What Does an Outsourced CFO Do for a Dental Practice?
Most dental practice owners already pay someone to keep the books and someone to file the return. The question that follows is whether a third role is worth paying for, and what it actually delivers that the first two do not.
What does an outsourced CFO actually do? 📊
Four things a bookkeeper and a tax preparer do not: forecast, benchmark, model decisions, and prepare the practice for a transaction.
Forecasting. A rolling cash flow projection that tells you what the account will hold in ninety days, given your collection patterns, payroll dates, debt service and planned purchases. This is what turns a strong month into a funded equipment purchase instead of a surprise.
Benchmarking. Your expense lines compared against dental industry norms rather than against last year. Total overhead running 60–65% of collections is a healthy general practice; above 70% something specific is wrong, and the benchmark tells you which line to open first.
Decision modeling. Hiring an associate, adding an operatory, buying the building, changing the payer mix — each of these changes the others. Modeling them together before committing is the part owners most often do on instinct.
Transaction readiness. Whether you are buying a second location or planning to exit, the financials have to withstand a buyer or lender review. That preparation takes a year or more, not a quarter.
How is that different from what I already pay for? ⚖️
Bookkeeping records the past, tax work reports it, CFO work changes the future. Three different jobs, often sold under overlapping names.
| Role | Question it answers | Time horizon |
|---|---|---|
| Bookkeeper | What did we spend? | Last month |
| CPA / tax preparer | What do we owe, and when? | Last year |
| Outsourced CFO | What should we do next, and what happens if we do? | Next 12–36 months |
The titles overlap in the market. Two firms can both advertise CFO services and deliver very different work — one sends a monthly statement pack, the other sits in the decision. The distinction worth testing is whether you get commentary and a recommendation, or only numbers.
When does a practice actually need one? 🚦
When decisions start affecting each other. Complexity is the trigger, not revenue.
A single-location practice with steady collections, one provider and a clean overhead ratio usually does not need a separate CFO function. Good bookkeeping and year-round tax planning cover it. The picture changes at specific moments:
• A second location — now you need entity structure, consolidated reporting and location-level P&L.
• An associate on production-based pay — compensation modeling changes your margin math.
• Buying the building — real estate brings Cost Segregation and financing decisions with long tails.
• Planning to sell within three years — preparation has to start well before the listing.
The signal we tell owners to watch
If you are making a six-figure decision using last quarter statements and your own instinct, you have outgrown pure compliance work. Not because instinct is wrong — experienced owners are usually directionally right — but because the cost of being wrong has grown past the cost of modeling it first.
What does it cost, and what drives the number? 💵
Usually a fixed monthly fee, scaled by entities, locations and providers rather than by revenue alone.
Three things drive the price more than practice size does. Entity count — a management company plus two practice entities is three sets of books and an intercompany reconciliation. Reporting cadence — monthly commentary costs more than quarterly. Bundling — whether bookkeeping and payroll are inside the fee or billed separately changes the comparison entirely.
Compare scope, not headline price
The same title covers very different work, so a quoted monthly figure means little on its own. Ask any firm to put the scope in writing: which reports, on what schedule, with or without commentary, and what falls outside the fee. Two quotes that look far apart often converge once the scope is specified — and occasionally the cheaper one turns out to exclude the part you were buying it for.
What should you expect every month? 📅
A benchmarked P&L, an overhead breakdown, collections against production, and written commentary on what changed and why.
Statements without commentary are bookkeeping output. The test of CFO work is whether you can ask why a number moved and get an answer connected to a decision you made — or one you should make. In our practice this is delivered against dental industry benchmarks each month, so an overhead line that drifts is visible in the month it drifts rather than at year end.
Practices we work with see their numbers continuously rather than in a monthly PDF, through our client dashboard, where every figure drills down to the underlying journal entries.
Which numbers should a dental practice watch every month? 📈
Six lines, each with a benchmark. If all six are in range the practice is healthy regardless of what revenue did.
