Don’t Forget About These End-of-Year Tax Benefits – Episode 312

It’s December and the holidays are coming soon … and so are end-of-year tax worries. Stay calm, we’ve got important answers to your year-end tax questions. On this episode of the Dentist Money™ Show, Ryan welcomes Morgan Hamon of HDA Accounting Group. Morgan provides an end-of-year tax checklist, advice on how to handle EIDL loan money, and his opinion on what tax changes may be coming.

Show notes:

www.hdagroupdental.com

 

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Podcast Transcript

Ryan Isaac:
Hello everybody, welcome back to another episode of The Dentist Money Show brought by Dentist Advisors, a fiduciary, no commission, comprehensive financial advisor just for dentists all over the country. Check us out at dentistadvisors.com. Today on the show I interview a long-time friend and good guy all around, Morgan Hamon, CPA, HDA Accounting, CPA firm for dentists. Today we’re talking about some of the possible changes in upcoming tax code, we’re talking about year-end checklist, dos and don’ts, common mistakes and pitfalls and some things to look forward to in 2022 as you start your new year. Some things to pay attention to and improve on as we move forward. Many thanks to Morgan for spending his time and his expertise with us, and sharing all of his wisdom on the show today. If you have any questions for us directly, you can post a question in our Facebook group on the dentist advisors discussion group on Facebook or go to dentistadvisors.com and get in touch with one of our very friendly dental specific advisors today, dentistadvisors.com. Thanks for joining us today and enjoy the show.

Announcer:
Consult an advisor or conduct your own due diligence when making financial decisions. General principles discussed during this program do not constitute personal advice. This program is furnished by Dentist Advisors, a registered investment advisor. This is Dentist Money. Now, here’s your host, Ryan Isaac.

Ryan Isaac:
Welcome to the Dentist Money Show, where we help dentists make smart financial decisions and avoid the battle along the way. I’m your host, Ryan Isaac, and I’m here with CPA extraordinaire, Mr. Morgan Hamon from HDA Dental Accounting. Morgan, what’s up, man? How are you doing?

Morgan Hamon:
I’m good, Ryan, thanks for having me.

Ryan Isaac:
Thanks for joining me. It’s been a while. We have you on the show probably once a year, maybe twice a year sometimes.

Ryan Isaac:
Yeah. A couple of times a year.

Ryan Isaac:
I feel like it’s been just insane though since… The last two years, man, have just…

Morgan Hamon:
It’s been an interesting journey this past 18 months.

Ryan Isaac:
I wanna shout out to your company, because the… I get news… I wouldn’t even call it newsletters, but they’re just announcements or news updates, especially in the last 18 months every time things have come out and there’s a million things to stay on top of. And I just appreciate the… I get them and I read them and I’ll forward them to people because they’re just packed full of really helpful, timely information about new changes that have come out. And there’s just been so many, man.

Morgan Hamon:
Great. Yeah, I try to be real sensitive on the newsletters, ’cause if you put out newsletters for the sake of a newsletter, I think people can get desensitized to those. And so any time I put out a message, it’s no fluff, like it is no kidding.

Ryan Isaac:
Yeah, I love it.

Morgan Hamon:
Here’s what you ought to know.

Ryan Isaac:
There’s no room for fluff these days, so much to talk about anyway. How about we… Let’s just do a really quick intro for… Tell us who’s HDA, what do you guys do? What’s your origin story?

Morgan Hamon:
Yeah, HDA Accounting Group, we do accounting and tax and business advising for dentists that own their practice, like very specific niche. We don’t work with any other type of doctor, no other type of industry. We’re not in the DSO space, we’re not in the corporate space, it’s all owner-operated dental practice. And I think that’s why we have good synergy, we work with the same type of folks.

Ryan Isaac:
Yeah, same people.

Morgan Hamon:
And we do the monthly accounting, provide a monthly practice profitability analysis each month, ’cause our goal, it’s not… People think about their CPA, it’s not just tax. Owning a business is hard, there’s risk involved, there’s a lot of sweat equity and let’s face it, there’s some stress, we’re thinking about it all the time. And so, at the end of the day, there has to be that appropriate financial reward, otherwise why own a business?

Ryan Isaac:
Yup.

