This is the first installment of a weekly double header. In this episode I wanted to touch base and see if you were getting quarterly business statements from your accountant. I go over a few things I look for in mine on episode 69 of Business of Dentistry podcast.
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I will start this episode off by saying I’m not an accountant – nor do I play one on TV! – but I recommend using quarterly reports. They help me understand where my practice is at so I can adjust accordingly. Let me explain how I use them and how I tailor my practice with the information in my quarterly reports.
James is my accountant and he does quarterly business statements for me, these statements are actually called “statements of revenue and expense on an income tax basis”. He runs these for me every quarter.
I suggest doing these every quarter because it gives you a snapshot of how your business is doing compared to last year at this same time. I like that fact, it breaks up the year into smaller chunks and gives time to recognize any trends in profits (good or bad). Because I do these quarterly I can adjust to those trends much quicker than if I waited til the end of the year to review everything.
Now here’s what I’m looking at when I look at these quarterly reports: first is income, then is expenses and then finally net profit.
Regarding income I look at what we collected in this year’s quarter versus last year’s, did we go up, down or stay flat? I look for trends and potential reasons why we increased or decreased, and then I either continue those trends if they helped us increase or I look for the solutions to any decrease.
For example in the first quarter of 2017 versus the first quarter of 2016 we went up 10%. I was happy with that – it’s double digit growth so of course I was happy! But I began to think back to 2016 and realized I took more time off in the first quarter of last year than I did in the first quarter of this year. So that 10% is a little misleading. If I factor in my time off from last year it could make that income be flat rather than 10%.
Next is expenses followed by net (or the bottom line). In my report expenses are covered, things like CE for my employees, payment for staff uniforms, computer improvements, marketing & advertising, service charges, dues and subscriptions, the various forms of insurance like malpractice, disability, etc. any license expenses, office supplies, etc. Those are all expenses.
Naturally we want less money spent on expenses if possible, that will give us a better net profit overall.
Finally, a the end of all of this, I look at our net income for this year’s quarter vs. last year’s quarter at this time. The first quarter of 2017 saw our practice have a 41% net increase over last year’s first quarter. We lowered our overhead, generated more income and had a better overall net income as a result – exactly where I wanted this practice to go!
I have a few qualifications, which I explain on today’s show. You’ll hear a specific example of why I stress having an emergency fund/savings for your business, and how my fund was useful for the practice earlier this year.
Listen in for that story, and then let me know if you are doing quarterly reports in your business. If not, why aren’t you? Everyone has their own way of running their business so I’d love to hear what you do differently, and how it’s working for you. Hear my thoughts on that and more on episode 69 of the Business of Dentistry.