108: Embezzlement Prevention Through Dentrec Technology

Welcome everybody to another episode of the Dental Boardroom podcast. It's Wes Reed, host, cpacfp. Today I have on the show Miles Davis, founder of a company called dentrec. And what dentrec does is it helps create reconciliation or symmetry between the practice management software collections and your bank account. Welcome to the show, Miles.

Thanks for having me.

All right, so this is something I've confronted since I started in dental as a, as an, as a CPA and as a financial advisor, is trying to make sure that what the day sheet says in the practice management software, whether that's Eaglesoft, Dentrix, Open Dental, there's a sheet at the end of the day that says here's all of the deposits by Visa, MasterCard, Discover, American Express, insurance, cash payment, yada yada, here's all the forms of money that have come in that should hit the bank account. You're also going to see CareCredit on there as well and any other third party financing.

Companies you use to collect payment from patients. Now, in the beginning I always tried to have the office manager, somebody in the dental office, enter into the accounting software QuickBooks, what is the collections that were expected for that day by each of these categories. And then we would make sure it mapped out to the bank. Unfortunately, what I found is it took a dramatic amount of time to do that. For reasons I'd love for you to share why, why it's sometimes difficult to do that reconciliation between the practice management software and, and the bank account. But here's what I will say is the problem that results when you don't do this is number one, theft or embezzlement, which is absolutely ubiquitous in dental practices. Unfortunately, even the most trusted front office managers, and oftentimes it is the most trusted office managers that tend to be the culprits for theft and embezzlement, which again is very, very common in dental offices. And there's many ways that embezzlement occurs, but a lot of those ways, not all of them, a lot of them can be prevented if there's this reconciliation and if the doctor is looking at credits, chargebacks, things like that, to make sure that they are all valid. So theft or embezzlement, the second one, or some of the problems of not reconciling these two, the second one is financial misstatements. So if I'm getting the preparing financial statements based on what hits the bank, which is what we do and most accountants do, because dentists are cash basis taxpayers, they're not what's called accrual basis Taxpayers, all we need is what hits the bank. And for me as a financial planner, what I have to work with is what hits the bank. So if it never hit the bank, even if it was supposed to hit the bank, then we're not reporting it on our financial statements. We're not able to fully assess the economic health of the practice. We're under reporting in taxes and we don't have that financial insight to what we should be collecting. And of course, the worst part is just that you don't have that dollar in your account now to pay your bills, pay your debt, pay your savings, and pay yourself. So financial misstatements, tax reporting, I mentioned on that. I would also say inaccurate performance tracking. If you have certain bonuses, maybe for your team around collections that can be misrepresented then. And also just kind of patient trust and billing errors. When there's billing errors and you follow up with a patient and a patient believes that it was paid, but if the system is saying it wasn't paid and that occurs because there was an error or embezzlement, then that just reduces trust in the system and you as a business owner. So those are some of the main consequences of having the lack of reconciliation between the practice management and the bank account. Now, I always say there's three things that should align. It's the practice management software, it's the bank account, and it's the QuickBooks file or the financial reporting. If those three things reconcile you, you're preventing a lot of these unintended or unwanted consequences in the revenue cycle management from errors and embezzlement. Now enter Dent. Wreck your company. Go ahead and kick us off. Where did you sort of spot this as a significant need? And how are you now attempting to solve that issue with your Are you looking to buy or sell a dental practice? If you're a seller, how do you find a strong list of potential buyers? There's no MLS or Zillow for dental practice sales. In such a fragmented market, many dentists selling their practice feel discouraged. That's why I built practiceOrbit.com practice orbit is modernizing how dental practices are bought and sold. It's a platform technology. Y' all know them. Zillow, Airbnb, Uber, and OpenTable, just to name a few. These technologies do two things. First, they help match buyers and sellers by centralizing the marketplace. Second, once the match between buyer and seller is made, these technologies help them navigate the sale to a successful close. Here are a few of the features inside a Practice Orbit users can determine a reasonable Sale price for practice in just minutes. All they need is the most recent business tax return. Practice owners can use the directory to find important service providers like practice brokers, attorneys, accountants and bankers. Practice owners and their brokers can invite those service providers into the platform so all parties are coordinating the sale together. Practice owners will have a beautiful digital listing of their practice like a home on Redfin. And importantly, the listing will be anonymous and personal information like your address, name and pictures are only released after an NDA is signed and approved by you or your broker. 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Technology.

