Presentation on theme: "Management Reports - What the Team Should be Monitoring"— Presentation transcript:
1 Management Reports - What the Team Should be Monitoring CVC West 2010Tom A. McFerson, CPA, ABV
2 Managing the Practice Where to start? What to look at? Limited time Limited resources
3 Managing the PracticeTechnicians, managers and owners can be bombarded with financial information. Given the limited amount of time they can devote to management, determining which information to focus on can be an important task.
4 Financial Information GoalsHave good handle on practice finances and issuesBe efficient with timeWork-life balanceFind management information “sweet spot”Not too littleNot too much
5 Financial Information GoalsSystem of financial reports in placeTimelyReliableAutomated as possiblePaints the “picture”Use to make decisionsBe sure to follow up
6 Important to Remember… Frequency of informationDailyWeeklyMonthlyQuarterlyAnnuallySet up reports to be as automated/easy to prepare as possible.
7 Important to Remember… Determine who prepares these reports.TechnicianManagerBookkeeperAccountantDetermine what are you looking for when you review these reports.What action should you take based on the information you’ve reviewed?
8 Management reports are only as good as the information they are created from. Always ensure that your source documents are accurate and timely.
9 Source Documents/Data Daily TotalsAccurate bank balancePayroll registersDoctor production reportsMonthly Production Reports by Service AreaBills/Vendor Invoices/Disbursements/Checks Written
11 Daily Daily Deposit Practice Schedule for following day From practice management softwareBreakdown of deposit: cash/check/CCBreakdown of serviceBreakdown by doctorPractice Schedule for following dayPractice Schedule for day just endedCancellationsWalk ins
13 Daily Helps you monitor day to day activity Keep an eye on spikes Monitor checking accountIssues with schedule
14 Weekly Flash Reports Summarizes activity by week Weekly Revenue Weekly DepositWeekly A/R BalanceWeekly Checking Account BalanceClient VisitsNew ClientsCash FlowCompared to prior year
15 Weekly Helps you monitor weekly activity Keep an eye on spikes – trends begin to develop
16 Monthly Financial Statements Profit and loss Balance Sheet Statement of Cash FlowsAll important…all give you results
17 Importance of Understanding Clinic Financial Matters Financial statements are the only reports a practice has that summarize the results of all the decisions made when operating the practiceFinancial acumen is key to increased personal earnings
18 Income Statement (P&L) Financial StatementsIncome Statement (P&L)Balance SheetRevenuesServicesOther revenueExpensesDirect costsdrugs/supplieslab costsIndirect costspayrollrentutilitiesinsuranceotherEarningsASSETSTangiblesCashInventoryEquipmentLiabilities$ from lenders+EquityPersonal $IntangiblesGoodwillEarnings$ = $
19 Basic Financial Statements Balance sheetIncome statementStatement of cash flows
20 Balance SheetAccounting statement summarizing the financial position of an entity at a point in timeAssets = Liabilities + Equity
21 Income StatementAccounting statement reflecting the financial performance of an entity between two points in timeThe statement of many namesProfit and loss statement (P&L)Statement of operationsStatement of revenues and expensesRepresents the equationRevenue – Expenses = Net Income
22 Financial Statements and the Passage of Time Balance sheetDec. 31, 2009Balance sheetDec. 31, 2010Income stmt2010Stmt of cash flows2010
23 Uses of Financial Statements Basis for tax returnsProvide informationResults of operationsAssets (resources)Liabilities (claims against resources)
24 Uses of Financial Statements Identify weaknessesBusinessInternal controlPlan for the future
25 Monthly Profit and loss for month and year-to-date Organized according to AAHA Chart of AccountsWith percentages (occupancy costs were 9% of gross revenues)Comparable to industryGives you financial results for the month, and also year to date
26 Monthly Profit and loss comparable to prior year Show differences in $ and %Should make you ask why?Profit and loss comparable to budgetShow difference in $ and %
27 Monthly Balance Sheet Comparable to prior year Show differences in $ and %Accurate Current assetsCashInventoryA/RAccurate Current liabilitiesAccounts payableAccrued Expenses
29 Cash AccountingProcess of reporting revenues and expenses in the financial statements of the period when the cash is received or paidDo not have a “matching” between when revenue generating activity occurs and when revenue recognizedComparative financial statements less reliable
30 Accrual AccountingProcess of recording revenues and expenses in the financial statements of the period in which the transaction occurs vs. when cash is received or paidRevenue recognized when earnedExpenses recognized when incurredComparative financial statements more reliable
31 Modified Cash Accounting Primarily cash basedSome transactions handled on an accrual basis—inventory capitalization, fixed asset capitalization and depreciationAccrual items usually determined by IRS requirements
32 Monthly Statement of Cash Flows P&L says I made money. Where is it? Tracks where your cash went for the monthBought fixed assetsPaid down debtOwner distributions
33 Monthly Accounts Receivable Aging Depends on whether your practice has much in way of A/RShould showCurrent (under 30 days)31-60 days61-90 daysdaysOver 120 days…(deadbeats)Ask yourself, what to do about certain clients?
