1. SHOPS is funded by the U.S. Agency for International Development. Abt Associates leads the project in collaboration with Banyan Global Jhpiego Marie Stopes International Monitor Group O’Hanlon Health Consulting Business for Health Business Skills for Private Medical Practices Module 14: Understand the Importance of Financial Information

2. A Quick Start Welcome! While you are waiting for the class to begin, please take the Pre-Test and make sure your name is on it before you hand it to the facilitator. While you are waiting for the class to begin, please take the Pre-Test and make sure your name is on it before you hand it to the facilitator. Thank you!. 2Business Skills for Private Medical Practices

3. Agenda Welcome Your Current Record Keeping System Effective Record Keeping Systems Income Statements and Profitability Balance Sheets and Equity Questions to Ask Your Accountant Working With Financial Information Summary and Evaluation Close 3Business Skills for Private Medical Practices

4. Learning Objectives During this session, you will: 1.assess your current financial record keeping system; 2.discuss the components of an effective financial record keeping system; 3.identify the financial records your practice should keep; 4Business Skills for Private Medical Practices

5. Learning Objectives 4.analyze an income statement; 5.determine the value of a balance sheet; 6.plan questions to ask your bookkeeper/accountant on a regular basis; 7.propose how to handle issues involving financial information; 8.discuss the next step; and 9.state your key take-away from this session. 5Business Skills for Private Medical Practices

6. Introduction You will have 1 minute to introduce yourself: 1.Your name 2.Your position 3.Your business 4. How long you have been in business 6Business Skills for Private Medical Practices

7. Your Current Record Keeping System Business Skills for Private Medical Practices 7

8. What You Currently Do With Your Financial Records 1.Review the “financial documents” you have been given. 2.Label envelopes or file folders to reflect the current way your practice files or organizes these financial documents; i.e., sales, receipts, insurance, etc. Business Skills for Private Medical Practices8

9. What You Currently Do With Your Financial Records 3.Place all of the relevant financial documents into the appropriate envelope or folder. 4.If there are certain pieces of information that your practice does not retain, place them into a “trash” envelope or folder. Business Skills for Private Medical Practices9

10. Effective Record Keeping Systems Business Skills for Private Medical Practices 10

11. Financial Record Keeping Best Practices Business Skills for Private Medical Practices11 Business Transaction Daily JournalLedger Accounts Financial Statements Business Transactions Financial Statements Daily Journal Ledger Accounts

12. Ledger Types  Sales  Accounts Receivable  Corporate Account  Insurance  Accounts Payable Business Skills for Private Medical Practices12  Stock/Materials  Equipment  Wages  Cash

13. Example of a Sales Journal Business Skills for Private Medical Practices13

14. A Cash Receipt Journal Business Skills for Private Medical Practices14

15. A Purchases Journal Business Skills for Private Medical Practices15

16. A Cash Payments Journal Business Skills for Private Medical Practices16

17. An Accounts Receivable Ledger Business Skills for Private Medical Practices17

18. A General Ledger: Left Side Business Skills for Private Medical Practices18

19. Business Skills for Private Medical Practices19 A General Ledger: Right Side

20. Sales Journal- Sales Ledger- General Ledger Business Skills for Private Medical Practices20

21. Ledgers of Value to Your Practice 1.What ledgers would be useful for your practice to keep? 1.How might this information change the way you manage your practice? 1.What financial statements do you or your bookkeeper/accountant generate, drawing information from the ledgers? Business Skills for Private Medical Practices21

22. Income Statements and Profitability Business Skills for Private Medical Practices 22

23. The Income Statement Business Skills for Private Medical Practices23 An income statement shows all income and expense accounts over a period of time.  All income sources are listed and totaled on the top.  All expenses are listed and totaled on the bottom.  Total expenses are subtracted from total income to give the profit for that period.

24. Example of an Income Statement Business Skills for Private Medical Practices24

25. Income Statement A Questions 1.Does it show a profit or a loss? 1.What categories on the Income Statement explain the profit or loss? 1.What else does the Income Statement reveal about the practice when you compare it to Income Statement A from the previous month? Business Skills for Private Medical Practices25

26. Income Statement A Business Skills for Private Medical Practices26

27. Income Statement B Questions 1.Does it show a profit or a loss? 1.What on the Income Statement explains the profit or loss? 1.What else does the Income Statement reveal about the practice? Business Skills for Private Medical Practices27

28. Income Statement B Business Skills for Private Medical Practices28

29. Case Study: Prof. Michael Olach Working independently, please: complete the Income Statement on page 17 so that you can identify the net income (after taxes) for Prof. Olach’s practice for the period ending 31 st December 2013. Business Skills for Private Medical Practices29

30. Income Statement for Prof. Olach Business Skills for Private Medical Practices30

31. Balance Sheets and Equity Business Skills for Private Medical Practices 31

32. The Balance Sheet Business Skills for Private Medical Practices32 A balance sheet provides a snapshot of assets, liabilities and owner’s equity for a given period of time.  Assets: Items of economic value.  Liabilities: Obligations to settle debts.  Equity: Total assets minus total liabilities. Indicates the financial health or net worth of the business.

33. Example of a Balance Sheet Business Skills for Private Medical Practices33

34. Got Any Equity? Business Skills for Private Medical Practices34 1.What are the accounts that comprise the current assets of the business?

