivery.
At Trident CPA Services, we incorporate this 3-step dental equipment purchasing process as part of our Annual Strategic Meetings (“ASMs”) we conduct with every client. As a result, our clients are prepared to purchase the equipment they need or want, maximize tax benefits, and obtain peace of mind that comes from knowing they are making a wise business purchase that they can afford.
Step 1: Communicate with the Sales Consultant
The 1st step in the process is for each dentist is to take stock of their current dental equipment (preferably in September), and discuss their needs and wants with their preferred sales consultant. The sales consultant is a critical resource, providing intel on manufacturing and industry trends, as well as insight specific to the dentist’s practice. Because of their knowledge of hundreds of other dental practices, consulting with a sales consultant not only saves enormous time and effort for the dentist, it also mitigates the dentist’s risk of making suboptimal purchasing decisions. Finally, the sales consultant provides information related to price, availability, and timing of installation—information critical for success in Step 2.
Step 2: Meet with the Dental CPA
The 2nd step in the process is for the dentist to meet, face-to-face, with their dental CPA. In our experience, there is no substitute for face-to-face meetings when rendering strategic tax planning
advice to our dentists. At this point in the process, the dentist has identified the equipment that falls into the “need” and “want” categories. Our job, as dental tax advisors, is to determine the optimal tax strategy to accomplish the dentist’s purchasing goals. We consider a multitude of factors, too many to name here, to help each dentist determine the next steps toward equipment acquisition. When dentists leave our office after their Annual Strategic Meeting, they have a strategic action plan to implement.
Step 3: Connect with a Trusted Banker
The 3rd step in the process is for the dentist to connect with a trusted banker. Even if the dentist can pay for the upcoming purchase with cash on hand, we almost always recommend our dentists at least maintain a commercial line of credit with their bank. Lines of credit should be established when times are good, not when cash is immediately needed. With good banking relations in place, dentists can optimize their purchases with lower interest rates and flexible payment options. Further, loan pre-approval affords the dentist maximum flexibility in executing equipment purchases according to the dentist’s desired timeline.
Dentists that execute the 3-step process outlined above enjoy many benefits, including:
- Purchase of dental equipment that meets their needs and wants,
- Optimized income tax results, and
- Lower interest rates and better cash flow.
Incidentally, they also report lower stress levels. After all, there is a certain peace of mind derived from knowing that one is making good decisions when investing in the equipment needed to run a successful dental practice.
At Trident CPA Services, we limit the number of dentists we take on as clients—we will not exceed our professional capacity to provide premier CPA services to dentists. We currently have capacity, however, to take on several astute dentists as clients interested in tax-savvy equipment purchasing.
For a free consultation with a CPA who has worked with hundreds of dentists since 2011, contact Jim Zenk, CPA/JD, at:
We are conveniently located at:
6120 College Blvd., Suite 210
Overland Park, KS 66211