How to Operate a Dental Practice Profitably - Fazel Mostashari, CPA

And that is that he is absolutely phenomenal in what he does. He has. Has really taken dentistry by a storm, if you will. I've known him for a few years now. We've done many seminars together, many, you know, live seminars, webinars. He really has helped a tremendous amount with my clients and done a fantastic job. So I know he's got a wealth of information to share today. I know many of you. I actually received several questions already via email. But I know that you all are excited to hear what he has to say, and I am as well. So take it away, Fazell.

Well, thank you very much, Gene.

What can you see now? Can you see my slides?

I can't see your slides yet.

You cannot? Okay, okay. Okay. How about now? Can you see my slides?

Yep. Just go to full slide mode and then you're good.

Okay, ma'. Am. How is that?

Perfect. Absolutely perfect. Thank you.

Well, first, thank you very much for having me today. Today we're talking about two of my one more favorite subject, financial statements, and the other one, the Eidl versus PPP loans that are these days giving a lot of people a lot of headache.

Good afternoon. My name is Fazell, so I'm a. In short, I'm a dental CPA and forensic accountant. Dental CPA pretty much means a CPA that is specialized in dental industry. I have well over 1012 years of experience in dentistry. My job usually is around things that dentists usually need, so accounting, tax and consulting services. Also, I'm doing plenty of practice acquisition and startup support. I'm not a broker, so I'm just a consultant and I usually work only for my clients. What is usually I only work for my clients. The best way to contact me is over email. It's cal.dental.cpamail.com or dentalcpaca.com if you need any of the additional information spreadsheets, just let me know, email me and I'm going to be very happy to provide you with additional resources.

So that's the first big one. So let's jump into this issue with PPP Eidl. I think by now there is a lot of general information available. And before I go further ahead. So this is not a tax.

Lecture, it's not an accounting lecture, it's not a financial.

Analysis lecture, it's not a loan lecture. It's just for general information. If you need any specific advice, you need to consult your own cpa. Hopefully you have a good one that you can get a hold of him or her as soon as possible. So let's go back like two and a half months ago, two months ago. So the first big loan that we all get familiar with and that was already there all the time is the Eidl Economic Injury Disaster loan. It's been there all the times. It just with the CARES act, this Corona and COVID 19 get added to those sections of the SBA loans as well. So I want to start with the Eidl on the right side. So this is pretty much very straightforward, a working capital loan. So obviously in the past two months a lot of people didn't work. A lot of the practices did not generate money. I think some of the cash you had already dried up. So that is supposed to provide you some fresh capital.

The terms are very, very favorable. So it's 3.75% for a 30 year loan. Usually in a dentistry business right now we're between 3.2 and 3.6 ish for a 10 year loan. One of the banks has a 15 year loan. So the longer the period of the loan the higher the interest rate. So a 30 year loan in a dentist right now should be around maybe 6 to 7% but you get it for 4% ish. There is deferred the payment by one year. There is no fee, no prepayment penalty and that's actually pretty nice. But don't forget it's a loan. And there was supposed to be a $10,000 of advance grant but it was up to at the beginning we just didn't know how this is going to be applied. After a few weeks of confusion we just learned that pretty much employees, the number of employees is very important. So each business gets according to the number of employees, $1,000. And a lot of people receive that already.

From the day one. We I pretty much try to warn a lot of people that is everything is not as simple as you believe it is. So it's not just you receive $10,000 or $1,000. So I'm going to go to the the next slide and provide how the strategy was supposed to be. And if you can still change some of your strategies, maybe that's going to help you a little bit. Then let's go to the PPP. The PPP specifically was designed to.

Provide for eight weeks of payroll and 75% or more is supposed to be for payroll. There is another 25% that is for interest. Interest is for utilities and also for rent. It's going to be deferred by six months, maturity is two years and up to 100% is forgivable. Probably a lot of people are not going to be able to have it forgiven by 100%. We discussed that in a few minutes later and very, very specifically in about two, four, six weeks, all the webinars are going to start that we're going to specifically be talking about forgiven. That is supposed to happen. But today I'm talking about general framework so you can plan your loan. Big, big question. Can you have both of them? Yes, you can have both of them, but do not pay anything from Eidl for payroll. I have a very, very detailed spreadsheet in the next slides that we can discuss which one can be used for what purposes. Also, as I mentioned, I told everyone to careful with the Eidl and especially with the advance because taking the Eidl and the PPP or the ppp, it's going to exclude you from some of the other available remedies or tax relief. We're going to discuss that later as well, a little bit more. And also the Eidl and the PPP might be in.

Some kind of direct.

Not very easy to explain, but they might compete with each other. That's why pretty much we don't want anyone to not be able to capitalize 100% on the PPP. That's why we recommended not to take the $10,000 or up to $10,000 in advance. So first exhaust as much as you can on the PPP before you tap into your E.

Also.

As I mentioned, should not be used for payroll, at least not until you exhaust all the ppp. Also, this is a federal loan, so misusing the funds can end up in fraud charges and that's a felony. We're going to talk about that later as well. So it could be up to five years or $250,000 of fines. And this is not as easy as it sounds. It is. So it's very tricky. So let me go to the next one. And this has been our general recommendation from the start in terms of the strategy. So we said, okay, definitely first of all, apply for all of it out there. The Eidl, you might not need a 30 year loan for the dentistry, but at the end of the day what you need is access to liquidity and credit. So my recommendation was as not just today to be able to capitalize. Well, capitalization means pretty much that you have money at favorable terms available for you to be able to conduct your business. And this capitalization is not just a practice loan. It's not just sometimes 0% credit cards or lines of credit. This is going to be one more of the resources that you can tap to. But at the beginning we recommended not to take this up to $10,000 of advance. And the reason for that was there is whatever advance you take from the Eidl is going to be discounted from PPP number one. And anytime you take any PPP and Eidl you exclude yourself or your available tax reliefs from.

