Financial Accounting and Medical Practice Benchmarking
[Improving What’s Measured]
By Gary L. Bode
Profits are an opinion; cash is a fact – Unknown
This chapter begins with the external point of view of your medical practice, as in the case of a banker considering your business loan. Financial statements are discussed, emphasizing their translation from financialease into English.
Some useful financial benchmarking ratios are then explained, both at a specific point in time, and, as successive values over time for internal managerial purposes. The chapter makes a strong case for proactive practice management and illustrates some of the tools needed to do so.
Your Medical Practice as an Asset
Your practice is a valuable asset in two respects. First, it provides the work environment that generates your personal income. Second, it has inherent sale value that can be part of an exit (retirement) or transfer strategy.
Some of this inherent value lies in the current market value of medical equipment, minus any money owed. The other aspect of inherent value is goodwill, or the worth of the practice as on going concern that allows you to sell it to another practitioner.
Despite the importance of the practice to the practitioner, some practices essentially run without a manager. This is like an orchestra without a conductor, in that the individual facets of talent have no common pathway to make music. Other practices evolve over time reactively, and are not what the practitioner would have proactively defined as ideal.
Sample Case Model: Financial Benchmarking Case Model
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