business Life Cycle Management
Understanding Financial Statements
What are Financial Statements?
You don’t need to memorize or understand all of the intricacies of the financial statements but, as an owner, the worst thing you can do, when presented with your practice’s reports, is to not ask questions, or even worse, not pay any attention to the information provided. You must understand what stories the financials are telling you. You must know how the financial details affect your bottom line, in other words, the Profit or Net Cash Flow. This chapter is meant to get you to ask the right questions and then interpret the answers.
You need to be provided with certain reports that will help you understand the status of your business. Four different financial statements are typically prepared by accountants for businesses on a regular basis (e.g., monthly, quarterly, annually, etc.). These reports include the
- Income Statement
- Balance Sheet
- General Ledger
- Statement of Cash Flows
Knowledge is Power
Typically, financial statements are prepared, at best, on a quarterly basis, and in some instances, only once per year. This can be a disaster waiting to happen.
You must be able to compare, in a timely fashion and on a regular basis, the current month, quarter, and annual financials, and, most importantly, update your actual and predicted revenue and expenses. Then, you can make adjustments, as needed, to stay on a successful path to your goals.
Owners have to develop some knowledge on how to read their financial statements.
Do you need to have a business background?
Most healthcare professionals are visionaries and experts in providing healthcare services. They are not trained to understand the financial part of their business, and they do not like to spend the time analyzing their financials; so, they are not good at it. They delegate the finances to their bookkeeper, accountant, office manager, and/or financial advisor and then, if they take the time to do it at all, the owner/doctors review reports that they may not understand.
Tracker Enterprises, Inc.™ will help coach you on sound Business Principles for your practice.
For more information about the importance and the understanding of your Financial Statements that you will need to know to succeed, contact us and/or read Chapter 15 of Dr. Pavlik’s book, Business Essentials for Healthcare Professionals available at Amazon by clicking here.