Although I would like to see more people use the “comment box” functionality below each daily blog, I receive a fair number of personal emails and texts asking questions pertaining to Friday Financials. Most of my blogs begin with someone asking about what is troubling or difficult in managing their finances.
To paraphrase several communications, “I’m overwhelmed with trying to learn to manage my finances in addition to being a full time veterinarian. I don’t know where to start!”
Start Now: review June Profit and Loss Statement
The good news is that every practice has the ability to generate some practice reports from which you can learn about the performance of the practice. The bad news is that you need to go to two sources of information to cobble together the story of your practice. You have financial software, probably QuickBooks and you have practice management software. QuickBooks will create financial reports for you in a keystroke. Your practice management software will create reports for you but usually not as easily as your financial software.
We will deal with the QuickBooks reports this week.
Start in July after your June books are closed by asking your book keeper to print a Profit and Loss side by side for the current month vs the same month last year. Ask her to spend 30 minutes studying the report and highlight any line items that don’t seem right for any reason. Make an appointment with your book keeper to spend 30 minutes together after she reviews the report so that she can tell you what doesn’t make sense. Your objective is to begin learning what happens in your practice monthly and if it happened at a different level than same month last year. As you get comfortable with the process you will begin to apply the “test of reasonableness”. If something just doesn’t make sense you may have to ask your accountant to help you understand. Your accountant will probably be surprised by the question because most veterinarians only use their accountants for taxes and fail to utilize them as advisors. Explain that you are trying to learn more about the operational finances of your practice and you need some help. As you look at reports try to focus on a few key indicators. The free ismypracticehealthy.com Data Dashboard provides you with a way to build a dashboard of your own key indicators. Some of the key indicators we believe are most useful in managing a practice are
- Total Revenue (Trailing 12 format)
- Drugs and Medical Supplies as a percent of revenue (Trailing 12 format)
- Labor expense as a percent of revenue (Trailing 12 format)
- Accounts Receivable as a percent of revenue
- Number of transactions (Trailing 12 format)
- Average Transaction Charge
- Gross Profit
Definitions are available on the data dashboard page.
You will be able to find the first three key indicators on your Profit and Loss statement. For an in-depth discussion of how to use the Data Dashboard, refer to the Data Input page at IsMyPracticeHealthy.com. The dashboard only requires the insertion of 8 datapoints each month. Start using it today.