You cannot use the tax reliefs anymore. And because at the beginning we didn't know how we're going to end up with those tax credits, we recommended to be careful with the advance. Then the next step is once you get your ppp, spend it for everything that is allowable. Once you have no more ppp, apply for the forgiveness. And then you have the decision either you keep the rest at 1% for two years or you repeat it immediately. But some planning is needed that we're going to be discussing a little bit later. This spreadsheet is pretty much a very very.

Framework about what for you can use the Eidl for. So the most important one, payroll avoided. If you've received any Eidl and some of my clients have maybe three so they have something between 50 and 400 ish those three. And the formula is very interesting to know as well because it's based on the gross revenues it seems to we don't exactly know and credit. So don't use it for payroll, don't use it for suta, don't use it for group health. We said at this time. So we don't know what's going to happen because you're going to be having this loan for 30 years. So are you going to be using it, are you going to be able to use it for payroll in 2021? Well, probably yes, because then the PPP is gone and then there will be some more communication and a lot more resources for us available. Be able to tell you 100% if that's a good if that's a good idea or not. So you should be able to use it for everything else, rent and utilities as well. But we recommend to wait for that because you can use your PPP for those. So definitely you can use it for supplies and lab. And this is the most expenses that you have besides your payroll just going down the list. You can use it for your independent contractors, IT accounting and legal. You can use it for.

Some other expenses as well. But we exactly. We just don't know how this is going to work for equipment. There is a lot of resources out there. So right now we just don't know a lot for sure. The reason for that is pretty much a lot of the times when the laws get out. It's not just a law, it's the interpretation, it's the guidance, it's how it's going to be handled. So at this time the recommendation is to be very, very safe with what for you can spend it. And then this is my favorite one these days, ppp. So definitely you want to use it for payroll. You want to exhaust it as much as you can. I'm not saying that spend it all. My recommendation is only spend it if you have a reason for it. Only spend it if you have a business purpose for it. Unfortunately, a lot of the concentration these on forgiveness and my recommendation is concentrate on the business side. So only use the money if you need it. If you get it forgiven, nice. If don't, it's still a loan. It's a good loan, but still it's a loan. It's somebody else's money. So payroll? Yes, suta, that's state unemployment, taxes? Yes.

Group health? Yes. Rent and the utilities. So I listed the utilities, which is water, gas, electric, phone, Internet.

TV is not included. You can use it for mortgage interest. But as far as I know, a lot of the people that have.

Loans, they have that actually deferred, so there might not be any interest due these days. And something that also I want to discuss a lot of questions that I receive is can I do advanced pay? No. And we're going to discuss that a little bit later. Can I increase payroll? Well, probably no. Definitely no. Should you pay for your family members just because you want to exhaust the payroll? No. So a lot of no. So don't pay it for something if you didn't do it before or if you don't have any real business purpose behind it. And the big one, this big, yes. Here is pretty much how much you can pay it for yourself and how much you can pay it for employees that are more highly paid. Maybe you have a top office manager. So up to 15,385 and how the computation works is 100,000 divided by 52, 52 weeks or 26 pay periods, times 8 if you go by weeks or times 4 if you go by the pay period. So yes, you can use it for payroll. Okay. And don't forget the 21, 25, 75. And we're going to discuss that in a minute one more time. So.

This is a big one. And the reason for that is not many people talk about that the way the certificate, the Borrower certification. Because, you know, when they started this, a lot of people just didn't know what they do. They just applied. They just widely believed that they can get some free money, but it's not a free money. So by the time that you had applied for this or every borrower, so you should be able to demonstrate that this loan was necessary to support your ongoing operations. SBA did actually eliminate a lot of the requirements because before they wanted you to use your savings, they wanted you to use some other credit. So that's not needed right now, but it's not. That is automatic. So you need to certify that it's not. Just check.

In the application. You should also read it one more time and make sure. And also what they did is they came out and say, okay, if you took the money and if you return it before May 7, we're fine. We okay with that. And again, I want to say if you misuse the money, there's a five year prison and or $250,000 in fines. And that's something that everybody should be aware of as well. So the next big one is when the eight weeks start. And that's the COVID period. So the CARES act says since the origination date and origination means when you signed it, let's say you signed it last Thursday. So one of my clients signed it last Thursday, but they received it today. So the funding day is today. Origination date is on last Thursday. I think it was April 30th. So which date to take? So this is still a little bit to be debated, but SBA says the funding date, but the CARES act says origination date is when you sign it. Actually good. And this is very important for you to know when the date starts. Maybe you can come up with a.

When, when you come up with the calendar. I have one question that I can respond to. So it' the question is they make $150,000 as an owner, can I still deduct the eight weeks for PPP? Yes. Number one, you eliminate 50,000. So the max is 100. The 100 is divided by 52. I think that's the two slides before. So I'm a little bit afraid to go back because I don't know how this. Maybe I can try.

Yeah, yeah, yeah. Oh, that's good. Okay, so this one, the 15,385 is based on 100. So divided by 52 is 1923. If you go by weekly, bi weekly, not bi weekly. If you go. If you compute the week and if you go bi weekly, it's going to be 3846. So 3846 times four pay periods biweekly. And you can use that. I think I responded to that. And it responded to that. Okay, thank you. So let's go back to the next ones. I think I did not discuss this one. Oh, okay. I did not. I missed this one. I was too fast. Okay. How PPP is supposed to be included? Computed. So the base for that is pretty much the average payroll cost for the prior 12 months or for the prior calendar year, 20, 19 times 2 1/2. What can be included? Initially they said you can include independent contractors as well. A lot of people that I know and some of the applications that we assisted to fill out, we had the independent contractor, but that's not supposed to be included because they can use their own PPPs so they can do that. So salary, wages, commissions, compensation, if you have a restaurant, cash tips, vacation, all of the family medical and sick leave and also the benefits is includable. It's just also max is 100,000. So again, if you had some compensation over 100,000, that needed to be max at 100,000. And initially they said you could use all of the, you need to use the payroll reports. But again they accepted a lot of backup information. Some of the larger banks these days, they come back with some very, very Weir computation. And unfortunately with the larger banks we cannot go back and just say, okay, that's not how it's intended or how it's computed. Sometimes they just don't do a good job on that. So my recommendation is provide as much as information. If you believe that your application is incomplete and it's still being processed, my recommendation is get together with somebody, get all the backups and provide it to them because that's important to receive the proper amount. We discussed certification. I apologize.

