How Should I Expense My Optos?

By Jerry Hayes OD | in

Practice Overhead

| 12/22/2008 - 11:00 am

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Michael Raff, OD writes:

Do your recommended limits on leasing remain the same for leases on equipment such as an Optos, which generates income?

Thank you for sharing this valuable information. I have had my solo practice for nearly 12 years and have never seen guidelines such as these to help me conform to recommended percentages of rent/maintenance vs. annual gross figures.

Jerry Hayes, OD responds:

Even though the Optos does generate income on a per procedure basis, I still think you have to expense it under equipment. After all, that's what it is.

I also asked my good friend, TIP OF THE WEEK author and noted consultant Neil Gailmard, OD for his thoughts on the matter. Here is what he had to say:

"With Optos, you pay for each procedure — each photo. The instrument tracks the usage and the user sends Optos a check every month. There is a fixed amount as a minimum per month — even if you took no photos. If your monthly usage is more than the minimum, then you pay based on each usage.

The doc signs a contract for a number of years and is obligated. The payments vary quite a bit based on the deal that is struck. It may depend on the volume of the practice or if it is a new placement or a renewal of the contract. I’ve seen practices pay from $2,000 to $3,500 per month. For a lease payment, that is a lot of cash! It’s a house payment for some.

I’ve had that question on variable vs. fixed before. I don’t think there is any question that the per use lease payment belongs under equipment and it’s a fixed cost.

It is not cost of goods, which is the only variable cost we recognize. The doc is not selling a product with Optos. I have seen that the large Optos payment makes the equipment category pretty large — more than 3% in many cases.

But that is how it should be. In my opinion, the large payment should be reflected in the ‘equipment expense’ category."

Disclaimer: The information and opinions contained on this site are for discussion purposes only and are NOT intended to serve as legal, accounting or investment advice. ©2008 Jerry Hayes, OD. Not to be reproduced without written permission of the author.

Thanks Dr Hubbard, you raise

Jerry Hayes OD - 01/06/2009 - 15:07 pm

Thanks Dr Hubbard, you raise a good point! Technically speaking, it appears that the Optos contract is based not on a lease, but a simple per use fee. Is that correct?

Keep in mind that our discussion is not about the ‘tax deduction’ aspect on a leased or purchase basis. It is a given that you can fully deduct the per use fee against your business income.

Our debate is about which expense category makes the most sense from a practice management standpoint. Dr. Gailmard and I both feel you should allocate the Optos costs in your annual equipment expense. Any thoughts?

Interesting take on Optos

Ned Hubbard OD - 12/27/2008 - 23:08 pm

Interesting take on Optos expenses.

I don't recall any mention about leasing equipment in my contract. Only being charged for service (the scan) provided by Optos. They do expect a minimum number of scans to provide the base fee and when go over that minimum additional charges will happen.

I believe Optos makes a deal with a financing company to get its minimum monthly fees in advance and not having to worry about collection. Any extra monies they bill and collect themselves. Now if they use as security of the advance payments the equipment in our offices that is their concern. But we also sign a personal contract to pay off the finance company for Optos which is not guaranteed by the Optos equipment.

I am being provided a service by Optos utilizing my staff providing the labor. I have no expectations of owning this equipment in the future as in paying off the finance company paying an additional $1.00 to own. So expensing the Optos as an equipment lease may not be correct. I believe it should be expensed as any other vendor supplying services.