Morgan Hamon:
So our goal is to help our doctors realize that the profit potential their practice should have, in other words, let’s make a large amount of money and then we’ll certainly go to work on the tax, and we’ll avoid paying as much tax as possible. We’ll be as proactive as we can, trying to predict. Like right now is November, we’re doing forecasts to look in the crystal ball, so to speak, where do we think our doctors are gonna end up profit-wise by December 31 and do some tax work now. And that’s what we’ve been doing every quarter. It’s difficult just because revenue and expenses change all the time, can be a bit of a three-dimensional moving target, but we wanna be as proactive as possible, so that’s what we try and do.

Ryan Isaac:
That’s doable.

Morgan Hamon:
Yeah, and we’ve been at it for, oh gosh, going on 12 years and counting.

Ryan Isaac:
Cool.

Morgan Hamon:
So that’s us.

Ryan Isaac:
And clients all over the country, right?

Morgan Hamon:
Yeah, clients just about every state, we have about 30 employees. Three owners, I co-founded the firm with my dad Ken, and then Courtney, we brought her on as a third partner about four years ago, she’s been fantastic.

Ryan Isaac:
That’s awesome.

Morgan Hamon:
And we’ll keep going. We’re gonna…

Ryan Isaac:
I like… No, I was gonna say I like the origin story of a lot of these businesses ’cause they reflect a lot, similar to how dentists begin, I mean, small beginnings, like you said, stress, sweat equity, blood, sweat and tears, sleepless nights, and it’s like a slow build to a big team and a big operation and lots of things, ups and downs along the way, man. You’ve probably seen it all.

0:05:28.9 MH: We’ve seen it, I’ve lived it.

Ryan Isaac:
Still going through it.

Morgan Hamon:
Yeah, and we’re gonna stay within… Stay in our niche, what we know best and keep on going.

Ryan Isaac:
Cool. Okay. Well, thanks for the little intro. Let’s dive into some different topics. If you’re listening to this later, we’re recording this, like you just said, November 2021. A few things on top of my mind I’d love to hit. Some of them are kind of… Year over year, what kind of things you would be thinking about towards the end of year, end of year checklist kind of stuff. Let’s hit that. A couple of other things on my mind there that might date us a little bit if you listen to this in the future, but I’m hearing questions come in about the use of EIDL loans for other things.

Morgan Hamon:
Right.

Ryan Isaac:
There seems to be a lot of grey area on what people are doing with their EIDL money, I’m curious about your opinion. And we’re on the cusp of, yet again, I feel like this just happened, but maybe some major tax changes in federal policy. So where do you wanna begin? Those are the things that are on my mind.

Morgan Hamon:
Let’s just talk about year end.

Ryan Isaac:
Okay.

Morgan Hamon:
There is still time to execute certain tax strategies, things to think about. One of the big ones that could come up as equipment, investments in the practice.

Ryan Isaac:
Yeah.

Morgan Hamon:
And how that works is, if you’ve been eyeing that new cone beam or upgrades in your office with a very generous million dollar plus limit on the Section 179, essentially unlimited for our clients.

Ryan Isaac:
Yeah. Yeah.

Morgan Hamon:
So that’s a dollar for dollar reduction in taxable revenue and I would never… You’ll never hear me say, “Let’s go spend money,” so then I can turn around and say, “Look how much I saved you on tax.”

Ryan Isaac:
Okay. I was just gonna say, I, unfortunately, you probably hear this too, way too often hear people say that buying stuff is a tax strategy.

Morgan Hamon:
No. I disagree with that.

Ryan Isaac:
It’s gotta be frustrating. Yeah.

Morgan Hamon:
Right. And so, any investment you make in the practice, that should be driven by the clinical and operational needs of the practice, and then we can certainly talk timing on the corresponding tax benefit. But if you just go buy… Let’s take the SUV. I talked to friends and they said, “I need to buy the 6000 plus pound car to save on tax.” My question is, “Do you need a car?” Well…

Ryan Isaac:
Do you need a 6000 pound plus car?

Morgan Hamon:
Yeah. Do you even need that? So we go spend all this money, you get your tax write-off. So whether it’s a car or whether it’s some piece of equipment that maybe you don’t need, right?