So this is a big one as well. And as you know, and I'm subject to a lot of frustration in the past few weeks, we know that some of the larger banks did a terrible job. They gave the money to their larger customers. And also some of the big ones, they do not process it based on.

Based on.

When you provided that. They just process it sometimes very randomly. That's why some of these smaller banks and some of the fintechs and some of the brokers, so I'm usually a little bit.

I question how brokers can be, can do that. But some of the brokers did great. So one that I know did a really good job is Blue Wine. So you contact them, the brokers, they go look for money. Their communication is great and they did a great job last week. PayPal did great. QuickBooks did great. Ready Capital and Kabbage rocked it. So if you still didn't apply, go to one of these. You can apply to more than one lender. You can do 2, 3, 4. Nobody's saying you should not do that. But you cannot take two, three, four loans. You could take only one. And how do you know that you got the loans? Well, you get approved, you get an SBA number and I think that's when you sign the note, you know that your loan is approved. It means that they secured the loan and they're going to process it also. Lendio did very, very good. Let's go to the next slide. And this is the basic spreadsheet. If you need it, email me and I'm going to provide you with this email. Maybe you can make sure one more time that your computation is correct. Maybe you still can go back and correct your information that is requested from you. Okay. Very, very important these days. And the reason for that is a lot of people are asking what are we supposed to do and how can we maximize it? And there is only one strategy. Just know the rules.

Follow what the lender is telling you, get some information. There is nothing in addition to that that I can tell tell you. So number one is.

From the date it starts and that's the funding date, eight weeks. So you need a calendar. Number two, you need to be aware of 75, 25. So whatever amount you receive, my recommendation is first of all very simple algebra divided by or times 75% or times 25%. So you know the maximum that you can spend on those areas.

Well, the payroll cost, including benefits, that's the part of the 75% interest. Rent, utility, that's the part of 25%. So the next one. Also some of the lenders I've seen, they do provide specific guidance. Some of them don't do. So if you did not receive any specific guidance, these are some of the recommendations that we have. So do set up a separate bank account. It's not required. It's not required. It's going to help you maybe account for it yourself. Maybe you can get some temporary checks, maybe you can talk to accountant to set up a new and separate balance sheet account. So that's going to account for this debt, which is a long term debt. Every, every term, every debt longer than one year is going to be on your balance sheets anyways. Again, be very, very familiar with the spreadsheet. And.

The most important thing that I can tell you at this point is whatever is the timing is very important. So number one, you need to incur the expense, and number two, the expense needs to be paid. So let's assume that today you received your funds and today is the payroll day, and the payroll period stops yesterday.

Stops yesterday. So can you pay today with your funds? Well, no, because you did not incur those expenses. You incurred it until yesterday. So can you pay your payroll in two weeks? Yes, you can, because in two weeks it's been incurred and.

You can use the money to pay it. I've been asked right now if I can provide these slides. Yes, I can do that.

It's Cal Dental CPA.

Apologizemail.Com email me and let me know what you need. It's in a Q and A. And I'm going to.

Email you the slides. One more question. Can I pay the qualified bills like utility from the start of the office closure? No, you cannot. And we just discussed that because you incurred the expenses before you get funded. So you can pay the utilities from today, but you cannot pay from. It's ask 3:17. No. So for the next eight weeks. Yes. For the past. Since 3:17 to today, no, you cannot. Okay, answer that as well. Okay. Very, very important that you have physical documents. I recommend not to get too creat. Do not come up with something that you don't need. A lot has changed. A lot is going to change. SBA and IRS said that they're going to audit some of these cases. And also I don't think that the lenders are just going to accept everything you provide them with. So. Because at the end of the day, they need to go back to SBA and show them that they have a great job, that they did a good job. So my recommendation is be very careful with those. Okay, then.

These are the rules. How this is supposed to be forgiven? These are some general rules. And these general rules, pretty much we don't know all about it and we don't know how this is going to be implemented.

We have the rules, but we don't have the policies yet. And I think about two, three weeks we will know more, and then I'm going to have them about that as well. Also, I have my regular webinars once a week. So if you want to know about my webinars, again, email me and I'm going to provide you about those that information as well. So first of all, you receive your loan and we're going through three steps. How this is supposed to be forgiven? You receive the loan. Let's say you receive 100,000 and you spent 90,000. Well, number one, on those allowable expenses, number one, you can only be forgiven 90,000, not those 10,000. What is supposed to do, what is supposed to happen with those 10,000? We come back to that later because we need to understand right now how much of those remaining 90,000 is going to be forgiven. Three steps. Number one is the reduction in the number of full time equivalent employees. So this is actually a very, very simple algebra. It just sounds a little bit tricky. So I've been an accountant for 10, 15, 20 years. What I've done in accounting, it's always simple algebras. I've been a financial analyst, so I've done some pricing models, I've done some other information. But this is really maybe fifth grade, maybe third grade. It sounds a little bit tricky and it is a little bit tricky. But if you understand the concep concept, it's piece of cake. So the reduction in the number of full time equivalent employees. So what is a full time equivalent employee? Let's say that in your office, everyone who works 32 hours is a full time employee. 4 times 8 is a full time employee. Let's assume, for the sake of the argument, very simple. You have an office manager, works 32 hours, so that's one full time employee. You have two dental assistants. Each of them works 16 hours. So two days a week. So you have one full time. Two times 16 is 32, so you have two full time equivalent employees. Let's keep it with this simple one. We're going to come back with this a little bit later, maybe two, three weeks with actual information and actual.

