The latest NASDAL (National Association of Specialist Dental Accountants and Lawyers) Benchmarking Report for 2017-18 has just been released and shows a decrease of 3% in net profits for a typical dental practice. Whilst income for NHS and private practices has increased (although there was a slight reduction for mixed practices), there has been an increase in most expenses – notably associates’ costs and wages.

NHS practices have fared the worst having seen average total fee income per dentist drop from £181,804 in 2017 to £169,615 in this 2018 report. Average net profit per principal in NHS practices also dropped by around 10%, from £139,698 to £126,269 for the year ending March 2018. The figure remained stable for private practice principals.

Rising costs – chiefly attributed to wages – have seen total expenses hit an average of 70.1% of fees across all practice types for the year.

Ian Simpson, chartered accountant and a partner in Humphrey and Co, which carries out the statistical exercise commented, ‘Although profits are down across all types of practices, it is clear that there is a big divide between private practices and those that are NHS and mixed. Private practices saw a reduction in profit of just 0.5% whereas both NHS and mixed practices saw reductions of around 10%. Interestingly, mixed practices typically have the highest level of fee income, but they also have the highest cost ratios.’

Associates – Brexit effect?

The report has also seen the first real rise in Associate profitability for many years. Associates have been used to their earnings flatlining for more than a decade but 2017-18 has seen that turn around. In some areas of the country (e.g. Cumbria and the North East) this will have been caused by Associates being in more short supply and thus their bargaining power increasing. There are a number of causes of this but it cannot be ignored that many EU qualified dentists have either returned home or retreated to the major conurbations.

Income has increased by more than 6% for associates but this has only translated into a small net profit rise of just under £2,000 per annum as outgoing expenses have increased for associates in the same way that they did for practices.

Associate fees in 2018 rose £4,596 to £86,310 during the year, but this translated into an increase in profits of less than £2,000, up from £66,318 to £68,155 as costs increased.

Goodwill valuations

Nick Ledingham, of Morris & Co, specialist dental accountants and chairman of NASDAL observed, ‘It seems that the costs of running a dental practice are on the rise and that revenues have not yet increased to keep pace. It is important that dental practices take specialist advice so that they can understand and react to changes in their business situation.’

The annual Benchmarking Survey statistics are gathered from the accountant members of NASDAL across the UK who together act for more than a quarter of self-employed dentists. The statistics provide average ‘state-of-the-nation’ figures so NASDAL accountants can benchmark their clients’ earnings and expenditure and help them run their practices more profitably. The basis of the survey figures is 2018 tax returns and accounts with year ends up to 5 April 2018.

Alan Suggett, specialist dental accountant at UNW and NASDAL Media Officer added, ‘The NASDAL annual profit and loss benchmarking report is a unique and valuable tool which enables NASDAL accountant members to compare their practice owning clients with industry norms. It means that we help our clients really understand what is happening in their dental business.’

The NASDAL benchmarking statistics are published annually in March and reflect the finances of dental practices and dentists for the most recent tax year. The NASDAL figures provide a detailed picture of dental practice finances, sourced directly from dentists working privately and in the NHS. The figures published by the Public Health England’s Information Centre later in the year reflect the income of NHS dentists only. NASDAL’s designation of practices as either private or NHS reflects that 80% of business income comes from that source. The sample size is 650 principals and limited companies, and 600 associates.