Ryan Isaac:
Yeah.

Morgan Hamon:
The easy way to calculate the tax benefit, let’s say we have a very successful doctor and their effective federal tax rate, maybe that’s kinda mid to upper 20 percentile would be realistic, plus maybe they’re in a state like… We’ll take Colorado for an example. So 4.6%. We’ll just around that maybe to five. So we can just estimate very quickly, let’s say we have got a 30% combined federal and state income tax rate. So if you spend $100,000, it’s a $30,000 tax benefit. That’s an easy way to calculate that.

Ryan Isaac:
Yup.

Morgan Hamon:
If you go spend $100,000 to “save on tax,” yeah, you’re gonna get a $30,000 tax benefit and be out of pocket 70,000 grand.

Ryan Isaac:
Yeah.

Morgan Hamon:
So it’s… I hate it when I hear that.

Ryan Isaac:
Yeah.

Morgan Hamon:
And I think, if that’s what your tax advisor, if that’s their big plan, go spend all this money so I can just say, “Look what I did for you,” it’s not helpful, I don’t think.

Ryan Isaac:
Yeah, it’s along the same lines, how we feel when we hear people investing in things that are not good investments, but they come with tax breaks that are favorable. And some of these things, the tax breaks and advantages, they are ancillary. They are great bonuses, but the main purpose still has to be, “I need to buy something” or “I want this investment, it makes sense in my strategy,” not… Taxes or tax benefits are ancillary, so let’s do it.

Morgan Hamon:
I saw… We had a client, they sent me sort of a screenshot. They were on a webinar, and they had this CPA on there giving them a presentation. And the big idea was, plus up your charitable contributions so that that’ll push you beyond the standard deduction, so you can get a bigger tax break on the personal side. Just stop and think about this. If you want to do the charitable donations and you’re gonna do it anyway, yeah, that could work.

Ryan Isaac:
Cool.

Morgan Hamon:
But otherwise, yeah, I tell you what, go spend $10,000 that you didn’t wanna spend, so I can turn around and say, “Look here, I saved you $3000.” But that’s crazy.

Ryan Isaac:
Yeah. Yeah. It is. Yeah.

Morgan Hamon:
But if you need something for the practice… Maybe you do need that [0:10:41.7] ____, ’cause that is going to help you provide better treatment, have additional revenue streams, all these good reasons you would want to make that capital investment in your practice, yeah, then we can certainly obtain that tax benefit and the question can come up and we’ll hear this like, “Well, do I need to get it this year so I don’t miss out?” And key concept here, you’re never gonna miss out any business expense you incur. You get to fully deduct that. It’s all a matter of timing. If we’re talking about medical equipment, there’s a couple of options. You could deduct it all right now via Section 179 or bonus depreciation and say, “We spent that, we can deduct it all right now,” as opposed to the other option, which is just the regular accelerated depreciation, which is a five-year, IRS requires medical… And it’s deducted over five years. So you can spread that tax benefit out. Sometimes that makes sense.

Morgan Hamon:
If we’re a growing practice and we think we’re gonna make more money next year, be in a higher tax bracket next year, and so we deduct a portion of that medical equipment in future years, those tax benefits can get more valuable, because we’re deducting those at a higher percentage if you’re in a higher marginal tax bracket. So bottom line, if you’re going to make the investment for the right reasons, clinical and operational needs, then we’ll obtain that tax benefit. We can do it all right now or we could spread it out over for five years. That doesn’t have to be decided this year. We can decide when we do the taxes in the Spring. Another key concept is, if… So let’s say we made the decision to make this investment in the practice for the right reasons in this time of year, so particularly it’s November 11th. If we wanted that tax deduction this year in 2021, the equipment cannot just be ordered, it has to be delivered and installed at the practice.

Ryan Isaac:
I’m glad you are saying that.

Morgan Hamon:
And the actual terminology is that it has to be basically installed and in a ready condition. So it doesn’t mean you have to have used it, but it has to be at the practice.

Ryan Isaac:
Are you finding… So November 2021, we’re dealing with huge supply chain issues. In my own backyard, I can see the ship sitting out on the water. Not literally in my backyard, I wish it was in the cool of a yard, but I drive down the street and I can look at the water and I can see the ship sitting there more than normal. Is this an issue for people being with a place in service?