Computations. And because this is going to be different for everyone, just maybe one more. So you have an office Manager, you have two dental assistants. Each of them works 32 hours. And then you have two hygienists. Each of them works 16 hours during weeks. So one office manager, 32 hours full time. Second DA, 32 hours full time. Three, another DA and you have two hygienists is 16. So you have four full time equivalent employees, but you have five employees. I think that explains it. So number one, we need to compute any reduction in the number of full time equivalent employees. Number two, we need to compute every time anytime somebody makes less than 100,000 and their.

Projected annualized.

Salary, if there's a reduction by more than 25%, there is another round of reduction in the amount of the forgiveness. All of that needs numbers. And all of that is going to be very, very unique to each of the offices, each of the businesses. That's why I believe that's very difficult to come up with the numbers example right now. But later.

Once we know more, we do that as well. That's number two. So one reduction based on full time equivalent employees. Second reduction, every time you have an employee that makes less than 100,000 and there is more than 25% in reduction, so they can have 20% in reduction of salaries and wages, nothing there. But if there is more than 25, there is another round and there is another very simple algebra again. But once you see it, hopefully you agree with me. Then there is a third step. And this third step has been this is.

This is, this third step is the definition and it's different. Some other people define it differently. So it says if you have any employment or wage reductions between February 15 and 30 days following the passage of the CARES act, which was 327, so it takes us to 427 if you had any reduction. But if you restore all of these reductions by June 30th, the reductions in number one and number two eliminate. And we have two interpretations. Number one says, some of the people say, and I'm a proponent of that as well, they say, okay, everything needs to be restored by April 26th to have this number one and number two eliminated. Some other people say, okay, if you have everything restored by June 30, it's going to be eliminated. I believe we still don't know enough policies. So that's why my recommendation is as of right now, just be concerned about how to get the PPP and how to pretty much spend it properly. This is a description.

For the calculation of the full time equivalent employees and also how this.

Forgiveness and reduction in forgiveness is supposed to work. So the.

Numerator is pretty much what you have from a full time equivalent employees during those eight weeks. The denominator is the lower of again, full time equivalent employees either between February 15, 2019 and June 30, 2019, or.

Excuse me, I have something here. Or from January 1 to February 29. And why lower? Because that's going to help you end up with a larger percentage. So every time in algebra the denominator is larger, the percentage is lower. So actually the government is helping us a little bit. They say, okay, if there was, let's say at some of those periods you had less employees, so the smaller number it's going to end up in a larger percentage. So I have the description. Again, email me and you receive the description. And in later webinars we're going to specifically talk about.

Reduction with example. So we have one question.

Okay, the question is the amount of the loan that I was given was only two and a half times of my employee payroll. I did not include my salary. Well, you should have. And as an owner, okay, even though I sent in my schedule C, can I request for more? Yes, you can request for more. And the reason for that is because you can include your own.

Your own salary. But as a schedule C, you have a net income. And that's very tricky because if you have some more expense, maybe your net income is lower, but you can get money as well. My recommendation is just try to redo it. Hopefully you have a CPA that you can communicate with and pretty much help you with that process as well. I think this is responded another question on the question of incurred expenses.

Okay, so the question is pretty much that the expense incurred back in March, but it was deferred to June, is this an incurred expense? Again, it's incurred in March, but it's paid in June. So out of those two conditions, only one is satisfied. It was incurred in the past. It was not incurred during those two weeks, eight weeks. So my recommendation is don't include that. This is responded to as well. Okay, so we have that. Now this one is a little bit more complicated and this is how the second algebra is going to work. This is the reduction in wages. I'm trying to explain it hopefully just as a general information. But later, in about two, three weeks, we're going to discuss it and hopefully it's easy for everyone to understand. So this is the step by step process, but I'm going to explain it based on simple words, not based on the slide. So pretty much what you need to compute right now is the annualized compensation for your employees during those eight weeks. Number two, you have to annual, you have to compute the annualized compensation for the first quarter. Then you compare those two. Anytime there is a reduction of more than 25%, there will be another round of deduction. A little bit complicated to explain that these ways. But again, in a few weeks when I have my other slides with now numbers, it's going to be easy to follow. Good, so another one. And that's going to be the third step that has to do with elimination of number one and number two. And hopefully until then we have a little bit more of guidance. So today I have about an hour I already spent 40 minutes on those. Let's see how far we come. Okay. I have found very, very nice spreadsheets online. So it's good. And these are free to have. So my recommendation is maybe you can Google find some spreadsheets, how to compute the reductions of wages and how to compute the calculation of forgivenesses. It's going to be a little bit too early to use the spreadsheets because still we are waiting for some more guidance. But I use them, I tried them and they work well. And again, the computation is really easy. The computation is just two algebra formulas. And don't be afraid of it. Okay? Okay. Right now, I don't know how much you follow the economy, but actually the whole economy is recapitalizing. So recapitalization pretty much means that you have something, some funds, you have some capital, some cash, some debt, and let's say, and right now.