So I'm going to take you back a little bit. So for the last 10 years I've been a accounting software solutions consultant. Basically I work with large DSOs and I help them build out their tech stack for their in house finance and accounting teams. There's a lot of there's a big gap between what's going on in Recycle and what's going on in the accounting department. So Debt rec was born to solve a lot of the issues between those two departments for my clients. Before we talk on the embezzlement piece which is also you know, a big reason we created Debrec with I want to just highlight a couple others the with the groups. A lot of groups would bank with what I would call central bank account, meaning one bank account for all of their offices. And the accounting department was having a very hard time understanding which deposit related to which practice and you know they're all coming into one account. So debt rec, we built that to solve that issue. We also built it out for groups that are billing under a single taxpayer ID where they would get a single EFT. Let's just say it was Delta Dental $1,000 that could be for two offices, 10 offices, four offices, one, whatever it may be. And we needed to help them allocate those specific transactions. Right, you hit on the obvious, which is the embezzlement. 40% was what the ADA says of dentists have embezzled or have been embezzled, and it's 18%, I believe, that has been embezzled more than twice. So it is at an alarming rate. And I believe the process that debt rec provides, it's just this constant, like, watchful eye on the team. The team knows that there is a process in place, things are being looked at and it's a deterrent from some of the easiest, most, you know, common and preventable measures or ways to, to, to, to skim some cash. Right. But Denmark also goes the other way. Right. It's not just about what's in the pms. Does it hit your financials and does it clear the bank? It's also holding your team members accountable. And did they post the payments into the patient's ledgers? Right. And a lot of times I'll work with a client and there's all this money that has been deposited that they have not recorded to their patients ledgers yet. And how would the doctor know, how would the owner know? There's just, it's just trust. And it's shocking to see people being, you know, four weeks, six weeks behind on these, on these postings. And that disrupts a lot of things. Like you mentioned before, billing statements to patients, resubmitting doctor compensation if they're paid on collections. And that money has already been posted to the account. The analogy, and it's a silly one, is it's like the fork test. It's like at home, it's like you go to your dishwasher, right, and you don't know if it's been ran or not. So you pick up a fork, you smell it or whatever, and you say, was this washed? You know, it's, that's what's happening in these dental practices all the time. It's a waste of time where staff are looking into claims. Was the, this already paid? Let's look it up. And they're just wasting time. Everyone's wasting time. And let's just, let's automate this as, and, and put a process around it and get all three systems to check and, and reconcile and everyone could be on that same page. And that's really what we're doing with that rec.

So you, this doesn't surprise me that this is an outgrowth of more of an institutionally run dental office, I. E. DSOs because they're hyper focused on processes based business and tech stack and controls, controls to prevent errors and embezzlement. And, and so there are actually many business focuses or tech or things that originate out of the kind of the business side, institutionally speaking of dentistry that can then feed into the benefit of the private office as well. Which is I think what's happening here as you've taken something you've sourced as an issue and attempted to solve for with the big, with a bigger organization and now make this available to the private dental practice. Something I think they should take advantage of because we at practice CFO in the early days attempted to do this. We would give our clients access to our accounting software. The front office staff usually, sometimes it was a spouse and they would every day enter in the day sheets all the total visa, MasterCard, Discover, all the care credit, all the cash checks, et cetera. And then when we would reconcile, we would get the bank and make sure everything landed. But there were so many mismatches and mapping errors and problems. It literally quadrupled the amount of time it took to close the financial statements. And so I would have to charge. I couldn't sustain the cost that it took me when an accountant essentially could only do 25% of the work if they were doing the full reconciliation than what they normally can do it by just pulling it from the bank feed. And I just found clients were not willing to pay the extra human labor that it took to do that. Now what you're doing is you're coming in with technology and you're saying I can actually have a solution here that's very, very inexpensive and largely automated. Not entirely, but a lot of it, it's automated to make sure that that reconciliation is strong. And I've actually been looking for a technology like that for a long time because I think there's definitely a need for that in dental offices given the amount of embezzlement that you know that takes place and know they're just errors that result from this. So you know there's a company, I'm sure you've heard of this company, but I had the owner and founder come to a in person webinar for practice CFO about five years ago and it's a company called prosperident. You ever heard of it?

I have, yeah.