Morgan Hamon:
I think it is. I think for some of the larger items, they may find that it’s already too late.

Ryan Isaac:
Yeah.

Morgan Hamon:
And so, the reason I point that out is you don’t wanna go out the last week of December and just have a purchase order and say, “I’m gonna deduct this.” No.

Ryan Isaac:
Right.

Morgan Hamon:
It does need to be placed in service, which means it’s at the office and you could use it if you want. It is not something…

Ryan Isaac:
Yeah. If it’s November and someone’s waiting for it to get shipped, there is a high possibility it’s gonna sit on a freighter for four months. Yeah. Good to know.

Morgan Hamon:
Right. So that’s some end to your considerations when it comes to those investments in the practice, and I would say, yeah, really think about why you’re doing that. And if you have a growing, thriving practice, even if that got pushed into next year, that may not be a bad thing. If you think you might make more money next year, which could put you into a higher tax bracket, that tax benefit is then more valuable next year.

Ryan Isaac:
I like that you said… You began some of this by saying, “Some people stress about missing out.” And that kind of FOMO, that’s something that… Especially buying things, business investments, business decisions, that kind of FOMO can really drive us into making poor decisions at the wrong times. And so I really like that you stressed that. There’s gonna be a tax benefit for you when you grow the business at the right time, in the right way, when you’re ready to do it. You don’t have to rush things, you don’t have to try to like… And maybe we’ll get to this, but a big thing right now is there’s a lot of speculation of what new tax changes are gonna happen. So people are trying to make decisions ahead of the official changes that might or might not be helpful or even smart.

Morgan Hamon:
May or may not happen.

Ryan Isaac:
Yeah, it might not even happen.

Morgan Hamon:
Right. And while we’re on this topic, one thing I will mention too, ’cause I actually had a client ask me this this morning about making those investments and how you pay for it. It doesn’t matter how you pay for it, whether you pay cash or if you got a loan, if the equipment manufacturer has some good deal financing and you’re not gonna start pay until next year, it does not matter how you pay for it, you get the full deduction provided the equipment is delivered. So that’s one thing I wanted to make sure I include on there. In regards to pending tax legislation, I… Just watching the news like everybody else.

Ryan Isaac:
Yeah.

Morgan Hamon:
What I know now, what I’ve seen on the news, the news is better recently than it was earlier. When I heard about some of the things that were being considered, notably the 3.8% surtax on pass-through income, I was very concerned about that. I think that’s very unfair for small business owners.

Ryan Isaac:
Oh, yeah.

Morgan Hamon:
I was just horrified to hear that. And to my knowledge, again, based on what I’ve seen in the news as of this date, I think that is out as are changes to the tax bracket. The top tax bracket currently is not slated to return to 39.6%, it’ll stay at 37. So the big changes are the tax on income over 10 million and over 25 million, targeted there. So does that… I’m sure that the CPAs and financial people that work with those people in that income range are not happy with that for our world, private dental practices, that they do really well and have a nice income. I think preserving the ordinary income tax rates where they are and not having that ridiculous surtax on pass-through income, that’s all very good news. That’s all very good news. So I’m not in panic mode, but any time these changes are pending and we have a Senate divide at 50-50, I don’t know if anything is really gonna change.

Ryan Isaac:
Yeah.

Morgan Hamon:
And if legislation goes through with that process, who knows what it’ll look like on the other side?

Ryan Isaac:
For all of our friends in expensive coastal cities, we’re gonna see the SALT deduction come back full effect?

Morgan Hamon:
Maybe so. That doesn’t help pay for these programs, quite the opposite, so it exposes perhaps a little hypocrisy on the political party and what they’re shooting for. But at this point… Well, I will put it this way. We’re not adjusting our…

Ryan Isaac:
Yeah. That’s good enough.

Morgan Hamon:
Our tax planning, based on some assumption. We’re proceeding with known data, because we’re talking about real dollars.

