Why Is My Take-Home So Low as a Dental Practice Owner?

Overhead as a share of collections, not production

Overhead is every cost of running the practice except dentists’ pay and the owner’s profit. Divide it by collections for the same months, not by production. Production includes write-offs the practice was never going to collect, so a ratio built on it looks better as fees rise and contracts deepen. Collections is the money that actually pays the bills.

The arithmetic: take total expenses on the profit-and-loss statement for the trailing twelve months, subtract the owner’s salary and every associate dentist’s pay, and divide by collections for the same twelve months. Decide once whether depreciation stays in, since it is an expense on the statement but not a payment that month, and keep the same rule every month after.

Ask the CPA which accounting method the books use. Under the cash method, the IRS’s Publication 538 says, “you include in your gross income all items of income you actually or constructively received during the tax year,” so the revenue line on a cash-basis statement sits close to collections. On the accrual method it does not, and the collections figure should come from the deposits report in the practice management system.

In the example above, overhead of $1,140,000 is 57.3 percent of collections. Against production it would read 43.8 percent: the same practice, the same bills, and a number 13.5 points kinder because production counts $610,000 of write-offs and uncollected balances that never reached the bank. Keep two versions on the page: overhead without any dentist pay, which shows what it costs to open the doors, and overhead with associate pay included, which shows what is left for the owner. With the associate, the example practice spends 69.3 percent of collections before the owner is paid at all.

What the IRS figures show for dental offices

One public, primary record of how a dental office’s dollar divides is the tax return. The IRS Statistics of Income Division’s Corporation Complete Report for tax year 2022, released in September 2025, estimates receipts and deductions for 99,916 corporation returns classified as offices of dentists, C and S corporations alike, with $120.0 billion in total receipts. The shares below are our arithmetic from its Table 5.1.

• Salaries and wages: 25.1 percent of receipts. By the report’s definitions this is pay to employees other than officers, so hygienists and any employed associate dentists who are not officers are both inside it, while payroll taxes, 401(k) contributions and any wages counted in cost of goods sold sit elsewhere.
• Compensation of officers: 12.7 percent. When a dentist-owner is an officer of the corporation, the owner’s salary sits on this line.
• Net income (less deficit), which the report calls “corporate pretax profits”: 11.1 percent. Officers’ pay and net income together: 23.8 percent.
• Rents paid: 4.8 percent.
• Taxes and licenses, which by the report’s definition include “Social Security and payroll taxes” along with state and local taxes: 3.9 percent.
• Pension and profit-sharing plans: 1.7 percent. Employee benefit programs: 0.9 percent.
• Depreciation and amortization: 3.5 percent. Advertising: 1.5 percent. Repairs and maintenance: 0.9 percent. Interest paid: 0.8 percent. Bad debts: 0.2 percent.
• Cost of goods sold: 4.6 percent. Other deductions: 28.3 percent. The corporate return has no line of its own for dental supplies or lab fees, so those costs sit somewhere inside these two, and the IRS figures cannot separate them.

Read these as a neighborhood, not a target. They are totals, so a corporation with $50 million in receipts counts fifty times as much as one with $1 million. They cover corporations only; dentists who file as partnerships or sole proprietors are not in them. They are estimates from a sample of unaudited returns, so a gap of a few tenths of a point is noise. And how owners split their pay between salary and profit moves money between two lines: the IRS says S corporations “must pay reasonable compensation to a shareholder-employee in return for services that the employee provides to the corporation” before any non-wage distribution to that shareholder. What that amount is belongs with the CPA, which is why officers’ pay and net income are read together. To set the practice beside these figures, compute each line as a share of collections, the practice’s closest match to the IRS’s receipts, and read the gaps of several points, not the decimals.

Staff payroll: what to compare it with, and your own ratio

Staff payroll here means everyone who is not a dentist: hygienists, assistants, the front desk and the office manager, plus the employer’s payroll taxes, health insurance and retirement contributions. Divide it by collections for the same months. Keep associate dentists on a separate line, because their pay is set by their own contracts, which may tie it to what they produce or collect, and mixing them in hides both numbers. In the example above, staff payroll of $560,000 is 28.1 percent of collections.

A single ratio cannot say whether wages are too high. Compare it with four things, in this order.