Revenue alone tells you almost nothing about a dental practice. Two practices collecting the same amount can have completely different owner income, and the gap always shows up in the same handful of ratios. These are the lines a CFO function watches monthly, expressed as a percentage of collections.
| Line | Healthy range | What it tells you when it drifts |
|---|---|---|
| Total overhead | 60–65% | Above 70% means one of the lines below is out of range |
| Staff wages (excl. owner) | 25–30% | Overstaffed, or scheduling is not filling the chairs |
| Dental supplies | 5–7% | Ordering discipline or vendor pricing |
| Lab fees | 8–10% | Case mix shifted, or lab pricing needs renegotiation |
| Occupancy | 5–8% | Fixed cost; drifts only when collections fall |
| Collections vs production | 98%+ | Front-desk follow-up or payer write-offs |
The last line is the one owners underuse. Production is what you did; collections are what you were paid for it. A practice producing well but collecting at 92% is giving away most of a percentage point of margin every month, and the cause is almost always process rather than pricing.
One caution about benchmarks
These ranges describe a general practice. A specialty practice, a heavily PPO-dependent office, or a practice carrying a recent build-out will legitimately sit outside them. A benchmark is a question, not a verdict — the useful move is to ask why a line is out of range, not to force it back into one.
Frequently Asked Questions ❓
Q. What is the difference between a bookkeeper, a CPA and an outsourced CFO?
A bookkeeper records what happened. A CPA reports it to the government and files the returns. An outsourced CFO uses those same records to change what happens next — budgeting, cash flow forecasting, pricing and compensation decisions, and preparing the practice for an acquisition or sale. Most practices need all three functions; the question is whether the third one is worth paying for separately at your current size.
Q. At what size does a dental practice need a CFO?
The trigger is usually complexity rather than revenue: a second location, an associate on production-based compensation, a building purchase, or a plan to sell within three years. A single-location practice with stable collections and a clean overhead ratio often does not need more than solid bookkeeping and tax planning. Once decisions start affecting each other, someone has to model them together.
Q. What does an outsourced CFO cost for a small dental practice?
Fees are typically a fixed monthly amount rather than hourly, and they scale with the number of entities, locations and providers rather than with revenue alone. What drives cost is the reporting cadence you need, whether payroll and bookkeeping are bundled, and how many entities have to be consolidated. Ask any firm to quote the scope in writing before you compare numbers, because the same title covers very different work.
Q. What reports should I expect every month?
At minimum a profit and loss statement benchmarked against dental industry norms, an overhead breakdown by category, collections against production, and a short written commentary on what changed. Statements without commentary are bookkeeping output, not CFO work. You should be able to ask why a number moved and get an answer tied to a decision.
Q. Can an outsourced CFO help me buy or sell a practice?
That is often the highest-value engagement. On the buy side it means quality-of-earnings review, payer mix and production analysis, and deal structuring including price allocation. On the sell side it means presenting clean, defensible financials well before you go to market — which usually takes a year or more of preparation to do properly.
Q. Do I keep my current CPA if I hire an outsourced CFO?
You can, though many practices consolidate to avoid paying twice for overlapping work. If you keep them separate, be explicit about who owns the tax filings and who owns the planning, because the gap between those two roles is where deadlines and elections get missed.
Q. What overhead percentage should a dental practice target?
A healthy general practice runs total overhead at 60 to 65 percent of collections, leaving a 35 to 40 percent owner margin. Above 70 percent, the cause is usually staff wages, supplies or lab fees rather than something diffuse. Specialty practices and offices carrying a recent build-out can sit outside this range legitimately.
Q. What is the difference between production and collections?
Production is the dollar value of dentistry performed; collections are what the practice was actually paid. A healthy office collects 98 percent or more of production. A persistent gap points to front-desk follow-up or payer write-offs, and it costs margin every month it goes unmeasured.
If you are weighing whether the CFO function is worth separating out at your current size, that is a conversation worth having before the next big decision rather than after it. Our dental practice services cover both the compliance base and the advisory layer above it.