Ryan Isaac:
Well, and that’s… Over long periods of time, years and years and years, that’s really the only way to respond to things, is when you have real data. Making predictions exposes you to some risks that… The chances of hurting yourself more than you’ll help…

Morgan Hamon:
And it was frustrating last year because it took… If we look back a year ago, we still didn’t know how the government was gonna handle PPP. And so we’re too in tax planning and what we’re having to assume that’s taxable, ’cause that’s what was in the rules. And Congress ended up rescinding that at the very last minute, at least December, thanks for that, and then the states took up to sometimes four or five months to decide if they were gonna follow federal. And guess what? Those tax returns were due in the spring and the states took forever. So it created a lot of uncertainty. And my hope is those days are behind us.

Ryan Isaac:
Yeah. What a year.

Morgan Hamon:
Right. And the other thing, if we’re just talking about the future, where I hope we do not go as a country is that every four years, we have a different political party that wants to redo the tax code every four years. Do they not understand how impossible that is for… In our world, private dental practices think about the big multinational corporations. If you never know what the tax rates are gonna be in three years, how do you plan for that? So I think that’s very…

Ryan Isaac:
I was gonna ask about that from your perspective, it’s actually pretty rare to see major overhaul changes, and then we just saw them only a couple of years ago finally get implemented and now we’re debating them again and its kind of wild.

Morgan Hamon:
: It used to be once a generation.

Ryan Isaac:
Yeah, right.

Morgan Hamon:
Yeah, and that stability allows for people to plan.

Ryan Isaac:
Planning and know the strategy. Yup, especially the large end of the scale, like you’re talking about.

Morgan Hamon:
Yeah, large end…

Ryan Isaac:
But it affects small businesses too.

Morgan Hamon:
Absolutely affects small business, but think about that company that needs to go build a factory somewhere. We’re talking millions and millions of dollars is invest… How do they plan if they don’t know what the tax code is gonna be in four years?

Ryan Isaac:
Yeah, it must be super frustrating. Yup. Okay, I don’t know, did you have any other items on end of year, things that you wanted to cover?

Morgan Hamon:
No, I think… Right now I don’t anticipate any changes, significant changes in the tax code, just based on what I’m seeing in the news along with everybody else. I think the world we live in, with the taxpayers we serve, not anticipating substantial changes in tax. So that’s where we are right now, we’ll see what happens. We talked about investments in the practice, other things, we get much further along in the calendar, we can start talking about next year. If it’s time to do maybe a qualified retirement plan, it’s a little late.

Ryan Isaac:
I was just gonna mention that.

Morgan Hamon:
Yeah, it’s a little late.

Ryan Isaac:
Limits are going up.

Morgan Hamon:
Yeah, limits are going up.

Ryan Isaac:
For next year.

Morgan Hamon:
I just turned 50 this year, so I’m hammering that bad boy. [laughter]

Ryan Isaac:
That’s kind of nice and you get that extra… Yeah. So for anyone listening right now, it’s $19,500 limit for 401k; next year it goes up a 1000 bucks, $20,500 and then 50 and over an additional 6500 bucks that you get to put into that thing. It makes a big difference.

Morgan Hamon:
Yeah.

Ryan Isaac:
A lot of money.

Morgan Hamon:
Yeah. So we’re gonna move into more planning for next year, but things this year, while there’s still time left on the calendar, some tax deductions that are available for practice owners: The home office reimbursement, auto expense, if you’re doing mileage reimbursement, you wanna get all that done by December. Annual Board meetings, if you own a practice and you’re incorporated, which everybody is, with an entity, you should have a board meeting. Don’t do that at home, make a nice four or five-day trip, document it. That can still be done this year. Kids, if you’re having the kids on payroll, that needs to be done by… It needs to occur in December. And if you’re doing maybe a holiday party or a staff meeting and you wanna do that at your home and reimburse yourself for the facility expense from the practice, that should be done in December. So all of those individual strategies that need to be executed and should be executed every year, still plenty of time on the calendar to get this done.

Ryan Isaac:
Which would be a reminder for anyone who’s trying to do a conversion or something, that’s also a calendar year deadline to do in the calendar.