And I think the owner's name is named Dave. But it's so it was incredibly insightful cause he was going over the many ways that Dentists are embezzled. There's quite a few of them actually. Employees can get very creative on how they embezzle money out of a dental office. And I've seen it firsthand where some clients have come to me or prospects. There was a prospective client I had up in Oregon who had come to me after she found out she had been embezzled, which she had calculated to be about $350,000 over about a 10 year period from her most trusted employee.

I want to say the ADA says the average, and they've done extensive studies on this, but I want to say they, they, it's around 250k is what they found. There's, there's been other studies that have been done, so don't quote me on that, but it's, it's a significant amount and it happens over time. You know, you don't catch it in an instance, can take years to catch or never. I mean it's, are you looking right? So we want to be more transparent and allow the dentist to have that, that ability.

And this company Prosperity has I believe on the website publicly something called the, the hall of Shame. Have you seen that?

I have. It's funny, it's, it's, it's actually, it's an awesome thing that they're, that they.

Are doing because it becomes a public record when somebody is found guilty of embezzlement in a business. And then if it's public record, what he's done is he's just aggregated them on the hall of Sh.

I mean some of the amounts on there are staggering, if I recall. I think he stratifies them between like the biggest hall of chambers which embezzled over a million, all the way down to people embezzled a few thousand dollars. But it happens, unfortunately, it happens. And not only does it affect the financial condition of the practice, but it ruins relationships that have been in place for, for many, many years where trust is completely obliterated because of that. And the reason why it becomes so perpetual is because a doctor who's been embezzled will fire that employee. But they don't want it to be publicly known. And so they don't tell anybody and they don't tell future employers who may be asking because it's embarrassing to do that. And so these embezzlers tend to sort of go stealthily from practice to practice and continue to commit the same crime. And they become quite effective at it, to be honest. And there's a lot of science we, we won't make This a a fraud podcast and go over the science and characteristics of of fraud. I think that would be actually a great subject. But this is more on your tech and how you're solving that problem. So if I'm a dentist, Miles and I sign up with dentrek, let's I, I want you to walk with me. What is the onboarding process and what do I as the doctor and what does the front office member as a supporting team member need to do to use dentrec correctly and to what extent do you feel that dent rec will prevent these issues we've been talking about?

Sure. So the process is very simple. Okay. They start with filling out a simple intake form. We've learned by working with our beta clients and current customers that there are a lot of nuances between different PMS systems. So we want to know what they're on, we want to know how their entity is, is structure and we want to know a lot of what they're enrolled in and how they're currently posting payments and what bank they're with their treasury management system. It's really not a big intake form, but it tells us a ton. It tells us if they're ready today to turn on debrec and just go right with it or if there's any internal processes that are so horrible that we have to talk through those first. I'm a big process guy. I think debt rec is just as much a process as it is a technology and we want to make sure good processes are happening in the office. So that intake form tells us a lot. Most changes, if there needs to be a change are very minor and we educate why that is important and we get the buy in from the team on those. Again, they're very subtle changes, but we really want to understand the relationships they have between those different payment types and how they're making those deposits. So I'll give you a very, very simple one. It might be cash and checks, right? We want to know, do they take those up to the banks together? Do you merge your cash and checks? Is that how we're going to see it in the bank? Do you only go to the bank once a week? Maybe that's fine. But are you making the deposits separately by day? Meaning if you got funds on Monday, Tuesday, Wednesday, and you go to the bank on Thursday, are you making those separate day deposits? What's the most effective and best way to do that, et cetera? So we start with that intake questionnaire. We talk about processes. We actually will build a depository policy to provide to the office so they can pin it up in the front desk. We know there's staff turnover, so we want to make sure that process is followed by long after someone exits the practice. And the mapping, we typically do it on just a quick 30 minute Zoom call and we actually do the mappings together for the office at least if it's a single practice, it shouldn't take too long. From that point forward, they're integrated. And the front desk, all they do every day is they just drag and drop that day sheet. So they log into Debt Rec, they'll have a, it's a single page, very simple. They'll run the deposit slip at the end of every day and they'll just drag it right into Debt Rec, our tool. Extract all the information based on the mappings. We'll send the data appropriately to the accounting software. In a nutshell, that's how it works. So pretty straightforward, very easy implementation. Usually only takes the kickoff call and as a second, you know, onboarding call for most, most cases.

