A Dental CPA’s Real Numbers

Why your CPA should speak dental: the benchmarks a generalist accountant never checks

A generalist CPA can keep a dental practice compliant. Taxes filed, books closed, payroll run — no complaints. But compliant and well-advised are different services, and the difference shows up in the questions. A generalist looks at your P&L and asks whether the numbers are accurate. A dental CPA looks at the same page and asks why hygiene is producing under target, what’s buried in your payroll line, and whether that reimbursement haircut is quietly costing you six figures.

Darin Sitto, CPA and Partner at Dental ROI Associates, gave us the cleanest tour of dental-specific accounting we’ve heard when he joined the Dentelligentsia podcast. Here’s what a specialist checks that a generalist typically doesn’t.

A P&L built to say something

Sitto’s starting point: “Accounting is the language of business” — and most practice P&Ls mumble. The standard chart of accounts lumps every wage into one payroll line, mixing the doctor, the hygiene department, and the front desk into a single unreadable number. A dental CPA bifurcates payroll and organizes costs so the statement answers operating questions: what does it truly cost to deliver the dentistry, and what does each department contribute?

That structure is what makes benchmarks usable. Sitto’s headline targets: overhead between 55 and 60 percent — defined precisely as excluding doctor compensation, because as he says, “overhead is very important — but overhead in relation to what? How are you calculating it?” A practice bragging about 50 percent overhead and one despairing at 70 may be identical businesses using different definitions. After a reasonable doctor’s comp, he wants EBITDA between 17 and 25 percent for a GP practice, with hygiene contributing 25 to 30 percent of production.

The ratios that flag problems early

A dental CPA reads a few numbers the way you read an x-ray. New patient flow: Sitto’s rule is one new patient per month for every day a doctor works — four days a week means 16 new patients a month, and a shortfall points at marketing or the phone. Hygiene share of production below range usually means a weak recare system, which suppresses restorative discovery downstream. Staff costs, supplies, lab — each has a range, and drift outside it has a short list of usual causes a specialist has seen a hundred times.

Where specialist knowledge pays hardest: transactions

Buying a practice is where the generalist gap gets expensive. Broker-prepared numbers arrive decorated with add-backs, and Sitto’s counsel is to work “from collections down to the true expenses of the practice, and be very careful with what a broker calls add-backs.” A dental CPA also knows the industry-specific traps — like the Delta Premier haircut, where a buyer inherits lower reimbursement rates than the seller enjoyed, so the same dentistry collects less the day after closing. Budget 10 to 15 percent patient attrition through a transition, and price the deal on profitability rather than headline revenue. Sitto’s framing question: “Would you rather own a million-dollar practice with 20 percent EBITDA or a $2 million practice with 5 percent? I’ll choose the million-dollar practice all day.”

The good news a specialist also brings: financing is on your side. Dentists carry the second-lowest loan default rate of any profession — “second to morticians” — so capital is accessible when the numbers are presented the way underwriters want to see them.

The real estate line on your tax return

Sitto’s advice for owners who buy their building was unequivocal: “If you’re going to do a startup and own the building, 100 percent do a cost segregation study.” Instead of depreciating the entire property over 39 years, a cost seg study identifies components that depreciate over 5, 7, or 15 — accelerating deductions into the early years, exactly when a practice with new debt needs the cash flow most. It’s a standard move for dental-savvy advisors and an afterthought for many generalists, and it’s one more reason the lease-versus-purchase decision should be modeled with your CPA before the real estate search starts, not after.

That’s the standard we’d hold any advisor to, in accounting or in real estate: specialist knowledge, and responsiveness. The compliment Sitto says his firm hears most often isn’t about tax genius — it’s “my guys actually answer the phone.”

Hear the full conversation with Darin Sitto of Dental ROI Associates on the Dentelligentsia podcast — startup versus acquisition, DSO structures, and the deep-breath advice he gives every stressed new owner.

And when the numbers conversation turns to the space itself — the rent line, the buy-versus-lease model, the building — talk to us. Tenants and buyers only.

For more on our interview with Darin Sitto, check out our article, “What Should Your Overhead Actually Be? A Dental CPA’s Real Numbers.”

And follow Darin Sitto on Linked In or check out the Dental ROI Associates website.