34 Accounts ReceivableExtra profit you generate from offering this service must exceed costs to administrate and bad debt write-offsChance of collection if receivable is one month old—93.8%, chance of collection if 12 months old—26.6%--don’t wait too long!: Commercial Collection Agency Section of the Commercial Law League of America
35 Monthly Accounts Payable Aging Are you current with bills? What bills are coming due (property taxes, delayed drug bills)Should showCurrent (under 30 days)31-60 days61-90 daysdaysOver 120 days…(you’re the deadbeat)What to do about lagging payables/cash flow problems
36 Monthly Doctor Production Summary Total production for each doctor for the monthShould also include benefit versus cost analysisIf on straight production pay, easy….If not, need to calculate what they would have made if on production versus what they were paidAverage per clientNumber of clients seenNumber of days worked
37 Total Doctor RevenueIncludes revenue for all medical and surgical servicesDoes not include revenue for ancillary services—boarding, grooming, OTC product salesUsually 85-90% of totalpractice revenue
38 What Can Cause Changes? Fee increases Change in transactions (# clients or # of visits per client)Change in ATCChange in support staff (#, competency)Equipment additions
39 What Can Cause Changes? Demographics Range and mix of services Changes in economyNot recommending all appropriate diagnostics and treatmentsNot charging for everything doneDiscountsEfficiency
40 Quarterly Income Tax Analysis Estimated taxes for year are usually based on prior year incomeCompare expected quarterly profit to actualDetermine whether estimated taxes or withholding need to be adjustedImportant if income is up or down significantly
41 Quarterly Inventory Count Update your quarterly inventory counts Look for fluctuations/surprisesReason?Big drug order? Something not accounted for?Adjust ordering for next quarter accordingly
42 Quarterly Staff Overtime Analysis Summarizes number of overtime hours paid to each employeeIf excessive, why?Short-staffed?Someone out sick?Busy month?Who approved these hours?Is it becoming a pattern?Cost?Need another employee?
43 Quarterly Vacation/Sick Pay Summarizes by employee what each is currently owed in vacation/sick/personal daysHelps you plan aheadDepending on policy, plan for upcoming vacations or extra compensationSomeone not taking vacation? Why?Someone “overdrawn”? Why?
44 Quarterly Analysis of Competition Hours they’re open Doctor schedules Exam feesPrices on other shopped itemsSpecials or discounts running
45 Quarterly Analysis of Vendors When possible, compare prices of certain drugs/medicationsQuantity ordered per monthPossible savings
46 Annual Annual Financial Statements Profit and loss – comparable to prior yearProfit and loss - comparable to budgetProfit and loss – comparable to industryBalance SheetStatement of Cash Flows
47 Annual Annual Financial Statements How did you do? Improvement? Changes implemented?Important to have good historical data for next year’s budget.
48 Annual Next Year’s Budget Where do you want practice to go? Month by monthHelps plan for cash flowUse historical dataGoal settingMotivating
49 Annual Tax Return Ultimate management report Everything according to plan?What about next year?
50 Annual True Profitability Analysis Income statement often includes: Extra compensationExcess rentOwner perksOther unusual or one-time only expensesWhat was your true profit, after you adjust for all of these?Tax versus value often butt headsTarget: %Used for valuation
51 Annual Valuation Analysis What is the practice worth? Important to know:Future saleFuture buy-inEstate planningCuriosityWhat have outside forces done to the value of your practice?Often largest asset in net worth – important to know its value