And then how reliable are you finding when it feeds QuickBooks? Because you've built an API with QuickBooks, right? So the front office is printing to PDF these day sheets. They drag and drop it into Dentrec or upload it and then from there Dent Rec feeds through an API into QuickBooks, the ledger of those deposits. Then when that account is reconciled at the bank, it's just a simple mapping of those deposits. So if Dent Wreck does this in such a way that it maps easily, there will be the exact set of deposits per day that hit the bank account. And easy reconciliation. How smooth are you finding that reconciliation between QuickBooks and the bank statement based on what Dentrec is feeding into QuickBooks from the PMS.

So if the process is ironed out extremely high, I would want to tell you 100%. It may not be every month, maybe it's 98, 97% but it's, it's been very high. If you were to implement this without that process check, it could be not too good. Right? I'll give you a quick example. We had a client who they are enrolled with zealous for their EFTs. And it's a big, you know, network of insurance and you, it helps you get set up with EFTs much quicker than going to each individual insurance company and they take a fee for the eft. It's about, I want to say it's two and a half percent and there's an option to deposit that at gross or an option to have that Deposit at net to your bank, so less their fee. And if you were to come out of debt rack initially, and we didn't talk about that, we didn't make the change to have those deposit at gross, every single one of those would be a mismatch. Right. It also it's funny because the client that had this zoneless piece, he didn't know he was even getting charged the two and a half percent. So it's these small things that we're finding and we're able to relay back to the dentist of hey, there might be other opportunities or cost savings, but if the process and we talk it through and we've seen a lot of different scenarios and situations, so hopefully we have an answer to all of them. But we're seeing like 97, 98, sometimes 100% of, of match. And keep in mind that there's. There is a lag between when the day sheet data will be posted in QuickBooks and when ultimately some of those will clear the bank. And that's okay. Those are just deposits in transit, but we're able to watch and make sure that they do eventually clear out. And with some good communication, we're able to effectively tell the team, hey, this is missing. And there's some very good reporting to see that at a high level and not only on what has not cleared the bank, but again, what hit the bank that we never got from a day sheet.

Right.

So I want to bring up one other point of why we actually have the day sheets be uploaded as the PDF, direct connections and APIs and all that is great. It can be expensive, but in this world, what we found is not everyone finishes their job in the day that they're supposed to. Suzy at the front desk might get a call from her kid's school and need to leave early. And then she comes back the next day and she finishes up and closes out the day. And so we don't want to put this data flow on a scheduler. We want the team to trigger the response and the upload to tell us that they are done with the day. So that was really important to us. The other piece is we want that Suzy to know that we're looking every day and it's a constant reminder of, hey, we have this end of day checklist. I'm going to upload this because someone's going to look at it. And if we did not do that, I don't think it.

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Would be as effective because people would, they, they would forget that there's a process in place. They wouldn't post appropriately or timely. And I think it also opens up, you know, there's no, no longer a watchful eye on this stuff. And I think now that opens up the case for risk of fraud and abuse. So we like that there's this very simple, I mean it takes less than a minute to run the report, save it as a PDF and just drag it from your download folder directly into debt rec. And that's, that's why we built it in this fashion.

All right, I've got a few follow up questions on that. A lot of times embezzlement takes place by way of adjustments to an account, to an EOB or to ar. That's expected. And the embezzler will go in and make some adjustment to the account, will the software. I imagine that the software isn't going to be able to detect every form of embezzlement that that front office is doing. Because if they make an adjustment, because let's say, I don't know, let's say a patient came in and I don't know, paid $100 in cash and they pocketed that cash. This is a very simple example, they made an adjustment on the account down by $100 and then they, that shows up on the day sheet. And so what's on the day sheet that gets fed into Dent wreck and ultimately QuickBooks is the amount that is expected to be cast, which is less. A hundred dollars now and all that three way reconciliation still occurs. So is that why there still needs to be a oversight and a human element to the process? And the software can't just automatically detect all embezzlement.

