Find out from Shawna Aho, CEO of Houston-based STAC Bizness Solutions
This blog kicks of a 3-part series dedicated to helping you gain more insight into the financial inner workings of your dental practice. While there are numerous financial statements that could garner your attention, there are three that we’d consider essential.
The balance sheet
The income statement
The cash flow statement
When you know how to read these core financial statements, you can find ways to make more profit, expand your business, or catch problems before they grow.
So let’s jump right into the balance sheet… what it is and how you can read it.
The Balance Sheet captures the full results of business operations since the beginning. It’s a snapshot of the health of the business at a moment of time. Assets (what is owned by the business) minus liabilities (what is owed by the business) reveals the net worth of the company.
This statement might not seem very interesting, but to your banker this statement is the one they love because it shows the financial strength of the business.
The balance sheet first presents your dental practice’s current assets.
Assets typically include:
- cash (checking and savings accounts),
- accounts receivable (amount patients and insurance companies owe your business),
- machinery & equipment, furniture & fixtures, and
- security deposits (this is an asset as the business will get this money back when the lease ends)
(See example ASSETS section below)
Next, the balance sheet presents your dental practice’s current liabilities.
Liabilities can include:
- accounts payable (amounts owed to vendors/contractors),
- credit card payables (credit cards are typically used to pay one-time vendors or smaller purchases like office supplies, etc), and
- long-term debt (typically loan or line of credit used to purchase the fixed assets at the start of the business)
(See example LIABILITIES section below)
Next, we find the equity section.
- Owners Capital – the money that the owner used to get the business up and running
- Owners Draw – is the money the owners paid themselves from the business in the current timeframe (this is not the same as W2 wages)
- Retained Earnings – is the net income the business has generated since the beginning less any owners draw paid out.
- Income – is the profit from the current timeframe. This gets rolled over into Retained Earnings at the beginning of the next fiscal year.
(See example EQUITY section below)
So there you have it, a brief walkthrough of the balance sheet. It’s the “go-to” statement anytime you are aiming to get an overall sense for the health of your dental practice.
In the next post, I’ll focus on the second of our three core financial statements, the income statement.
Until then, don’t hesitate to reach out if you have any questions. As a Greater Houston-based team focused exclusively on the needs of dental practices, we’re uniquely positioned to help you grow your practice while increasing profitability! To learn more, visit us at https://stacbiz.com or call us at 844-424-9637.
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7 Key Financial Practices That Separate Thriving, Growing Practices From The Rest.
There’s no denying it. Creating a thriving practice is about much more than practicing medicine!
Topping the list of “other” priorities is your practice’s financial management. In this short guide, the experts at STAC Bizness Solutions outline 7 financial best practices that differentiate struggling practices from those which are highly profitable and experiencing healthy levels of growth.