You have access to credit, you have access to cash and you are using that to use your money, use your capital more efficiently. My recommendation is definitely go to your banks, especially those of you that have a practice loan, and see if you can recapitalize, if you can refinance. So we've done a lot of refinancing in the past three years. The reason for that is once the money environment became a little bit more generous, the rates decreased. And actually I can tell you that 60, 70, maybe 80% of my clients recapitalized. So refinance. So there is a lot of lines of credits available. There are a lot of business credit cards at 0%. I'm not saying to use the money. My recommendation is just to have access. Having access to credit is very important. Also Google AdWords, Google Ad Credits, they provide some credits based on your expended, based on the money that you spent in 2019. Facebook is having some cash grants, US Chamber of Commerce. I know City of Los Angeles is having very nice loans. I think zero percent. So just do some research and see if you can have more access to credit and cash. I'm not saying to spend it, but it's very important to be able to have access. Okay, I have two more questions. Do you think.

Okay. Based on how the CARES act was written, I don't think that the eight weeks is going to be extended. I hope it's going to be extended. And the reason for that is some of it is just not reasonable. And that's maybe that's one of the comments that I can tell you that is a little bit. I'm not political, but it seems to me that the federal government and the state's government are competing a little bit. And I don't like that because this is going against our interest in the business. Saudi order is still not lifted. I understand. I live in California and the money is deposited in the bank. I understand. That's one of my problems as well. My wife is a dentist. Office is closed. We received the money pretty much. We cannot use a lot of it, or maybe not most of it, but it is what it is. The law is written. Nothing we can do. So.

If I received a PPA loan and now feel that I don't need the Eidl loan.

Okay. My recommendation is to Kurt. Well, and I can go back to the slides. It's very, very important that you have access to credit. So on the Eidl, I recommended almost everyone not to take the advance. And the reason was because.

It'S going to be a little bit difficult with all of the available tax relief. And also it's going to be discounted from PPP anyway. So my recommendation was not to touch the 10,000 or up to 10,000. But my recommendation to everyone in a business is have your applications until it's processed, have access, and then once you have access, pretty much you can decide if you want to keep it or return it. It's not costing you anything. Usually SBA loans are very, very difficult to get, number one, because of all the paperwork. And number two, they're costly because they have prepayment penalties, they have fees. This one, no fees. So.

My recommendation is don't cancel it. Just. Just wait until the last second. So this one is responded as well. Okay. So talked about that as well. Tax relief. I want to keep this very short actually, because a lot of the people disqualified themselves for the tax relief. Anyways, the reason for that is they started using the PPP money or the Eidl. And in our practice, our tax practice is actually 70, 80% dentists and mostly doctors and attorneys. So we did not have anyone that would benefit from most of this tax relief. Maybe the last one that I'm going to discuss, that's what I'm going to very, very fast move from this. So everybody knows right now that the tax filing and the tax prepayment is extended by 30 days. So just know everything that was due on April 15th is now due July 15th for the federal government. And the same thing is for the ftb also the EDD and the cdtfa. CDTFA is, is what bought off Equalization in California. Used to be they extended by 60 days. Something that I want to mention right now is because you are in a business of dentistry, doesn't mean that you don't need to pay sales taxes. Most of the offices that I work with, they need to file for sales tax because a lot of the supply purchases that they have is from out of state. And some of these is not subject to use, excuse me, to sales tax tax. That's why they need to file use tax returns. And we also had a few audits on that. I just wanted to mention that at this time has nothing to do with Eidl. Just know that some of you might be subject to sales and use tax as well. This is actually the big one to me right now. Only worth a single sentence. So employee retention credit.

In a simple sentence. So whatever you pay to your employees up to 10,000 receives 50%.

Credit on your employment taxes. It's not much. And for most, for all of the people that we computed that not material. So capitalizing on PPP much more important. I know some people do a big deal out of it, but not for our purposes at this time.

So deferral of payments for payroll taxes. Again, if you use any of the PPP or Eidl, you don't qualify for this, number one. Number two, I would not recommend anyone owe taxes until end of 20, 21 and 22. So I recommend people not to incur a lot of debt anyways. But this is some of those tax traps that I highly dislike. Net operating loss rules for C Corps. Very, very interesting. When President Trump.

And actually not President Trump. So pretty much when every time with governments change. So we have some tax changes. So the job Act, I forgot the name of it. The Trump tax laws, if you want to say this way, in 2017, pretty much they got rid of some of the rules of the net operating losses. It used to be you can go back to years and go forward 20 years. So they stopped that. They said no more going back, but going forward indefinitely. And they changed the rules right now for 20, 18, 19 and 20, which is very good, especially for 20, because some of the.

Taxpayers might have losses. So you can go back up to five years. But again.

Very tricky. So my recommendation is just speak to your professional. Good. So we just finished the PPP and Eidl and some of the tax stuff. Gene, do you want to maybe. Gene, are you there?

Yeah, I'm here.

Okay, so we just completed 50 minutes. One topic. I tried it.

Yeah, I would like you to touch on. There were quite a few people that had shown Answers interest in just understanding the benchmarks of their profit and loss statement and their overhead. So I don't know how many more slides you have left. I've got about five questions that were emailed to me and so I'll ask those when you're done.

My recommendation is talk about, is it about Eidl and ppp? Can we complete those questions? Maybe?

Sure. So one question is, if we, we can't open yet, how can we use the PPP for payrolls?

Well, not opened. You have the money. You did not incur the expenses? Well, no expenses incurred, nothing paid, nothing forgivable. And I'm sorry, and I'm sitting in the same boat, it's happening to my wife and myself as well.

So just so you could correct me if I'm wrong, but let's just hypothetically say the governor decided to open, say you got funded today or Thursday, last Thursday, and the governor decided to open May 18 or May 30 or June 1, you could essentially have your team in for training right away in June 1st, if the opening was June 1st, could you have your team in for training and begin paying them right then?