Yeah, so we're not going to detect all embezzlement. Embezzlement also can happen outside of rev cycle. Right. It can be paying a utility bill or fluffing your time for your payroll or you know, there's a lot of other ways. I will tell you without disclosing too much, the adjustment piece is actually a feature that we are, we are expanding on is actually doing a reconciliation with the clearinghouse on the adjustments and seeing discrepancies there. So I do think in hopefully not too much time we have a great solution to, you know, and future enhancement to provide to everyone that is on dentrock. So we're super excited about, about what we're working on there. But we just tell our clients currently that they need to take a small, and it's a small sample, it doesn't need to be every day and run the adjustments. Look at your adjustments and pull a sample of vobs and make sure they align. I think if you do, if you're open, let's say 20 days a month and every month you pull four days at random. I mean that's a, that's a large percentage of, of the data. And then for those four days you don't have to check every single adjustment but pull some at random. And I think that's a prudent thing that everyone should do at the end of every month it should be random. I think the doctor should be the one that does it, not the staff because they could be in on it. But hopefully we can, we can expand that and scale for our customers.

Yeah, I, I've been telling doctors for, for years, just make sure the front office knows that you're checking in. Even if you're just, and, and come up with a question, come up and ask about an adjustment or ask about something. Even if you know what it is, just ask about it so they, so they know that you're looking. And you may only be spending, I don't know, five minutes a week looking at a few things and going and letting them, but in their head they may think that you're taking 30 minutes a day to review everything. And research has shown that that will prevent most embezzlement it's just the idea that the doctor is looking or that the owner is looking. It's a basic, simple control. One of the thoughts I have about the software, and I don't know if it does this, you tell me, but can it send an automated email to the doctor at the end of the day with kind of a summary or a digestion showing any adjustments that were made so that it can be a lot easier for the doctor to just quickly glance at it and the front office who's entering in the data knows that that email is being sent to the doctor.

Yeah, so that's, that's part of what we're actually working on, on expanding is, is all this adjustment piece because we have the ability to do a data pull. I mean we, we, we know that we're able to do that from the PMS and from the clearinghouse and bridge that gap and actually I detect anomalies and, or inconsistencies. So we're very excited for when we can roll that piece out. But we have a few other modules in the works as well. Not just on adjustments, but we're really looking at expanding debt rec to not just reconciliation, but a few other elements to make sure this process is flowing well. I'll give you another one that's kind of in the works too, which is just good banking fee data. So one of our best practices that we tell our clients is to post the EFTs based on when they actually clear the bank. Essentially would act as like a to do list for the front staff of these at your account. Let's go record them. And a lot of staff don't have access to their banks. The doctor may not want them to know how much cash there is in the account or there's other sensitive or maybe personal expenses going through it. We see that all the time. And so a future that should be rolling out by the end of this month is actually a bank feed in debt rec that actually parses out and just separates out only the EFT payments and actually extracts the trace number. So it's very easy to just look that payment up and all the eobs attached right there. So really using it as a process of what to post and when to post so that the data that is recorded confines to, you know, the whole depository system and how things are actually getting applied and posted to the bank. So it's this whole ecosystem that we are building and all revolves around depository management. Real.

And this is very unique to small businesses which tend to be cash basis taxpayers I just want to pause on that and, and make sure our listeners understand the difference between taxpayer and accrual. I mean, a tax, a cash basis of accounting and an accrual basis of accounting had to clarify that most small businesses, and I practice cfo, am also a cash basis taxpayer, which means I only pay taxes and I recognize it as income. What actually hits the bank account. And if somebody owes me at the end of the year $20,000 and I'm making this up, but if somebody owes me $20,000 on December 31, I delivered a service and I'm just waiting to collect on it. I don't report that $20,000 on my tax return. I only report it when I receive the money. Accrual basis is you report it when you've done the work and it's owed to you. So even if, and so you have what's called accounts receivable, we've done the work and we're now just waiting to be paid for that work. And an accrual basis taxpayer is recognizing the income when the work is done and when it should theoretically be received.