Morgan Hamon:
Yeah, and the reason that’s important to happen is all of our clients, I’m sure everybody listening, whether they have a sole proprietor, an S Corp or a partnership, those are all pass-through entities that we all know, and so you pay tax personally on a cash basis. So the money has to move, we have to record that as happening in December. When it comes time for payroll, if we’re trying to get a last payroll in, whether that’s for the owner, S corp owner salary, or if it’s for having maybe a spouse on payroll to help, perhaps double-dip on a qualified retirement plan or having the kids on payroll, that needs to post in December, the payday needs to be in December, you can’t run that on December 28 with a payday on January second and say, “Well, they took the money on January 29.” Paydays are always recognized or the payroll is always recognized on the payday, not the debit from the bank account. So you gotta make sure and get that done in December.

Matt Mulcock:
On the Dentist Money Show, we teach dentists how to make smart financial decisions.

Ryan Isaac:
You’re correct.

Matt Mulcock:
Is that all it takes, Ryan, to make smart financial decisions, listening to our show?

Ryan Isaac:
Matt, it’s a good first step, but to put your financial future on the fast track, the next smart decision is to go to dentistadvisors.com. What you do there is you click on the book free consultation button right in the middle of the home screen and then you schedule a time to talk with one of our very friendly dental-specific financial advisors today.

Ryan Isaac:
Do you wanna talk about, address at all, any… Maybe it includes PPP money, but more is the EIDL money. A lot of people with idle EIDL money sitting around and they’re wondering, “Can I use this for the downpayment of the expansion building? Can I buy a practice acquisition with this? You wanna address that at all?

Morgan Hamon:
Yeah, so the rules are, with the EIDL loan, it’s intended as revenue replacement to keep your business operating, it is not intended to refinance existing debt or rebuild the office. Now that being said, the big question out there is, “What are the enforcement mechanisms?” And there are so many programs out there. I question whether SBA has capacity, like what are they gonna do to go audit this? I don’t know. So I… With that, I guess my suggestion would be, use that money within the scope of what it was for because some of those EIDL loans, it’s some big, big money.

Ryan Isaac:
They are big.

Morgan Hamon:
And I don’t think anybody would wanna be on the hook for repaying that, perhaps in a timeline they’re not… It may not be advantageous if it were… If they did look into what those monies were used for.

Ryan Isaac:
Yeah. Someone audited the, yep.

Morgan Hamon:
So I would say… But here’s the thing, Ryan, and this is why I think it would be difficult for the SBA to truly audit and trace every dollar, because it is intended to be revenue replacement, property and expenses. So say we’re very disciplined, we put it in a separate account and we’re gonna pull it out and fund payroll as an example, practice payroll. We’re gonna pay the rent, we’re gonna pay all those correct expenses that it’s designed for and be very diligent, solid paper trail.

Ryan Isaac:
Good record keeping.

Morgan Hamon:
This is exactly what we used it for. Well, what’s gonna happen then? If that money is funding those, you are going to have residual profit.

Ryan Isaac:
Exactly.

Morgan Hamon:
It accumulates.

Ryan Isaac:
Piling up.

Morgan Hamon:
And use that pile of money to maybe take out some equipment loans that you’re tired of. Or make investments in the practice. So in some regard, it’s a matter of mechanics. I would say you have that EIDL money, use it as revenue replacement, be disciplined to show, this is what I used it for. And the reality is, with EIDL funding those operating expenses, the other money you’re collecting is going to accumulate and use that money.

Ryan Isaac:
As you would. Yeah. Okay. That’s probably why there’s a lot of gray in there. Morgan, is there on the… To wrap it up here, is there anything heading into next year that you would say someone should pay attention to, do better next year than they did this year, something to focus on just from a broader perspective?

Morgan Hamon:
Big picture. In my world with the financial accounting background, I’m seeking with our clients to find opportunities for profit improvement because we… Like we started, I guess to tie it together at the very beginning of the call, we talked about why own a business if you’re not gonna have the appropriate financial reward for doing so? And there’s a lot of good… There’s a lot of rewarding aspects to owning a business, but the financial aspect of that is certainly part of it.

Morgan Hamon:
So in terms of profit improvement, looking ahead, how to do better, and I’ve said this before on other podcasts. Administratively, the most important thing that your practice can do is collect money and it’s an ongoing topic when I visit with our clients. And it’s very… It can be very frustrating for the owner if they’re working hard, they’re paying for the treatment, paying the bills and if that production does not turn into collections, it can be devastating. I had a phone call just this week with a new client, they just… They came on board after being open for about six months and had collection issues, which created this huge cash flow problem. So I would say, as your friendly CPA, always hawk that collection process as much as you can.