You can do that. You can pay them benefits, you can pay sick leave, you can pay some vacation. So, so it's not a lot. But, you know, one of the policies that I recommend every dental office is especially with, you know, we are sometimes high producing. So I pay, my wife pays every dental hygienist, every dental assistant. In January, we just pay them all of the sick leaves. And the reason for that is if they're sick, they're sick, but we don't want them, let's say in October, in November, in December, just not show up because they, they want to save their sick leaves. Then we have maybe a high production day. So maybe you can pay the sick leave, maybe you can pay some of the benefits. But again, can you pay it all? I would say maybe no, because again, we don't know enough these days. It's very tricky.

Okay, next question that I have is.

Does a CEO get $1,000 from EIDL if they're only taking the Eidl and not for payroll?

I apologize, I didn't understand that.

So on the EIDL, can a CEO get the thousand dollars. It was $1,000 per employee, even though the CEO is taking draws, is not on payroll.

I don't exactly know how this was done, but I just, I think in the, in the Eidl loans, you just tell them the number of the employees or somehow they Know it maybe. Obviously, if that's an employee, yes. So can you go back and argue? I don't know. Yeah.

Okay, the next one is. Let's see here.

Oh, how does the pandemic affect practice sales for a dentist close to retirement? 1099 versus 2 for dentist associates.

I have three other questions. I can respond to those before we go to practice sales. So how is Eidl grant and PPP funds allocated if deposited into checking account, bills and payrolls paid from the same account? Well, I would definitely separate Eidl from ppp. Ppp, if you have co mingling is not going to help. So my recommendation at this point is really, really, really separate the accounts, separate the money, because again, we don't know who we deal with. Unfortunately, in the past eight weeks, I was dealing with bankers that would not even understand the simplest issues that we had. So they just go with whatever they believe is right. So my recommendation for Ernesta is definitely keep everything separate. Then I have two more too. Yeah. Could 1099 be included on payroll? No, you cannot include 1099. So the independent contractors cannot be included.

So PPP versus employee tax credit. I would definitely go for the PPP because the employee tax credit is going to take some time until you have all of this. So I like the PPP a little bit more.

Okay, responded. And then I received grant for the eidl, but I've got anything. Okay. Most of the people receive the Eidl. Yes, I received the grant portion from the eidl, but have not heard anything from sba. So, like most of the people, for that amount of the loan that I can apply for, there was no amount of. Yes, there was no amount of the loan that you can apply for for. Should I do it now? Well, Eidl, you cannot tell them how much you want. They tell you. That's what I know and what I know because maybe five people of my clients received the money. It's between 25 and 45, 50% of the collection that they had. So number one, you have to provide those five, six additional documents because the streamline that most of the people did is not the actual.

Application. So they changed it three times. So first it was online so you could fill out a, I don't know, five, six pages of application. You had to provide tax return. You had to provide two forms of 4506T request for transcripts. You have to provide schedule of debt, and you have to provide a personal financial statement. Then they changed that. No more online. It was upload. So they still asked for the whole package, but you could not have it online. So you uploaded it, and then after a few weeks and a lot of, I guess, crashes off the server, they came up with a two or three pages streamlined, so they don't ask for any more information right now, except they move for a full loan. So those people that received the loan, these are those that filled out the whole application around, I would say, March 20 to March 31. So we don't know how much they're going to give you, so hopefully we know more. Can I tell SBA that I don't want the loan now? Well, yes. I don't know if you can. Well, you can contact them, actually, as a matter of fact, you can call them. And I had the number here. Maybe I can. Oh, I can provide the number. I put it. And that's interesting because I did talk to some people at the SBA, and I'm right now putting the number. It's 659-2955. So I'm putting the number of the SBA that you can talk to in the chat.

I don't want to take the. Do I have to return the grant? I think. I don't know, but I think if you don't take the loan, you don't get the grant. So they said you can keep the grant if you don't qualify, but maybe you have to return the grant if you qualify for the loan and don't take the grant. I don't know, but I think they're going to let you know that you need to return it.

So this is responded. Do I ask for correction to include my salary as an owner or accept the current amount now to make sure I'm getting some, and at least I'm not sure if you can go back and reapply. Also, I'm too conservative. So whatever they give me, I will take it if it's not too material, obviously. And that's maybe not very easy, and I'm sorry for that. And that's actually something that I really want to mention. I had it in my slides, but I forgot to talk about it. The last two months definitely showed me how important it is to have proper books and records, to have, you know, your employee medical expenses included into W2. A lot of people don't do that to have. And I apologize if I do some advertising for myself to have somebody educated, somebody in this business. That's. That's super important. So most of the people in dentistry, they just work with people that just fill out some Paperwork for them, that's no good. So. And some of these people are not even properly educated. So it took me eight years of high education to become who I am. So two master's degrees and be a cpa. So that's very important. And unfortunately, a lot of the people that got hurt is because of bad paperwork, is because of bad advice. So my recommendation is work with good people. Do you recommend us, those who get the PPP money to apply a second time for a later loan payment due to. Well, they said once you apply for one PPP, you cannot apply for any other program in 2020. Maybe they change it, I don't know. But I don't think that you can apply. I mean, you can apply, but I don't think they're going to process it. Or if they process it, they might deny it. There is nothing against. Nobody says you cannot apply, so you can apply and then just see how this is going to work out. Can you use ppp? Can you use PPP funds you just received to pay employees from prior period in April and end of March? Note, we discussed this before. It's been incurred in prior periods. So if you pay it right now, those two elements is not, is not meeting. So it's incurred in a prior period, it's paid now. So it needs to be incurred and paid in the same eight weeks.

Okay, next question. You set up throughout the presentation or once that to apply for forgiveness if you've gotten the PPP loan, what do you need to do for that? Is there any option to apply if they get ppp?