And once you get to a certain size, all businesses become eventually accrual basis taxpayers. So this is very much a unique issue to the small business. So when you're a small business and you're a cash basis taxpayer, ultimately all that matters is for tax purposes is what's going in your QuickBooks account, which is what's coming off the bank statement. That's it. And so if patients owe you money, you're not recognizing taxes on that. And so it leaves this sort of vulnerability for doctors who don't therefore create this forced reconciliation between what they should have been paid and received in their bank account and what actually was received and paid in the bank account. When you're these big accrual companies, they're forced to do that. Otherwise they these, this ar and this account's receivable. What they're expecting to be paid when it doesn't land in the bank, they're going to follow up on this. And so what you're trying to do is essentially solve that. Now, doctors oftentimes will ask me this question. They'll say, wes, a patient owed me X, they didn't pay it. I'd like to write that off for tax purposes. I should have been paid. And when I'd explained to him that there's no write off needed, they're really confused by that. Well, Wes, I was supposed to be paid. Why don't I get a tax benefit for not having been paid. And what I have to tell them is because the cash never hit your bank account, it was never recognized as res revenue in the first place. So you can't write off a deduction against income that never existed. If we recognize the income and then never got paid, then I'm going to go write off that income. And sometimes it's a little bit difficult for doctors to understand that because what they're thinking is, well, substantively I did work and I'm out of pocket and I never got paid for that. And I feel like I should have some form of tax benefit out of that. Well, the tax benefit is the fact that you're not having to recognize income that you never received. So inherently it is a tax deduction by virtue of not recognizing it as taxable income in the first place. Okay, let me also ask you about cash. Doctors can be a little notorious about not depositing their cash. And it just tends to end up in their wallet or, you know, in a jar or a drawer somewhere that then is used for maybe petty cash things or small stuff. Now less and less are patients paying in cash. So this is maybe less of an issue now than it used to be, but I think it still occurs at times, especially with older patients. And a lot of doctors will get cash and checks now checks. A lot of doctors have these check scanning machines that they just put in all the checks for the day and it just zips it right through and it posts to the account. Instead of going to the bank or taking sort of pictures front and back, one by one, there's these check scanners and not all banks have those, but most of the big banks do. But they can't scan in cash for obvious reasons. So the doctor will then go and deposit that cash. But what happens when the doctor is saying, look, it's 20 bucks here, 50 bucks there. I'm not going to go through the work of depositing this or pay for check scan or any of that kind of stuff. So I'm just going to pocket that cash. What do you. How does it. How does dent rec handle that situation?

So we have two workflows for that. The first is we can map cash to a completely separate account so we can keep track of it, but it not be hitting revenue, essentially putting it to distribution or something like that. We can track it separately. The other thing we can do is we can actually find that payment type. And I'm not the biggest fan on this, but we built it just for really. This was like one of the main use Cases. But we can actually suppress just that payment type's data going into the QuickBooks file. I'm not a fan of that. It's an option. But really.

We have a conversation with the doctors about why it's important to do that. And I've seen even worse than that. I've seen doctors that take the cash and they pay their doctors with the cash and then they can't. They have no record of paying the doctors, so. Or, you know, it's, it's.

You mean like associate doctors, correct?

Yeah, like associate doctors where they just get money and they pay it to some associates. And those are heavy cash paying clinics. And then all of a sudden at your end you're like, okay, how much did I pay this guy? I have to do a 1099. And I have no idea. So there's. The right answer is deposit the cash.

Right?

That's the clear one. It's, it's also, I would say, one of the more exposed areas you have for theft. I mean, that's, that's easy once did the doctor take it or did the staff take it? But we can suppress the data or we can map it differently, which would be my preference if we had to. Another comment, though, on the petty cash. You had mentioned petty cash, and I'm a big, big believer in you don't use patient cash for petty cash. What you should really do is you should go to the bank and withdraw the petty cash funds. And then when you run low, you go and you replenish that amount and you don't take it from the patients. The process should be all patient funds, cash checks, whatever, are going to the bank. And ultimately, if it's the owner's decision to take the cash, he's not doing himself or herself a favor. That's our take at least.

