A guide to dentists’ finances, part three
Part 3: Providers
As a Provider the number of financial commitments increases as you combine practising dentistry with running a business.
If you’ve set up your own practice, or bought a share in one, you will want to ensure it runs smoothly. From the premises to the equipment, there are a lot of expenses to think about and it is unlikely that you will be able to afford them from your regular income. Business loans are a good way to access finance, ensuring your personal and professional finances are kept separate.
Speak to a financial adviser with expertise of the dental profession who will be able to explain the options available.
Like many other businesses, dental surgeries are often set up without consideration to what would happen if a partner, if there is more than one, falls ill or dies.
Following the death of a partner, their share of the practice would become part of their estate and pass to their beneficiaries, who could then conceivably sell this to an unconnected third party if there isn’t a legally binding option for the remaining partners to purchase.
Partnership Protection provides a lump sum, allowing their share to be retained in the practice and current ownership to continue. It can also be used if a partner is critically ill or unable to work.
Partnership agreements are a complicated area and professional advice is strongly recommended.
Key Person Insurance
Key Person Insurance can be taken out to cover the lives and/or health of other important members of staff, such as nurses, support staff or the practice manager. Typically, it will pay out a lump sum to the business in the event that either the person dies or is diagnosed with a critical illness, which could be used to cover the cost of recruitment or loss of profits while the practice reorganises.
You should already have insurance in place to protect the practice and its contents against events such as flooding, fire, burglary, etc. Typically, dental practices contain equipment that could cost tens of thousands of pounds to repair or replace, such as dental chairs and x-ray machines, therefore it’s important to ensure you are not under-insured.
Practice Agreements and contracts
It is also important that a robust written agreement is put in place between the Provider and Performer. This agreement will cover things like sick pay, maternity leave and holiday entitlement.
The BDA model contract is the most widely used and has been recognised by HM Revenue & Customs as a benchmark. However, independent legal advice should always be sought by both parties to ensure any agreements that are drawn up are bespoke to the practice.
Hopefully, you will now have a good level of income from the practice, and it may be the right time to consider paying off an outstanding mortgage, along with any other debts.
Many mortgages allow you to make ad-hoc additional repayments to help pay off the debt early. With the help of professional advice, you can put together a plan to allow you to clear any debts once and for all.
Saving for the future
With your debts paid off, you may also feel a greater sense of financial freedom which could be heightened with your children leaving education and moving out of the family home. As such, your saving objectives are likely to have changed, as you possibly plan a dream holiday or buying a second home.
Whatever your goals, it’s important to have plans in place to achieve them, which might involve regular savings or lump sum investments.
As you get older and have children – or even grandchildren – you may be thinking about how you can help them financially. You can save money in trust for them, perhaps for their education, or even put money into pensions for their benefit.
Closely aligned to your savings goals will be your pension arrangements. Ideally you would have been taking advice throughout your career. However, it’s important to check regularly that you’re retirement plans are still on track especially in light of the proposed changes to the NHS Pension Scheme. If you’re thinking about retiring early you’ll need to know how this will impact your pension income.
The above information does not constitute financial advice. If you would like more information or need specialist financial advice call Wesleyan Medical Sickness, which specialises in financial services and products for dentists, on 0800 980 5462 or visit the website at www.wesleyan.co.uk/dentists.