Why Veterinary Practices Need a Veterinary Bookkeeper and a Veterinary Tax Accountant
Running a veterinary hospital is no easy feat. This business is complex, and most practice owners and managers come from a veterinary background with minimal business or financial training. Although you may be able to survive by muddling through on your own, if you hire professionals, you help ensure your veterinary practice thrives.
Business and tax laws can be confusing, and you can easily get into trouble with the IRS if you are unfamiliar with tax filing. A certified public accountant (CPA) is a knowledgeable professional who can help with business operations and tax planning, but their ability to do the job well hinges on quality bookkeeping, which—when done correctly—is incredibly time-consuming.
Hiring a single professional to handle the books and taxes may seem like an efficient move, however, because of a veterinary business’s complexities, different skill sets are required for each job. For the best outcome, practices should work with two professionals to handle finances: a veterinary bookkeeper and a veterinary tax accountant.
What does a veterinary bookkeeper do?
In a veterinary practice, the bookkeeper’s job is to maintain an accurate record of day-to-day financial transactions, which number in the hundreds or possibly thousands each month. Using appropriate software, the bookkeeper categorizes each transaction and can track not only money in versus money out, but also exactly from where that money is coming and where it’s going. At each month’s end, the bookkeeper can generate reports and statements that accurately reflect profits and losses and allow the practice’s owner and leadership team to create an action plan for course correction or growth.
What does a veterinary tax accountant do?
A veterinary tax accountant’s job is to handle tax law compliance, tax filing for the business, and the business owner’s individual taxes, all of which are intimately tied. This person is typically a CPA who focuses on business and tax law. The tax accountant meets with practice management quarterly and analyzes the financial data created by the bookkeeper, then uses that information to make recommendations that will impact annual tax filing. The tax accountant’s recommendations can guide operational choices and make or break the year-end tax situation.
Can your veterinary bookkeeper and accountant be the same person?
Your bookkeeper and tax accountant can be the same person, and this may work well for some practices. However, businesses with complex tax situations—which is the case for most veterinary hospitals—can benefit from hiring separate people or entities to accomplish these financial tasks. Typically, when one person is hired to do both jobs, that person is an enrolled agent (EA), authorized by the IRS to file taxes. Although qualified in many respects, an EA isn’t the same as a CPA, who has a greater understanding of business law and is more qualified to provide veterinary hospitals with advisory services.
You may find that some CPA firms provide bookkeeping in addition to tax accounting services, which is done to ensure the accounting team is working from accurate data. However, these services are usually performed by different people or departments within the firm.
How do your veterinary bookkeeper and tax accountant work together?
The bookkeeper and accountant each have a skill set that complements the other’s abilities. The bookkeeper creates an accurate financial picture for practice leadership, and the tax accountant uses that information to advise practice leadership on business decisions and tax filing plans. Because of this relationship, VetBooks often partners with Granite Peak Associates, a veterinary-focused tax accounting firm, to provide our veterinary practice clients with a complete financial solution.
“If I’m looking at numbers that are materially off, my entire analysis that I’m giving the client is completely off base,” said Jharid Pratt, CPA, MST, CEO of Granite Peak Associates. “So first it’s making sure everything is accounted for and classified correctly, and if you have a veterinary bookkeeper, they are doing that monthly. So I know that in my quarterly client conversations, I’m giving appropriate advice.”
Why should practices use veterinary-specific bookkeepers and accountants?
Veterinary-specific knowledge is crucial to your bookkeeper’s and tax accountant’s efficiency and success. By working with an experienced veterinary company, you have access to a professional team that is familiar with typical veterinary accounts, revenue streams, and tax codes and elections with which general accountants aren’t as familiar. Plus, veterinary companies, such as VetBooks and Granite Peak Associates, frequently collaborate and create a synergy that is unmatched by providers outside our profession. We lean on each other to ensure things get done right.
“You’re getting the infrastructure and team so there’s multiple people on every engagement,” said Pratt. “You’re going to get a team approach from both perspectives, have multiple points of contact, and you’re going to get timely information. For new clients, it’s going to feel like a lot of infrastructure at first, but you’re going to grow into it.”
What involvement should veterinary practice owners have in their financial operations?
Practice owners don’t necessarily need to learn QuickBooks’ ins and outs, the AAHA chart of accounts, or complex tax law. Accounting and bookkeeping are crucial to business success, but the value comes from the result, not the process. Practice owners need to understand their financial status and general tax recommendations, but they can do that by hiring professionals to ensure the process is done correctly. You should spend your time analyzing financial data to better your business rather than collecting information.We started VetBooks because we saw a need for bookkeeping services in the veterinary profession. Many practices with disorganized books don’t know if they’re profitable and are missing the granular data necessary to manage their businesses optimally. Our goal is to provide practice owners with actionable, accurate information about their finances and give them back the time they’re losing trying to manage the books themselves. Together with veterinary tax accountants, our team works to ensure practice owners have a complete understanding of their financial situation. If you’re ready to take charge of your practice’s finances, contact our team or schedule a short meeting with us.
The information in this article is for educational purposes only. It is not intended to provide legal or tax advice.
