What Do Patient Lab Reports Have To Do With A Medical Practice's Financial Statements?

An important aspect of managing a business is learning how to read financial statements.

It’s no secret, however, that most doctors don’t have formal business training. So reading financial statements to some is like reading in a language you don’t speak.

Screen Shot 2016-01-05 at 10.05.35 AMBut that is not an excuse for physicians that own or have a stake in their medical practices not to learn fundamental business principals such as reading financial statements.

Learning how to read just a few financial reports will give you a good idea of the financial health of your practice.

THEY’RE LAB RESULTS

If the financial report talk sounds complicated, think of them as a patient’s lab reports. Imagine your practice is a sensitive patient with an illness.

Just like labs results tell you want’s going on with a patient’s health, financials reports let you know what is going on with the medical practice’s financial condition.

And when you know what’s going on, you can instantly spot potential problems before they get out of control.

FINANCIAL STATEMENTS

Below are four financial reports. Familiarize yourself with them as well as get in the habit of checking/reading them each month.

Keep in mind that I’m not saying these are the only reports you should review. I am suggesting, however, that these are among the most significant and valuable reports for a business/private medical practice.

PROFIT & LOSS STATEMENT (P&L)

Also called the income statement, the P&L shows revenue minus expenses and either your practice’s net profits or loss.

The income statement gives you a snapshot of how different areas of the business is performing. For example, did the practice match revenue projections? Is the practice staying within budget?

BALANCE SHEET

The balance sheet is a simple document that shows what your business is worth. It list all of your assets and liabilities.

The report provides a quick and simple way to see what you own, who you owe, and revenues owed to you.

RECEIVABLES REPORT

This report – also referred to accounts receivables (AR) – shows you who owes you money, how much they owe, and the age of the debt.

In a perfect world, you would avoid extending credit to anyone. But in the business of private practice, we provide credit to virtually every single patron. Therefore, this report is critical to understand and review frequently.

CASH FLOW REPORT

If you’ve balanced your checkbook before, the cash flow report is a supped up version of that. The report shows you the number of checks you’ve written, your deposits, and your account balance.

This report is the best way to verify that your bank account balance is correct, and there are no unusual charged or errors.

GOOD HEALTH = STRONG PROFITS

 

You wouldn’t neglect to review a delicate patient’s lab results. So don’t neglect to familiarize yourself with these important financial reports and review them regularly.