35. Got Any Equity? Business Skills for Private Medical Practices35 1.What are the accounts that comprise the current assets of the business? Cash balance + Patient Charges + Inventory Balance + Drugs Bought -Drugs Sold- Payment to Suppliers- - Expenses

36. Got Any Equity? Business Skills for Private Medical Practices36 2.How much are they worth in total?

37. Got Any Equity? Business Skills for Private Medical Practices37 2. How much are they worth in total? 30,000 + 60,000 30,000 + 60,000 Cash balance + Patient Charges + 15,000 + 10,000 + Inventory Balance + Drugs Bought - 6,000 - 8,000 -Drugs Sold - Payment to Suppliers- - 7,500 = 93,500 - 7,500 = 93,500-Expenses

38. Got Any Equity? Business Skills for Private Medical Practices38 3.What are the fixed assets and how much are they worth?

39. Got Any Equity? Business Skills for Private Medical Practices39 3.What are the fixed assets and how much are they worth? furniture (5,000) + equipment/vehicle (15,000) + building (10,000) + land (10,000) (40,000)

40. Got Any Equity? Business Skills for Private Medical Practices40 4.What expenses are yet to be paid (accrued expenses)?

41. Got Any Equity? Business Skills for Private Medical Practices41 4.What expenses are yet to be paid (accrued expenses)? what is owed for water and electricity

42. Got Any Equity? Business Skills for Private Medical Practices42 5.What are the total accrued expenses?

43. Got Any Equity? Business Skills for Private Medical Practices43 5.What are the total accrued expenses? 1500 + 1500 = 3000

44. Got Any Equity? Business Skills for Private Medical Practices44 6.What business liabilities are yet to be paid (accounts payable)?

45. Got Any Equity? Business Skills for Private Medical Practices45 6.What business liabilities are yet to be paid (accounts payable)? balance due suppliers for drugs (2000)

46. Got Any Equity? Business Skills for Private Medical Practices46 7.What are the total business liabilities?

47. Got Any Equity? Business Skills for Private Medical Practices47 7.What are the total business liabilities? Balance due for drugs 2000 + water rate + 1,500 + electricity bill + 1,500 5,000 5,000

48. Got Any Equity? Business Skills for Private Medical Practices48 8.If equity = assets – liabilities, how much equity is there in the business?

49. Got Any Equity? Business Skills for Private Medical Practices49 8.If equity = assets – liabilities, how much equity is there in the business? 133,500 – 5,000 = 128,500 assets – liabilities = equity

50. Got Any Equity? Business Skills for Private Medical Practices50 9.If the owner invested 54,000, how much are the retained earnings?

51. Got Any Equity? Business Skills for Private Medical Practices51 9.If the owner invested 54,000, how much are the retained earnings? total owners equity128,500 -owner’s cash invested - 54,000 -owner’s cash invested - 54,000 retained earnings 74,500

52. Got Any Equity? Business Skills for Private Medical Practices52 10.Does this seem financially healthy to you?

53. Got Any Equity? Business Skills for Private Medical Practices53 10.Does this seem financially healthy to you? Yes, because the liabilities are minimal- the business only owes 5000 and there is more than enough to pay it. Also, the owner invested 54,000 and has built up equity with past earnings.

54. Koffi Julius Medical Centre Balance Sheet Business Skills for Private Medical Practices54

55. Questions to Ask Your Accountant Business Skills for Private Medical Practices 55

56. What You Need to Know About Your Finances Business Skills for Private Medical Practices56  What questions should you be asking about your finances on a regular basis?  How will you use the answers to these questions?

57. Working With Financial Information Business Skills for Private Medical Practices 57

58. Case: Munyori Herbal Clinic Working with your table group, please: 1.Create an income statement and 2.Answer the question that follows the case study. Business Skills for Private Medical Practices58

59. Case: Munyori Herbal Clinic Business Skills for Private Medical Practices59

60. Munyori Herbal Clinic Income Statement Business Skills for Private Medical Practices60

61. Case: Munyori Herbal Clinic Question: Besides profitability, which other factors should Dr. Nang’ayo consider before acquiring Munyori Herbal Clinic? Business Skills for Private Medical Practices61

62. Case: Munyori Herbal Clinic Question: Besides profitability, which other factors should Dr. Nang’ayo consider before acquiring Munyori Herbal Clinic?  Competition  Cost of Acquisition  Previous Performance  Operation Cost Business Skills for Private Medical Practices62

63. Summary and Evaluation Business Skills for Private Medical Practices 63

64. Evaluation Sheet 64Business Skills for Private Medical Practices

65. The Next Step 1.Ensure that your financial record keeping system retains all financial information, records all transactions, and maintains ledgers for significant accounts. 2.Meet with your bookkeeper/accountant on a regular monthly basis and ask your questions so you can monitor the profitability of your practice. 65Business Skills for Private Medical Practices

66. The Next Step 3.Identify at least three things you plan to do differently to improve your financial record keeping: a.b.c. 66Business Skills for Private Medical Practices

67. Let’s See How Much You’ve Learned Please take the Post-Test. We will compare it to your Pre-Test to see how much you’ve learned in this session. Thank you. Business Skills for Private Medical Practices67

68. My Key Take-Away 68Business Skills for Private Medical Practices