Morgan Hamon:
So that’s always something to work on. Other real-time trends in the industry right now, I’ll share with you. We monitor all the expense benchmarks for our clients and it’s been very interesting to see movement on those client averages over these last 18 months. Prior to the pandemic, total non-doctor staff cost was around 27 and half percent, it was pretty normal.

Ryan Isaac:
Including payroll taxes.

Morgan Hamon:
Yeah, that’s gross pay, payroll taxes, benefits, out the door costs on having… Everyone is not a doctor in your office. That’s been creeping up over the years. In COVID, it was a little bit all over the place, but it really, it peaked and we’re seeing a 28%, a 29%, and I was thinking, “Is this the new normal?” We didn’t really know at the time.

Morgan Hamon:
Simultaneously along with that, everybody’s been very frustrated with the HR aspect of their practice. Trouble finding assistants, trouble finding hygienists. The pay that some people are asking for and demanding is extraordinarily high, reimbursement rates aren’t getting any better. It’s creating a lot of frustration. So for your listeners, if they’re just worn out by the process of trying to staff their practice, I’ve always said for years, HR is the never-ending project, it’s never done. But it’s been particularly challenging these last 18 months. One interesting thing that I’ve seen in the last few months is our client average staff costs have actually been declining as a percentage of revenue. I’ve seen our client average dip into the 25 percentile range, 25% of collections.

Ryan Isaac:
Interesting.

Morgan Hamon:
I haven’t seen that in five years. So what’s causing that is… Overall, the industry’s healthy. Our clients are doing well, they’re making money. I’m sure you’re seeing that too. So it’s been a good year. People, employees are more expensive, but what’s happening is that there’s just not as many of them and so offices are doing more with less. And that is causing… So with the nice revenue levels we’re seeing with less staff, not necessarily by choice, even though those folks are probably getting paid well, we’re seeing a lower percentage staff cost. While that’s great, as their CPA looking at the financials, “Hey, I love it. This is a great place to be,” that is not, I think, translating over to good times at the office. I think people are having to do more with less and they’re not necessarily enjoying that. So I would say looking into next year, I think solving that HR puzzle will be an ongoing project for the time being. But that’s just some interesting things I’ve seen as we monitor those expense benchmarks for our clients.

Ryan Isaac:
Yeah, it’s… What crazy trends. And I like what you said, I wanna reiterate that too. I think when you have an opportunity, like dentists do, to work in an industry where basically you have unlimited funding for any growth that you ever wanna do, you have pretty wild profit margins compared to so many other industries and you’re in an industry where you do have the option for longevity, you can earn that kind of money for a very long time, even with the reduced hours and work capacity, you can could still earn… It’s just getting the money out of that practice, collecting high profitability… There’s probably literally nothing more important at the top end of the funnel for a dentist’s entire financial picture. So I’m glad you kind of brought it all back and I agree.

Morgan Hamon:
Yeah, that is something that’s… You can look at all the production numbers in Dentrix all day long and say, “This is awesome. We’re crushing it.” But you gotta look at those financials and make sure that that’s translating into cash flow.

Ryan Isaac:
Yeah. Morgan, where can people find you if they wanna reach out and get in touch?

Morgan Hamon:
Our website is hdagroupdental.com. You can find us there. Or my email is morgan@hdagroupdental.com. You can certainly shoot me an email. I always love meeting new doctors, learning about their practice, see if there’s some opportunity we could support them. And we’re always here.

Ryan Isaac:
Okay. Well, Morgan, thank you for spending some time and going over that. What a crazy couple of years it’s been for you guys and the whole tax industry.

Morgan Hamon:
It’s been for everybody.

Ryan Isaac:
It’s been insane. And for all of you listening, if you’re new, thank you. If you’ve been around for a long time, thank you. Thanks for being here with us. And I hope you enjoyed the show. We’ll catch you next time. Take care. Bye-bye.

Morgan Hamon:
Bye-bye.

 

Taxes