Yes. Well, first of all, nobody's going to come after you and tell you to apply for forgiveness. You have to do it. So otherwise, so the way the notice written, and I've read a few of those, they say that's the loan. They don't talk much about forgiveness and they say starting in six months, we're going to start, you know, withdrawing from your account. So I didn't read much about how this is supposed to be forgiven yet, but I assume that we're going to know more. So the borrower needs to go back and the borrower needs to make sure how this is supposed to be done. So my recommendation is based on some of the general information that I provided. You start.

Putting together your files and then once all of these applications are available, if you are on my mailing list, you're going to receive some guidance because heavily, heavily we are communicating these days with blogs and webinars. But also you should make sure that pretty much you talk to your own consultants and make sure that they help you put these packages together. Okay.

The other question is.

What if I received the ppp, but there was no promissory note that I recall signing, and I did not get any. Any documentation.

Well, Mexico is closed. Take the money. Go have fun. I don't think. I don't think so. I have never seen that. I mean, sometimes I've seen you signed it. You've signed it.

I'm sure that the person signed it when they initially filled out the documents. But now other documents of a promissory note, document, DocuSign document. Do you think that's.

Well, I've never heard that, but I mean, constructively, you receive the money in substance, maybe not in a proper form, but you owe the money.

Yeah, I think really the concern wasn't. Or how I understood the question wasn't so much that they didn't think they owed the money, but how do they. If they didn't get a promissory note and they don't know the terms of the note?

Well, the terms are pretty straightforward because SBA is dictating the terms. Terms. Term is six months of deferral, 1% over two years. Don't misuse it. So in general terms, these are the terms, and this is a loan. And then get it forgiven, hopefully as soon as possible. I would try to communicate to the lender and make sure that I have a copy of.

The note. Yep.

Okay. Well, do you want to touch on this or do you want to. I know you've been gracious with your time, and I do appreciate it. One more time.

I can come back anytime. Okay. I had 61 slides today. I only talked about, I think, 20. Let me tell you. And the other topic is actually very, very more. There is more into it, but maybe we can discuss this one slide only.

Because. And one second.

And I'm going to be. So I have another. Yeah, I have another.

30 slides or more. So I'm going to discuss it very shortly. And this is important because benchmarking is my bread and butter. So when do I do benchmarking?

Well, thank you, Andre. When do I do benchmarking? Benchmarking? Benchmarking. Every time I get a new client, first thing we do is benchmarking. So I say, give me your profit and loss statement. Give you a tax return. So I review what was done. I review the books. I can tell you pretty much how healthy this company is. Number one, every time I get to work on, let's say, purchasing an office, so it Takes me sometimes five minutes to tell you it's a good office. It's not a good office based on the numbers. So I like to recommend financial statements with X rays, with panel, with CT scan and with actual surgery. So sometimes just an X ray and sometimes just a visual inspection helps me to say it's a good office or not a good office. And pretty much the process of benchmarking helps me do that. So how number one and maybe I can go back and touch to this one. So these are some of the financial statements that I take a look at some of it. Again, this is not an accounting lecture. So this is just to understand what is out there. So some tax returns, but just know that tax returns are no good information. So a lot of the people say banks accept tax returns and I say I don't care because they tax returns are end products. There are no sources, I'm just looking for the source documents. So profit and loss statement. It's obvious. Payroll reports, depreciation schedules. My favorite one, general ledger. You cannot falsify general ledgers. I've seen a lot of bad tax returns, I've seen a lot of bad profit and loss. But you know, once I review the general ledger, I know pretty much what's going on. So this is some of the information that we use use to come up with benchmarking again. When benchmarking a lot of people just ask me, take a look and let us know pretty much why we don't profit. Sometimes you buy the offices. So when I do the due diligence on a financial side, I do review financial statements. At the end of the day there is only 100%. So let's say the collection of an office, so medium sized office is 700,000. So if you take home $700,000, you profit 100%. If you don't take home a single dollar, you profit 0%. So we try in a dental offices to end up somewhere between 25 and 45%. And this is based on a lot of financial statements that I review and I think I review over, I don't want to exaggerate, I review maybe 300 financial statements of new practices each year. And the reason for that is because we are a consulting type CPA firm and we consult at least consult on a lot of, a lot of those deals. We try not to be involved much sometimes because that takes a long time and has a lot of liability sometimes. So there is 100% that you can make. We try to have a profit at about 30 to 45% and these are the general ideas and these are the general areas that pretty much where those percentage of expenses are supposed to fall. So personal cost 25 to 30%. I've seen offices with less. Anytime I see something below 15, I don't like it. Anytime I see something about a rep around 30 ish, 35 ish, I know there is an issue, facility cost. And facility cost is not just a rent.

It's the rent, it's some of the bigger equipment. It's pretty much everything. It's just a very hard expense. Personal cost is maybe the soft expense. Then we have the clinical cost is the supply and lab, other business expenses. So the general overhead and some discretionary expenses and hopefully 30 to 40% is remaining. If you have a practice loan, the practice loan is part of those 30 to 40%. So you do profit. You don't see it in the earlier years and actually until you pay off your loan. And the reason for that is you're building equity. So this is the general.

Formula. So anytime you have an expense, and just maybe you can finish it here before we go to some other of my slides. Anytime you have couple numbers, you can come up with some algebras. And every time you have some of this algebra you can come up with, okay, some understanding of the office. So the annual collection, 875 square feet, 1200 four operatories, monthly rent. Okay, Based on that, you can already know a lot about this office. So you know that each of the operatories is 300 square feet. That's very nice. The office is not oversized because every time you have an oversized office, you pay more for something that you can don't use in dentistry, that's a little bit less. But I do work in some of the medical spas and in the medical spa industry, it's very, very nice. So because those people that do consulting, they come up with every square feet and they compute it into to real dollars sometimes. So we know that it's not an oversized. We know per operatory you have 220,000 ish of production. There is the rent per square feet. You can compare this with your comps. And based on 4450, we know that.

