Practice Management Strategies – Financial Management

At our Business Partner Summit last week, Sarah Aesoph and Jonathan McGiverin presented on Financial Management and Cash Flow.  The session covered financial basics, making data driven decisions and being proactive in your practice management.

Financial Basics
Knowing your financials is the pathway to making precise decisions.

•  Balance sheet = The health of the business

  • If there is a weakness with your business it can be found here.
  • 95% of time is spent reconciling the balance sheet.

•  Income statement = operational execution

  • Tells you how you’re doing at any given time.
  • Can be misleading as it may not reflect cash flow position.

•  Cash flow

  • Most important financial tool for operating business.
  • Aids in making management decisions.
  • Could be misleading if it excludes balance sheet items.

A healthy balance sheet = assets to liabilities ratio of 1.5.

What to Analyze on an Income Statement
Budget v. Actual monthly results:

  • Revenue – what is your pricing strategy?
  • ASP
  • RFC
  • COGS %
  • ROI on Advertising
  • Fixed expense – e.g. rent, insurance, salaries, lease/equipment rental
  • Variable expense – e.g. commissions, hourly employees, office/clinical supplies, mileage, credit card fees, utilities

Why Cash Flow is Important

  • Cash is King!
  • Ability to reinvest and grow your practice is limited by your cash on hand
  • Understanding what drives your cash will create opportunities for your future
  • It is a dashboard of the health of your cash positions (simply tells you where your $ went)

Tip – Use an accounting system:

  • Quickbooks
  • Peachtree
  • Quicken
  • Etc.

 

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