• The practice’s own trailing months. Staff payroll as a share of collections for each of the last twelve months, beside the same months a year earlier. A ratio that climbs while paid hours and pay rates stay flat points at collections, not at wages.
• Each role’s hourly rate against the area’s wages. The Bureau of Labor Statistics put the national median wage for dental hygienists at $47.16 an hour in May 2025, and for dental assistants at $23.11. Its Occupational Employment and Wage Statistics program publishes the same estimates “for individual states, and for metropolitan and nonmetropolitan areas,” which is the comparison that matters for one office.
• Paid hours against scheduled hours. From payroll, the hours each person was paid; from the schedule, the hours that person had patients booked or, for the front desk, the hours the office was open. The difference is setup, sterilization, charting, meetings and idle time. Some of it is necessary; the point is to know its size.
• Collections per paid hour, by role where the reports allow it. For hygiene: collections from hygiene procedures divided by hygienists’ paid hours. If it falls while rates hold, the problem sits in the schedule or in collections, not in pay.

Illustrative example: a hypothetical practice pays three hygienists for 40 hours a week each, and the schedule books 34 hours of patients for each of them. That is 18 paid hours a week without a patient in the chair. At $55 an hour with payroll taxes and benefits, it comes to about $51,500 a year. Some of those hours are setup and charting the practice needs; the rest is a scheduling decision, and only the owner can say which is which. A high payroll ratio has three possible causes: rates above the area’s, more paid hours than the schedule uses, or collections too low for the team the practice already has. Only the first is a wage question, and cutting pay to fix the third risks losing the people who produce.

Which overhead lines can change this year, and which cannot

Before cutting anything, sort every overhead line by when it can move. A lease with years left to run cannot change in March; a supply order can change next week.

• Fixed until a date: the lease, the practice-purchase and equipment loans, equipment leases and multi-year software or service contracts. Each one gets its renewal or payoff date on the owner’s calendar. Renegotiating or refinancing is a conversation with the landlord or the lender months before that date, with the practice’s attorney reading any new terms.
• Changeable this year: staff hours and overtime against the schedule, dental supplies ordered against procedures produced, lab fees against cases seated and billed, card-processing fees against the processor’s monthly statement, software seats nobody uses, and marketing spend against new patients by source.
• Revenue-side lines that act like overhead: write-offs by plan, claims sent and never paid, patient balances, and accepted treatment that never reached the schedule. A dollar recovered from write-offs, claims or balances arrives with no new overhead behind it, because the dentistry was already done and its costs already paid. Treatment brought onto the schedule adds supplies and lab fees, but it can fill hours the staff are already paid for.

Lab fees deserve a monthly match: every line on the lab’s invoice against a case on the schedule. A remake, a case the lab billed that was never seated, and a case seated that the practice never posted each show up there. Supplies get the same treatment at a coarser grain: the month’s orders by category against the month’s production, read for the months that run high and the reason written beside them.

The one-page monthly check

One page, prepared by the office manager or the bookkeeper by the tenth of each month and read by the owner in half an hour. Three columns: last month, the trailing twelve months, and the same twelve months a year earlier. Beside each dollar line, its share of collections.

• Gross production, write-offs and adjustments, net production.
• Collections, and the change in accounts receivable.
• Staff payroll with taxes and benefits, and staff paid hours against scheduled hours.
• Associate dentists’ pay.
• Supplies, lab fees, rent and occupancy, and everything else, each on its own line.
• Left before the owner: collections minus all of the above.
• Loan principal and interest paid, from the loan statements.
• The owner’s salary, draws and distributions, in whatever form the CPA has set.
• Cash at the end of the month, against the start.

Weekly, three counts keep the monthly page honest: staff hours paid against hours booked, deposits against payments posted, and lab cases sent against cases seated. Once a quarter, the owner reads the page with the CPA, who reconciles it to the books and says what the tax side changes. Two months running in the wrong direction on any line is the agenda for that meeting.

When this needs no outside help, and where the Review fits

If the page above exists, someone prepares it every month, and the owner can say which lines moved and why, there is nothing here to buy. If take-home is low because of a purchase loan the owner chose and every other line holds, the answer is time or the lender, not a consultant. Tax planning, entity choice and how the owner is paid belong with the CPA.

For an owner-led practice, the Revenue Review counts this under the Payment → Margin hand-off. From read-only access to the practice’s own reports, profit-and-loss statements and payroll summaries, starting with aggregate reports that carry no patient names, it builds the subtraction above for twelve months and puts a monthly dollar figure on each gap the records support: write-offs posted under the wrong name, claims and balances never collected, paid hours the schedule does not use, lab fees with no seated case. It takes two weeks. It gives no tax, legal or clinical advice, sets no one’s pay, and does not replace the CPA.

It is built for owner-led practices with $2 million or more in annual collections and two or more doctors or locations. If the numbers suggest it, the next step is a free 20-minute call, where a practice that does not need the Review is told so.