The Dental Practice: Business Foundations Financial Statements Dr. Dave Willis Dental Simulations

Measuring Financial Success: Types of Financial Statements Balance Sheet (Statement of Financial Position) Income Statement (Profit and Loss Statement) Budget Cash Flow Statement

Types of Financial Statements Balance Sheet Point in time “snapshot” Lists what you own what you owe the balance or your financial position You can have a negative “Net Worth” Should grow (more positive) over time Successive statements identify trends

Types of Financial Statements Balance Sheet Formula Assets Liabilities Net Worth

John and Dr. Mary Doe As of December 31, 201X ASSETS   ASSETS Cash/Cash Equivalents Checking Account 3,050 Credit Union Savings 4,000 Money Market Account 7,500 Life Insurance Cash Value 8,000 22,550 Personal Use Assets House 135,000 Automobiles 28,000 Personal Property 52,000 215,000 Business Use Assets Dental Practice 200,000 200,000 Investments Stock Portfolio 7,800 Mutual Funds 6,500 SEP / IRA’s 18,980 33,280 470,830    LIABILITIES Short Term Liabilities Credit Card Balance 950 950 Long Term Liabilities Auto Notes Balance 4,920 Home Mortgage Balance 87,900 Dental Practice 150,300 Student Loans 100,000 343,120 344,070 NET WORTH 126,760

Types of Financial Statements Income (Profit and Loss) Statement Shows money flows over time Month, quarter, year or other Indicates taxable income and expense items Indicates a profit or loss

Types of Financial Statements Income Statement Formula - Expenses Profit (Loss)

Example Profit and Loss (Income) Statement (Schedule C format) For the Year Ending December 31, 201X   Income Gross Collections 268,723 Returns and Allowances 875 Net Collections 267,848 Expenses Advertising 854 Auto Expenses 1,928 Commissions 0 Depreciation 23,047 Employee Benefit Program 3,640 Insurance 1,650 Interest Expense 12,487 Legal and Professional 1,790 Office Expense 3,817 Pension / Profit Sharing Plan 3,048 Rent or Lease 12,000 Repairs and Maintenance 270 Taxes and Licenses 9,108 Meals, Travel and Entertainment 139 Utilities 8,955 Wages 60,950 Other Expenses Temporary Services 340 Bank Charges 120 Office Cleaning 3,055 Dental Supplies 17,010 Dental Lab 29,754 Dues and Publications 1,050 Continuing Education 1,808 Postage 690 200,779 Profit (Loss) 67,069

Example Profit and Loss (Income) Statement (Organized format) For the Year Ending December 31, 200X  Income Gross Collections 268,723 Returns and Allowances 875 Net Collections 267,848  Expenses Staff Costs Employee Benefit Program 3,640 Pension / Profit Sharing Plan 3,048 Wages 60,950 Temporary Services 340 67,978   Office Space Costs Depreciation 23,047 Rent or Lease 12,000 Repairs and Maintenance 270 Utilities 8,955 Office Cleaning 3,055 47,327   Office Expenses Insurance 1,650 Office Expense 2,817 Postage 690 5,157   Marketing Expenses Advertising 854 854   Bank Expenses Interest Expense 12,487 Bank Charges 120 12,607   Variable (Production) Expenses Dental Supplies 17,010 Dental Lab 29,754 Office Supplies 1,000 47,764   Professional Expenses Legal and Accounting 1,790 Taxes and Licenses 9,108 10,898   Owner’s Expenses Auto Expenses 1,928 Meals, Travel and Entertainment 139 Dues and Publications 1,050 Continuing Education 1,808 4,925 200,779   Profit (Loss) 67,069

Types of Financial Statements Cash Flow Statement Cash receipts and disbursements over a time Similar to Income Statement All Inflows equal all Outflows Shows spending patterns, savings and investments

Types of Financial Statements Cash Flow Statement Formula Cash Inflows Equal Cash Outflows

Types of Financial Statements Budget Estimate of future spending Based on historical patterns Helps to define income and spending goals

Types of Financial Statements Budget Formula Projected – Actual = Difference

Types of Financial Statements Pro Forma Statements Projected (Future) performance Balance Sheet Income Statement Cash Flow Statement Budget vs Pro Formas

Uses of Financial Statements Decision making in personal and professional situations. Income distribution and expense allocation to doctors and other providers. As required by law, such as income tax returns. To meet the needs and desires of creditors. Planning and control of the practice or personal / family matters.

Cash Flow Cash In Cash Out Cash In must meet or exceed Cash Out Operations Borrowing Savings Cash Out Pay Bills Pay Loans Pay Taxes Personal Living Expenses Cash In must meet or exceed Cash Out Non-payment Bounced checks

Working Capital “Extra Cash” Uses Collections Lag Immediate Payments Start-Ups Growth

The Dental Practice: Business Foundations

The Dental Practice: Business Foundations Financial Statements Dr. Dave Willis Dental Simulations