Yeah. Let me add a few, I think, important comments here. The reasons to deposit the cash, even if it's not significant, are, number one, if you were ever audited. The IRS knows for small businesses this is a default checkbox. Are there any signs of this small business not recognizing cash? And I have an uncle who ran an A and W restaurant, and he took the cash off the table for many years and he was eventually audited. And they discovered this in the audit. And he almost lost his business. And I think he paid $150,000 to an attorney to help him sort of escape this tax issue with the irs. It was ugly and it went on for a long time. And then he was on the IRS's radar for many years after that as a suspect. Essentially. It's almost like once you're audited and found guilty, you're like guilty by default for the following five years until the IRS feels like they can keep their eye off you. And you just never want to get in the IRS crosshairs. I mean, talk about taking time for petty stuff. Buckle up. It's a total nightmare. So that's one. Just avoid an IRS being found by the IRS that you were not recognizing your own dollar because they're going to look at that as embezzlement or tax fraud. That's tax evasion. There's a difference between tax planning and tax avoidance through legitimate strategies and tax evasion. Evasion is the formal word that the IRS and tax law labels as when somebody deliberately and intentionally avoids paying, not avoids, doesn't pay their taxes through an illegal method of not paying those taxes. So that's number one. Number two is just your financial reporting. I mean, if you really want to understand the economic health of your practice fully, then recognize every dollar. And for me, understanding the financial health of your practice is worth something that's very valuable to have that. And so don't, you know, don't, don't leave your cash out or checks out, anything like that. And then valuation, if you're under reporting your collections, that just lowers the valuation of your practice if you were to be selling or bringing on a partner. So full accounting end to end. I do recommend that it doesn't mean that we can't be aggressive in tax planning. That's a whole different discussion and ways to do that. But to do it legally. And the last thing I'll say is about this petty cash as well. I really recommend doctors don't even have petty cash, period. Instead they should be using their bank. And there's a lot of great banking features emerging in the fintech or the financial technology space. I love banks like Relay, which is a credit card. It's really a technology company layered on top of Visa is I think what Ramp uses. Then there's a checking account called Relay as well, which is out. And Relay is a technology company layered on top of a traditional bank called Thread Bank. But it's really. Your bank is known as Relay. And Relay will allow you to create virtual cards for your employees which they literally can put on their, on their, you know, their Apple Wallet on their. Or they, you can get, get a printed card but you, it's not creating a new checking account or a new credit card account. It's actually just this sub account that rolls into the main account. But you can put controls on there and you can be flagged. If it's above a certain amount you can limit it to say $100 a week, you know, depending on how much they're using to go buy lunches or whatever it's being used for. And so here at practice cfo, various sort of leadership positions and then our office manager herself who will periodically go out and bring in lunch for the team has a card but we have controls around that and it's very easy to manage that. And then you're not even dealing with cash at all. So I'm a big fan of these new tech oriented banks like Relay Fi and like Ramp. And for clients of practice CFO we can actually, so we have a partnership with them so we can set it up on their own, on our own and get their approval and, and it also helps dramatically on the accounting side because when we lose access to a bank account like bank of America, which has happened a lot, American Express, it's happened a lot. It takes like moving mountain and earth, mountains and water or whatever to get the doctor to go in and I love you doctors, you're just busy and this kind of stuff doesn't take priority. For you to go back into that bank and get us that access again that we need in order to do our financial reporting. We. Well these tech driven banks and credit card accounts are built to give the accountant or outside consultant, whoever the owner wants to give that access to access in such a clean, sturdy way that it doesn't break and we can deliver on our financial statements a lot more efficiently and timely for the doctor. So I love those new tech banks and I think that there's no reason to have cash. That's my bottom line there. Okay, great.

See if the doctor does do this, let's go into cost real quick. I think we've gone over the profile of the tech what it does which is it creates that three way reconciliation, it can help reduce embezzlement and errors and create a stronger revenue cycle management and you continue to add features to strengthen in all of those characteristics. We talked a little bit about the mechanics. The front office member gets the day sheet, drops it into dentric website and then it automatically creates the journal entry which feeds over to QuickBooks to populate the general ledger which then the accountant will reconcile back to the bank and you have a full end to end clean accounting cycle around the deposits and money coming in. So now we've, I think we've got a good understanding of what the software is and does tell us a little bit about if somebody wants to sign up, where do they start? What are the costs?

Yeah, so they can go directly to our website, dent. Com, there is a sign up form and I would book a call with myself and or my team and we would have that initial kickoff call and actually do that intake form together. The cost, it's $89 a month if you go month to month and $79 equivalent of 79 if you pay for a 12 month subscription. And they can also go to or email us at helloentrE-E-N-T r e c.com and that's another good way to get a hold of us as well.

And I'll remind people that that 70, $80 payment of course is tax deductible. And so this is the way I always view things when I'm considering an outlay is what is my true out of pocket cost. Because the IRS is going to help pay for some of that depending on your tax rate that you're in. But for most of our doctors it's going to be somewhere around 23% on the low end and all the way up to 47% on the high end. If you're in a state like California and you're in the highest tax bracket, you're paying about 47% in taxes on your every new marginal dollar above the 600,000 married filing joint taxable income level. And if you're under that, let's say you're 3 or 400,000, you might be total 35 to 40% is your combined federal and state marginal tax rate. And so if you pay dent rec $80 a month, the true out of pocket might be let's say $50 a month. So the way to then think about this is what does this save you by way of preventing errors and embezzlement and clarity and also helping in AR and collecting money as well and then decide whether or not you think that's a good idea. In my opinion, every dentist should be treating their business like it were a bigger business when it comes to controls and accuracy of financial reporting. So I'm actually a big fan of what you're endeavoring to do at Dent Wreck.

