Covid-19 has caused unprecedented closures and lock downs across the world. With viruses such as SARS, Ebola, H1N1 and Covid-19 springing up more frequently, you can expect that office closures are probable. Here are some lessons we can apply:
1) Have your team in place. A successful business is run by more than just the owner. To reduce stress, make sure you identify everyone on your team and their roles and responsibilities. This past experience of closing your own office likely left you with questions you didn’t even know you had. For example, what are my obligations to my patients and staff? Do the staff still get paid? Do I still pay my bills and loans? What is a record of employment (ROE) and how do I file it? Am I covered by insurance? The team also includes your spouse, office manager, staff, accountant, lawyer, banker or insurance agent. Surrounding yourself with a team who responds during an emergency is the first step in planning for the worst.
2) Review and implement employment contracts for staff. Office closures means staff may have to be laid off. Your employment contracts may protect you and limit your liability if you are forced to lay-off and/or terminate employees. It will also enhance your practice’s value.
CONNECT HOME AND OFFICE
3) Make your office digital friendly. Working from home isn’t often associated with dental offices; however, there are many processes that can be performed remotely, including charting and documentation, bookings and scheduling, predeterminations and various administrative functions (eg. paying bills, bookkeeping, payroll, submitting EDI claims and emergency calls with patients). Having the ability to connect to the office so that you can access patient charts, appointment books and other data means these tasks can still be done even when the office is closed. It could also provide you more time with family and untether you from the office. New tax rules provide accelerated tax write-offs on equipment, software, hardware, etc. This means a reduced after-tax cost of these items due to the new tax rules.
COMPLIANCE WITH INFECTIOUS DISEASE PROTOCOLS
4) Make sure you are compliant with infectious disease protocols. With viruses and infectious diseases making headlines globally, the general public is now much more aware and sensitive to the health risks associated with airborne bacteria and viruses. This means the repercussions of non- compliance with infectious disease protocols is heightened. Being shut-down in the past due to a public health infraction was bad enough but, being shut-down in a post-coronavirus environment for an infraction will be far worse. Upgrading and investing in equipment to comply with infectious disease protocols will also save you taxes due to accelerated tax write-offs. See (3) above.
OWN YOUR WORKPLACE
5) Invest in your dental building. An investment that serves more than one purpose reduces risk. Purchasing your dental building allows you to protect your practice by avoiding demolition and relocation clauses, saves on rent and provides a future source of retirement income. Dentists spend less when they have less to spend. The building mortgage payments remove cash which may have otherwise been spent on non-essential items (i.e. it is a form of forced savings, especially during good times). During bad times, it provides a safe haven from a tyrannical landlord.
CASH IS KING OR QUEEN
6) These closures show the reality of what happens when cash stops coming in completely. A profitable dental practice which generates a lot of cash flow can still be in a bad position if all that cash has been paid out to maintain a lavish lifestyle leaving nothing for emergencies. Many dentists ask, “Can I afford to buy something?” (An article recently published in Vol. 88 of the Professional Advisory was dedicated to this topic.) Invariably, the answer is, “yes”. Most dentists should ask, “Although I can afford to buy something (a boat, cottage, plane, etc.), can I afford to pay for the maintenance of these items?”. You should have enough cash and/or a business line of credit to cover three months of expenses, even without any production/billings. On the personal side, if you have equity in your home, consider a line of credit secured against your home. You will only pay interest when you draw on it, but it will provide you and your family peace of mind during an apocalyptic world.
This article was prepared by David Chong Yen*, CPA, CA, CFP, Louise Wong*, CPA, CA, TEP, Basil Nicastri*, CPA, CA and Eugene Chu, CPA, CA of DCY Professional Corporation Chartered Professional Accountants who are tax specialists* and have been advising dentists for decades. Additional information can be obtained by phone (416) 510-8888, fax (416) 510-2699, or e-mail firstname.lastname@example.org / email@example.com / firstname.lastname@example.org /email@example.com. Visit our website at www.dcy.ca. This article is intended to present tax saving and planning ideas, and is not intended to replace professional advice.