When the world of dentistry was looking at consistent and continued growth, income, and reputation-building, the COVID-19 pandemic struck.
Along with COVID-19 came plenty of implications for dentists and their businesses. There were tensions building, staff layoffs, and locking down at home while the country and the world isolated itself to overcome some of the results of the virus. Sickness and death were everywhere, and dental offices were shutting down at a rapid rate. Who knew how temporary or long term the shutdowns of the practices would be? Congress passed certain laws to allow cash flow to dental practices, and some dentists and dental advisers had their own creative ways to produce a cash flow during this mess.
There were consequences to all of this trouble, however, with the tensions that were building while trying to survive personally, financially, and professionally. One pressure point was living at home 24/7 and the resulting emotional impact. Proceeding with divorce became an outlet for some dentists, mainly from the financial and emotional heartbreak from the virus, closing the office for an undetermined time, and living 24 hours a day in an isolated home environment.
Of course, steps should be taken to attempt to change the situation prior to going to court if there is any hope for resolving the issues. Mediation could be an approach to settling a lot of the problems, at least when it comes to the financial situation and some of the emotional setbacks.
Before going through a divorce trial or even the proceedings leading up to a divorce, it is certainly worth the risk of attempting some type of resolution. One can always go to court if all else fails to alleviate the problems.
Too many bills and not enough income
For some dentists who have just "had it" with some dental suppliers, equipment sales companies, and other bills in general, the thought and actual filing of bankruptcy occurred. This concept is a must for consultation with experts on the results, reputational consequences, and overall financial effect that it has or will have on the dental practice and personal outcome for the dentist.
Bruce Bryen, CPA, CVA.If the current cash flow and the expected future results of operations are so low that there seems to be no hope, expert attorneys and other dental advisers are there for guidance in discussing this approach. Sometimes it leads to a new start and expected turnaround in the dental practice's fortunes as well as those of the dentist/owner. However, this approach should only be taken when there is no other choice to resolve the problem of having less income than overhead.
It is always advisable to speak with your creditors first for assistance with the financing prior to speaking with the attorneys and dental practice advisers about the outcome of a bankruptcy petition for protection from the creditors.
Some dentists had recently purchased one or more dental practices and added desperately needed new equipment which, of course, resulted in higher expenditures. While the dental suppliers were happy to provide these items, neither they nor the dentists ever expected the dental practice to suffer such sudden financial hardships as they have during this crisis. Even those dentists who maintained their own practices without additional acquisitions may have purchased one or two expensive pieces of equipment with easily obtained financing. Now their payments are not affordable because there is little to no patient income flow and the prospects for returning to almost full capacity are bleak in some areas.
What does the dentist do next?
The threat of a bankruptcy petition to protect the dentist from his or her creditors may enlist the ear of the dental supplier or equipment and instrument seller. A reasonable approach for the supplier and the dentist is certainly worth considering. Of course, the terms must be appropriate and acceptable to each party or there can be no compromise. Sometimes merely stretching out the payment terms allows a lower monthly payment that can be achieved, even during the financial conditions resulting from COVID-19.
A financial restructuring will allow the amount paid to attorneys if a lawsuit ensues to be used in a settlement for the payment to the supplier without the litigation. Worse for the supply house would be the bankruptcy petition where the dentist would be mostly protected from the payment to his or her creditors, at least at the current level.
COVID-19 has caused many financial and emotional problems for the dentist and for many of those employed by him or her as well. The reason for layoffs of personnel was because there was no cash flow to pay the employees. The same circumstances affect the dentist as well since there has been little to no patient income.
If parties are willing to work together with proper advice, many of these issues can be overcome or at least postponed until the post-COVID-19 financial situation has settled somewhat. A more normal approach to the dentist's affairs regarding financial security and the relationship with suppliers and other creditors will return once there is some clarity to the downturn. Now that various governors have opened their states for the dental profession to resume full business, there should be a surge in patient requests for appointments and the flow of patient income will commence.
Speaking with advisers
It's always good for dentists to speak with their trusted advisers regarding any type of financial situation. While the virus is still in existence and could return this fall, it is even more important to talk to advisers. Seeking their opinions can only assist the dentist in returning to the financial wellness of his or her practice prior to the arrival of COVID-19.
Bruce Bryen, CPA, CVA, is a certified public accountant and a certified valuation analyst with more than 45 years of experience. Learn more about him and his services.
The comments and observations expressed herein do not necessarily reflect the opinions of DrBicuspid.com, nor should they be construed as an endorsement or admonishment of any particular idea, vendor, or organization.
