Remove seasonality from your financial metrics

May 6, 2016 by Andrew Clark

Does the seasonality of your practice undermine your confidence when you need to make decisions based on your financials?  While doing the research before building www.ismypracticehealthy.com, we often heard people say something like “I’m not sure how we are really doing because we had a slow month last month and that throws off the numbers.”   

With that concern in mind we developed the ismypracticehealthy data dashboard using trailing 12 month totals and rolling 12 month averages. These formats take the seasonality out of your reports and give you a 12 month report on your business every month.  Let’s take a look at Investopedia’s definitions for these reports: 

“Trailing 12 months (TTM) is the timeframe of the past 12 months used for reporting financial figures. A company's trailing 12 months is a representation of its financial performance for a 12-month period, but typically not at its fiscal year end.” [1]

“A twelve month rolling average is a mathematical result calculated by averaging the most recent twelve months of data points.” [2]

If you want a no nonsense protocol to monitor the health of your practice, use the Data Dashboard and keep it simple.  Capture and monitor 8 data points monthly.  Add them to a chart which shows these data in Trailing 12 or Rolling 12-month average format.  Each data point in these charts represents 12 months of data, so all seasonality is effectively removed.  The trends you see are real and allow you to identify negative and positive trends early.  For more instructions on using a data dashboard and Key Performance Indicators, go the Data Input page at IsMyPracticeHealthy.com. [3]

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