Miles, thank you so much. And I'd also want to just mention like if the team is already trying to accomplish this reconciliation which we actually see a lot, we see a lot of teams that have, you know, this end of day process of putting things into Excel and trying to send that over to a bookkeeper or an accountant. And they're trying to do this. If they're attempting to do this, they will see the ROI immediately because the amount of time and hours spent doing it, they won't have to do that any longer. Right. If this is a whole new process, well, it's a whole new process and they'll be better for it. I believe that processes drive culture. I don't think that culture is just the fluff that's out there. I think every team member should have written procedures and processes and that leads to less finger pointing when there are discrepancies or issues. So I think that for the small costs that we're charging, we're building upon that and it's really a small insurance policy, if you will, to help push accountability, reassurance and protection across the board.

So yeah, if a, if a front office staff member spending, let's say on average 15 minutes a day trying to do this reconciliation, you're paying them an hourly rate for that. And so if they're, if their hourly rate is 30 bucks an hour, that's $15 per day times 20 days, whatever they're working during the month, that, that's going to end up being more than what they would pay to dent wreck.

And you know, this is, this is, you might find this funny but like we've had team members that just don't want to do the busy work and they don't understand why do I have to key all this data? And that's already there, you know, and, and we've actually had team members and I've seen, I've seen it in my, in consulting where they don't want to do that work and they, they say this job's not for me and they quit. We've had, we've literally seen a team member walk off from having to manually do this work. And you know, had Denreck been around at that time, hopefully we could have prevented that as well. And the need for dentrock only goes up as you have growth we touched on in the beginning of this podcast episode. But with the, with the DSOs and the groups, they have a whole set of other issues which is centralized banking and the accounting team not knowing which deposit is for which location. And when the accounting department's trying to do site level financials and gets you that detail and they can't do it, or they're spending a lot of time and they're charging you an hourly rate and those hourly rates aren't $25 an hour. You know, it becomes, you know, the ROI just goes way up as, as you have scale and then if you are a DSO and you form a DSO and you're billing under a single tiny, again, there's a whole new set of pain points and elements. So whether you're the single practice so practitioner, I think we have a great value and great benefit to you. And as you scale, I think it only goes up great.

And one other comment I'll say is a lot of times accountants will inadvertently categorize a personal contribution into the practice checking account for from personal funds as collections. Because a lot of times what bookkeepers do is they think, okay, well everything deposited in the client's business checking account is collections because let's face it, 98% of the time that's what it is, it's collections. However, on occasion a doctor will transfer money and deposit money in to the business checking account from a personal account. And accounts oftentimes have inadvertently categorized that as taxable income if they code that to the same account. Like all of our revenue, all of our collections account is account 4000 in QuickBooks. If we, if my team made that mistake, they might accidentally classify that as income. And now you're paying $3,000 $4,000 in taxes on money that should not have been classified as income. That should have been classified on the balance sheet as an owner contribution. Where if with dentrec, dentrec will automatically create all of the income that should be income. And any other deposit that hits is not going to be a part of the Dent Rec journal entries inside of QuickBooks. And it would be therefore automatic to easily see that these are not collections, this is owner contribution. So it's a little, it's, this is a little peripheral, but that is another control that is important. We here at practice CFO in our review process of the financials every month is to look at all deposits for potential personal contributions to make sure that we don't recognize that as income. We become very, very good at that because we've been doing that for just for so, so long. So Dent Rec could actually help with that I think as well. And then lastly, I'll say the effectiveness of this, I have to imagine like virtually any software is correlated to the effectiveness of, of the implementation and the adoption. So the process around the setup and the ongoing use of the technology. And lastly, I'll say, doctor, never step outside of this Foley. You've got to let the front office know that you're just looking, even if you're not doing anything mechanical other than just looking and making sure that they know that you look. That's the final layer on the cake that I think is so valuable to. To having a strong RCM and avoiding embezzlement. Well, Miles, thank you for being on the show. Again, it's dentrec.coM-E-N-T r e c.com is how they can reach out and get a quote or a demo. Thanks so much for joining the Dental Boardroom podcast.