Daily, monthly and annual financial procedures

Most of you will have recently submitted your annual self-assessment tax return and paid a hefty sum to the taxman. But did you ever think that better financial management could reduce your tax bill?

Most of you being higher-rate tax payers, have you ever thought how much tax you would have overpaid due to omission of expenses during the process of preparing your

annual accounts?

To put this in the simplest form, an unaccounted invoice of £100 would have resulted in you paying an extra £41 of tax to the taxman, including class IV national insurance. This is equally true with any unaccounted income – if you have understated your income you would have underpaid tax!

I am not suggesting that your annual accounts are wrong, but incomplete record keeping can lead to inaccuracies in your accounts resulting in an incorrect tax bill, unless your accountants have performed a full bookkeeping exercise.

Therefore this article is a list of steps which you could take weekly, monthly and annually to make the process of managing your finances far less painful and far more effective for you.


Obvious as it may seem, the most important day-to-day financial procedure is the end-of-day cashing up and reconciliation, which should be done at the end of each day to balance the till and highlight any anomalies as soon as they occur. Rectifying any mistakes as soon as they happen is far easier than trying to go back through the transactions at a later date.

You should maintain a daily collections register to record cash, cheque and card payments received during the day. Total collections as per the register should tally with the total as per the practice software.

Apart from this, you should also maintain a deposit register to record banking. Ideally, banking should done on a daily or weekly basis depending on the amount of collections. It is recommended to have a set pattern.

The above registers will enable you to manage daily collections in a systematic way. This will also help your accountants during the process of preparing annual accounts.

In addition, using a spreadsheet to update data such as business mileage only takes a minute or two to do on a daily basis but leads to much better records and higher levels of accuracy, and will save time and effort at the end of the month.

In our experience, most dentists never maintain a business mileage log. This prevents you from claiming mileage allowance for business travel involving your personal car. Therefore, maintenance of a mileage log is another task you should do on a daily basis.


Similarly, there are procedures which can be done on a weekly basis to aid good record keeping. Regular banking and recording of deposits should be done weekly.

In addition to this, supplier bills could be paid on a weekly basis, for example every Friday, to keep your supplier happy! Again, it would a good idea to keep a payment register to record the details of the payments made on a given date. This will provide you with a record to track past payments to various suppliers, including the invoice numbers you have settled.

Also, a set pattern in making supplier payments will enable you to optimise the credit period offered by the suppliers. This will help your short-term finance.


• Bookkeeping

The most efficient way to perform bookkeeping is to train a person who works in the practice, for example the manager, to update the system on a regular basis in manageable chunks. Using a good bookkeeping package recommended by your accountant, you can record information in a clear and professional manner. I would recommend using a package which can be tailored to a dental practice to make the process easier.

The benefits of monthly bookkeeping are numerous. You’ll be provided with vital management information to make timely decisions, will reduce the risk of omitting any transactions from you accounting records, and be able to prepare your annual accounts quickly with minimum fuss.

To make sure that record keeping is complete, it is highly recommended to perform bank reconciliation too on a monthly basis. Bookkeeping software has this feature. The importance of the monthly bank reconciliation is that it’ll ensure that all transactions are properly accounted.

If you haven’t got a bookkeeping system in place, then it is highly recommended to maintain a very good filing system so that your accountants will be able to collate the information and prepare a set of accurate accounts much faster. In addition to the above daily/weekly registers, such a filing system should involve classifying source documents into various categories such as lab bills, materials bills etc, and filing them on a calendar month basis.

• KPI monitoring

Another monthly tool which can add a lot of valuable financial and non-financial information is Key Performance Indicator measuring. You need to identify critical success factors, which are factors you believe are essential for the success of your practice, (for example, associate performance or number of new patients).

Once you have identified the critical success factors, it is then important to identify the key performance indicators for each critical success factor. This will enable you to measure the performance of the identified critical success factor on a regular basis and take timely corrective actions. For example, if the expansion of the customer base is a critical success factor for your practice, then you have to monitor new patients on a regular basis. Therefore, ‘number of new patients per month’ becomes a key performance indicator which needs to be measured.

Before you identify the KPIs you will be measuring, you need to be aware of your goals and objectives, as obviously to judge whether a critical success factor has been successful you need to have targets against which actual performance can be measured.

• Payroll

This generally takes place on a monthly basis, and keeping good monthly employee pay records and tax records will save time and make for a more streamlined year-end accounts preparation, and end-of-year documentation such as P60, P14 and P35.

It is highly recommended to maintain a record of PAYE and NI remittances made to HMRC. This will help with the preparation of the employer’s annual return. You should use the HMRC payslip booklet in this regard.


• Financial plan or budget

Every practice needs a full financial plan or budget to identify not only where resources will be needed, but also the amount of resources required. This needs to be done on annual basis and updated and reviewed to ensure that any changes in the practice’s circumstances are taken into account.

When preparing the annual budget, it’s essential to establish your long-term financial objectives and to assess your current position. The budget should be broken down into monthly forecasts which put you in a better position to monitor actual performance of the practice and compare it to the budgeted performance.

Therefore, although budget setting is an annual financial procedure, budget versus actual performance comparison should be done on a monthly basis.

This comparison will highlight any adverse and favourable variances so that you can take timely management action. For example, if the actual revenue is below the budgeted revenue for the month, you have to ascertain reasons for this adverse variance with a view of taking corrective measures. This process is known as the budgetary control.

• Fee reviews

A successful private practice knows how to price right. Therefore it is essential to set fees that are transparent yet profitable for you in your business. Your costs are likely to change from year to year and so your fee structure should reflect these changes. Every year you need to review your fees and ensure you are charging the right prices for your practice.

Take into account all the costs you have, variable and fixed, the hours you work and then use this information to calculate the potential prices for the treatments you provide. This approach will enable you to ascertain the cost per hour of keeping your practice open. Based on this and the profit margin that you desire, you can set the hourly fee rate and the fee per each type of treatment. This approach will also highlight whether your operational costs are too high.

For example, based on the hourly cost that you calculated, if the hourly suggested fee rate is well above the market rates, then this implies your practice overheads are high.

Based on your location, practice performance and financial information, review the prices you charge and calculate appropriate prices for your practice based on the these criteria.

Accounts and tax returns

The above procedures will ensure that annual accounts and tax return preparation becomes a much more straightforward affair for you and your accountants. Since documents are organised on a daily, weekly and monthly basis, you should be able to submit the information to your accountants soon after the year end. From another angle, your accountants will receive a set of well-kept records. If you have used a bookkeeping system and performed the monthly bank reconciliation it will be a big bonus!

Everyone is aware that submitting your tax return before the 31 January will help you avoid a fine, but not many people are as aware that getting your accounts and tax return sorted well in advance can lead to added advantages. These include the ability to plan your cash flows by knowing your tax bill earlier in the year, the ability to evaluate practice performance soon after the year end and, if you submit your tax return before the end of September, the taxman will calculate and inform you of the tax liability.

In addition, you may be aware that the deadline to file your self-assessment tax returns will be brought forward to 31 October from the 2007-08 tax year onwards. Although this will not affect online tax returns, this is another reason why you should get your tax return sorted earlier in the year.

Therefore, in conclusion, by following the above daily, weekly and monthly procedures you will be able to streamline lots of admin work pertaining to financial records at your practice. This will help both you and your accountants in preparing your annual accounts, make the process more straightforward and stress free and, more importantly, it will lead to a much accurate set of accounts prepared on a timely basis.

On top of all that, procedures such as KPI monitoring and budgetary control will enable you to take timely management actions leading to improved practice performance.

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