The rent expenses are 53,400. We divide this by total collection and we get how much? We get 6%. So the rent is pretty much where it's supposed to be. So there is more room to profit.

To get to this hundred percent. Now the second example, same office, it's just the rent is more 95,000. So you see that the rent is already 11%. So the same person, same production, same scheme skills, just profits 5% less. And using benchmarking helps me define and identify areas of concerns. Every time there is an area of concern, I go back, I pull up the books, I see what's going on and I can tell you pretty much how we can fix it or how we cannot fix it. Okay, that's going. These are all of the details that I intended to discuss today. It's going to be very difficult, but based on the benchmarking, we go to valuation. And before we talk about valuation, I want to talk about who does valuation for what purpose. There are brokers who do valuation and what's the purpose for them? Because they want to sell the practice. The bankers, they do valuation. Why? Because they want cash flow it and see how much they can pay for it. I am a CPA and I have a specialty in doing business valuation. So it's a training. So I do valuation because if I'm working for a buyer, I want to make sure that we have a good investment value. If I work for a seller, I want to make sure that we receive the fair market value value. And all of that is actually based on the financial statements. So I cannot just come up with a number. I mean, people are going to question me. How did you get into that? It's not just that's because it sells for that much, it's because today is Monday. No, there is a formula behind it and the formula again is in the financial statements. This, again, I cannot discuss it. I was going to discuss about a 2010, 2018 tax, but.

Maybe this slide before I go to my last slides. Personal financial planning is very, very important, has four areas. So this presentation was built to start with the financial statements, to start with investing in an office, to start with valuation and pretty much what, what you get out of it because it's all about profitability, to build a nice life. And the knife, the knife, the life, the life. So the life is pretty much based on.

You being able to be on top of your financials. And some of the financials is based on the personal financial planning sessions that I have with my clients. So we talk spending, risk goals, estate planning and investing. And as you see, see the first one we talk about spending. And that's the difference between a real financial planner and a salesperson. So a salesperson just wants you to sell you some bad insurance product. A financial planner is talking about targets, talking about budgeting, talking about liquidity and a lot about debt. So That's I want to leave this over there.

And maybe the last two ones. Oops. Some of the biggest financial mistakes that dentists do is if you don't have an office, please buy an office. Because dentistry is so easily structured that you can profit well, but you have to be very careful to buy the right office. Again, we go back to the benchmarking. So before you do anything, it's a business decision. And again, I don't want to do advertising for my profession or myself. So having a CPA is very important. Some of my clients that we do this budgeting with, so we tell them not to buy expensive homes, be careful with credit cards, and always have liquidity before they buy an office. So we make sure that pretty much all of that is met. Student loans are okay, but please don't do any settlements on your student loans. So I have a couple clients, they did settlement for 20, 30, $40,000 for 3, 4, $500,000 of student loans. They will never, ever be able to get a practice loan. And some other things that I can also, based on the financial statements that we just reviewed, analysis, you need to, at least on a quarterly basis, sit down with somebody and discuss numbers. We do this with our clients. We do talk about the areas that need to be improved. So I'm and text and.

Cell phone numbers with most of the people that I talk to. We talk about these issues and make sure that pretty much their financial goals are met. So that was a lot for today. All right, thank you very much.

Thank you. I'm going to go ahead and launch a poll. It's very easy and quick, so I just want to go ahead and answer. Feel free. And also, while you were saying speaking, I was aware that we are able to offer CE for this week's webinars. So if you email me, I'll make sure that you get that. So please participate in the polling. Just kind of anxious. We've got one so far. So if you would just kind of. One was, what is the first place you will go after the lockdown is over? That was a Fazell's question. I loved it. Barber shop, hair salon, favorite restaurant, visit family. Second is when the COVID 19 is over, would you resume going to the dental conventions? And the third is, what topics would you like to see for these webinars? Staff topics, business topics, clinical topics, motivational topics. So right now we've got business topics as number one at 81% with 16 respondents. And then we're clicking in with 72% would say they would Go to a dental convention with 18 people that have responded and the first place that they would go after the lockdown. This is 18 of 32 of you have voted. I can't see who's responding. It's anonymous. So.

We have a tie going. Most people say they would visit their family at 53%. That's the first thing they're going to do when this is over. So that's awesome. 68% of you said now and it keeps going up and down a little bit as more people in. Thank you for the lecture or for attending. We appreciate it.

And I will send the results if anyone would like. And also please email Fazelle with any questions. This is being recorded. It will be on YouTube. Jean St. Louis Consulting. You can go and get that recording as well as you'll see the slides and then Fazell will take I. He's more than generous with his time. He's very willing to offer any kind of conversations with you and really exploring what he might be able to do to help you as well as myself. If anyone's interested in a COVID 19 baseline analysis, please email me. And that's complimentary. So, Fazelle, you had a question or a comment?

I just wanted to say. Yes, I just wanted to say. Well, first of all, Gene, thank you for having me. I've worked with you on a lot of nice projects. Thank you for doing this. Also, we have usually for our clients, we have our weekly.

Zoom meetings and we have one Zoom meeting per week. Specifically, we talk about Eidl on Thursday, we talk about buying off the other week, and we talk about tax and financial planning for associate dentists. So if you want to be on our on my email list, cal dental.cpamail.com and you receive the URLs and pretty much the blocks. Very important these days.

Awesome.

Awesome.

Well, thank you so much and thank you, audience. We appreciate it. I hope you're going to join us tomorrow when I will be speaking on COVID 19 strike strategic scheduling, what to do. So looking forward to it. Please be safe, be healthy and we will hopefully see you tomorrow. Thanks, everyone.

Thank you. Thanks, Gene. Bye. Let's go. Lunch.

All right.

Alrighty. Thank you. Talk to you soon. Bye. Bye.

Sa.